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

                              FORM 20-F

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

    X  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934
       For the fiscal year ended December 31, 2001
                                OR

    _  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 000-31215
                      ___________
                                  MIND CTI LTD.
____________________________________________________________________
            (Exact name of Registrant as specified in its charter
              and translation of Registrant's name into English)

                                      ISRAEL
____________________________________________________________________
                    (Jurisdiction of incorporation or organization)

            Industrial Park, Building #7, Yoqneam, 20692, Israel
____________________________________________________________________
                     (Address of principal executive offices)

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

Title of each class       Name of each exchange on which registered
None __________  __________________________________________________

Securities registered or to be registered pursuant to Section 12(g) of the Act.
              Ordinary Shares, nominal value NIS 0.01 per share
____________________________________________________________________
                       (Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
None_______________________________________________________________
                       (Title of Class)
Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period
covered by the annual report.


















As of December 31, 2002, the Registrant had outstanding 20,686,220
Ordinary Shares, nominal value NIS 0.01 per share.
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  X  No  _

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


























			      -2-
PART I
Unless the context requires otherwise, "MIND", "us", "we" and "our"
refer to MIND C.T.I. Ltd. and its subsidiaries.

Item 1.     Identity of Directors, Senior Management and Advisers

		Not applicable.

Item 2.     Offer Statistics and Expected Timetable

		Not applicable.

Item 3.     Key Information

A.	Selected Financial Data
The following table presents selected consolidated financial data as of and for
each of the five years in the period ended December 31, 2002. The selected
consolidated financial data presented below are derived from our audited
consolidated financial statements for these periods, and should be read in
conjunction with these financial statements and the related notes thereto.
Our audited consolidated financial statements as of December 31, 2001 and 2002
and for each of the three years in the period ended December 31, 2002 and the
related notes thereto are included elsewhere in this annual report. You should
read the selected financial data in conjunction with Item 5 "Operating and
Financial Review and Prospects."

                             Years Ended December 31,
                      ---------------------------------------
                       1998    1999    2000     2001    2002
                      ------  -----  -------  ------  -------
                 In US $ thousands, except share and per share data)
                      ---------------------------------------
Consolidated Statement
  of Operations Data:
Revenues:
  Sales of licenses    $3,385  $6,791  $12,476  $7,108  $6,535
Services                  685   1,405    3,137   3,361   3,473
                      ------  ------    ------  ------ -------
Total revenues		4,070	8,196	15,613	10,469	10,008
Cost of revenues	  823	1,487	 2,203	 2,242	 2,479
Gross profit		3,247	6,709	13,410	 8,227	 7,529
Research and development,
  expenses - net	1,049	1,927	 3,795	 4,423	 3,723
Selling, general and
  administrative
  expenses:
  Selling expenses	  863	1,958	 4,774	 6,767	 4,154
  General and
   administrative
     expenses		  592	1,000	 1,931	 3,097	 1,279
Operating income (loss)	  743	1,824	 2,910	(6,060)	(1,627)
Financial and other income
 net			   99	  137	 1,083	 1,588	 2,078

                                        -3-

Income (loss) before taxes
 on income		  842	1,961	 3,993	(4,472)	   451
Taxes on income		  201	  447	   245	     7	   117
Income (loss) before
minority interest	  641	1,514	 3,748	(4,479)	   334
Minority interest in
losses of a subsidiary	   --	   --	    --	    89	    --
                       ------  ------   ------  ------ -------
Net income (loss)	  641	1,514	 3,748	(4,390)	   334
Accretion of mandatorily
  redeemable preferred
  shares to mandatory
  redemption value	   --	   --   (8,894)     --      --
Amortization of beneficial
  conversion  feature of
  mandatorily redeemable
  convertible preferred
  shares	  	   --      --	(7,223)     --      --
Net income (loss)
 applicable to ordinary
 shares			 $641  $1,514 $(12,369) $(4,390)  $334
Earnings (loss) per
 ordinary share -
  basic and diluted	$0.05   $0.10   $(0.73)  $(0.21) $0.02
Weighted average number
 of ordinary shares
 used in computation
 of earnings (loss) per
 ordinary share - in
 thousands:
  Basic		       12,246  14,667   16,897  20,654  20,677
                       ======  ======  ======  ======   ======
  Diluted	       12,283  14,984   16,897  20,654  20,761
                       ======  ======  ======  ======   ======
Dividends per
 ordinary share	       $ 0.01  $ 0.03   $ 0.12  $ 0.00  $ 0.00
                       ======  ======  ======  ======   ======

                                       As of December 31,
                            -----------------------------------------------
                               1998      1999     2000     2001     2002
                            --------  --------  --------  -------   -------
                                               (In US thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents      $803    $2,646  $43,373  $39,723  $11,312
Working capital		      1,181     4,415   46,689   41,640   11,334
Total assets		      3,217     7,493   52,948   46,734   47,967
Share capital and additional
 paid-in capital	      1,103     3,442   60,831   60,985   61,142
                             ------    ------   ------   ------   ------
Total shareholders' equity    1,760     5,220   48,227   43,991   44,482


                                  -4-
	B.	Capitalization and Indebtedness
		Not applicable.

	C.	Reasons for the Offer and Use of Proceeds
		Not applicable.

	D.	Risk Factors

	We believe that the occurrence of any one or some combination of the
following factors would have a material adverse effect on our business,
financial condition and results of operations.

Risks Relating to Our Business

A continued slow down in expenditures by telecommunications service providers
could have a material adverse effect on our results of operations.

	The global deterioration of the economy and economic uncertainty in the
telecommunications market resulted in a curtailment of capital investment
by telecommunications carriers and service providers beginning late in 2000 and
continuing throughout 2002 and into 2003. Many new and small service providers
have failed and existing service providers have been reducing or delaying
expenditures on new equipment and applications. As a result, our revenues
for 2001 were lower than for 2000, and our revenues for 2002 were lower than for
2001. A further decline in capital expenditures by telecommunications services
providers may reduce our sales and could result in additional pressure on the
price of our products, both of which would have a material adverse effect on
our operating results.

If the outbreak of the Severe Acute Respiratory Syndrome virus, known
as SARS, is not curbed, our business in the Asia Pacific region will suffer.

	In 2002, approximately 21.14% of our revenue derived from the Asia
Pacific region  We are currently experiencing difficulties in providing required
maintenance and support to our customers in this region due to travel
restrictions.  Furthermore, if the SARS outbreak is not controlled shortly and
if the traffic restrictions are not lifted, our ability to pursue further
business in this area will be impeded and our business would be materially
harmed.

Our revenues and operating results may vary significantly from quarter to
quarter.

	Our revenues and operating results may vary significantly from quarter
to quarter due to a number of factors, including the following:
* the timing of orders for our software may be delayed as customers typically
  order our billing and customer care software only after other vendors have
  provided the network infrastructure, a process that is subject to delay.
  It is therefore difficult for us to predict the timing of orders for our
  products by customers;
* the ability of our customers to expand their operations and increase their
  subscriber base, including their ability to obtain financing;
* changes in our pricing policies or competitive pricing by our competitors;

                                      -5-
* the timing of releases of new products by manufacturers of telecommunications
  equipment with which our billing and customer care software operates; and
* the timing of product introductions by competitors.
In future quarters, our operating results may be below the expectations of
public market analysts and investors, and as a result, the price of our
ordinary shares may fall.

If the demand for IP-based services does not continue to grow, the demand for
our billing and customer care software would diminish substantially.

	A substantial portion of our business depends on the growth in demand
for IP-based services. Growth in the demand for IP services is a phenomenon that
may not reoccur. If growth in the demand for IP services does not reoccur, we
will continue to face substantially diminished demand for our billing and
customer care software. The failure of the IP-based services market to grow and
develop will have a material and adverse impact on our results of operations and
financial condition.

We have a limited operating history as a provider of billing and customer care
software for traditional wireline and wireless operators. As a result, it is
difficult to evaluate our business in this market.

	Until March 2001, our billing and customer care software was
implemented for Voice over IP and additional IP-based services only. Following
our acquisition of VeraBill in March 2001, we began to offer billing and
customer care software to operators of traditional wireline and wireless
telephony worldwide. We intend to invest in research and development and in
marketing in order to offer enhanced software for this market. Therefore, we
will experience the risks and difficulties frequently encountered by companies
entering new market segments, including those discussed in this report. Our
business strategy may not prove successful and we may not successfully address
these risks. We cannot be sure that our software will achieve acceptance in this
market segment. In addition, there may never be significant demand for new
billing and customer care software for providers of traditional services.

The customer base for our traditional wireline and wireless billing and customer
care products is characterized by small to medium size telephony carriers.
If this market segment fails to grow, the demand for our billing and customer
care software would diminish substantially.

	Our traditional wireline and wireless billing and customer care products
target small to medium size telephony carriers. Our growth in this field depends
on continued growth of these traditional telephony carriers. We cannot be
certain that small to medium size telephony carriers will be able to
successfully compete with large telephony carriers in existing markets or will
successfully develop in new and emerging markets. If this market segment fails
to grow, the demand for our billing and customer care software would diminish
substantially and our business would suffer.

From time to time, our software and the systems into which it is installed
contain undetected errors. This may cause us to experience a significant
decrease in market acceptance and use of our software products and we may be
subject to warranty and other liability.

                                      -6-
	From time to time, our software, as well as the systems into which it is
integrated, contain undetected errors. Because of this integration, it can be
difficult to determine the source of the errors. Also, from time to time,
hardware systems we resell contain certain defects or errors. As a result, and
regardless of the source of the errors, we could experience one or more of the
following adverse results:
* diversion of our resources and the attention of our personnel from our
  research and development efforts to address these errors;
* negative publicity and injury to our reputation that may result in loss of
  existing or future customers; and/or
* loss of or delay in revenue and loss of market share.
In addition, we may be subject to claims based on errors in our software or
mistakes in performing our services. Our licenses and agreements generally
contain provisions such as disclaimers of warranties and limitations on
liability for special, consequential and incidental damages, designed to limit
our exposure to potential claims. However, not all of our contracts contain
these provisions and we cannot assure you that the provisions that exist will
be enforceable. For example, we have an agreement with Cisco Systems Inc.
relating to our provision of billing and customer care software to China Unicom
jointly with voice gateways provided by Cisco. This agreement requires us to
indemnify Cisco for claims by China Unicom relating to our software.
In addition, while we maintain product liability and professional indemnity
insurance, we cannot assure you that this insurance will provide sufficient,
or any, coverage for these claims. A product liability or professional indemnity
claim, whether or not successful, could adversely affect our business by
damaging our reputation, increasing our costs, and diverting the attention of
our management team.

If our products fail to achieve widespread market acceptance, our results of
operations will be harmed.

Our future growth depends on the continued commercial acceptance and success of
our products. We first introduced our billing and customer care software for
Voice over IP in 1997 and since then we have developed new versions that offer
mediation, rating, billing and customer care for multiple services. Accordingly,
we cannot be sure that our products will achieve widespread market acceptance.
Our future performance will depend on the successful development, introduction
and consumer acceptance of new and enhanced versions of our products. We are
not certain that we will be able to develop new and enhanced products to meet
changing market needs. If our new and enhanced products are not well received in
the marketplace, our business and results of operations will be harmed.
We cannot assure you that we will be successful in developing and marketing
new products.

We depend on our marketing alliances and reseller arrangements with
manufacturers of telecommunications equipment to market our products.
If we are unable to maintain our existing marketing alliances, or enter into new
alliances, our revenues and income will decline.






                                      -7-
	We have derived, and anticipate that we will continue to derive, a
significant portion of our market opportunities and revenues from our marketing
alliances and reseller arrangements with major manufacturers of
telecommunications equipment, including Alcatel, Cisco, Ericsson, Lucent and
VocalTec, which market our products to their customers. Our marketing alliances
and reseller arrangements with these parties are nonexclusive and do not contain
minimum sales or marketing performance requirements. In some instances, there is
no formal contractual arrangement. As a result, these entities may terminate
these arrangements without notice, cause or penalty. There is also no guarantee
that any of these parties will continue to market our products. Our arrangements
with our resellers and marketing allies do not prevent them from selling
products of other companies, including products that compete with ours. Our
marketing allies and resellers also work with some of our competitors, and have
invested in these competing companies. For example, Cisco has invested in
Portal Software Inc., one of our competitors. Moreover, our marketing allies and
resellers may develop their own internal mediation, rating, billing and customer
care software products that compete with ours and sell them as part of their
equipment. If we are unable to maintain our current marketing alliances and
reseller relationships, or if these marketing allies and resellers develop their
own competing mediation, rating, billing and customer care software products,
our revenues and income will decline.

We depend on a limited number of customers who generate a significant portion of
our revenues.

	21% or our total revenues in 2002 were generated by sales to two
customers. Our future growth will depend on, among other things, our ability to
disperse our revenues among a greater number of customers or to continue to
generate revenues from a limited number of customers. Our operating results
could be materially adversely  affected if we are unable to disperse our
revenues among a greater number of customers or to continue to generate
revenues from a limited number of existing customers.


If our software does not continue to integrate and operate successfully with the
telecommunications equipment of the leading manufacturers, we may be unable to
maintain our existing customer base and/or generate new sales.

	The success of our software depends upon the continued successful
integration and operation of our software with the telecommunications equipment
of the leading manufacturers. We currently target a customer base that uses a
wide variety of network infrastructure equipment and software platforms, which
are constantly changing. In order to succeed, we must continually modify our
software as new telecommunications equipment is introduced. If our product line
fails to satisfy these demanding and rapidly changing technological challenges,
our existing customers will be dissatisfied. As a result, we may be unable to
generate future sales and our business will be materially adversely affected.

If we fail to attract and retain qualified personnel we will not be able to
implement our business strategy or operate our business effectively.




                                      -8-
	Our products require sophisticated research and development, sales and
marketing, software programming and technical customer support. Our success
depends on our ability to attract, train, motivate and retain highly skilled
personnel within each of these areas of expertise. Qualified personnel in these
areas are in great demand and are likely to remain a limited resource for the
foreseeable future. We cannot assure you that we will be able to retain the
skilled employees we require. In addition, the resources required to retain such
 personnel may adversely affect our operating margins. The failure to retain
qualified personnel may harm our business.

We depend on a limited number of key personnel who would be difficult to
replace. If we lose the services of these individuals, our business will be
harmed.

	Because our market is new and evolving, the success of our business
depends in large part upon the continuing contributions of our senior
management. Specifically, continued growth and success largely depend on the
managerial and technical skills of Monica Eisinger, our President and Chief
Executive Officer and one of our founders, and other members of senior
management. Because the demand for highly qualified senior personnel exceeds
the supply of this type of personnel, it will be difficult to replace members
of our senior management if one or more of them were to leave us. If either
Ms. Eisinger or other members of the senior management team are unable or
unwilling to continue their employment with our company, our business will be
harmed.


Our success depends on our ability to continually develop and market new and
more technologically advanced products and enhancements.

 	The market for our products and the services they are used to support is
characterized by:
* rapid technological advances like the development of new standards for
  communications protocols;
* frequent new service offerings and enhancements by our customers, such as
  value-added IP-based services and new rating plans; and
* changing customer needs.
We believe that our future success will largely depend upon our ability to
continue to enhance our existing products and successfully develop and market
new products on a cost-effective and timely basis. We cannot assure you that we
will be successful in developing and marketing new products that respond
adequately to technological change. Our failure to do so would have a material
adverse effect on our ability to market our own products.

The growth of our business is dependent on the continuation of a favorable
regulatory environment, and any change in this environment could harm our
business.







                                      -9-
	Federal, state and international regulatory bodies regulate the
telecommunications industry and the products that use telecommunications
networks. Over the past decade, a variety of new entrants have begun to
provide telecommunications services and, in particular, Voice over IP services,
intensifying competition in that industry. Future growth in the markets for our
products and services will depend in part on the continuation of a favorable
regulatory environment for Voice over IP services. However, the growth of Voice
over IP has also led to close examination of its regulatory treatment in many
jurisdictions. The provision of Voice over IP services is subject to change as
a result of future regulatory action, judicial decisions or legislation. The
cost of providing Voice over IP services could increase as a result of any
regulatory changes that would require providers to pay charges applicable to
traditional telephone networks. Any new regulations that increase the cost of
providing Voice over IP services could halt the growth of the Voice over
IP market. As a result, the market for our billing and customer care software
could decline.

Any future regulation of the Internet may slow its growth and result in a
decreased demand for our products and services.

	The demand for our products and services depends on the growth in
Internet usage since Voice over IP and other IP-based services are delivered
mainly over the Internet. The adoption of any laws or regulations that affect
the growth of the Internet, or the Voice over IP industry, could result in
decreased demand for our products.

If our billing and customer care software for IP services fails to achieve
market acceptance among traditional telecommunications service providers, we may
suffer a decrease in market share, revenues and profitability.

	We believe that as the demand for IP services grows, traditional
telecommunications service providers will increasingly offer IP services to
remain competitive and these providers will constitute a growing portion of the
IP services market. These companies already have relationships with traditional
billing and customer care software providers for their telephony services, and
may wish to work with their current providers of billing and customer care
software to enhance and modify that software for IP services. If our billing and
customer care software for IP services fails to achieve market acceptance among
traditional telecommunications service providers, we may suffer a decrease in
market share, revenues and profitability.

Because some of our customers require a lengthy approval process before they
order our products, our sales process is often subject to delays that may
decrease our revenues and seriously harm our business.

	In 2002, we derived 74% of our revenues from the sale of software and
related services to providers of IP services and traditional wireline and
wireless telephony services. Before we can sell our software to some of these
customers, they must conduct a lengthy and complex approval and purchase
process. Prospective customers must make a significant commitment of resources
to test and evaluate our products and to integrate them into larger systems.
The following factors, among others, affect the length of the approval process:
* the time involved for our customers to determine and announce their
  specifications;
                                      -10-
* the complexity of the networks being deployed;
* the timely delivery by telecommunications equipment manufacturers of the
  hardware comprising the customer's network infrastructure;
* the build-up of the customer's network infrastructure; and
* the timely release of new versions of products comprising the customer's
  network infrastructure by the vendors of those products.
Delays in product approval may decrease our revenues and could seriously harm
our business and results of operations.

If we are unable to compete effectively in the marketplace, we may suffer a
decrease in market share, revenues and profitability.

	Competition in our industry is intense and we expect competition to
increase. We compete both with emerging billing companies such as Portal
Software Inc. and Digiquant as well as with the more established traditional
billing and customer care companies, such as Amdocs Ltd. and Convergys
Corporation (after the acquisition of Geneva Technology by Convergys
Corporation). Some of our competitors have greater financial, technical, sales,
marketing and other resources, and greater name recognition than we do. Current
and potential competitors have established, and may establish in the future,
cooperative relationships among themselves or with third parties to increase
their ability to address the needs of prospective customers. Accordingly, new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. As a result, our competitors may be able to adapt more
quickly than us to new or emerging technologies and changes in customer
requirements, and may be able to devote greater resources to the promotion and
sale of their products. We cannot guarantee that we will be able to compete
effectively against current or future competitors or that competitive pressures
will not harm our financial results.

We may seek to expand our business through acquisitions that could result in
diversion of resources and extra expenses, which could disrupt our business and
harm our financial condition.

	We may pursue acquisitions of business, products and technologies, or
the establishment of joint venture arrangements, that could expand our business.
For example, in March 2001 we acquired the VeraBill product line for traditional
wireline and wireless carriers for $1 million. The negotiation of potential
acquisitions or joint ventures as well as the integration of an acquired or
jointly developed business, technology or product could cause diversion of
management's attention from the day-to-day operation of our business. This could
impair our relationships with our employees, customers, distributors, resellers
and marketing allies. Future acquisitions could result in:
* potentially dilutive issuances of equity securities;
* the incurrence of debt and contingent liabilities;
* amortization of intangible assets;
* research and development write-offs; and
* other acquisition-related expenses.
Acquired businesses or joint ventures may not be successfully integrated with
our operations or with our technology. If any acquisition or joint venture were
to occur, we may not receive the intended benefits of the acquisition or joint
venture. In addition, we have limited experience with respect to negotiating an
acquisition and operating an acquired business. If future acquisitions disrupt
our operations, our business may suffer.
                                      -11-
If we are unable to adequately protect our intellectual property or become
subject to a claim of infringement, our business may be materially adversely
affected.
	Our success and ability to compete depend substantially upon our
internally developed technology. Any misappropriation of our technology could
seriously harm our business. In order to protect our technology and products, we
rely on a combination of trade secret, copyright and trademark law. Despite our
efforts to protect our intellectual property rights, unauthorized parties may
attempt to copy or otherwise obtain and use our software or technology or to
develop software with the same functionality. Policing unauthorized use of our
products is difficult and we cannot be certain that the steps we have taken will
prevent misappropriation, particularly in foreign countries where the laws may
not protect our intellectual property rights as fully as in the United States.
	Although we have not received any notices from third parties alleging
infringement claims, third parties could claim that our current or future
products or technology infringe their proprietary rights. We expect that
software developers will increasingly be subject to infringement claims as the
number of products and competitors providing software and services in the
mediation, rating billing and customer care industry increase and overlaps
occur. Any claim of infringement by a third party could cause us to incur
substantial costs defending against the claim, even if the claim is invalid, and
could distract our management from our business. Furthermore, a party making
such a claim could secure a judgment that requires us to pay substantial
damages. A judgment could also include an injunction or court order that
could prevent us from selling our software. Any of these events could seriously
harm our business.

	If anyone asserts a claim against us relating to proprietary technology
or information, we might seek to license their intellectual property or to
develop non-infringing technology. We might not be able to obtain a license on
commercially reasonable terms or on any terms. Alternatively, our efforts to
develop non-infringing technology could be unsuccessful. Our failure to obtain
the necessary licenses or other right or to develop non-infringing technology
could prevent us from selling our software and could therefore seriously harm
our business.


Some members of our board of directors may have conflicts of interest with us,
and some of these conflicts may be resolved in a manner adverse to us.

	Mr. Mohan, a member of our board of directors, is a general partner of
Summit Partners and a director of Martin and Associates, a company partially
owned by Summit Partners. Martin and Associates is a provider of billing and
customer care software for local telephony providers and might compete with us
in the future. Mr. Mohan, as a director of our company, has fiduciary duties,
including a duty of loyalty, to our company but may also have conflicts of
interest with respect to matters potentially involving or affecting us, such as
acquisitions or other corporate opportunities that may be suitable for both us
and Summit Partners or Martin and Associates. Although we believe that Mr. Mohan
will be able to fulfill his fiduciary duties to our shareholders despite his
involvement with Summit Partners, there could be potential conflicts of
interest when Mr. Mohan is faced with decisions that could have different
implications for our company and Summit Partners. These conflicts could be
resolved in a manner adverse to us, which could harm our business.
                                      -12-
For more information relating to how we handle conflicts of interest, see
Item 6.C "Board Practices - Approval of Specified Related Party Transactions
under Israeli Law."

Because a substantial majority of our revenues are generated outside of Israel,
our results of operations could suffer if we are unable to manage international
operations effectively.

	During 2002, approximately 91% of our revenues were generated outside
of Israel. Our sales outside of Israel are made in more than 25 countries. We
currently have sales and support offices located in Hasbrouck Heights,
New Jersey, Beijing, China, and Jassy, Romania. In addition, we have an
R&D team in Jassy, Romania. We plan to establish additional facilities in other
parts of the world. The expansion of our existing international operations and
entry into additional international markets will require significant management
attention and financial resources. Our ability to penetrate some international
markets may be limited due to different technical standards, protocols and
requirements for our products in different markets. We cannot be certain that
our investments in establishing facilities in other countries will produce
desired levels of revenue. In addition, conducting our business internationally
subjects us to a number of risks, including:
* staffing and managing foreign operations;
* increased risk of collection;
* potentially adverse tax consequences;
* the burden of compliance with a wide variety of foreign laws and regulations;
* burdens that may be imposed by tariffs and other trade barriers; and
* political and economic instability.

Our business may be negatively affected by exchange rate fluctuations.

	Although most of our revenues are denominated in U.S. dollars,
approximately 45% of our expenses are incurred in New Israeli Shekels, or NIS.
As a result, we may be negatively affected by fluctuations in the exchange rate
between the Euro or the NIS and the U.S. dollar. We cannot predict any future
trends in the rate of inflation in Israel or the rate of devaluation of the NIS
against the U.S. dollar. If the U.S. dollar cost of our operations in Israel
increases, our U.S. dollar-measured results of operations will be adversely
affected. In addition, devaluation in the Euro or local currencies of our
customers relative to the U.S. dollar could cause customers to decrease or
cancel orders or default on payment. We may choose to limit these exposures by
entering into hedging transactions. However, hedging transactions may not enable
us to avoid exchange-related losses, and our business may be harmed by exchange
rate fluctuations.  The imposition of price or exchange controls or other
restrictions on the conversion of foreign currencies could affect our ability to
collect payments, which in turn, could have a material adverse effect on our
results of operations and financial condition.

Breaches in the security of the data collected by our systems could adversely
affect our reputation and hurt our business.

	Customers rely on third-party security features to protect due privacy
and integrity of customer data. Our products may be vulnerable to breaches in
security due to failures in the security mechanisms, the operating system, the
hardware platform or the networks linked to the platform. MIND-iPhonEX, which
                                      -13-
provides web access to information, presents additional security issues for our
customers. Security vulnerabilities could jeopardize the security of information
stored in and transmitted through the computer systems of our customers. A party
that is able to circumvent our security mechanisms could misappropriate
proprietary information or cause interruptions in the operations of our
customers. Security breaches could damage our reputation and product acceptance
would be significantly harmed, which would cause our business to suffer.
Risks Relating to the Market for our Ordinary Shares

Holders of our ordinary shares who are United States residents face income tax
risks.

	We believe that we classified as a passive foreign investment company,
or PFIC, for 2002. Our treatment as a PFIC could result in a reduction in the
after-tax return to the U.S. holders of our ordinary shares and could cause a
reduction in the value of our shares. For U.S. federal income tax purposes, we
will be classified as a PFIC for any taxable year in which either:
* 75% or more of our gross income is passive income; or
* 50% or more of the average value of all of our assets for the taxable year
  produce, or are held for the production of, passive income.
As a result of our substantial cash position and the decline in value of our
ordinary shares, we believe that we classified as a PFIC for 2002 under the
asset test. We could also be deemed a PFIC in 2003. A separate determination
must be made each year as to whether we are a PFIC.
Highly complex rules apply to U.S. holders of our ordinary shares if we are
treated as a PFIC for U.S. federal income tax purposes for any year during the
U.S. holder's holding period. Accordingly, U.S. holders are urged to consult
their tax advisors regarding the application of these tax rules. U.S. residents
should carefully read Item 10.E "Taxation - United States Federal Income Tax
Considerations" for a more complete discussion of the U.S. federal income tax
risks related to owning and disposing of our ordinary shares.

Our share price has fluctuated and could continue to fluctuate significantly.

	The market for our ordinary shares, as well as the prices of shares of
other technology companies, has been volatile. The price of our ordinary shares
has decreased significantly since our initial public offering in August 2000.
A number of factors, many of which are beyond our control, may cause the market
price of our ordinary shares to fluctuate significantly, such as:
* fluctuations in our quarterly revenues and earnings and those of our publicly
  held competitors;
* shortfalls in our operating results from the levels forecast by securities
  analysts;
* public announcements concerning us or our competitors;
* changes in pricing policies by us or our competitors;
* market conditions in our industry;
* the general state of the securities market (particularly the technology
  sector); and
* the relatively small number of shares trading in the public market
We do not control these matters and any of them may adversely affect our
business internationally. In addition, trading in shares of companies listed on
the Nasdaq National Market in general and trading in shares of technology
companies in particular has been subjected to extreme price and volume
fluctuations that have been unrelated or disproportionate to operating
                                      -14-
performance. These broad market and industry factors may depress our share
price, regardless of our actual operating results.

Substantial sales of our ordinary shares could adversely affect our share price.

	Sales of a substantial number of ordinary shares could adversely affect
the market price of our ordinary shares. Given the likely volatility that exists
for our ordinary shares, such sales could cause the market price of our
ordinary shares to decline.
As of June 11, 2003, we had outstanding 20,686,220 ordinary shares and 4,724,775
ordinary shares that are freely tradable without restriction or further
registration under the federal securities laws unless purchased by our
"affiliates", as that term is defined in Rule 144 under the Securities Act. In
addition, many of our ordinary shares were issued outside the United States
under Regulation S and are freely tradable without restriction or further
registration under the federal securities laws unless held by our affiliates.
Holders of 15,961,445 ordinary shares have the right to require us to register
their shares on two occasions, and have incidental registration rights with
respect to those ordinary shares. In addition, as of June 11, 2003  there were
outstanding options to purchase a total of 1,749,420 ordinary shares, of which
702,550were vested, and we were authorized to grant options to purchase
1,531,280  additional ordinary shares. We have filed a registration statement
on Form S-8 covering all of the ordinary shares issuable upon the exercise of
options under our stock option plans, at which time these shares will be
immediately available for sale in the public market, subject to the terms of the
related options.

If we do not satisfy all the requirements for continued listing on the Nasdaq
National Market, our shares may be delisted.

	The Nasdaq Stock Market has a number of requirements for the continued
listing of shares on the Nasdaq National Market.  For example, a company's
shares must have a minimum bid price of $1.00 per share and the company is
required to maintain a minimum market value of publicly held shares of
$5 million. If we do not comply with the continued listing requirements, we
could be delisted from the Nasdaq National Market.  Our shares would then be
quoted on the Nasdaq SmallCap Market (if we satisfy the continued listing
requirements for such market) or the Over-The-Counter Bulletin Board. If our
shares are delisted from the Nasdaq National Market, our share price might
decline further.

Our ordinary shares are listed for trading in more than one market and this may
result in price variations.

	Our ordinary shares are listed for trading on the Nasdaq National
Market, or Nasdaq, and on the Tel Aviv Stock Exchange, or TASE. Trading in our
ordinary shares on these markets is made in different currencies (U.S. dollars
on Nasdaq and New Israeli Shekels on TASE), and at different times (resulting
from different time zones, different trading days and different public holidays
in the United States and Israel). Actual trading volume on the TASE is
insignificant and as such is subject to volatility.  The trading prices of our
ordinary shares on these two markets often differ, resulting from the factors
described above, as well as differences in exchange rates. Any decrease in the
trading price of our ordinary shares on one of these markets could cause a
                                      -15-
decrease in the trading price of our ordinary shares on the other market.

Some of our shareholders continue to be able to control the outcome of matters
requiring shareholder approval.

	As of June 11, 2003, Monica Eisinger, Lior Salansky,
Polar Communications Ltd. and Summit Partners and its affiliates beneficially
own an aggregate of 16,037,794 ordinary shares representing approximately 77.5%
of our outstanding ordinary shares. These shareholders, if they vote together,
are able to control the outcome of various actions that require shareholder
approval. For example, these shareholders could elect all of our directors,
delay or prevent a transaction in which shareholders might receive a premium
over the prevailing market price for their shares and prevent changes in control
or management. This concentration of ownership may adversely affect our share
price. Risks Relating to Our Location in Israel

Potential political, economic and military instability in Israel may harm our
operating results.

	We are organized under the laws of the State of Israel and a substantial
portion of our assets, and our principal operations, are located in Israel.
Accordingly, our operations, financial position and operating results are
directly influenced by economic, political and military conditions in and
relating to Israel. Since the establishment of the State of Israel in 1948,
a condition of hostility, varying in degree and intensity, has led to security
and economic problems for Israel. Since October 2000, there has been a high
level of violence between Israel and the Palestinians, which has led to a crisis
in the Middle East peace process and affected Israel's relationship with its
Arab citizens and several Arab countries. Any armed conflicts or political
instability in the region could negatively affect business conditions and harm
our results of operations. We cannot predict the effect on the region of the
increase in the degree of violence between Israel and the Palestinians.
Furthermore, several countries restrict business with Israel and Israeli
companies, and additional countries may restrict doing business with Israel and
Israeli companies as a result of the recent increase in hostilities. These
restrictive laws and policies may seriously harm our operating results,
financial condition or the expansion of our business. In addition, the current
situation in Israel could adversely affect our operations if our customers
and/or strategic allies believe that instability in the region could affect our
ability to fulfill our commitments.

We currently participate in or receive tax benefits from government programs.
These programs require us to meet certain conditions and these programs and
benefits may be terminated or reduced in the future.

	We receive tax benefits under Israeli law for capital investments that
are designated as "Approved Enterprises." To maintain our eligibility for these
tax benefits, we must continue to meet several conditions including making
required investments in fixed assets. If we fail to comply with these conditions
in the future, the tax benefits received could be cancelled. The Israeli
government has reduced the benefits available under this program in recent years
and has indicated that it may reduce or eliminate these benefits in the future.
These tax benefits may not continue in the future at their current levels or at
any level. From time to time, we submit requests for expansion of our Approved
                                      -16-
Enterprise programs or for new programs. These requests might not be approved.
The termination or reduction of these tax benefits could seriously harm our
business, financial condition and operating results. For more information about
Approved Enterprises, see Item 10.E "Taxation - Law for the Encouragement of
Capital Investments, 1959" and Note 7 to our financial statements contained in
Item 18.

Because we have received grants from the Office of the Chief Scientist, we are
subject to on-going restrictions.

	We have received grants in the past from the Office of the Chief
Scientist of the Israeli Ministry of Industry and Trade. According to Israeli
law, any products developed with grants from the Office of the Chief Scientist
are required to be manufactured in Israel, unless we obtain prior approval of a
governmental committee. As a condition to obtaining this approval, we may be
required to pay the office of the Chief Scientist up to 300% of the grants we
received. In addition, we are prohibited from transferring to third parties the
technology developed with these grants without the prior approval of a
governmental committee. Approval is not required for the export of any products
resulting from the funded technology.

Our operating results may be negatively affected by the obligation of some of
our key personnel to perform military service.

	Some of our executive officers and employees in Israel are obligated to
perform up to 36 days of military reserve duty annually, and may, during times
of emergency, be required to serve for longer periods of time. There are
proposals to increase this annual commitment.  Our operations could be
disrupted by the absence for a significant period of one or more of our
executive officers or key employees due to military service. Any disruption in
our operations would harm our business.

It may be difficult to enforce a U.S. judgment against us, our officers and
directors or to assert U.S. securities laws claims in Israel.

	We are incorporated in the State of Israel. Substantially all of our
executive officers and directors are nonresidents of the United States, and a
substantial portion of our assets and the assets of these persons are located
outside the United States. We have been informed by our legal counsel in Israel
that original actions may not be instituted in Israel to enforce civil
liabilities under the Securities Act and the Exchange Act. However, subject to
specified time limitations, Israeli courts are authorized to enforce a United
States final executory judgment in a civil matter, including a monetary or
compensatory judgment in a non-civil matter provided that:
* adequate service of process has been effected and the defendant has had a
  reasonable opportunity to present his arguments and evidence;
* the judgment and the enforcement thereof are not contrary to the law, public
  policy, security or sovereignty of the State of Israel;
* the judgment was obtained after due process before a court of competent
  jurisdiction according to the rules of private international law prevailing in
  Israel;
* the judgment was not obtained by fraud and does not conflict with any other
  valid judgment in the same matter between the same parties;
* an action between the same parties in the same matter is not pending in any
                                      -17-
  Israeli court at the time the lawsuit is instituted in the United States
  court; and
* the U.S. court is not prohibited by law from enforcing judgments of Israel
  courts.
Therefore, it may be difficult for a shareholder, or any other person or entity,
to collect a judgment obtained in the United States against us or any of these
persons, or to effect service of process upon these persons in the United
States.

Provisions of Israeli law and our articles of association may delay, prevent or
make difficult a change of control and therefore may depress the price of our
stock.
	Some of the provisions of our articles of association and Israeli law
could, together or separately:
* discourage potential acquisition proposals;
* delay or prevent a change in control; and
* limit the price that investors might be willing to pay in the future for our
  ordinary shares.
In particular, our articles of association provide that our board of directors
will be divided into three classes that serve staggered three-year terms and
authorize our board of directors to adopt protective measures to prevent or
delay a coercive takeover, including without limitation the adoption of a
"Shareholder Rights Plan". In addition, Israeli corporate law regulates mergers
and acquisitions of shares through tender offers, requires approvals for
transactions involving significant shareholders and regulates other matters that
may be relevant to these types of transactions. See Item 10.B "Memorandum and
Articles of Associations -Mergers and Acquisitions under Israeli Law."
Furthermore, Israeli tax law treats stock-for-stock acquisitions between an
Israeli company and a foreign company less favorably than does U.S. tax law.
For example, Israeli tax law may subject a shareholder who exchanges his
ordinary shares for shares in another corporation to taxation prior to the sale
of the shares received in such stock-for stock swap.

Item 4.		Information on the Company

A.	History and Development of the Company.

General

	Our name is MIND C.T.I. Ltd. for both legal as well as commercial
purposes. We were incorporated under the laws of the State of Israel on
April 6, 1995 as a company with limited liability, and we are subject to the
Israeli Companies Law, 1999 and the regulations promulgated thereunder.
Our principal executive offices are located at Industrial Park, Building 7,
Yoqneam 20692, Israel. Our telephone number is +972 4 993 6666. Our agent in
the United States is MIND C.T.I. Inc. and its principal offices are located at
777 Terrace Avenue, Hasbrouck Heights, New Jersey, 07604.

Developments since January 1, 2002

	During 2002 we deployed our 3G solution at our first mobile operator,
H3G Italy. The solution enables diverse multimedia mobile services for data,
content and video for prepaid and post-paid subscribers and provides real-time
AAA (Authentication, Authorization and Accounting). H3G Italy obtained a
                                      -18-
universal mobile telecommunications system (UMTS) license in Italy in
November 2000 and is aiming at becoming the first Multimedia Mobile Operator of
the Italian market. The listing of our shares on the Tel-Aviv Stock Exchange, or
TASE, was completed and trading of our shares on TASE began on July 11, 2002.
Our ordinary shares are quoted on the Tel-Aviv Stock Exchange under the symbol
MIND and are part of TELETEC index.
	Prior to listing our shares on TASE, our share capital was divided into
ordinary shares and non-voting ordinary shares. However, the Israeli Securities
Law, 1968, prohibits the initial listing on the TASE of the securities of a
company if such company's share capital is divided into more than one class of
shares where the voting rights of such shares do not carry equal voting rights
in proportion to their nominal value.  In order to complete the listing of our
shares on TASE in compliance with the Israeli Securities Law, 1968, our
non-voting ordinary shares were converted into ordinary shares and our
memorandum and articles of association were amended so that we will only have
one class of shares, the ordinary shares. The conversion of all of the
non-voting ordinary shares into ordinary shares on a one-for-one basis and the
corresponding amendment of the Company's memorandum and articles of association
were approved by our shareholders on June 27, 2002.

Principal Capital Expenditures

	During 2000, 2001 and 2002 the aggregate amount of our capital
expenditures was $3.4 million. These expenditures were principally for the
purchase of testing and other equipment, and include $1.0 million paid in cash
during 2001 for the purchase of the VeraBill product line. Although we have no
material commitments for capital expenditures, we anticipate an increase in
capital expenditures if we purchase or merge with companies or purchase assets
in order to obtain complementary technology and to expand our product offerings,
customer base and geographical presence.

B.	Business Overview

Overview

	Mediation, Rating, Billing and Customer Care Solutions

	We develop, manufacture and market real-time mediation, rating, billing
and customer care software for multiple services, including voice, data and
content services.
	Our billing and customer care software, known as MIND-iPhonEX, enables
providers of multiple IP-based services to meet complex, mission-critical
billing and customer care needs. MIND-iPhonEX is scalable, which means that it
is easily adapted to changes in the size and configuration of a service
provider's network. It interfaces with the IP telecommunications equipment of
major manufacturers, such as Cisco Systems and Ericsson, as well as with
traditional telecommunication equipment. We expect that our software will also
support other services that may be offered in the future by operators over the
IP infrastructure. The basic difference between billing for these services is
the method of rating (calculating the cost) of each service. For example, voice
is rated by duration and destination, data is rated either by packets or by
bytes, and content is rated by its nature.
	During 2001 we completed the acquisition of the VeraBill line of
telephony billing and customer care software solutions from
                                      -19-
Veramark Technologies Inc. The VeraBill product line, now marketed under the
MindBill name, provides mediation, provisioning and billing solutions for small
and medium size wireline and wireless mobile telephony carriers. The MindBill
product line targets wireline and wireless telephony carriers with up to a few
hundred thousand subscribers.
	MIND-iPhonEX, MindBill and VeraBill have been installed for a large base of
customers worldwide, including:
* Traditional telecommunications service providers that also offer Voice over IP
  telephony, such as China United Telecommunications Corp. (China Unicom),
  Marconi Telecom, Singapore Telecommunications Limited (SingTel), Sovintel,
  Sri Lanka Telecom, Telefonica del Peru and Verizon;
* Internet telephony service providers that primarily offer Voice over IP
  services and do not offer traditional telephone services, including,  AzulTel,
  BudgetTel Australia Pty. Ltd., ePHONE Telecom Inc. and First Mobile Japan ;
* Internet service providers such as S.C. Artelecom S.A. and Vivodi
  International;
* Traditional wireline telephony providers such as Antigua Public Utilities
  Commission, Tanzania Telecom and Telefonia Bonairiano;
* GSM wireless telephony providers, including American Samoa Telecommunications
  Authority and SouthEast Telephone; and
* 3rd generation (3G) mobile operators that provide broadband mobile IP
  services, such as H3G Italy.

	Enterprise Call Management Systems

	In addition to our billing and customer care software, we offer two call
management systems used by organizations for call accounting, traffic analysis
and fraud detection. Our enterprise software, which we call PhonEX, has been
installed in many locations throughout the world for customers including
BezeqCall Communications Ltd., Credit Suisse First Boston and
STMicroelectronics. Our other enterprise software which we call MEIPS, is a
product directed towards the same market segment where IP switches are
implemented. MEIPS has been installed at a variety of locations around the world
for customers, including Cisco Systems and Getronics.

	Professional Services

	We also provide professional services, primarily to our billing and
customer care customers, consisting of installation, customer support, training
and maintenance services, customization and project management. Our professional
services also include turnkey project implementation services.

Our Market Opportunity

	IP Market - Technology Background

	IP is establishing itself as the infrastructure of choice for voice,
data and video content transmission. Content is compressed into electronic data
packets that are transmitted individually to the final destination. Each packet
can follow a different route as each packet contains the IP address of its
destination. Upon arrival, the content is decompressed and reconstituted into
its original format. Packet-based transmission optimizes a network's capacity
by utilizing bandwidth only during the actual transmission. As data networks
are not regulated and distance is irrelevant, IP networks represent a
                                      -20-
cost-efficient infrastructure for telecommunication carriers.

	Voice Over IP Industry

	Voice over IP, also known as Internet telephony, is the real-time
transmission of voice communications over the public Internet and private
networks based on Internet Protocol, commonly known as IP. Internet Protocol is
the process by which data is transmitted from one device to another on the
Internet. Voice over IP offers a number of advantages to subscribers over
traditional telephony. Providers of Voice over IP services can offer their
subscribers enhanced voice and data communications services and applications,
such as:
* unified messaging services permitting single source retrieval of voice mail,
  e-mail and faxes through the Internet or by phone or any other
  Internet-capable devices;
* personal computer-to-phone services allowing subscribers to place calls
  through a personal computer and speak to a party who uses a standard
  telephone; and
* web-based services that allow a live voice connection from any web site to any
  regular telephone over the Internet while continuing to view the web-site.
	In addition, Voice over IP service providers typically enjoy lower
capital costs because the infrastructure for networks based on Internet Protocol
is less expensive than that for traditional telecommunications networks.
To date, typically Voice over IP providers bypass the international settlement
process, which represents a significant portion of international long distance
tariffs. As a result, Voice over IP service providers are able to offer their
customers lower rates for telephony services.

	Wireless IP Services Industry

	The new generations of mobile communication technologies, starting with
2.5G technologies such as general packet radio service (GPRS) and 3G
technologies such as universal mobile telecommunications system (UMTS), pose new
challenges for wireless operators, service and content providers, and enable new
and complex revenue streams and partnerships. The new technologies offer a much
wider bandwidth based on packet switching and an 'always on' mode of operation.
This opens the market to a variety of new services and options that were not
feasible in 2G networks. Furthermore, because the average revenue per user
(ARPU) for traditional voice services is declining, operators are looking for
new sources of revenue based on these next-generation technologies.
	Wireless LAN (WLAN) networks or as commonly called "Wireless Fidelity"
or Wi-Fi, have recently expanded beyond the private enterprise to offer services
providers unique advantages as part of a public wireless service solution,
enabling users to use public "hot-spots" located at public venues, such as
convention centers, hotels, airports and restaurants, for Internet access.
Existing ISPs or new public Wi-Fi Internet Service Providers (WISPs) have begun
to provide hot spots services, as have incumbent mobile operators, which see
the WLAN technology a complementary service or even an alternative to their 3G
offerings.

	Billing and Customer Care Industry

	Billing and customer care software is among the key components of any
telecommunications service provider's systems because they enable the service
                                      -21-
provider to track and bill for usage, manage revenues and customer relations and
devise marketing programs and rate plans. In a competitive telecommunications
market, sophisticated billing and customer care software can provide a
competitive advantage as service providers attempt to differentiate themselves
by providing superior features, like cross-discounting and a single bill for
multiple services. As service providers broaden their service offerings to
include multiple IP-based services, the demand for more sophisticated billing
software suitable for these services, is growing. We believe that as providers
of IP-based services continue to expand their service offerings, they will
increasingly need products that allow them to monitor and bill their subscribers
based on the type and content of services provided. As a result, we believe that
this trend will increase the demand for sophisticated billing and customer care
products for what is known as convergent billing.
	Many existing billing and customer care software products do not meet
the demands of the increasingly competitive and dynamic environment of multiple
IP-based services. Traditional billing systems are typically designed to support
a particular type of service provider, for instance, either wireline or
wireless, and a specific size of network. As a result, these billing systems
require time and expense to accommodate a growing subscriber base or new
products and features. Traditional billing systems are also generally unable to
efficiently support multiple services or convergent networks. In addition,
traditional billing systems are typically limited to periodic or
"batch-oriented" processing, and cannot provide the real-time processing
typically required by providers of IP-based services.
	Providers of multiple IP-based services typically require billing and
customer care products that can handle authentication, authorization and
accounting needs in real-time in order to determine the types of services to
which the subscriber is entitled, as well as any applicable limits to the
availability of the services. This real-time functionality is particularly
important for prepaid billing plans. Finally, billing and customer care
software products need to be capable of being easily adaptable to changes in the
size and configuration of a IP provider's system, or scalable, to enable rapid
growth in subscriber base, and to permit easy adaptation to emerging products
and services.

	Our Mediation, Rating, Billing and Customer Care Solution

	We develop, market and support real-time, scalable mediation, rating,
billing and customer care software for providers of voice, data and content
services that are designed to meet their complex, mission-critical provisioning,
authentication, authorization, accounting and reporting needs. Our billing and
customer care software provides our customers with the following benefits:
* Real-Time Solution. Service providers require a system that enables
  authentication, authorization and accounting and, if needed, cut-off, all in
  real-time. We believe that MIND-iPhonEX is one of the few billing and customer
  care products designed for IP services that offers real-time functionality for
  both prepaid and postpaid billing plans, and that has a real-time rating
  engine able to support rating of voice, data and content services
  simultaneously;
* Scalability. MIND-iPhonEX is designed to be easily adapted to changes in the
  size and configuration of a service provider's network. Our products enable
  the network of a service provider to grow from accommodating a small number of
  subscribers to a large number of subscribers, primarily through the addition
  of hardware. This feature allows a service provider to expand its
                                      -22-
  infrastructure and its subscriber base without the need to redesign or replace
  its billing and customer care software. The scalability of our software is
  important since many IP service providers begin with a relatively small
  subscriber base and experience rapid growth. For example, we designed and
  provided a billing and customer care solution for China Unicom, which started
  offering Voice over IP services in 1999. When China Unicom first deployed our
  software in May 1999, it was capable of supporting one million users.
  Our software was upgraded to five million users in November 1999, to 20
  million users in June 2000 and to 80 million users in June 2001. Increases in
  the potential number of users have been, and future increases will be,
  accomplished without the need to modify or replace our installed software;
* Interoperability. Currently, there are no industry-accepted standards for the
  interface between IP telecommunications equipment and IP billing products. Our
  IP billing system is fully interoperable with the IP telecommunications
  equipment of most of the leading manufacturers, including Alcatel, Cisco,
  Ericsson and VocalTec, for Voice over IP and data services. This
  interoperability provides us with a competitive advantage, as it enables our
  customers to use networks composed of equipment manufactured by multiple
  vendors. It also allows providers to upgrade an existing network with new and
  different equipment without changing their billing and customer care products;
  and
* Improved Time to Market. MIND-iPhonEX is a modular, extensible software
  product based on software architecture designed for easy adaptability and
  implementation. These features allow each of our customers to tailor our
  products to meet their individual needs in terms of the number of subscribers
  serviced and the variety of services provided. In addition, due to its
  adaptable design, MIND-iPhonEX can be customized relatively quickly, enabling
  our customers to improve their time to market as they initially implement
  their networks and, later, as they add and modify the services they provide.

	Our Strategy

	Our objective is to be a leader in the market for billing and customer
care software for multiple IP-based services as the market for these products
grows. The key elements of our strategy include:
* Leverage our brand name recognition and technical expertise. We were one of
  the first to provide billing and customer care software for IP telephony,
  introducing MIND-iPhonEX in 1997. We believe that our early position in the
  market and our reputation for offering high quality, reliable billing and
  customer care software has provided us with significant brand name recognition
  among Voice over IP providers. We intend to leverage our reputation, brand
  name recognition and expertise to be a leader in the market for billing and
  customer care software for multiple IP-based services;
* Enhance alliances with industry leaders. We have established cooperative
  relationships with leading manufacturers of IP telecommunications equipment
  such as Alcatel and Cisco. We team with these industry leaders in marketing
  activities, as well as in the research and development and implementation
  stages of product development and enhancement. Our alliances allow us to
  broaden our marketing capabilities significantly, support new features offered
  by equipment vendors as these features are introduced to the market, and
  maintain our technology leadership over our competitors. We intend to continue
  to leverage these alliances in order to solidify and expand our market
  presence;
* Maintain and expand our technological expertise. We believe that our
                                      -23-
  reputation in the market is due in large part to our technological expertise.
  We make significant investments in our research and development to continually
  enhance our products to meet the changing needs in the IP industry. We intend
  to continue our commitment to technology, both to enhance our existing
  products and to develop new products for growing markets;
* Offer convergent IP billing products. As providers of IP-based services
  continue to broaden their service offerings, we believe that they will
  increasingly need billing and customer care products to monitor and bill their
  customers based on the type and content of the services provided. For example,
  instead of the flat fee for access pricing model, Internet service providers
  may want to bill subscribers based on the type and content of the services
  used. We intend to leverage our position in the market for billing and
  customer care software for IP and our technological expertise to be a leading
  provider of convergent billing products; and
* Expand professional services opportunities. As IP-based service offerings
  become more complex, our customers increasingly require consulting services,
  especially for customization, as well as for project management, installation
  and training, technical support and maintenance. This provides us with the
  opportunity to increase our revenue base from existing customers. We have
  begun to capitalize on this opportunity and, as a result, fees from providing
  professional services are expected to increase as a percentage of our
  revenues.

	Our Products and Services

	Mediation, Rating, Billing and Customer Care Solutions

	MIND-iPhonEX

	MIND-iPhonEX is a real-time, fully scalable mediation, rating, billing
and customer care product for voice, data and content that meets the
mission-critical needs of service providers and is interoperable with the
IP telecommunications equipment of major manufacturers as well as with
traditional telecommunications equipment.
	Our highly functional and adaptable product enables our customers to
quickly deploy IP networks and to rapidly grow and add new services.
MIND-iPhonEX supports both prepaid billing plans, in which customers pre-pay
for the services, or postpaid billing plans, in which customers pay for the
services after using them, on the basis of either limited or unlimited credit
lines. The key functionalities of MIND-iPhonEX are as follows:
* Mediation. The MIND-iPhonEX mediation platform provides real-time and batch
  event collection interfacing with the content, data, service delivery and
  routing network elements. Our mediation platform incorporates an intelligent
  processing engine to correlate, aggregate, merge and filter raw events into a
  single valuable usage event;
* Provisioning. Provisioning involves setting up the ability of a subscriber to
  use services. The MIND-iPhonEX customer database includes information
  regarding customers' personal data, identification parameters and the services
  provided. This information can be provided in real time or on demand to any
  external system, such as network elements and legacy billing solutions. The
  data provided includes service parameters such as enabled features and
  quantitative limits;
* Authentication. MIND-iPhonEX authenticates subscribers who dial into the
  network to use the service. Authentication is based on a number of methods,
                                      -23-
  including user codes, passwords and caller line identification. The
  identification information is passed to the MIND-iPhonEX system, where the
  subscriber is authenticated and then permitted to use the service;
* Authorization. The MIND-iPhonEX system authorizes a particular usage, among
  other ways, by:
* reviewing the destination of a call to determine whether a call to this
  destination is permitted or reviewing the amount of data and the type of
  content to determine whether the data session is permitted; or
* reviewing the amount of money remaining on the subscriber's prepaid card and
  pre-rating the call or data session that the subscriber desires to make, using
  the rating engine described below; or
* reviewing the balance of a credit limit of a prepaid plan and calculating the
  resulting cut-off time, if any, of the call or data session;
* Accounting. When each call is completed, MIND-iPhonEX uses the rating engine
  described below to determine the amount to be charged to the subscriber and
  updates the balance of the account in real-time. In addition, the usage
  detail records are stored on the MIND-iPhonEX system for invoicing and
  reporting;
* Interconnect Billing. The networks operated by our customers are typically
  interconnected with the networks of other telecommunications service
  providers. Interconnecting providers need to charge other providers for
  carrying each other's services over their networks. MIND-iPhonEX generates
  reports that enable providers to bill for traffic and services that are being
  transported across their networks by other providers;
* Multiple Services and Products. MIND-iPhonEX allows service providers to
  provide to their customers services such as Web access, Web hosting, e-mail
  and unified messaging, application hosting, domain registration, e-learning,
  e-commerce, voice and fax over IP, e-gaming, Web TV and Virtual Private
  Networks. Service providers need the ability to bundle groups of services into
  tailor-made packages for which they can offer special rates, discounts and
  promotions. There are different classes of customers with respect to the
  availability, bandwidth, and quality of service requirements for these
  services. MIND-iPhonEX offers an easy way to define these services, combine
  them into products, and rate each service and product differently;
* Rating Engine. MIND-iPhonEX offers a real-time and flexible rating engine that
  allows service providers to offer subscribers a wide variety of billing plans.
  This flexibility also allows service providers to set different tariff
  parameters. For example, our billing and customer care software can support
  different rates for individual customers and for different customer groups,
  different rates for different types of data transferred, rates based on the
  day of the week and time of the day and rates based on the origin and
  destination of the call. MIND-iPhonEX also allows international service
  providers to define rates in different currencies using the product's
  multi-currency functionality;
* Support for Customer Relationship Management. The Customer Relationship
  Journal is a feature of the MIND-iPhonEX that enables service providers to
  keep track of all subscriber-related events, including subscriber inquiries,
  payments and customer information updates. The Journal also stores a history
  of all interactions between the service provider and the subscriber. This tool
  helps the service provider identify valued customers and build positive
  customer relationships;
* Subscriber Web Interface. MIND-iPhonEX has a user-friendly subscriber web
  interface that allows subscribers to resolve billing inquiries themselves.
  Individual customers can obtain real time information about their account,
                                      -25-
  including details of calls made that have not yet been invoiced, like the
  time, destination, length and cost of each call. The subscriber can also
  browse invoices, call details and payment history records. This feature is
  convenient for subscribers and efficient for service providers as it reduces
  service costs;
* Customer Support Representative Web Interface. MIND-iPhonEX has a
  user-friendly customer support representative web interface that allows
  operators of the system to perform customer care from any location. The
  Customer Support Representative web interface is an extension of the
  management capabilities of the service provider's system. This feature is of
  particular significance to service providers who have remote operations
  centers and are required to provide local support of their system in more than
  one location;
* Call Management and Traffic Analysis Reports. MIND-iPhonEX's Call Management
  and Traffic Analysis features allow service providers to generate reports and
  graphic analyses of usage activity. These reports contain information
  regarding peak hours, usage loads to different destinations, the number of
  sessions per minute for a specific gateway or group of gateways, the duration
  of sessions and other parameters. These features enable service providers to
  analyze subscriber behavior and use the information to improve their marketing
  and business development strategies. In addition, the traffic analyses
  reports assist service providers in planning the growth and development of
  their networks; and
* Fraud Detection. MIND-iPhonEX contains a fraud detection tool that enables
  detection of "stolen" calls and telephone misuse. MIND-iPhonEX Guard detects,
  locates and warns of any suspicious activity by activating alarms. It is
  easily customized to suit the needs of each service provider and allows a
  provider to build fraud inquiries based on a defined set of parameters. When
  these specific parameters are violated, MIND-iPhonEX Guard activates an alarm
  at four different alarm levels. Different actions may be implemented at each
  level. For instance, the operator may be alerted to possible fraud via e-mail,
  fax, pager, audio or visual alarms.

	MindBill

	MindBill is a billing and customer care solution for traditional
wireline and wireless networks that meets service provider needs for tracking
and billing for usage, managing revenues and customer relations and devising
marketing programs and rate plans. In addition, MindBill provides solutions for
management tasks such as service provisioning, controlling inventory and
tracking service issues.
	The key functionalities of MindBill are as follows:
* Event Collection. There is a wide array of activity that takes place on the
  network, with respect to customer usage. Different switches and different
  types of events can produce records in various formats to be used for billing.
  A switch interface, or front end, is used with MindBill to read data and to
  then create a common format for rating purposes. This process can also use the
  raw data to determine and apply additional data to the record, also for rating
  purposes;
* Call Management. MindBill's Call Management module allows the network operator
  to define very simple or very complex plans, referred to as service plans, for
  applying cost to usage. Based on the information that is provided in a call
  detail record from the switch and then formatted by the front-end interface,
  the cost of a call can be measured using dialing patterns, meter pulses or
                                      -26-
  message types. In addition, rate bands, duration (simple and tiered), flat
  fee and other methods are used to calculate an event's cost. Weekday, weekend,
  holiday and time of day can also be factored into the costing process;
* Rating. The MindBill rating engine takes the formatted event records, finds
  their subscriber(s) and the respective service plan and applies a cost to the
  call, then stores the records to be used at billing time to produce customer
  invoices. The rated records may be used to determine a customer's standing
  with regard to his or her credit limit;
* Roaming. The need for more widespread roaming ability was the primary
  catalyst to the development of GSM. MindBill supports the billing of visiting
  subscribers on a network employing MindBill and bills subscribers of that
  network for roaming on another network;
* Provisioning. MindBill provides a direct connection with the home location
  register in order to accurately bill subscribers for services that they are
  using, and to provide them with quick activation or deactivation of services
  upon request;
* Financial Transactions. MindBill allows the network operator to make
  adjustments and to credit and debit customer balances. In addition, MindBill
  performs and tracks payments and one-time charges for customers in a single
  screen interface to banks and other financial institutions that can be
  developed for use with MindBill to support a variety of payment methods
  including cash, check, direct debit and credit card. MindBill can charge back
  a payment with an additional fee when a bank or credit card company denies a
  check or credit card payment. MindBill also enables the service operator to
  configure a currency conversion table to support multiple currencies. This
  conversion data is used when rating mobile call records rated in another
  currency by a carrier in another country. It is also used to support the
  acceptance of payments in different currencies. This data can be regularly
  updated to manage the fluctuation of conversion rates;
* Stock and Network Equipment Management. The equipment used in conjunction with
  telecommunications, such as a handset/telephone, can also provide a
  substantial source of revenue for an operator. The asset management module
  within MindBill can keep track of the inventory by part number, serial number
  and location within one or many warehouses. An electronic database of
  equipment vendors can be maintained and parameters can be set to indicate when
  reorders are necessary. This functionality is also used to keep track of the
  equipment and materials that a mobile operator uses for its network. The
  asset management module manages SIM card inventory. Once loaded into MindBill
  using the SIM card processor, SIM cards can be viewed as serialized stock
  through the user interface. The system keeps track of which SIM cards are
  available or to which subscribers they are assigned; and
* Customer Care. Answers to customer inquiries, including the current status of
  their existing services, pending changes, outstanding balances and payments
  are quickly located within the system. The service module within MindBill
  supports the process of handling "service orders" and "trouble tickets."
  Using service orders, a service provider's customer care representative can
  specify changes to be made to an account by provisioning. Once the service
  order is closed, the changes indicated in the service order automatically put
  the new billing method into effect. A related "work order" is created to
  communicate to technicians, vendors or other internal departments about what
  work must be scheduled and completed. The trouble tickets feature allows
  service-related issues to be recorded. A work order can also be linked to a
  trouble ticket to communicate the need for repair work to technicians in the
  network operations center.
                                      -27-
	Enterprise Software

	Our enterprise products, known as PhonEX and MEIPS, are used by
corporations for call accounting, traffic analysis and fraud detection. PhonEX
is a call management system that collects, records and stores all call
information in a customized database. The system:
* allows customers to generate near real-time reports on the enterprise's
  telephone use;
* produces sophisticated reports and graphics for easy and effective analysis of
  call activity; and
* allows customers to allocate telephone expenses to specific departments,
  individual clients or projects.
	These functions allow organizations to more effectively manage their
telecommunications resources. PhonEX is easy to install and configure,
user-friendly and compatible with any switchboard system. PhonEX also performs
call management and traffic analysis as well as fraud management in the same
manner as MIND-iPhonEX. In addition, PhonEX is a multi-lingual and
multi-currency system, which means that reports can be generated in any currenc
defined in the system, or in two currencies simultaneously.
	Manufacturers of IP telecommunications equipment have begun to develop
and market Voice over IP systems for enterprises. Our enterprise solution for
IP switches, known as MEIPS, is used to provide call accounting, traffic
analysis and fraud detection for enterprises that use IP telephony. MEIPS
provides substantially the same features as PhonEX. We intend to further
develop and market this product as the emerging market for Voice over IP
systems for enterprises grows.

	Professional Services

	We provide professional services to our customers, consisting primarily
of project management, customization, installations, customer support, training
and maintenance services. As IP-based service offerings become more complex,
more customers require customization services to add specialized features to
their systems. We typically incorporate additional or specialized features
developed for a particular customer into future versions of our products.

Technology
MIND-iPhonEX has an open architecture, which was developed using industry
standards-based application programming interfaces that enables it to readily
integrate with other software applications. These application program
interfaces create an object-oriented, multi-layered architecture that supports
a distributed environment. Our object-oriented technology enables the design and
 implementation of software on the basis of reusable business objects rather
than complex procedural code. Our multi-layered architecture organizes these
applications in layers of related information that support the top tier
interface between the user and the application. We implement our application in
a distributed configuration. This allows various modules to be installed on
different servers. We believe that our technology allows us to offer products
with the following benefits:
* fast integration and interoperability with the IP telecommunications equipment
  of major manufacturers;
* modular architecture that allows MIND-iPhonEX to be easily scalable and
  enables us to customize our software relatively quickly;
* reliable products that ensure high availability of the service for
                                      -28-
  mission-critical applications and are designed to support network-operating
  centers service providers to ensure no single point of failure in their
  networks. In the case of the failure of a network component, MIND-iPhonEX has
  an automatic fail-over mechanism to ensure minimum loss of service;
* secured at all levels of the architecture. Each user of the system may be
  assigned to different security groups. Service providers are therefore able to
  determine and audit who has access to the system. In addition, firewalls can
  be installed to prevent unauthorized access to the system;
* rapid development of new applications, features and services; and
* easy interface with legacy systems and external software.
MIND-iPhonEX has a four-tier architecture, consisting of the following tiers:
* Client Application Tier: This is the top tier graphic user interface between
  the user and the application. It includes client applications for customer
  registration, customer care and billing administration;
* Business Object Tier: This tier includes the business logic and rules of the
  billing system. This tier manages accounts, services, events and tariffs.
  It includes an object request broker that facilities the transfer of
  information requested by the client application tier from the database object
  tier;
* Database Object Tier: This tier brings together data objects that define the
  accounts, services and tariffs; and
* Database Tier: This tier includes the Oracle database server and management
  software where the actual billing and customer care information is stored.

Sales and Marketing

	Sales

	Mediation, Rating, Billing and Customer Care Solutions

	We conduct our sales and marketing activities primarily through our
marketing and co-operative alliances with hardware platform developers and
software application developers such as Alcatel, Cisco, Ericsson and VocalTec,
under which we market and sell our software to the customers of those entities.
These marketing allies and resellers provide us with a global extension of our
direct sales force and are a significant source of leads and referrals. We
perform co-development with our marketing allies to support new software and
product releases to maintain interoperability of our software with their
equipment. We also engage in joint marketing activities with them including
joint responses to requests for proposals, sharing booths in trade shows,
distributing each others' marketing information and cross links and references
to web sites. We believe these relationships also help validate our technology
and facilitate broad market acceptance of our software.
Our contracts with our marketing allies, distributors and resellers are
non-exclusive, do not contain minimum sales or marketing performance
requirements and may be terminated at any time with notice. For example, we
entered into a non-exclusive agreement with Cisco Systems, Inc. on
January 1, 2000 under which we agreed to participate in Cisco's New World
Ecosystem Program. The Ecosystem Program was established by Cisco to facilitate
the establishment of a network of vendors of complementary products and services
that are interoperable with Cisco's equipment and each other. Under the terms of
the agreement, we cooperate with Cisco in marketing and distributing products
and services that Cisco desires to include in the Ecosystem Program from time to
time. The agreement is terminable on 60 days' written notice by either party.
                                      -29-
	Enterprise Software
	In Europe, the United States and Israel our enterprise software is sold
by our appointed distributors, resellers and directly through our sales force.

	Marketing

	Our marketing programs are focused on creating awareness, interest and
preference for our products and services. We engage in a variety of marketing
activities, including:
* participating in industry trade shows and special events, including as
  panelists and presenters at industry conferences;
* advertising in industry media;
* conducting ongoing public and press relations programs; and
* conducting training seminars for vendors and system integrators.

Principal Markets
The following table shows our revenues for each of the past three years
classified by activity and geographic market.

                                              Years Ended December 31,
                                          --------------------------------
                                              2000      2000      2002
                                             ------    ------    ------
                                           (In thousands of U.S. dollars)
                                          --------------------------------
The Americas (total)			    $5,777    $2,520    $2,869
		   Sale of Licenses	     4,792     1,591     1,726
		   Services	               985       929     1,143
Asia Pacific and Africa (total) 	     3,435     3,693	 2,860
		   Sale of Licenses	     2,681     2,804	 1,802
		   Services		       754	 889	 1,058
Europe (total)				     4,840     3,176	 3,364
		   Sale of Licenses	     4,119     2,325     2,741
		   Services		       721	 851	   623
Israel (total)				     1,561     1,080	   915
		   Sale of Licenses	       883 	 388	   266
		   Services		       678	 692	   649
Total					    15,613    10,469	10,008
		   Sale of Licenses	    12,476     7,108	 6,535
		   Services		     3,137     3,361	 3,473

Customers

	Mediation, Rating, Billing and Customer Care Solutions
	We currently provide traditional telecommunications service providers,
Internet telephony service providers and Internet service providers with our
billing and customer care software. Some key customers are as follows:

Traditional
Telecommunications	Internet Telephony
Service Providers	Service Providers	Internet Service Providers
--------------------------------------------------------------------------
China Unicom		AzulTel			S.C. ARtelecom S.A.
Marconi			BudgetTel Australia     Vivodi SA
                                      -30-
Singtel 		  Pty. Ltd.
Sri lanka Telecom	Callsat
Teledome 		ePHONE Telecom Inc.
Telefonica del Peru	First Mobile Japan
Verizon 		Verastar

Enterprise Software

	Our enterprise software has been installed in locations throughout the
world, for customers including ABN Amro, Cellcom, a large cellular
telecommunications provider in Israel, Cisco Systems, Credit Suisse First
Boston, the European Parliament, the Israeli Defense Forces, Israel Electric
Corp. Limited and Tenovis.

Competition

	Mediation, Rating, Billing and Customer Care Solutions

	Competition in the market for billing and customer care software is
intense and we expect competition to increase. We compete both with emerging
billing companies such as Portal Software Inc. and Digiquant as well as with the
 more established traditional billing and customer care companies, such as
Amdocs Ltd. and Convergys Corp. (after the acquisition of Geneva Technology by
Convergys Corp.).
	We believe that our competitive advantage is based on:
* our ability to provide a real-time, scalable, interoperable and reliable
  billing and customer care software;
* our ability to rapidly deploy our software; and
* our reputation of providing proven, high-quality billing and customer care
  software; and
* our financial strength.
	However, we depend on our marketing alliances with manufacturers of
telecommunications equipment and reseller arrangements to market our billing and
customer care software. Some of our marketing allies and resellers also work
with some of our competitors. For example, Cisco has invested in
Portal Software Inc. Our marketing alliances and reseller arrangements are for
the most part non-exclusive and do not contain minimum sales or marketing
performance requirements. We may not be able to compete effectively with our
competitors under these circumstances. Many of our competitors have greater
financial, personnel and other resources, have longer and more established
relationships with service providers and may be able to offer more aggressive
pricing or devote greater resources to the promotion of their products. In
addition, one or more of our competitors could develop superior products and
these products could achieve greater market acceptance than our product.

	Enterprise Software

	Our main competitors in the market for enterprise software products
include Avotus Corporation, ISI, Inc., Mer Telemanagement Solutions Inc. and
Veramark Technologies, Inc. To compete effectively, companies must be able to
offer adequate technical support and ongoing product development and
customization services. In addition, multinational companies prefer call
accounting systems that can be installed at their various offices throughout
the world, and therefore require call accounting products that are multilingual
                                      -31-
and support the local telecommunication requirements. The principal factors
upon which we compete are customer support, ease of use, compatibility with
major switchboard systems and IP switches and the multi-lingual and
multi-currency nature of our system.

Israeli Office of the Chief Scientist

	Under the Israeli Law for the Encouragement of Industrial Research and
Development, 1984, or the Research and Development Law, research and development
programs which meet specified criteria and are approved by the Office of the
Chief Scientist are eligible for grants of between 20% and 50% of the project's
expenditure, in exchange for the payment of royalties from the sale of products
developed in accordance with the program. We have received grants in the past
from the Office of the Chief Scientist and have repaid them. However, the
Research and Development Law prohibits the transfer of the funded technology
outside of Israel and requires that the manufacture of products developed with
government grants be performed in Israel. In the event that any of the
manufacturing rights are transferred out of Israel, with the approval of the
Office of the Chief Scientist, we would be required to pay an amount in the
range of 120% to 300% of the grants received. A failure to obtain the approval
by the Office of the Chief Scientist to the transfer of manufacturing rights out
of Israel could harm strategic alliances that we enter into in the future that
require such transfer.
	The technology developed pursuant to the terms of these grants may not
be transferred to third parties without the prior approval of the Office of the
Chief Scientist. Approval is not required for the export of any products
resulting from covered research or development. Approval of the transfer of
technology may be granted only if the recipient abides by all the provisions of
the applicable law and regulations promulgated thereunder, including the
restrictions on the transfer of know-how. There can be no assurance that such
consent, if requested, will be granted.
	An amendment to the Research and Development Law adds reporting
requirements with respect to certain changes in the ownership of a grant
recipient.  The amendment requires the grant recipient and its controlling
shareholders and interested parties to notify the Office of the Chief Scientist
of any change in control of the recipient or a change in the holdings of the
means of control of the recipient that results in a non-Israeli becoming an
interested party directly in the recipient and requires the new interested party
to undertake to the Office of the Chief Scientist to comply with the Research
and Development Law.  For this purpose, "control" is defined as the ability to
direct the activities of a company other than any ability arising solely from
serving as an officer or director of the company.  A person is presumed to have
control if such person holds 50% or more of the means of control of a company.
"Means of control" refers to voting rights and the right to appoint directors or
the chief executive officer.  An "interested party" of a company includes a
holder of 5% or more of its outstanding share capital or voting rights, its
chief executive officer and directors, someone who has the right to appoint its
chief executive officer or at least one director, and a company with respect to
which any of the foregoing interested parties owns 25% or more of the
outstanding share capital or voting rights or has the right to appoint 25% or
more of the directors.  Accordingly, any non-Israeli who acquires 5% or more of
our ordinary shares will be required to notify the Office of the Chief Scientist
that it has become an interested party and to sign an undertaking to comply with
the Research and Development Law.
                                      -32-
C.	Organizational Structure
Set forth below is a list of our significant subsidiaries:
* MIND C.T.I. Inc., a wholly owned subsidiary, incorporated in the
  State of New Jersey; and
* MIND Software SRL, a wholly owned subsidiary, incorporated in Romania.

D.	Property, Plant and Equipment
	Our headquarters are located in Yoqneam, Israel, approximately 50 miles
north of Tel Aviv. We lease approximately 22,000 square feet at our Yoqneam
headquarters. We received approval under the Approved Enterprise program in
Israel to expand our facilities in Yoqneam.. We also lease 2,000 square feet of
office space in Hasbrouck Heights, New Jersey, 1,000 square feet in Beijing,
China, and 8,100 square feet in Jassy, Romania . The offices in New Jersey and
Beijing are used primarily for presales and customer support, while the office
in Jassy is used primarily for research and development and for customer
support.

Item 5.		Operating and Financial Review and Prospects

	Cautionary Statement Regarding Forward-Looking Information. Statements
in this Annual Report concerning our business outlook or future economic
performance; anticipated revenues, expenses or other financial items;
introductions and advancements in development of products, and plans and
objectives related thereto; and statements concerning assumptions made or
expectations as to any future events, conditions, performance or other matters,
are "forward-looking statements" as that term is defined under the United States
Federal Securities Laws. Forward-looking statements are subject to risks,
uncertainties and other factors which could cause actual results to differ
materially from those stated in such statements. Factors that could cause or
contribute to such differences include, but are not limited to, those set forth
under "Risk Factors" in this Annual Report as well as those discussed elsewhere
in this Annual Report and in our other filings with the Securities and Exchange
Commission.
	The following discussion and analysis is based on and should be read in
conjunction with our consolidated financial statements, including the related
notes, contained in Item 18.

A.	Operating Results

Overview

	We were incorporated in Israel in 1995 and started providing our
enterprise software product to large organizations in that year. In 1997, we
introduced our billing and customer care software for Voice over IP. In 2001,
we acquired the VeraBill product line for billing and customer care for
traditional wireline and wireless service providers. We generate revenues from
the sales of licenses for our billing and customer care and enterprise software,
and from fees for professional services. In 2002, 65% of our revenues were
derived from licensefees and 35% were derived from professional services. Of the
total fees for licenses and professional services in 2002, 74% were derived from
providing our billing and customer care software and 26% were derived from
providing our enterprise software. During 2002, two customers accounted for 21%
of total revenues. In 2001, two customers accounted for 29% of total revenues.
In 2000,two customers accounted for 11% of total revenues. We expect to continue
                                      -33-
to derive substantial revenues from a small number of changing customers.
	The currency of the primary economic environment in which we operate is
the U.S. dollar. More then 90% of our revenues are derived from sales outside
Israel, which are denominated primarily in U.S. dollars. In addition, most of
our marketing costs are incurred outside Israel, primarily in U.S. dollars.
Transactions and balances originally denominated in U.S. dollars are presented
at their original amounts. Balances in non-dollar currencies are translated into
U.S. dollars using historical and current exchange rates for non-monetary and
monetary balances, respectively. For non-dollar transactions and other items
reflected in our income statements, the following exchange rates are used:
* for transactions, exchange rates at the transaction dates or average rates;
  and
* for other items (derived from non-monetary balance sheet items such as
  depreciation and amortization, changes in inventories or similar items),
  historical exchange rates.
	The resulting currency transaction gains or losses are reported as
financial income or expenses as appropriate.
	Our financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America.
	Revenues. Our revenues from licenses are recognized on the basis set
forth in Statement of Position 97-2 (SOP 97-2) of the American Institute of
Certified Public Accountants. Our revenues from licenses are recognized when
delivery has occurred, persuasive evidence of an agreement exists, the sales
price is fixed or determinable and collectibility is probable. In cases where we
install our software products, the revenue recognition is deferred until the
installation is completed. Due to the ongoing slowdown in the global economy, we
adopted a more conservative approach to evaluating the probability of
collectibility and in some instances we do not recognize revenue until payment
is received.
	Customization of our products, if any, is performed before delivery
occurs.
	We generally do not grant a right of return on products sold to
customers, distributors and resellers. In the event any of our customers are
granted the right to return products, we do not recognize revenues from the
sale of such products until the right to return the products has expired.
Revenues from providing professional services are priced on a fixed price basis
and recognized ratably over the period of the agreement, or as services are
performed.
	We are paid a one-time license fee by our customers for the right to use
our billing and customer care or our enterprise call management software
products, and additional fees to expand the scale of the network supported by
our software. We price our licenses for our billing and customer care software
based on (1) traffic volume, which is measured by factors such as minutes per
month, number of lines used and number of subscribers, and (2) the functionality
of the system based on application modules that are added to the software.
Licenses for our enterprise software are priced based on the number of
extensions in the customer's switchboard, as well as the functionality of the
system based on application modules that are added to the software. In relation
to our professional services, other than maintenance services, we quote a fixed
price based on the type of service offered, estimated direct labor costs and the
expenses that we will incur to provide these services. Fees for maintenance
services are based on a fixed percentage of the license fee and are paid
annually.
	We provide a revenue breakdown for our customer care and billing
                                      -34-
software and our enterprise call management software. We believe that this
information provides a better understanding of our performance and allows
investors to make a more informed judgment about our business.
	Cost of Revenues. The cost of revenues relating to providing our billing
and customer care and enterprise software consists primarily of direct labor
costs and overhead expenses related to software installation. Cost of revenues
also includes software license fees to Oracle, hardware, amortization of
intangible assets, materials, documentation, packaging and shipping costs. Our
cost of professional services revenues consists primarily of direct labor costs
and travel expenses. Our revenues from the sale of our licenses have a higher
gross margin than that from providing our professional services. We incur
variable direct labor costs when we provide professional services. There are no
comparable variable labor costs incurred when we license our software.
	Research and Development Expenses. Our research and development expenses
consist primarily of compensation and overhead costs for research and
development personnel and depreciation of testing and other equipment. Research
and development costs related to software products are expensed as incurred
until the "technological feasibility" of the product has been established.
Because of the relatively short time period between "technological feasibility"
and product release, and the insignificant amount of costs incurred during that
period, no software development costs have been capitalized. We expect to
continue to make substantial investments in research and development.
	Selling Expenses. Our selling expenses consist primarily of
compensation, overhead and related costs for sales and marketing personnel, the
operation of international sales offices, sales commissions, marketing programs,
public relations, promotional materials, travel expenses and trade show expenses
and exhibition expenses.
	General and Administrative Expenses. Our general and administrative
expenses consist primarily of compensation, overhead and related expenses for
executives, accounting, professional fees, insurance, provisions for doubtful
accounts and other general corporate expenses.
	Financial and Other Income, net. Our financial and other income, net
consists primarily of interest earned on bank deposits, gains and losses from
the conversion of monetary balance sheet items denominated in non-dollar
currencies into U.S. dollars, net of financing costs and bank charges in real
terms as well as the devaluation of monetary assets and monetary liabilities.
	Taxes on Income. Israeli companies are generally subject to income tax
at the corporate tax rate of 36% and are subject to capital gains tax at a rate
of 25% of capital gains derived after January 1, 2003. Substantially all of our
facilities, however, have been granted "approved enterprise" status under the
Law for the Encouragement of Capital Investments, 1959. Income derived from the
approved enterprise is tax exempt for a period of ten years commencing in the
first year in which we earn taxable income from the approved enterprise, since
we have elected the "alternative benefits scheme" (involving a waiver of
investment grants) and our approved enterprises are located in a preferred
geographic location. In the event of distribution of cash dividends from income
that was tax exempt, we would have to pay up to 25% tax in respect of the amount
distributed. As a result of dividends paid by us with respect to 1999 and 2000,
we were subject to this tax with respect to the amount distributed. Our
effective tax rate after 2005 will continue to be reduced depending upon future
capital investments and approved enterprise certifications. These tax benefits
may not be applied to reduce the tax rate for any income derived by our foreign
subsidiaries.
	Conversion and Redemption Feature of Preferred Shares. An amount of $7.2
                                      -35-
million in connection with the issuance of the preferred shares representing a
beneficial conversion feature, was amortized against retained earnings
(accumulated deficit) over a period that commenced upon issuance of the
preferred shares on March 30, 2000, and ended in August 2000 upon the
completion of our initial public offering. These amounts were calculated as the
difference between the per share conversion price and the deemed fair value of
an ordinary share, which was estimated by us at $8.00 per ordinary share at the
issuance date, multiplied by the applicable number of equivalent ordinary
shares.
	We, our existing shareholders and the investors in the preferred shares
entered into a redemption agreement on March 30, 2000, concurrently with the
purchase of the preferred shares. The redemption agreement provided that if a
liquidity event did not occur by March 30, 2005, the holders of the preferred
shares would be entitled to cause a sale of our company or redemption of the
preferred shares at an amount equal to the higher of (a) fair market value of
the preferred shares or (b) the amount as determined in the case of a liquidity
event.
	As a result of the redemption provisions, we recognized a non-cash
charge to accumulated deficit, which was accreted for the period ended on the
date of our initial public offering in an amount of $8.9 million. This amount
reflects the difference between the redemption value of the Series A preferred
shares and the net proceeds we have received for the issuance of those shares.
The preferred shares were converted into our ordinary shares upon consummation
of our initial public offering in August 2000, and non-cash charges in the
amount of $16.1 million were recorded in our financial statements for 2000 for
accretion and amortization of the beneficial conversion feature.

The following discussion of our results of operations for the years ended
December 31, 2000, 2001 and 2002, including the percentage data in the
following table, is based upon our statements of operations contained in our
financial statements for those periods, and the related notes, included in this
annual report:

                                              Years Ended December 31,
                                          --------------------------------
                                              2000        2001      2002
                                             ------      ------    ------
                                           (In thousands of U.S. dollars)
                                          --------------------------------
Revenues                                     100.0%     100.0%     100.0%
Cost of revenues			      14.1 	 21.4	    24.8
                                           --------   --------   --------
Gross profit				      85.9	 78.6	    75.2
Research and development expenses	      24.3	 42.3	    37.2
Selling, general and administrative expenses:
Selling expenses			      30.5 	 64.6	    41.5
General and administrative expenses	      12.4	 29.6	    12.8
                                           --------   --------   --------
Operating Income (loss)			      18.7	(57.9)	   (16.3)
Financial and other income -  net	       6.9	 15.2	    20.8
                                           --------   --------   --------
Income (loss) before taxes on income 	      25.6	(42.7)	     4.5
Taxes on income				       1.6	  0.1	     1.2
                                           --------   --------   --------
                                      -36-
Net income (loss) before minority interest    24.0	(42.8)	     3.3
Minority interests in losses of subsidiaries    --	  0.9	      --
Net income (loss)			      24.0%	(41.9)%	     3.3%



The following table presents the geographic distribution of our sales.

                                              Years Ended December 31,
                                          --------------------------------
                                              2000        2001      2002
                                             ------      ------    ------
                                           (In thousands of U.S. dollars)
                                          --------------------------------
The Americas                                 37.0%	 24.1%	   28.7%
Asia Pacific and Africa			     22.0	 35.3	   28.6
Europe					     31.0	 30.3	   33.6
Israel					     10.0	 10.3	    9.1
                                           -------     -------   -------
Total					    100.0%      100.0%    100.0%

	As shown in the above table, our sales in Asia Pacific and Africa
increased as a percentage of sales between 2000 and 2001 and then decreased as a
percentage of sales during 2002 in comparison to 2001. Sales in the Americas
decreased as a percentage of sales between 2000 and 2001 and then increased as a
percentage of sales during 2002 in comparison to 2001. Sales in Europe decreased
as a percentage of sales between 2000 and 2001 and then increased as a
percentage of sales during 2002 in comparison to 2001.

Critical Accounting Policies

	To improve understanding of our financial statements, it is important to
obtain some degree of familiarity with our critical or principal accounting
policies. These policies are described in note 1 to the consolidated financial
statements contained at the end of this annual report. We review our accounting
policies annually to ensure that the financial statements developed, in part, on
the basis of these accounting policies provide complete, accurate and
transparent information concerning the financial condition of our company. As
part of this process, we reviewed the selection and application of our critical
accounting policies and financial disclosures as of December 31, 2002, and we
believe that the consolidated financial statements contained at the end of this
annual report present fairly, in all material respects, the consolidated
financial position of our company as of that date.
	In preparing our financial statements in accordance with generally
accepted accounting policies in the United States of America, our management
must often make estimates and assumptions which may affect the reported amounts
of assets, liabilities, revenues, expenses and related disclosures as of the
date of the financial statements and during the reporting period. Some of those
judgments can be subjective and complex, and consequently actual results may
differ from those estimates. For any given individual estimate or assumption
made by our management, there may be alternative estimates or assumptions which
are also reasonable. However, we believe that, given the facts and circumstances
before our management at the time of making the relevant judgments, estimates or
assumptions, it is unlikely that applying any such other reasonable judgment
                                      -37-
would cause a material adverse effect on the consolidated results of operations,
financial position or liquidity for the periods presented in the consolidated
financial statements included in this annual report.
	We are also subject to risks and uncertainties that may cause actual
results to differ from estimates and assumptions, such as changes in the
economic environment, competition, customer claims, foreign exchange, taxation
and governmental programs. Certain of these risks, uncertainties and assumptions
are discussed under the heading Cautionary Statement Regarding Forward-Looking
Information and in Item 3.D - Risk Factors.
	We consider our most significant accounting policies to be those
discussed below:
	Revenue Recognition.  As discussed above, we apply the provisions of
SOP 97-2, as follows:
	Sales of Licenses. Revenue from the sale of a product is recognized when
delivery of the product has occurred, persuasive evidence of an arrangement
exists, the sales price is fixed or determinable and collectibility is probable.
Customization of the product, if any, is performed before delivery occurs. If
collectibility is not considered probable, revenue is recognized when the fee is
collected. Determination of the probability of collection is based on
management's judgments regarding the payments of the sales price. Should changes
in conditions cause management to determine that these criteria are not met for
certain future transactions, revenue recognized for any reporting period could
be adversely affected.


	In cases where we install the product, the revenue recognition is
deferred until the installation is completed.
	We generally do not grant a right of return on products sold to
customers, distributors and resellers. In the event any of our customers are
granted the right to return the products, we do not recognize revenues from the
sale of such products until the right to return the products has expired.
	We render maintenance and support services to our customers, mainly for
a period of one year from delivery. When revenue on the sale of the products is
recognizable, we defer a portion of the revenue from our sale and recognize it
as maintenance and support service revenue ratably over the above period. The
portion of the sales price that is deferred is determined based on the fair
value of the service as priced in transactions in which we render solely
maintenance and support services.
	Services. The services we provide consist of installation, training,
maintenance, support and project management.  Project management consists of
advice to our customers regarding the development of billing and customer care
software over their IP networks. Service revenues are priced on a fixed price
basis and are recognized ratably over the service period or as services are
performed.
	Provision for Doubtful Accounts. The provision for doubtful accounts is
for estimated losses resulting from the inability of our customers to make
required payments. We regularly evaluate the adequacy of this provision by
taking into account variables such as past experience, age of the receivable
balance, and current economic conditions that may affect a customer's ability
to pay. The use of different estimates or assumptions could produce different
provision balances. The customer base for our billing and customer care
solutions is concentrated in the service provider industries. Several of the
leading companies in these industries have announced liquidity concerns. If
collection is not probable at the time the transaction is consummated, we do not
                                      -38-
recognize revenue until cash collection. If the financial condition of our
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional provision for doubtful accounts may be required.
	Recently Issued Accounting Pronouncements.
	In April 2002, the Financial Accounting Standards Board of the United
States (the "FASB") issued Statement of Financial Accounting Standards ("FAS")
No. 145, "Revision of FASB statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Connections". Among other amendments and
rescissions, FAS 145 eliminates the requirement that gains and losses from the
extinguishments of debt be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect, unless such gains and
losses meet the criteria in paragraph 20 of APB No. 30, "Reporting the Results
of Operation - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions".
FAS 145 is partially effective for transactions occurring after May 15, 2002 and
partially effective for fiscal years beginning after May 15, 2002. We do not
expect the adoption of FAS 145 to have a material effect on our consolidated
financial statements.
	In June 2002, the FASB issued FAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". FAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)". FAS 146
requires that a liability for a cost associated with an exit or disposal
activity to be recognized when the liability is incurred. Under EITF 94-3, a
liability for an exit cost as generally defined in EITF 94-3 was to be
recognized at the date of the commitment to an exit plan. FAS 146 states that a
commitment to a plan, by itself, does not create an obligation that meets the
definition of a liability. Therefore, FAS 146 eliminates the definition and
requirements for recognition of exit costs in EITF 94-3. It also establishes
that fair value is the objective for initial measurement of the liability.
FAS 146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. We do not expect the adoption of FAS 146 to have a
material effect on our consolidated financial statements.
	In December 2002, the FASB issued FAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
Statement No. 123". FAS 148 amends FAS 123 to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, FAS 148 amends the
disclosure requirements of FAS 123 to require prominent disclosures in the
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
transition guidance and annual disclosure provisions of FAS 148 are effective
for financial statements issued for fiscal years ending after December 15, 2002.
	We have elected to continue accounting for employee stock based
compensation in accordance with APB 25 and related interpretations and has
applied the disclosure provisions in FAS 148 in our consolidated financial
statements.
	In November 2002, the FASB issued FASB Interpretation No. 45
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others"). FIN 45 requires the guarantor
to recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. It also elaborates on the
                                      -39-
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued and to be made in
regard of product warranties. Disclosures required under FIN 45 are already
included in the financial statements included in this annual report. However,
the initial recognition and initial measurement provisions of FIN 45 are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. We do not expect the adoption of FIN 45 to have a material
effect on our consolidated financial statements.
	In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities". Under FIN 46, entities are
separated into two categories: (i) those for which voting interests are used to
determine consolidation (this is the most common situation); and (ii) those for
which variable interests are used to determine consolidation. FIN 46 explains
how to identify Variable Interest Entities (VIEs) and how to determine when a
business enterprise should include the assets, liabilities, non-controlling
interests and results of activities of a VIE in its consolidated financial
statements.
	FIN 46 is effective as follows: for variable interests in VIEs created
after January 31, 2003, FIN 46 shall apply immediately; for variable interests
in VIEs created before that date, FIN 46 shall apply - in the case of publicly
traded entities - as of the beginning of the first interim or annual reporting
period beginning after June 15, 2003. We do not expect the adoption of FIN 46
to have a material effect on our consolidated financial statements.
	In April 2003, the FASB issued FAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities". FAS 149 amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under FAS 133, "Accounting for
Derivative Instruments and Hedging Activities". FAS 149 is effective
prospectively for contracts entered into or modified after June 30, 2003 and
prospectively for hedging relationships designated after June 30, 2003. We
currently analyzing the impact of FAS 149 on our consolidated financial
statements but do not believe that on adoption, it will have a material impact
on our results of operations or financial position.
	In May 2003, the FASB issued FAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity".
FAS 150 establishes standards for classification and measurement in the
statement of financial position of certain financial instruments with
characteristics of both liabilities and equity. It requires classification of a
financial instrument that is within its scope as a liability (or an asset in
some circumstances) because that financial instrument embodies an obligation of
the issuer. FAS 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective on the first interim
period beginning after June 15, 2003. We currently analyzing the impact of
FAS 150 on our consolidated financial statements but do not believe that on
adoption, it will have a material impact on our results of operations or
financial position.

Comparison of Years ended December 31, 2001 and 2002

	Revenues. Revenues decreased from $10.5 million in 2001 to $10.0 million
in 2002, a decrease of $0.5 million, or 4.4%.
	Revenues in 2002 remained almost constant compared to 2001 due to the
continuing global economy slowdown. Since March 2001, we have been affected by
                                      -40-
the adverse situation in global financial markets that has caused a drastic
change in the spending patterns of our existing customers and potential
customers (both service providers and enterprises). Incumbent telecommunications
operators deferred project implementation in all stages of the business cycle
and new operators delayed the launch of services. During 2002, revenues from
professional services remained almost constant. Revenues from professional
services as percentage of our total revenue increased from 32% in 2001 to 35% in
2002, while in absolute terms they increased from $3.4 million in 2001 to $3.5
million in 2002.
	Cost of Revenues. Cost of revenues increased from $2.2 million in 2001
to $2.5 million in 2002, an increase of 10.6%. This increase was primarily due
to an increase in fees paid by us to our third party suppliers of software and
hardware. Gross profit as a percentage of revenues decreased from 78.6% in 2000
to 75.2% in 2002.
	Research and Development. Research and development expenses decreased
from $4.4 million in 2001 to $3.7 million in 2002, or 15.8%. This decrease was
primarily due to a decrease in the cost attributable to payroll and related
expenses of our employees engaged in research and development despite a moderate
increase in the total number of employees engaged in research and developments
compared to 2001. Such decrease in payroll and related expenses was primarily
due to employing lower-cost employees.  Research and development expenses
decreased as a percentage of revenues from 42.3% in 2001 to 37.2% in 2002.
	Selling Expenses. Selling expenses decreased from $6.8 million in 2001
to $4.2 million in 2002, or 38.6%. This decrease was primarily attributable to
two factors: (1) a decrease of approximately $1.5 million in expenses related
to (i) payroll and related expenses of Israeli employees engaged in sales, (ii)
exhibitions and advertising and (iii) commissions; and (2) a decrease of
approximately $1.0 million in expenses related to our sales offices in the
United States, China, Japan and the Netherlands.  We closed our offices in
Japan and the Netherlands during the course of 2002 as part of our cost-cutting
measures.   Selling expenses decreased as a percentage of revenues from 64.6% in
2001 to 41.5% in 2002 due to the decreases in expenses described above.
	General and Administrative Expenses. General and administrative
expenses decreased from $3.1 million in 2001 to $1.3 million in 2002, or 58.7%.
This decrease was primarily attributable to a decrease of $0.9 million in the
provision for doubtful accounts. General and administrative expenses as a
percentage of revenues decreased from 29.6% in 2001 to 12.8% in 2002.
	Taxes on Income. Taxes on income increased from $7,000 in 2001 to
$117,000 in 2002. During 2002, our effective tax rate was 25.9%. Our effective
income tax rate was increased primarily as a result of foreign withholding taxes
on revenues and tax generated on our foreign operations.
	Net Income (Loss). In 2001 we had a net loss of $4.4 million and in 2002
net income of $334,000.

Comparison of Years ended December 31, 2000 and 2001

	Revenues. Revenues decreased from $15.6 million in 2000 to $10.5 million
in 2001, a decrease of $5.1 million, or 32.9%.
	The decrease in our revenue is attributable to the continuing global
economic slowdown and resulting lengthened sales cycle.  During 2001, revenues
from professional services increased as a percentage of our total revenue from
20% in 2000 to 32% in 2001, while in absolute terms it increased from
$3.1 million in 2000 to $3.4 million in 2001. The increase of revenue from
professional services is attributable to two factors: (1) since revenues from
                                      -41-
providing professional services are recognized ratably over the period of the
agreement, a portion of the revenues resulting from agreements signed in 2000
was not recognized until 2001; and (2) typically, support and maintenance
services are purchased by our customers annually with a resulting incremental
increase of revenues from professional services. In addition, the decrease in
license revenues in absolute terms during 2001 has further increased the weight
of professional services as a percentage of total revenues.
	Cost of Revenues. Cost of revenues remained constant at $2.2 million in
2000 and 2001. Gross profit as a percentage of revenues decreased from 85.9% in
2000 to 78.6% in 2001. The decrease in our gross profit was due to an increase
in fees paid by us to our third party suppliers of software and hardware and a
decrease in our sales of licenses for our billing and customer care software as
a percentage of our total revenues. The decrease in our sales of licenses for
our billing and customer care software as a percentage of our total revenues
decreased gross profit since gross profit on revenues from the sales of licenses
is greater than gross profit on revenues from professional services.
	Research and Development. Research and development expenses increased
from $3.8 million in 2000 to $4.4 million in 2001, or 17.0%. This increase was
primarily attributable to an increase in the number of our employees engaged in
research and development. Research and development expenses increased as a
percentage of revenues from 24.3% in 2000 to 42.3% in 2001. This increase was
primarily due to the increase in compensation costs described above and a
decrease in our total revenue.
	Selling Expenses. Selling expenses increased from $4.8 million in 2000
to $6.8 million in 2001, or 41.7%. This increase was primarily attributable to
an increase of approximately $2.0 million in expenses related to the expansion
of our sales offices in the United States, the Netherlands, China and Japan.
Selling expenses increased as a percentage of revenues from 30.5% in 2000 to
64.6% in 2001, primarily due to the increase in expenses described above and a
decrease in our revenue.
	General and Administrative Expenses. General and administrative
expenses increased from $1.9 million in 2000 to $3.1 million in 2001, or 60.4%.
This increase was primarily attributable to an increase of $1.0 million in the
provision for doubtful accounts to reflect the deterioration of the economy and
economic uncertainty in the telecommunications market. General and
administrative expenses as a percentage of revenues increased from 12.4% in
2000 to 29.6% in 2001.
	Taxes on Income. Taxes on income decreased from $245,000 in 2000 to
$7,000 in 2001. During 2000, our effective tax rate was 6.1%. Through
March 31, 2000, we distributed as a dividend to our shareholders all of our
earnings from tax exempt income.
	Net Income. In 2000 we had a net income of $3.7 million and in 2001 a
net loss of $4.4 million.
	Net Income (Loss) Applicable to Ordinary Share. In 2000 and 2001 we had
a net loss of $12.4 million and $4.4 million, respectively.

Impact of Foreign Currency Fluctuations on Results of Operations
	The U.S. dollar cost of our operations is influenced by the extent to
which any inflation in Israel is offset, on a lagging basis, or is not offset
by the devaluation of the NIS in relation to the U.S. dollar. When the rate of
inflation in Israel exceeds the rate of devaluation of the NIS against the U.S.
dollar, companies experience increases in the U.S. dollar cost of their
operations in Israel. Unless offset by a devaluation of the NIS, inflation in
Israel will have a negative effect on our profitability as we receive payment
                                      -42-
in U.S. dollars for most  of our sales while we incur a portion of our expenses,
principally salaries and related personnel expenses, in NIS.
	In addition, a portion of our revenues is denominated in Euro derived
from sales to customers in Europe. Devaluation in the local currencies of our
customers relative to the U.S. dollar could cause our customers to cancel or
decrease orders or default on payment. Further, a strengthening of these
currencies versus other currencies could make our products less competitive in
foreign markets and collection of receivables more difficult.
	The following table presents information about the rate of inflation in
Israel, the rate of devaluation of the NIS against the U.S. dollar, and the rate
of inflation of Israel adjusted for the devaluation:

					Israeli		Israel Inflation
 Years Ended	Israeli	Inflation	Devaluation 	Adjusted
 December 31,	Rate			Rate		for Devaluation
-------------  -------------------     -------------   ------------------
	1997		7.0		       8.8		(1.8)
	1998		8.6		      17.6		(9.0)
	1999		1.3		      (0.2)		 1.5
	2000		0.0		      (2.7)		 2.7
	2001		1.4		       9.3		(7.8)
	2002 		6.5		       7.3		(0.8)

We cannot assure you that we will not be materially and adversely affected in
the future if inflation in Israel exceeds the devaluation of the NIS against
the U.S. dollar or if the timing of the devaluation lags behind inflation in
Israel.

A devaluation of the NIS in relation to the U.S. dollar has the effect of
reducing the U.S. dollar amount of any of our expenses or liabilities which are
payable in NIS, unless these expenses or payables are linked to the U.S. dollar.
This devaluation also has the effect of decreasing the U.S. dollar value of any
asset, which consists of NIS or receivables payable in NIS, unless the
receivables are linked to the U.S. dollar. Conversely, any increase in the value
of the NIS in relation to the U.S. dollar has the effect of increasing the U.S.
dollar value of any unlinked NIS assets and the U.S. dollar amounts of any
unlinked NIS liabilities and expenses.
Because exchange rates between the NIS and the U.S. dollar fluctuate
continuously, with a historically declining trend in the value of the NIS,
exchange rate fluctuations and especially larger periodic devaluations will
have an impact on our profitability and period-to-period comparisons of our
results. The effects of foreign currency re-measurements are reported in our
consolidated financial statements in current operations.

B.	Liquidity and Capital Resources

	Since our inception, we have financed our operations mainly through cash
generated by operations. We supplemented this source by two private rounds of
equity financing and our initial public offering.
	Our first round of financing in an amount of $1.0 million closed in
August 1997. A follow-on exercise of a warrant during January 1999 yielded an
additional $2.3 million. Our second round of financing, in a net amount of
$11.1 million, was completed in the first quarter of 2000. We sold 3,450,000 of
our ordinary shares in our initial public offering in August 2000, with net
                                      -43-
proceeds to us of $29.9 million. As of December 31, 2002, we had approximately
$42.9 million in cash, cash equivalents and long-term bank deposits, and our
working capital was $11.3 million. In our opinion, our working capital is
sufficient for our  requirements for the foreseeable future.
	Our operating activities provided cash in the amount of $2.4 million in
2000, and in 2001 we used cash for operating activities in the amount of
$2.0 million. During 2002 our operating activities provided cash in the amount
of $1.7 million. Cash provided by operating activities in 2000 was primarily
attributable to our net income of $3.7 million, an increase in payables and
accruals of $2.5 million and non-cash expenses relating to depreciation and
amortization in the amount of $379,000, offset in part by an increase in
receivables. Cash used in operating activities in 2001 was primarily attributed
to our net loss of $4.4 million and a decrease in accounts payable of
$1.9 million offset in part by a decrease in accounts receivable of $3.2 million
and depreciation and amortization of $805,000. Cash provided by operating
activities in 2002 was primarily attributable to our net income of $334,000, an
increase in accounts payables and accruals of $705,000 and a decrease in account
receivables of $1.2 million, offset in part by interest of $1.6 million accrued
on a long term bank deposit and depreciation and amortization of $944,000.
	During 2002, most of our cash was deposited with banks in time deposits
bearing rates of interest, which varied based on fluctuations in the London
Interbank Offered Rate (LIBOR). Accordingly, in March 2002, we deposited an
amount of $30 million in three-year, structured, callable time deposits with a
bank. Under the arrangement with the bank, whether or not the deposits bear
interest depends upon the rate of the three-month U.S. dollar LIBOR, as follows.
For each day in which the three-month U.S. dollar LIBOR is below an agreed
annual fixed rate of 4% in the first year, 5% in the second year and 6% in the
third year, the deposits bear interest at the rate of 7.25% per annum. On all
other days the deposits do not bear any interest at all. The bank with which we
deposited these amounts called the deposit on March 17, 2003. In April 2003 we
deposited most of our cash in four-year, structured, callable time deposits
(callable every six months period), bearing interest at the rate of between
6.00% and 6.25% per annum in the first year, 6.50% per annum in the second year,
7.50% per annum in the third year and 8.50% per annum in the fourth year.
However, we will not be entitled to receive interest in respect of days during
which the six-month U.S. dollar LIBOR exceeds, in the last six months of the
first year 2.0% per annum, in the second year 3.0% per annum, in the third year
4.0% per annum and in the fourth year 5.50% per annum.

	We used cash in investing activities of $815,000 in 2000, $1.7 million
in 2001 and $30.1 million in 2002. During 2001, our principal investment
activity was the purchase of intangible assets relating to the VeraBill product
line. During 2002, our principal investment activity was the investment of
$30 million in a long term bank deposit.
	In 2000 our financing activities provided $39.1 million, primarily
attributable to our initial public offering in August 2000 and issuance of
preferred shares in March 2000, offset in part by dividends paid to shareholders
in the amount of $2.0 million in the first quarter of 2000. In 2001and 2002 our
financing activities provided $33,000 and $19,000, respectively, attributed to
the proceeds from the exercise of employee stock options.
	During 2000, 2001 and 2002 the aggregate amount of our capital
expenditures was $3.4 million. These expenditures were principally for the
purchase of testing and other equipment, and include $1.0 million paid in cash
during 2001 for the purchase of the VeraBill product line. Although we have no
                                      -44-
material commitments for capital expenditures, we anticipate an increase in
capital expenditures if we purchase or merge with companies or purchase assets
in order to obtain complementary technology and to expand our product offerings,
customer base and geographical presence.
As of December 31, 2002, we do not have any outstanding loans or lines of
credit.
In the first quarter of 2000, we declared a $2.0 million dividend, which was
paid in the second quarter of 2000. We did not declare a dividend during year
2001 or 2002. Our board of directors is currently reviewing our dividend policy.

C.	Research and Development, Patents and Licenses, etc.

	We believe that significant investment in research and development is
essential for maintaining and expanding our technological expertise in the
market for billing and customer care software and to our strategy of being a
leading provider of new and innovative convergent billing products. We work
closely with our partners, customers and distribution channels, who provide
significant feedback for product development and innovation.
	We have invested significant time and resources to create a structured
process for undertaking research and product development. We believe that the
method that we use for our product development and testing is well suited for
identifying market needs, addressing the activities required to release new
products, and bringing development projects to market successfully. Our product
development activities also include the release of new versions of our products.
Although we expect to develop new products internally, we may, based upon timing
and cost considerations, acquire or license technologies or products from third
parties.
	Our research and development personnel include engineers and software
developers with experience in the development and design of billing and customer
care software. As of December 31, 2002, our research and development department
consisted of  94 employees. We currently have research and development
facilities in Yoqneam, Israel and in Jassy, Romania.
	Research and development expenses for 2000 were $3.8 million, for 2001
were $4.4 million and for 2002 were $3.7 million.

D.	Trend Information

	The ongoing deterioration of the economy and economic uncertainty in the
telecommunications market resulted in a curtailment of capital investment by
telecommunications carriers and service providers beginning late in 2000. Many
new and small service providers have failed and existing service providers have
been reducing or delaying expenditures on new equipment and applications. We
believe that this slow down in telecommunications-related expenditures will
continue affecting our sales and putting pressure on the prices of our products.
	Integrating voice and data in enterprise switches (the IP private branch
exchanges, or IP PBXs) is a trend in which we are participating. Our goal is to
develop marketing and sales relationships with the vendors of IP PBXs such as
Cisco Systems and 3Com under which our enterprise software will be sold together
with these vendors' systems. This requires us to develop new sales channels with
the distributors of IP PBXs. This process is time consuming and requires the
investment of resources to sign the necessary agreements and to certify and
train these new channel partners.
	At the end of 2001, we began offering service-enabling products for the
broadband market in general and for the wireless 3G-market space in particular.
                                      -45-
The emergence of this market segment has been significantly delayed due to
technology impediment and the global economic slowdown. This delay has caused
the deferral of the deployment of new networks and of the need for new solutions
that we provide. This trend has reduced our ability to forecast the acceptance
of our solutions in this market segment.
Our new wireless solutions target incumbent wireless operators, where we
encounter longer sales cycle, more costs and lower visibility on win timetables.
The sales cycle to these operators is significantly longer than the sales cycle
we encountered in the past. In most cases we are required to respond to an RFI
(Request for Information) and an RFP (Request for Proposal), which require large
investments of time of our technical pre-sale team. In most cases, we need to
partner with at least one system integrator on a case-by-case basis. The cost of
sales is also significantly higher due to the increased resources required in
the sales process. Our ability to forecast timing of wins is reduced, as the
decision-making process of the wireless operators is unclear and in many cases
the decision is either delayed or deferred to an indefinite date.

Item 6.		Directors, Senior Management and Employees

A.	Directors and Senior Management

	The following table sets forth certain information regarding our
directors and executive officers as of the date of filing of this annual report:
Name			Age		Position
Monica Eisinger		 45		President, Chairperson of the Board of
					Directors and Chief Executive Officer
Sagee Aran		 40		Vice President - Professional Services
Izik Ben Zaken 		 29		Vice President -
					Research and Development
Zeev Braude		 37		Vice President -
					Marketing and Business Development
Arie Ganot		 42 		Chief Financial Officer
Ilan Melamed		 39		Vice President -
					General Manager Americas
Zamir Bar-Zion		 46		Director
Rimon Ben-Shaoul	 58		Director
Kevin P. Mohan		 39		Director
Amnon Neubach		 59	 	Director
Lior Salansky		 39		Director

The background of each of our directors and executive officers is as follows:

	Monica Eisinger. Ms. Eisinger is a founder of our company and has been
President, Chairperson and Chief Executive Officer of our company since
inception. Prior to founding MIND, Ms. Eisinger served as an information
systems consultant to Raphael, the Israeli Armaments Industry and directed over
40 projects. Ms. Eisinger holds a B.Sc. in Computer Sciences and a Masters
Degree in Telecommunications (with expertise in Voice and Data Integration over
the Ethernet) from the Technion, Israel Institute of Technology.

	Sagee Aran. Mr. Aran joined our company in March 2000 as Vice President
of Professional Services. Prior to joining our company, he worked for seven
years at HISH Ltd., a company specializing in process engineering and
management, at which he held a number of positions including Operations Manager
                                      -46-
and International Sales and Marketing Manager. Mr. Aran holds a B.Sc. in
Engineering from the Technion, Israel Institute of Technology.

	Izik Ben Zaken. Mr. Ben Zaken has worked at our company since our
inception and has served in a number of positions including Head Software
Architect. He has served as our Vice President of Research and Development
since June 2001. Mr. Ben Zaken holds a B.A. in Computer Science from the
Technion, Israel Institute of Technology.

	Zeev Braude. Mr. Braude has worked at our company since our inception
serving in a number of positions, the most recent of which was Vice President of
Product Line Management. Mr. Braude has been Vice President of Marketing and
Business Development of our company since February 2000. Mr. Braude holds a
B.Sc. in Computer Engineering from the Technion, Israel Institute of Technology.

	Arie Ganot. Mr. Ganot joined our company in 1998. He has held a number
of positions with the company including Vice President - Finance and Comptroller
From 1994 to 1998, Mr. Ganot served as the Chief Financial Officer of S.A.L.
Technical Equipment Ltd. and from 1990 to 1994, he worked as an accountant with
Kesselman and Kesselman, a member of PricewaterhouseCoopers International
Limited. Mr. Ganot holds a B.A. in Accounting and Economics from Tel Aviv
University and is a Certified Public Accountant in Israel.

	Ilan Melamed. Mr. Melamed has served as General Manager of our U.S.
office since September 1998 and as Vice President - General Manager Americas of
MIND C.T.I. Inc. since May 2000. Prior to joining our company, Mr. Melamed was
employed by Israel Aircraft Industries for five years, at which he held a number
of positions including the Director of the Israel Aircraft Industries office in
Colombia. He holds a B.A. degree in Business Administration from Hebrew
University.

	Zamir Bar-Zion. Mr. Bar-Zion has served as an external director of our
company since June 2002. Mr. Bar-Zion was a Managing Director for investment
banking at Nessuah Zannex & Co. from 1998 until 2001. Prior to joining Nessuah
Zannex & Co., Mr. Bar Zion served as a private financial consultant and a senior
partner at Evergreen Canada - Israel Investments Ltd. Mr. Bar-Zion holds a B.S.
degree in Computer Science and Finance from the New York Institute of
Technology, an M.A. degree in Finance from Pace University and has graduated
from the Program of Management Development at Harvard University.

	Rimon Ben-Shaoul. Mr. Ben-Shaoul has served as a director of our company
since August 2002. Mr. Ben-Shaoul has served as the Co-Chairman, President and
Chief Executive Officer of Koonras Technologies Ltd., an investment company
controlled by Polar Investments Ltd., since February 2001. From 1997 to 2001
Mr. Ben-Shaoul served as the President and Chief Executive Officer of Clal
Industries and Investments Ltd. From 1985 to 1997 Mr. Ben-Shaoul was President
and Chief Executive Officer of Clal Insurance Company Ltd. From 1997 to 2001
Mr. Ben-Shaoul served as Chairman of Scitex Corporation Ltd. and currently
Mr. Ben-Shaoul serves as Chairman of Cimatron Ltd. and as a director of Arel
Communications & Software Ltd., Nice Systems Ltd., B.V.R. Technologies Ltd.,
Polar Communications Ltd. and Compugen Ltd. Mr. Ben-Shaoul also serves as a
director on the boards of several privately held companies. Mr. Ben-Shaoul
holds an M.B.A. and a B.A. in Economics, both from Tel Aviv University.

                                      -47-
	Kevin P. Mohan. Mr. Mohan has served as a director of our company since
March 2000. Mr. Mohan is a general partner of Summit Partners, a venture capital
firm, where he has been employed since 1994. He received an A.B.  in Economics
from Harvard College, a J.D. from Harvard Law School, and an M.B.A. from Harvard
Business School. Mr. Mohan also serves as a director on the boards of several
privately held companies.

	Amnon Neubach. Mr. Neubach has served as an external director of our
company since February 2001. From  2001 until 2003 Mr. Neubach has served as
Chairman of the Board of Pelephone Communications Ltd., a company founded by
Bezek and Motorola,  Mr. Neubach served as an economic consultant to several
companies in the private sector since 1997. From 1995-1997, Mr. Neubach served
as country advisor to Goldman Sachs in Israel, and from 1990-1994 he served as
the Minister of Economic Affairs in the Israeli Embassy in Washington, D.C.
Currently Mr. Neubach serves as a director of Arelnet Ltd., Zika Ltd. and EIL
Ltd. Mr. Neubach also serves as a director on the boards of two privately held
companies. Mr. Neubach holds a B.A. in Economics and Business Administration and
an M.A. in Economics, both from Bar Ilan University.

	Lior Salansky. Mr. Salansky is a founder of our company and has served
as a director since our inception. He has served in a number of positions within
our company from inception until February 2000, including Vice President of
Business Development, R&D Manager and software developer. He holds a B.Sc. in
Computer Science from the Technion, Israel Institute of Technology.

B.	Compensation of Directors and Executive Officers

	The aggregate direct remuneration paid to all persons who served in the
capacity of director or executive officer during 2002 was approximately
$777,000, including approximately $ 57,000, which was set aside for pension and
retirement benefits. This does not include amounts expended by us for
automobiles made available to our officers, expenses, including business,
travel, professional and business association dues and expenses, reimbursed to
officers.
	During 2002, no options to purchase ordinary shares were granted to our
directors and executive officers under our option plans.

C.	Board Practices

Board of Directors

Our board is divided into three classes of directors, denominated Class I,
Class II and Class III. The term of Class III will expire in 2003, Class I
will expire in 2004 and Class II in 2005. Monica Eisinger is a member of
Class I, Lior Salansky and Rimon Ben-Shaoul are members of Class II, and
Kevin P. Mohan is a member of Class III. At each annual general meeting of
shareholders, directors will be elected by a simple majority of the votes cast
for a three-year term to succeed the directors whose terms then expire. There
is no legal limit on the number of terms that may be served by directors who are
not external directors. External directors, who are elected for up to two
three-year terms pursuant to the Companies Law, are not members of any class.
Mr. Amnon Neubach was elected as an external director in February 2001 and Mr.
Zamir Bar-Zion, was elected as an external director in June 27, 2002.

                                      -48-
External Directors

	We have obtained an exemption from Nasdaq's independent director
requirements based on our compliance with the corresponding requirements under
the Companies Law, described immediately below.
	Under the Companies Law, companies incorporated under the laws of Israel
whose shares are listed for trading on a stock exchange or have been offered to
the public in or outside of Israel are required to appoint two external
directors. The Companies Law provides that a person may not be appointed as an
external director if the person or the person's relative, partner, employer or
any entity under the person's control has, as of the date of the person's
appointment to serve as an external director, or had, during the two years
preceding that date, any affiliation with:
* the company;
* any entity controlling the company; or
* any entity controlled by the company or by its controlling entity.
  The term affiliation includes:
* an employment relationship;
* a business or professional relationship maintained on a regular basis;
* control; and
* service as an office holder.

	The Companies Law defines the term "office holder" of a company to
include a director, the chief executive officer and any officer that reports
directly to the chief executive officer.
	No person can serve as an external director if the person's position or
other business creates, or may create, conflict of interests with the person's
responsibilities as an external director or may otherwise interfere with the
person's ability to serve as an external director.
	Until the lapse of two years from termination of office, a company may
not engage an external director to serve as an office holder and cannot employ
or receive services from that person, either directly or indirectly, including
through a corporation controlled by that person.

	External directors are to be elected by a majority vote at a
shareholders' meeting, provided that either:
* at least one third of the shares of non-controlling shareholders voted at the
meeting vote in favor of the election; or
* the total number of shares of non-controlling shareholders voted against the
election of the external director does not exceed one percent of the aggregate
voting rights in the company.
	The initial term of an external director is three years and may be
extended for an additional three years. External directors may be removed from
office only by the same percentage of shareholders as is required for their
election, or by a court, and then only if the external directors cease to meet
the statutory qualifications for their appointment or if they violate their duty
of loyalty to the company. Each committee of a company's board of directors is
required to include at least one external director, except for the audit
committee which is required to include all the external directors.

Audit Committee

	We have obtained an exemption from Nasdaq's audit committee requirements
based on our compliance with the corresponding requirements under the Companies
                                      -49-
Law, described immediately below.
	Under the Companies Law, our board of directors is required to appoint
an audit committee, comprised of at least three directors including all of the
external directors, but excluding:
* the chairman of the board of directors; and
* a controlling shareholder or a relative of a controlling shareholder and any
director employed by the company or who provides services to the company on a
regular basis.
	The role of the audit committee is to examine flaws in the business
management of the company, in consultation with the internal auditor and the
company's independent accountants, suggest appropriate courses of action, and to
approve specified related party transactions. Our audit committee consists of
	our external director(s) and one additional director,
Mr. Rimon Ben-Shaoul.
The approval of the audit committee is required to effect specified actions and
transactions with office holders, controlling shareholders and entities in which
they have a personal interest. An audit committee may not approve an action or a
transaction with related parties or with its office holders unless at the time
of approval the two external directors are serving as members of the audit
committee and at least one of whom was present at the meeting in which any
approval was granted.

Internal Auditor

Under the Companies Law, the board of directors must appoint an internal auditor
proposed by the audit committee. The role of the internal auditor is to examine,
inter alia, whether the company's actions comply with the law and orderly
business procedure. The internal auditor may not be an interested party, an
office holder, or a relative of any of the foregoing, nor may the internal
auditor be the company's independent accountant or its representative. The
Companies Law defines the term "interested party" to include a person who has
holds 5% or more of the company's outstanding share capital or voting rights, a
person who has the right to appoint one or more directors or the general
manager, or any person who serves as a director or as the general manager.
Mr. Gideon Douvshani, CPA, serves as our internal auditor.

Fiduciary Duties of Office Holders

	The Companies Law imposes a duty of care and a duty of loyalty on all
office holders of a company. The duty of care requires an office holder to act
with the level of care with which a reasonable office holder in the same
position would have acted under the same circumstances. The duty of care
includes a duty to use reasonable means to obtain:
* information on the advisability of a given action brought for his approval or
  performed by him by virtue of his position; and
* all other important information pertaining to these actions.
  The duty of loyalty of an office holder includes a duty to:
* refrain from any conflict of interest between the performance of his duties
  in the company and the performance of his other duties or his personal
  affairs;
* refrain from any activity that is competitive with the company;
* refrain from exploiting any business opportunity of the company to receive a
  personal gain for himself or others; and
* disclose to the company any information or documents relating to a company's
                                      -50-
  affairs which the office holder has received due to his position as an office
  holder.

	Disclosure of Personal Interest of an Office Holder

The Companies Law requires that an office holder of a company disclose to the
company any personal interest that he may have and all related material
information known to him, in connection with any existing or proposed
transaction by the company. The disclosure is required to be made promptly and
in any event no later than the board of directors meeting in which the
transaction is first discussed. If the transaction is an extraordinary
transaction, the office holder must also disclose any personal interest held by:
* the office holder's spouse, siblings, parents, grandparents, descendants,
  spouse's descendants and the spouses of any of these people; or
* any corporation in which the office holder is a 5% or greater shareholder,
  director or general manager or in which he has the right to appoint at least
  one director or the general manager.

	Under Israeli law, an extraordinary transaction is a transaction:
* other than in the ordinary course of business;
* otherwise than on market terms; or
* that is likely to have a material impact on the company's profitability,
  assets or liabilities.

Approval of Related Party Transactions

	Once an office holder complies with the above disclosure requirement,
the board of directors may approve a transaction between the company and an
office holder, or a third party in which an office holder has a personal
interest. A transaction that is adverse to the company's interest may not be
approved.
	If the transaction is an extraordinary transaction, approval of both the
audit committee and the board of directors is required. Under specific
circumstances, shareholder approval may also be required. A director who has a
personal interest in a matter which is considered at a meeting of the board of
directors or the audit committee may not be present at this meeting or vote on
this matter, unless a majority of the members of the board of directors or the
audit committee, as the case may be, has a personal interest in the matter. If a
majority of members of the board of directors have a personal interest therein,
shareholder approval is also required.

Disclosure of Personal Interests of a Controlling Shareholder

	Under the Companies Law, the disclosure requirements which apply to an
office holder also apply to a controlling shareholder of a public company.
A controlling shareholder is a shareholder who has the ability to direct the
activities of a company, including a shareholder that owns 25% or more of the
voting rights if no other shareholder owns more than 50% of the voting rights,
but excluding a shareholder whose power derives solely from his or her position
on the board of directors or any other position with the company. Extraordinary
transactions with a controlling shareholder or in which a controlling
shareholder has a personal interest, and the engagement of a controlling
shareholder as an office holder or employee, require the approval of the audit
committee, the board of directors and the shareholders of the company, in that
                                      -51-
order. The shareholder approval must be by a majority of the shares voted on
the matter, provided that either:
* at least one-third of the shares of shareholders who have no personal interest
  in the transaction and who vote on the matter vote in favor thereof; or
* the shareholders who have no personal interest in the transaction who vote
 against the transaction do not represent more than one percent of the voting
 rights in the company.
Shareholders generally have the right to examine any document in the company's
possession pertaining to any matter that requires shareholder approval. If this
information is made public in Israel or elsewhere, we will file the information
with the Securities and Exchange Commission in the United States.
For information concerning the direct and indirect personal interests of an
office holder and principal shareholders in specified transactions with us, see
Item 7.B "Related Party Transactions."
Remuneration of Members of the Board of Directors
Under our articles of association, no director may be paid any remuneration by
the company for his services as director except as may be approved by a
shareholders' resolution. Our external directors are entitled to consideration
and reimbursement of expenses only as provided in regulations promulgated under
the Companies Law and are otherwise prohibited from receiving any other
consideration, directly or indirectly, in connection with their service as
external directors. In accordance with these regulations, our shareholders
approved an annual fee of $8,000 and a participation fee of $400 for attendance
at a meeting of the board or a committee thereof to be paid to each of our
external directors. Except for the external directors, we do not pay cash
remuneration to our directors for their services as directors.

Executive Officers

Our executive officers are elected by our board of directors and serve at the
discretion of our board of directors. We maintain written employment agreements
with our executive officers. Each agreement terminates on a 30 days written
notice and provides for standard terms and conditions of employment. All of our
executive officers have agreed not to compete with us for 12 months (or 24
months in the case of Monica Eisinger) following the termination of their
employment with us. Monica Eisinger is entitled to severance pay upon
termination of her employment by either her or us, other than for cause and in
addition to receive, during each month of the six-month period following
termination of her employment by us, or by her for cause, an amount of salary
and benefits equal to her former monthly salary and other benefits. Under
recent Israeli case law, the non-competition undertakings of employees may not
be enforceable.

D.	Employees

As of December 31, 2002 we employed 163 employees, of whom nine are part-time
employees. Of these employees, 94 were employed in Israel, 47 in Romania, 15 in
the United States and seven in China. We employed 94_employees in research and
development, 25 in professional services and customer support, 31 in sales and
marketing and 13 in general and administration. This represents a decrease from
the total number of 177 employees as of December 31, 2001 and 183 employees as
of December 31, 2000. Of the 177 employees as of December 31, 2001, 115 were
employed in Israel, 26 in Romania, 24 in the United States, eight in China,
three in Japan and one in the Netherlands; 87 were employed in research and
                                      -52-
development, 31 in professional services and customer support, 47 in sales and
marketing and 12 in general and administration. Of the 183 employees as of
December 31, 2000, 154 were employed in Israel, 20 were employed in the
United States, seven in China, one in Japan and one in the Netherlands; 69 were
employed in research and development, 46 in professional services and customer
support, 48 in sales and marketing and 20 in general and administration.
We are subject to Israeli labor laws and regulations with respect to our
Israeli employees. These laws principally concern matters such as paid annual
vacation, paid sick days, length of the work day and work week, minimum wages,
pay for overtime, insurance for work-related accidents, severance pay and other
conditions of employment.
Furthermore, by order of the Israeli Ministry of Labor and Welfare, all
employers and employees are subject to provisions of collective bargaining
agreements between the Histadrut, Federation of Labor, and the Coordination
Bureau of Economic Organizations in Israel. These provisions principally
concern cost of living increases, recreation pay, commuting expenses and other
conditions of employment. We provide our employees with benefits and working
conditions above the required minimums. Our employees are not represented by a
labor union. To date, we have not experienced any work stoppages and our
relationships with our employees are good.

E.	Share Ownership

	As of June 11, 2003, Monica Eisinger beneficially owns 4,797,500 or
23.2%, of our ordinary shares, including options to acquire 20,000 ordinary
shares at an exercise price of $1.65 per share. Ms. Eisinger holds options to
acquire an aggregate of 80,000 ordinary shares, which vest in equal installments
on the 31st day of December in each of 2002, 2003, 2004 and 2005 and expire on
December 31, 2008.
	As of June 11, 2003, Lior Salansky beneficially owns 3,501,140 or 16.9%,
of our ordinary shares.
See Item 7A "Major Shareholders" for details of the number of our ordinary
shares that may be deemed to be beneficially owned by directors associated with
our major shareholders.
None of our other directors or members of senior management beneficially owns
1% or more of our ordinary shares.
	We have established stock option plans to provide for the issuance of
options to our officers and employees. Under the plans, options to purchase our
ordinary shares may be issued from time to time to our officers and employees
at exercise prices and on other terms and conditions as determined by our board
of directors. Our board of directors determines the exercise price and the
vesting period of options granted. The option plans permit the issuance of
options to acquire up to 3,308,000 ordinary shares. As of March 31, 2003,
options to purchase 1,677,420ordinary shares are outstanding and options for
72,000 ordinary shares have been exercised. The options vest over three to five
years, commencing on the date of grant. Generally, options not previously
exercised will expire approximately seven years after they are granted. In
connection with the recent Israeli tax reform, our board of directors elected
capital gains treatment in respect of options awarded under our Israeli option
plan after January 1, 2003. Accordingly, gains derived from options awarded
after January 1, 2003, and held by a trustee for two years from the end of the
tax year in which they were awarded, will be taxed as capital gains at a rate
of 25%, and we will not be entitled to recognize an expense for the award of
such options.
                                      -53-
Item 7	Major Shareholders and Related Party Transactions

A.	Major Shareholders

The following table sets forth certain information regarding the beneficial
ownership of our ordinary shares as of June 11, 2003 by each person who is
known to own beneficially more than 5% of the outstanding ordinary shares.

				Total Shares 		Percentage of
Name of Beneficial Owners	Beneficially Owned(1)	Ordinary Shares (2)
-------------------------       ---------------------   -------------------
Monica Eisinger			4,797,500		23.17 %
Rimon Ben-Shaoul(3)		5,166,554		24.98
Kevin Mohan(4)			2,592,600		12.53
Lior Salansky			3,501,140		16.92
Polar Communications Ltd.	5,166,554  		24.98
Summit Partners(5) 		2,592,600		12.53

(1)	Shares beneficially owned include shares that may be acquired pursuant
	to options that are exercisable within 60 days of June 11, 2003 and are
	treated	as outstanding only for purposes of determining the percentage
	owned by such person.
(2)	Based on 20,686,220 ordinary shares outstanding on June 11, 2003.
(3)	Represents shares described with respect to Polar Communications Ltd.
	Mr. Ben-Shaoul, one of our directors, is a director of Polar
	Communications Ltd. Mr. Ben-Shaoul disclaims beneficial ownership of
	these shares.
(4)	Represents shares described in note (5) below, beneficially owned by
	Summit Partners. Mr. Mohan, one of our directors, is a member of Summit
	Partners LLC, the sole general partner of Summit Partners V, L.P., which
	is the sole general partner of Summit Ventures V, L.P., Summit Ventures
	V Companion Fund, L.P., Summit V Advisors Fund (QP), L.P., and Summit V
	Advisors Fund, L.P. Summit Partners, LLC, through an investment
	committee, has voting and dispositive authority over the shares held by
	these entities and Summit Investors III, L.P. Mr. Mohan does not have
	voting and dispositive authority over these shares and disclaims
	beneficial ownership except to the extent of his pecuniary interest in
	these shares.
(5)	Summit Partners is the name used to refer to a group of investment
	partnerships. Shares reflected include 1,731,100 shares held by Summit
	Ventures, V, L.P. 644,180 shares held by Summit Ventures V Companion
	Fund, L.P., 136,120 shares held by Summit V Advisors Fund (QP) L.P.,
	41,600 shares held by Summit V Advisors Fund, L.P. and 39,600 shares
	held by	Summit Investors III, L.P. The general partner for each of
	Summit Ventures V, L.P., Summit Ventures V Companion Fund, L.P., Summit
	V Advisors Fund (QP) L.P. and Summit V Advisors Fund, L.P. is Summit
	Partners V, L.P., the general partner of which is Summit Partners, LLC.

	As of June 11, 2003, 20,686,220 of our ordinary shares were outstanding.
At such date, there were 20 holders of record of our ordinary shares in the
United States who collectively held approximately 13.6% of our outstanding
ordinary shares. In addition to this amount, there were also 4,724,775 shares
held by the Depositary Trust Company in the United States. The number of record
holders in the United States is not representative of the number of beneficial
                                      -54-
holders nor is it representative of where such beneficial holders are resident
since many of these ordinary shares were held of record by brokers or other
nominees.
	As part of a private placement during March 2000, Summit Partners
acquired Series A and Series B Preferred shares of MIND. These preferred shares
were converted into 2,592,600 ordinary shares (of which 650,000	shares were
non-voting shares) immediately prior to our initial public offering in August
2000. The 650,000 non-voting shares were later converted into 650,000 voting
ordinary shares. For more information regarding the conversion of these
non-voting ordinary shares see Item 4.A "History and Development of the Company
- Developments since January 1, 2002". Consequently, as set forth in the table
above, Summit Partners owns 12.5% of our outstanding ordinary shares.
	In connection with our private placement in March 2000, Lior Salansky
sold Series B Preferred shares to the Series B investors, and an aggregate of
468,240 ordinary shares to certain other purchasers. Immediately prior to our
public offering in August 2000, Lior Salansky beneficially owned 4,016,200
ordinary shares, representing 23.5% of our outstanding ordinary shares.
Mr. Salansky transferred an aggregate of 117,060 ordinary shares immediately
following our initial public offering pursuant to obligations under the share
purchase agreement relating to the ordinary shares that he sold in connection
with the private placement. Since the closing of our initial public offering
through June 11, 2003, Mr. Salansky sold an additional 398,000 ordinary shares.
Consequently, Mr. Salansky currently owns  ordinary shares,representing 16.9% of
our outstanding ordinary shares. See Item 7.B "Related Party Transactions -
Investment by Summit" for a description of these transactions.
	Pursuant to a Share Sale and Purchase Agreement dated July 23, 2002,
ADC Telecommunications Israel Ltd., which beneficially owned 4,502,000, or
21.8%, of our ordinary shares as of March 31, 2002, sold 4,166,554 of its shares
to Polar Communications Ltd. Pursuant to said Share Sale and Purchase Agreement
ADC Telecommunications Israel Ltd. agreed, among other matters, to vote for
Mr. Ben-Shaoul election to our board of directors at the general meeting of
shareholders which took place during 2002.
	On June 27, 2002 our shareholders approved the conversion of the 650,000
non-voting ordinary shares held by Summit Partners into ordinary shares on a
one-for-one basis. Accordingly, our major shareholders have the same voting
rights as our other shareholders.

B.	Related Party Transactions

Investment by Summit

	Conversion of Non-voting Shares. In March 2000, we raised $12 million in
a private placement of our securities to a group of funds led by Summit Ventures
V, L.P.
	Upon conversion of a portion of its preferred shares upon our initial
public offering, 650,000 non-voting ordinary shares were issued to Summit
Ventures, V, L.P. These non-voting ordinary shares were convertible into
ordinary shares on a one-for-one basis at the option of the holder thereof or
automatically upon transfer to a third party, unless the holder would then own
in excess of 10% of our outstanding ordinary shares. On June 27, 2002, these
non-voting ordinary shares were converted into ordinary shares on a one-for-one
basis in order to complete the listing of our shares on TASE in compliance with
the Israeli Securities Law, 1968. For more information regarding the conversion
of these non-voting ordinary shares, see Item 4.A "History and Development of
                                      -55-
the Company - Developments since January 1, 2002".
	Summit Ventures V, L.P. and its related funds have no relationship with
us other than their investment in our shares. Kevin P. Mohan, a member of Summit
Partners, LLC, the sole general partner of the sole general partner of Summit
Partners V, L.P., is one of our directors. Eleven individuals, including
Mr. Mohan, are members of Summit Partners, LLC.
	Registration Rights Agreement. In connection with the investment, we
granted to our principal shareholders, and transferees of their shares, two
demand registration rights and unlimited incidental registration rights.
	Shareholders' Agreement. In connection with the investment, we and our
principal shareholders entered into a shareholders' agreement. The shareholders'
agreement provides, among other things, that if Monica Eisinger or Lior Salansky
desire to sell all or any part of the shares owned by them, other than in the
public market, Summit and ADC Teledata Communications Ltd. and Ms. Eisinger or
Mr. Salansky are entitled to sell a pro rata portion of the shares proposed to
be sold. Except for these limited co-sale rights, the shareholders agreement
terminated immediately prior to the closing of our initial public offering in
August 2000.

Options Granted to Monica Eisinger

In December 2001, our audit committee and board of directors approved the grant
of 80,000 options to Ms. Monica Eisinger, our Chairperson, President and
Chief Executive Officer. The grant was approved by our shareholders at our
annual general meeting of shareholders on June 27, 2002. The exercise price of
the options is $1.65 per share. The vesting period commenced on
December 31, 2001 and the options vest in equal installments on the 31st day of
December in each of 2002, 2003, 2004 and 2005 and expire on December 31, 2008.

Loans to Key Management Personnel
In March 2002, we granted a loan in the amount of $7,000 to one of our officers.
The loan bore interest at the rate of 4% per year, as adjusted by changes in the
Israeli consumer price index. As of December 31, 2002, all of the principal and
interest on the loan has been repaid.

C.	Interests of Experts and Counsel
	Not applicable.

Item 8.		Financial Information

Financial Statements

	See Item 18.

Legal Proceedings

	We are not a party to any material legal proceedings.
Dividend Policy

	Through March 31, 2000, we distributed to our shareholders all of our
earnings from tax-exempt income. We did not distribute dividends in 2001 or
2002. Our board of directors is currently reviewing our dividend policy.

Item 9.		The Offer and Listing
                                      -56-
A.	Offer and Listing Details

	Our ordinary shares have been quoted on the Nasdaq National Market under
the symbol MNDO since August 8, 2000. The following table sets forth, for the
periods indicated, the high and low sales prices of our ordinary shares as
reported on the Nasdaq National Market.
					Price Per Share
	Calendar Year			High	   Low
	-------------		       ------     -----
		2002		       $1.84	  $0.79
		2001		       $8.875	  $1.11
2000 (commencing August 8, 2000)       $14.12     $6.50


					Price Per Share
	Calendar Quarters		High	   Low
	-----------------	       ------     -----
	2003 First Quarter  	       $1.45	  $1.24
	2002 First Quarter  	       $1.84	  $1.30
	     Second Quarter  	       $1.30	  $1.12
	     Third Quarter  	       $1.27	  $0.90
	     Fourth Quarter	       $1.39 	  $0.79
	2001 First Quarter  	       $8.875	  $1.531
	     Second Quarter  	       $3.18	  $1.344
	     Third Quarter  	       $3.00	  $1.41
	     Fourth Quarter	       $1.87	  $1.11


	Calendar Month
	--------------
	2003 January		       $1.45      $1.24
	     February		       $1.43	  $1.30
	     March  		       $1.40	  $1.24
	     April 		       $2.03	  $1.35
	     May		       $2.90	  $2.10
	2002 December		       $1.34	  $1.09

	Trading of our shares on the TASE is insignificant and typically
represents less than 1% of the volume traded on Nasdaq. Accordingly, we do not
believe sales price information with respect to the limited trading of our
ordinary shares on TASE is meaningful.

B.	Plan Of Distribution
	Not applicable

C.	Markets

	Our ordinary shares are quoted on the Nasdaq National Market under the
symbol MNDO. In addition, commencing July 11, 2002, our ordinary shares are
quoted on the Tel-Aviv Stock Exchange under the symbol MIND and are included in
the TELETEC index.

D.	Selling Shareholders
	Not applicable
                                      -57-
E.	Dilution
	Not applicable

F.	Expenses of the Issue
	Not applicable

Item 10.	Additional Information

A.	Share Capital
	Not applicable

B.	Memorandum and Articles of Associations

Objects and Purposes

	We were first registered under Israeli law on April 6, 1995 as a private
company, and on August 11, 2000 became a public company. Our registration number
with the Israeli registrar of companies is 51-213448-7. The full details of our
objects and purposes can be found in Section 2 of our Memorandum of Association
filed with the Israeli registrar of companies. Among the objects and purposes
stipulated are the following: "to engage in any kind of commercial and/or
productive business and to engage in any action or endeavor which the company's
managers consider to be beneficial to the company."

Transfer of Shares and Notices

	Fully paid ordinary shares are issued in registered form and may be
freely transferred pursuant to our articles of association unless such transfer
is restricted or prohibited by another instrument. Unless otherwise prescribed
by law, shareholders of record will be provided at least 21 calendar days' prior
notice of any general shareholders meeting.

Election of Directors

The ordinary shares do not have cumulative voting rights in the election of
directors. Thus, the holders of ordinary shares conferring more than 50% of the
voting power have the power to elect all the directors, to the exclusion of the
remaining shareholders. Our board is divided into three classes of directors
serving staggered three year terms, in addition to our external directors, who
are not members of any class.

Dividend and Liquidation Rights
	Dividends on our ordinary shares may be paid only out of profits and
other surplus, as defined in the Companies Law, as of the end of the most recent
fiscal year or as accrued over a period of two years, whichever is higher,
unless otherwise approved by a court order. Our board of directors is authorized
to declare dividends, provided that there is no reasonable concern that the
dividend will prevent us from satisfying our existing and foreseeable
obligations as they become due. In the event of our liquidation, after
satisfaction of liabilities to creditors, our assets will be distributed to the
holders of ordinary shares in proportion to their respective holdings. This
liquidation right may be affected by the grant of preferential dividends or
distribution rights to the holders of a class of shares with preferential rights
that may be authorized in the future.
                                      -58-
Voting, Shareholders' Meetings and Resolutions
	Holders of ordinary shares have one vote for each ordinary share held on
all matters submitted to a vote of shareholders.
	These voting rights may be affected by the grant of any special voting
rights to the holders of a class of shares with preferential rights that may be
authorized in the future.
	We have two types of general shareholders meetings: the annual general
meetings and extraordinary general meetings. These meetings may be held either
in Israel or in any other place the board of directors determines. An annual
general meeting must be held in each calendar year, but not more than 15 months
after the last annual general meeting. Our board of directors may convene an
extraordinary meeting, from time to time, at its discretion and is required to
do so upon the request of shareholders holding at least 5% of our ordinary
shares. The quorum required for an ordinary meeting of shareholders consists of
at least two shareholders present in person or by proxy who hold or represent
between them at least 25% of the outstanding voting shares unless otherwise
required by applicable rules. A meeting adjourned for lack of a quorum generally
is adjourned to the same day in the following week at the same time and place or
any time and place as the Chairman may designate with the consent of the
shareholders voting on the matter adjourned. At such reconvened meeting the
required quorum consists of any two members present in person or by proxy.
	Under the Companies Law, unless otherwise provided in the articles of
association or applicable law, all resolutions of the shareholders require a
simple majority of the shares present, in person or by proxy, and voting on the
matter. However, our articles of association require approval of 75% of the
shares present and voting to remove directors or change the structure of our
staggered board of directors.

Duties of Shareholders

	Under the Companies Law, each and every shareholder has a duty to act in
good faith in exercising his rights and fulfilling his obligations towards the
company and other shareholders and to refrain from abusing his power in the
company, such as in voting in the general meeting of shareholders on the
following matters:
* any amendment to the articles of association;
* an increase of the company's authorized share capital;
* a merger; or
* approval of certain actions and transactions which require shareholder
  approval.
	In addition, each and every shareholder has the general duty to refrain
from depriving rights of other shareholders. Furthermore, any controlling
shareholder, any shareholder who knows that it possesses the power to determine
the outcome of a shareholder vote and any shareholder that, pursuant to the
provisions of the articles of association, has the power to appoint or to
prevent the appointment of an office holder in the company or any other power
toward the company is under a duty to act in fairness towards the company. The
Companies Law does not describe the substance of this duty of fairness. These
various shareholder duties, which typically do not apply to shareholders of U.S.
companies, may restrict the ability of a shareholder to act in what the
shareholder perceives to be its own best interests.

Restrictions on Non-Israeli Residents

                                      -59-
	The ownership or voting of our ordinary shares by non-residents of
Israel, except with respect to citizens of countries which are in a state of
war with Israel, is not restricted in any way by our memorandum of association
or articles of association or by the laws of the State of Israel.

Mergers and Acquisitions under Israeli Law

	The Companies Law includes provisions that allow a merger transaction
and requires that each company that is party to a merger approve the transaction
by its board of directors and a vote of the majority of its shares, voting on
the proposed merger at a shareholders' meeting called on at least 21 days' prior
notice. For purposes of the shareholder vote, unless a court rules otherwise,
the merger will not be deemed approved if a majority of the shares held by
parties other than the other party to the merger, or by any person who holds
25% or more of the shares of the right to appoint 25% or more of the directors
of the other party, vote against the merger. Upon the request of a creditor of
either party of the proposed merger, the court may delay or prevent the merger
if it concludes that there exists a reasonable concern that as a result of the
merger, the surviving company will be unable to satisfy the obligations of any
of the parties to the merger. In addition, a merger may not be completed unless
at least 70 days have passed from the time that a proposal of the merger has
been filed with the Israeli Registrar of Companies.
	The Companies Law also provides that an acquisition of shares of public
company must be made by means of tender offer if as a result of the acquisition
the purchaser would become a 25% or more shareholder of the company and there is
no 25% or more shareholder in the company. If there already is another 25% or
more, but less than majority, shareholder in the company, the Companies Law
provides that an acquisition of shares of a public company must be made by means
of a tender offer if as a result of the acquisition the purchaser would become
a 45% or more shareholder of the company. If following any acquisition of shares
the acquirer will hold 90% or more of the company's shares, the acquisition may
not be made other than through a tender offer to acquire all of the shares of
such class. If more than 95% of the outstanding shares are tendered in the
 tender offer, all the shares that the acquirer offered to purchase will be
transferred to it. However, the remaining minority shareholders may seek to
alter the consideration by court order.
	Finally, Israeli tax law treats stock-for-stock acquisitions between an
Israeli company and a foreign company less favorably than does U.S. tax law. For
example, Israeli tax law subjects a shareholder who exchanges his ordinary
shares for shares in another corporation to taxation prior to the sale of the
shares received in such stock-for-stock swap.

Modification of Class Rights

	Our articles of association provide that the rights attached to any
class (unless otherwise provided by the terms of such class), such as voting,
rights to dividends and the like, may be varied by a shareholders resolution,
subject to the approval of the holders of a majority of the issued shares of
that class.

Board of Directors

	According to the Companies Law and our articles of association, the
oversight of the management of our business is vested in our board of directors.
                                      -60-
The board of directors may exercise all such powers and may take all such
actions that are not specifically granted to our shareholders. As part of its
powers, our board of directors may cause the company to borrow or secure payment
of any sum or sums of money, at such times and upon such terms and conditions as
it thinks fit, including the grants of security interests on all or any part of
the property of the company.
	A resolution proposed at any meeting of the board of directors shall be
deemed adopted if approved by a majority of the directors present and voting on
the matter. For additional information, please see Item 6.C "Board Practices".

Exculpation of Office Holders

	Under the Companies Law, an Israeli company may not exempt an office
holder from liability for a breach of his duty of loyalty, but may exempt in
advance an office holder from his liability to the company, in whole or in part,
for a breach of his duty of care provided the articles of association of the
company allow it to do so. Our articles allow us to exempt our office holders
to the fullest extent permitted by law.

	Insurance of Office Holders
	Our articles of association provide that, subject to the provisions of
the Companies Law, we may enter into a contract for the insurance of the
liability of any of our office holders, with respect to an act performed in the
capacity of an office holder for:
* a breach of his duty of care to us or to another person;
* a breach of his duty of loyalty to us, provided that the office holder acted
  in good faith and had reasonable cause to assume that his act would not
  prejudice our interests; or
* a financial liability imposed upon him in favor of another person.

	Indemnification of Office Holders
	Our articles of association provide that we may indemnify an office
holder against the following obligations and expenses imposed on the office
holder with respect to an act performed in the capacity of an office holder:
* a financial obligation imposed on him in favor of another person by a court
  judgment, including a settlement or an arbitrator's award approved by the
  court; and
* reasonable litigation expenses, including attorneys' fees, expended by the
  office holder or charged to him by a court in connection with:
* proceedings we institute against him or instituted on our behalf or by another
  person;
* a criminal charge from which he was acquitted; or
* a criminal proceeding in which he was convicted of an offense that does not
  require proof of criminal intent.
	Our articles of association also include provisions:
* authorizing us to undertake to indemnify an office holder as described above,
  provided that the undertaking is limited to types of events which our board of
  directors deems to be anticipated when the undertaking is given and to an
  amount determined by our board of directors to be reasonable under the
  circumstances; and
* authorizing us to retroactively indemnify an officer or director.

	Limitations on Exculpation, Insurance and Indemnification
	The Companies Law provides that a company may not exculpate or indemnify
                                      -61-
an office holder, or enter into an insurance contract, which would provide
coverage for any monetary liability incurred as a result of any of the
following:
* a breach by the office holder of his duty of loyalty unless, with respect to
  insurance coverage, the office holder acted in good faith and had a reasonable
  basis to believe that the act would not prejudice the company;
* a breach by the office holder of his duty of care if the breach was done
  intentionally or recklessly;
* any act or omission done with the intent to derive an illegal personal
  benefit; or
* any fine levied against the office holder.
  In addition, under the Companies Law, indemnification of, and procurement of
  insurance coverage for, our office holders must be approved by our audit
  committee and our board of directors and, if the beneficiary is a director,
   by our shareholders.
	We have agreed to exempt from liability and indemnify our office holders
to the fullest extent permitted under the Companies Law. We have obtained
directors and officers liability insurance for the benefit of our office
holders.

C.	Material Contracts

	The agreements that we entered into with Summit Partners are summarized
under Item 7.B "Related Party Transactions".

D.	Exchange Controls
	There are currently no Israeli currency control restrictions on payments
of dividends or other distributions with respect to our ordinary shares or the
proceeds from the sale of the shares, except for the obligation of Israeli
residents to file reports with the Bank of Israel regarding certain
transactions. However, legislation remains in effect pursuant to which currency
controls can be imposed by administrative action at any time.

E.	Taxation
Israeli Tax Considerations
	The following is a summary of the current tax structure applicable to
companies in Israel, with special reference to its effect on us. Note that this
tax structure and any resulting benefit may not apply for any income derived by
our foreign subsidiaries, which subsidiaries may be taxed according to tax laws
applicable to their country of residence. The following also contains a
discussion of the material Israeli and United States tax consequences to persons
purchasing our ordinary shares. To the extent that the discussion is based on
tax legislation, which has not been subject to judicial or administrative
interpretation, we cannot assure you that the tax authorities will accept the
views expressed in the discussion in question.

	Prospective purchasers of our ordinary shares should consult their own
tax advisors as to the United States, Israeli or other tax consequences of the
purchase, ownership and disposition of ordinary shares, including, in
particular, the effect of any foreign, state or local taxes.

	Tax Reform
	On January 1, 2003, the Law for Amendment of the Income Tax Ordinance
(Amendment No. 132), 5762-2002, as amended, known as the "Tax Reform", came into
                                      -62-
effect.
	The Tax Reform, aimed at broadening the categories of taxable income and
reducing the tax rates imposed on employment income, introduced the following,
among other things:
* Imposition of Israeli tax on all income of Israeli residents, individuals and
  corporations, regardless of the territorial source of income, including income
  derived from passive sources such as interest, dividends and royalties;
* Reduction of the tax rate levied on real capital gains (other than gains from
  the sale of listed securities) derived after January 1, 2003, to a general
  rate of 25% for both individuals and corporations. Regarding assets acquired
  prior to January 1, 2003, the reduced tax rate will apply to a proportionate
  part of the gain, in accordance with the holding periods of the asset, before
  or after January 1, 2003, on a linear basis;
* Imposition of capital gains tax on real capital gains realized by Israeli
  individuals as of January 1, 2003, from the sale of shares of companies
  publicly traded in the Tel Aviv Stock Exchange (such gain was previously
  exempt from capital gains tax in Israel). Special directives will apply for
  the selling of shares purchased prior to January 1, 2003. For information with
  respect to the applicability of Israeli capital gains taxes on the sale of
  ordinary shares to non-Israeli shareholders, see "-Capital Gains Tax on the
  Sale of our Ordinary Shares - Non- Residents of Israel" below;
* Introduction of controlled foreign corporation (CFC) rules into the Israeli
  tax structure. Generally, under such rules, an Israeli resident who holds,
  directly or indirectly, 10% or more of the rights in a foreign corporation
  whose shares are not publicly traded (or which has offered less than 30% of
  its shares or any rights to its shares to the public), in which more than 50%
  of the rights are held directly or indirectly by Israeli residents, and a
  majority of whose income or profits in a tax year is considered passive
  income, will be liable for tax on the portion of such income attributed to his
  holdings in such corporation, as if such income were distributed to him as a
  dividend;
* Introduction of a new regime for the taxation of shares and options issued to
  employees, officers and directors;

	General Corporate Tax Structure

	The general rate of corporate tax in Israel to which Israeli companies
are subject is 36% and the general rate of capital gains tax in Israel
(regarding capital gains derived after January 1, 2003) to which Israeli
companies are subject is 25%. As described below, the tax rate payable by a
company which derives income from an "Approved Enterprise" may be considerably
less.

	Law for the Encouragement of Capital Investments, 1959

	General
	The Law for Encouragement of Capital Investments, 1959, provides that
upon application to the Investment Center of the Ministry of Industry and Trade
of the State of Israel, a proposed capital investment in eligible facilities
may be designated as an "Approved Enterprise." Each certificate of approval for
an Approved Enterprise relates to a specific investment program delineated both
by its financial scope, including its capital sources, and by its physical
characteristics, such as the equipment to be purchased and utilized pursuant to
the program. The tax benefits derived from any such certificate of approval
                                      -63-
relate only to taxable income derived from the specific Approved Enterprise. If
a company has more than one approval or only a portion of its capital
investments are approved, its effective tax rate is the result of a weighted
combination of the applicable rates. The benefits under the law are usually not
available with respect to income derived from products manufactured outside of
Israel.
	Taxable income of a company derived from an Approved Enterprise is
subject to tax at the maximum rate of 25%, rather than the regular rate of 36%,
for the benefit period. That income is eligible for further reductions in tax
rates depending on the percentage of the foreign investment in the company's
share capital (conferring rights to profits, voting and appointment of
directors) and the percentage of its combined share and loan capital owned by
non-Israeli residents ("foreign investment level"). The tax rate is:
* 20% if the foreign investment level is 49% or more but less than 74%;
* 15% if the foreign investment level is 74% or more but less than 90%; and
* 10% if the foreign investment level is 90% or more.
	The lowest level of foreign investment during the tax year will be used
to determine the relevant tax rate for that year. These tax benefits are granted
for a limited period not exceeding seven years, or ten years for a company whose
foreign investment level exceeds 25% from the first year in which the Approved
Enterprise has taxable income.
	The period of benefits may in no event, however, exceed the lesser of
12 years from the year in which production commenced and 14 years from the year
of receipt of Approved Enterprise status.
	The 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.

	The Alternative Path

	A company owning an Approved Enterprise may elect to receive, in lieu of
the foregoing, an alternative package of benefits. Under the alternative
package, the company's undistributed income derived from an Approval Enterprise
will be exempt from tax for a period of between two and ten years from the first
year of taxable income, depending on the geographic location of the Approved
Enterprise within Israel, and the company will be eligible for the tax benefits
under the law for the remainder of the benefit period.

	General Requirements by the Investment Center

The Investment Center bases its decision of whether to approve or reject a
company's application for designation as an Approved Enterprise on criteria set
forth in the law and related regulations, the then prevailing policy of the
Investment Center and the specific objectives and financial criteria of the
applicant. Accordingly, a company cannot be certain in advance whether its
application will be approved. In addition, the benefits available to an Approved
Enterprise are conditional upon compliance with the conditions stipulated in
the law and related regulations and the criteria set forth in the specific
certificate of approval. In the event that a company violates these conditions,
in whole or in part, it may be required to refund all or a portion of its tax
benefits, linked to the Israeli consumer price index and interest. These
conditions include:
* adhering to the business plan contained in the application to the Investment
  Center;
                                      -64-
* financing at least 30% of the investment in property, plant and equipment
  with the proceeds of the sale of shares;
* filing regular reports with the Investment Center with respect to the Approved
  Enterprise; and
* obtaining the approval of the Investment Center for changes in the ownership
  of a company.

	The Company's Approved Enterprises

	Most of our manufacturing facilities in Yoqneam have been granted the
status of Approved Enterprise. Since our manufacturing facilities are located
in an area that was designated by the State of Israel as "Area A" at the time
of the approval of our two existing Approved Enterprises, and since we elected
to receive the alternative package of benefits (involving waiver of investment
grants), our income derived from each Approved Enterprise is tax exempt for a
period of ten years commencing in the first year in which we earn taxable income
from each Approved Enterprise. In February 2001 the area in which our
manufacturing facilities are located was designated by the State of Israel as
"Area B", and accordingly, the rules applicable to Area B will apply to any
future Approved Enterprise approved by the Investment Center. To date, we have
two Approved Enterprises, as follows:
* the first Approved Enterprise commenced operations in 1995 and income derived
  and not distributed from this Approved Enterprise is exempt from tax for a
  period of ten years through 2004;
* the second Approved Enterprise requires that we invest approximately
  $6.4 million in property, plant and equipment pursuant to an approved
  investment plan. In May 2002 we submitted a request to Investment Center to
  amend the second Approved Enterprise so that it would cover investments in
  property, plant and equipment of approximately $1.5 million. On February 17,
  2003 our request was approved by the Investment Center; and
* after we have invested 80% of this amount, income from this Approved
  Enterprise will be exempt from tax for a period of ten years.

	Dividends Taxation

	When dividends are distributed from the Approved Enterprise, they are
generally considered to be attributable to the entire enterprise and their
effective tax rate is a result of a weighted combination of the applicable tax
rates. A company that has elected the alternative package of benefits is not
obliged to distribute exempt retained profits, and may generally decide from
which year's profits to declare dividends. In the event that we pay a cash
dividend from income that is derived from our Approved Enterprises pursuant to
the alternative package of benefits, which income would otherwise be tax-exempt,
we would be required to pay tax on the amount of income distributed as dividends
at the rate which would have been applicable if we had not elected the
alternative package of benefits, that rate is ordinarily up to 25% and to
withhold at source on behalf on the recipient of the dividend an additional 15%
of the amount distributed. Through May 31, 2000 we distributed most of our
income and paid corporate tax at the rate of 25%. Since then we did not
distribute additional amounts as dividends. Our board of directors is currently
reviewing our dividend policy.

	Law for the Encouragement of Industry (Taxes), 1969

                                      -65-
	Under the Law for the Encouragement of Industry (Taxes), 1969, or the
Industry Encouragement Law, a company qualifies as an "Industrial Company" if it
is resident in Israel and at least 90% of its income in a given tax year,
determined in NIS, exclusive of income from capital gains, interest and
dividends, is derived from Industrial Enterprises owned by that company. An
"Industrial Enterprise" is defined as an enterprise whose major activity in a
particular tax year is industrial activity.
	Industrial Companies qualify for accelerated depreciation rates for
machinery, equipment and buildings used by an Industrial Enterprise. An
Industrial Company owning an Approved Enterprise, as described above, may choose
between the above depreciation rates and the depreciation rates available to
Approved Enterprises.
	Pursuant to the Industry Encouragement Law, an Industrial Company is
also entitled to amortize the purchase price of know-how and patents over a
period of eight years beginning with the year in which such rights were first
used.
	In addition, an Industrial Company is entitled to deduct over a
three-year period expenses involved with the issuance and listing of shares on a
stock exchange and has the right, under certain conditions, to elect to file a
consolidated tax return with related Israeli Industrial Companies that satisfy
conditions set forth in the law.
	Eligibility for the benefits under the law is not subject to receipt of
prior approval from any governmental authority. We believe that we currently
qualify as an Industrial Company within the definition of the Industry
Encouragement Law. However, the definition may be amended from time to time and
the Israeli tax authorities, which reassess our qualifications annually, may
determine that we no longer qualify as an Industrial Company. As a result of
either of the foregoing, the benefits described above might not be available in
the future.

	Taxation Under Inflationary Conditions

	The Income Tax (Inflationary Adjustment) Law, 1985, commonly referred to
as the Inflationary Adjustments Law, attempts to overcome some of the problems
presented to a traditional tax system by rapid inflation. The Inflationary
Adjustments Law provides tax deductions and adjustments to depreciation
deduction and tax loss carry forwards to mitigate the effects resulting from an
inflationary economy. Our taxable income is determined under this law.
	The Israeli Income Tax Ordinance and regulations promulgated thereunder
allow "Foreign-Invested Companies," which maintain their accounts in U.S.
dollars in compliance with the regulations to adjust their tax returns based on
exchange rate fluctuations of the NIS against the U.S. dollar rather than
changes in the Israeli consumer price index, or CPI, in lieu of the principles
set forth by the Inflationary Adjustments Law. For these purposes, a
Foreign-Invested Company is a company more than 25% of the share capital of
which in terms of rights to profits, voting and appointment of directors, and of
the combined share capital of which including shareholder loans and capital
notes, is held by persons who are not residents of Israel. A company that
elects to measure its results for tax purposes based on the U.S. dollar exchange
rate cannot change the election for a period of three years following the
election. We adjust our tax returns based on the changes in the Israeli CPI.
Because we qualify as a "Foreign-Invested Company," we are entitled to measure
our results for tax purposes on the basis of changes in the exchange rate of
the U.S. dollar in future tax years.
                                      -66-
Capital Gains Tax on the Sale of our Ordinary Shares

	General

	The State of Israel generally imposes income tax on residents and
non-residents of Israel on any income which considered as accrued or derived in
Israel, including from the sale of capital assets in Israel or the sale of
direct or indirect rights to assets located in Israel (including our ordinary
shares, unless a specific exemption is available or unless an applicable tax
treaty between Israel and the shareholder's country of residence provides
otherwise) and on income derived from sources in Israel (These sources of
income include passive income such as dividends, royalties and interest, as well
as non-passive income from services rendered in Israel). The Israeli Tax
Ordinance distinguishes between "Real Gain" and "Inflationary Surplus". Real
Gain is the excess of the total capital gain over Inflationary Surplus computed
on the basis of the increase in the Israeli CPI between the date of purchase and
the date of sale.
	Prior to the Tax Reform, gains on sales of the ordinary shares were
generally exempt from Israeli capital gains tax, for so long as the shares were
quoted on Nasdaq or listed on a stock exchange recognized by the Israeli
Ministry of Finance, provided that we qualified as an Industrial Company or
Industrial Holding Company. See "-Law for Encouragement of Industry (Taxes),
1969" Above.

	Israeli Residents

	Pursuant to the Tax Reform, generally, capital gains tax is imposed at a
rate of 15% on real gains derived on or after January 1, 2003, from the sale of
shares in (i) companies publicly traded on the Tel Aviv Stock Exchange ("TASE")
or (ii) (subject to a necessary determination by the Israeli Minister of
Finance) Israeli companies publicly traded on a recognized stock exchange.
	This tax rate is contingent upon the shareholder not claiming a
deduction for financing expenses (in which case the capital gain will be taxed
at a rate of 25%), and does not apply to: (i) dealers in securities who will be
taxed at a rate of 36% for corporations and at a marginal tax rate of up to 50%
for individuals; (ii) shareholders that report in accordance with the
Inflationary Adjustment Law who will be taxed at a rate of 36% for corporations
and at a marginal tax rate of up to 50% for individuals; or (iii) shareholders
who acquired their shares prior to an initial public offering (that are subject
to a different tax arrangement).  The tax basis of shares acquired prior to
January 1, 2003 will be determined in accordance with the average closing share
price in the three trading days preceding January 1, 2003.  However, a reques
 may be made to the tax authorities to consider the actual adjusted cost of the
shares as the tax basis if it is higher than such average price.
	In any event, the provisions of the Tax Reform shall not effect the
exemption from capital gains tax for gains accrued before January 1, 2003, as
described above.

	Non-Residents of Israel

	Non-Israeli residents are exempt from Israeli capital gains tax on any
gains derived from the sale of shares publicly traded on the TASE, and are
exempt from Israeli capital gains tax on any gains derived from the sale of
shares of Israeli companies publicly traded on a recognized stock exchange,
                                      -67-
provided that such capital gains are not attributed to a permanent establishment
in Israel and that such shareholders are not subject to the Inflationary
Adjustment Law and did not acquire their shares prior to the issuer's initial
public offering. However, non-Israeli corporations will not be entitled to such
exemption if an Israeli resident (i) has a controlling interest of 25% or more
in such non-Israeli corporation, or (ii) is the beneficiary of or is entitled to
25% or more of the revenues or profits of such non-Israeli corporation, whether
directly or indirectly.
	Furthermore, under the income tax treaty between the U.S. and Israel, a
holder of ordinary shares who is a U.S. resident will be exempted from Israeli
capital gains tax on the sale of ordinary shares unless: (i) the holder owned,
directly or indirectly, 10% or more of our voting power at any time during the
12-month period before the sale; or (ii) the capital gains from such sale can
be allocated to a permanent establishment in Israel.
	In some instances where our shareholders may be liable to Israeli tax
on the sale of their ordinary shares, the payment of the consideration may be
subject to the withholding of Israeli tax at the source.
	A non-resident of Israel who receives interest, dividend or royalty
income derived from or accrued in Israel or capital gains derived from the sale
of our ordinary shares, from which tax was withheld at the source, is generally
exempted from the duty to file tax returns in Israel with respect to such
income, provided such income was not derived from a business conducted in Israel
by the taxpayer and the taxpayer has no other taxable sources of income in
Israel.

Dividend Taxation

	Israeli Residents and Non-Israeli Residents

	We are generally, required to withhold income tax at the rate of 25%, or
15% for dividends of income generated by an Approved Enterprise, on all
distributions of dividends other than bonus shares (stock dividends) to Israeli
individuals and non-Israeli residents (individuals and corporations), unless a
different tax rate is provided in a treaty between Israel and the shareholder's
country of residence. Such distribution of dividends to Israeli corporations is
tax exempt, unless the source of such dividends is income derived outside of
Israel.

	U.S Residents

	Under the income tax treaty between the United States and Israel, the
maximum tax on dividends paid to a holder of ordinary shares who is a U.S.
resident (as defined in the treaty) is 25%, and if such shareholder is a U.S.
corporation holding at least 10% of the issued voting shares through out the tax
year in which the dividend is distributed as well as the previous tax year is
12.5% or 15% for dividends of income generated from an Approved Enterprise.

	United States Federal Income Tax Considerations

	Subject to the limitations described in the next paragraph, the
following discussion describes the material United States federal income tax
consequences of the purchase, ownership and disposition of the ordinary shares
to a U.S. holder.

                                      -68-
	A U.S. holder is:
* an individual citizen or resident of the United States;
* a corporation or another entity taxable as a corporation created or organized
  under the laws of the United States or any political subdivision thereof;
* an estate, the income of which is includable in gross income for United States
  federal income tax purposes regardless of its source; or
* a trust, if a United States court is able to exercise primary supervision over
  its administration and one or more United States persons who have the
  authority to control all substantial decisions of the trust.
	Unless otherwise specifically indicated, this summary does not consider
United States tax consequences to a person that is not a U.S. holder and
considers only U.S. holders that will own the ordinary shares as capital assets.
	This discussion is based on current provisions of the Internal Revenue
Code of 1986, as amended, referred to as the Code, current and proposed Treasury
regulations promulgated under the Code, and administrative and judicial
interpretations of the Code, all as in effect today and all of which are subject
to change, possibly with a retroactive effect. This discussion does not address
all aspects of U.S. federal income taxation that may be relevant to any
particular U.S. holder based on the U.S. holder's particular circumstances, like
the tax treatment of U.S. holders who are broker-dealers or who own, directly,
indirectly or constructively, 10% or more of our outstanding voting shares, U.S.
holders holding the ordinary shares as part of a hedging, straddle or conversion
transaction, U.S. holders whose functional currency is not the U.S. dollar,
insurance companies, tax-exempt organizations, financial institutions and
persons subject to the alternative minimum tax, who may be subject to special
rules not discussed below. Additionally, the tax treatment of persons who hold
the ordinary shares through a partnership or other pass through entity is not
considered, nor are the possible application of U.S. federal estate or gift
taxes or any aspect of state, local or non-U.S. tax laws. You are advised to
consult your own tax advisor with respect to the specific tax consequences to
you of purchasing, holding or disposing of the ordinary shares.

	Distributions on the Ordinary Shares

	Subject to the discussion below under "Passive Foreign Investment
Company Status", a distribution paid by us with respect to the ordinary shares
to a U.S. holder will be treated as ordinary income to the extent that the
distribution does not exceed our current and accumulated earnings and profits,
as determined for U.S. federal income tax purposes. The amount of any
distribution which exceeds these earnings and profits will be treated first as
a non-taxable return of capital reducing the U.S. holder's tax basis in its
ordinary shares to the extent thereof, and then as capital gain from the deemed
disposition of the ordinary shares.
	Dividends paid by us in NIS will be included in the income of U.S.
holders at the dollar amount of the dividend, based upon the spot rate of
exchange in effect on the date of the distributions. U.S. holders will have a
tax basis in the NIS for U.S. federal income tax purposes equal to that U.S.
dollar value. Any subsequent gain or loss in respect of the NIS arising from
exchange rate fluctuations will be taxable as ordinary income or loss and will
be U.S. source income or loss.
	Subject to the limitations set forth in the Code, U.S. holders may elect
to claim as a foreign tax credit against their U.S. federal income tax liability
the Israeli income tax withheld from dividends received in respect of the
ordinary shares. The limitations on claiming a foreign tax credit include among
                                      -69-
others, computation rules under which foreign tax credits allowable with respect
to specific classes of income cannot exceed the U.S. federal income payable with
respect each such class. In this regard, dividends paid by us will generally be
foreign source "passive income" for U.S. foreign tax credit purposes or, in the
case of a financial services entity, "financial services income." U.S. holders
that do not elect to claim a foreign tax credit may instead claim a deduction
for the Israeli income tax withheld. The rules relating to foreign tax credit
are complex, and you should consult your own tax advisor to determine whether
and to what extent you would be entitled to this credit.

	Disposition of Ordinary Shares

	Subject to the discussion below under "Passive Foreign Investment
Company Status", upon the sale or exchange of the ordinary shares, a U.S.
holder generally will recognize capital gain or loss in an amount equal to the
difference between the amount realized on the sale or exchange and the U.S.
holder's tax basis in the ordinary shares. The gain or loss recognized on the
sale or exchange of the ordinary shares generally will be long-term capital
gain or loss if the U.S. holder held the ordinary shares for more than one year
at the time of the sale or exchange.
	Gain or loss recognized by a U.S. holder on a sale, exchange or other
disposition of ordinary shares generally will be treated as U.S. source income
or loss for U.S. foreign tax credit purposes.

	Passive Foreign Investment Company Status

	Generally, a foreign corporation is treated as a passive foreign
investment company, or PFIC, for U.S. federal income tax purposes for any tax
year if, in such tax year, either (i) 75% or more of its gross income is
passive in nature, referred to as the "Income Test", or (ii) the average
percentage of its assets during such tax year which produce, or are held for
the production of, passive income (determined by averaging the percentage of
the fair market value of its total assets which are passive assets as of the
end of each quarter of such year) is 50% or more, referred to as the "Asset
Test".
	There is no definitive method prescribed in the Code, U.S. Treasury
Regulations or administrative or judicial interpretations thereof for
determining the value of a foreign corporation's assets for purposes of the
Asset Test. However, the legislative history of the U.S. Taxpayer Relief Act of
1997, referred to as the 1997 Act, indicates that for purposes of the Asset
Test, "the total value of a publicly-traded foreign corporation's assets
generally will be treated as equal to the sum of the aggregate value of its
outstanding stock plus its liabilities." It is unclear under current
interpretations of the 1997 Act whether other approaches could be employed to
determine the value of our assets. Under the approach set forth in the
legislative history to the 1997 Act, we believe that we would be deemed a PFIC
for 2001 and for 2002, principally because a significant portion of our assets
continued to consist of cash, cash equivalents and short-term investments from
the proceeds of our initial public offering, coupled with the decline in the
public market value of our ordinary shares during 2001 and 2002. In addition,
based on application of the approach of the 1997 Act, there is a high likelihood
that we may be deemed a PFIC in 2003. A separate determination must be made
each year as to whether we are a PFIC. As a result, our PFIC status may change.
	Because less than 75% of our gross income in 2002 and in prior years
                                      -70-
constituted passive income, as defined for purposes of the Income Test, we do
not believe that application of the Income Test would have resulted in our
classification as a PFIC for any of such years. In addition, we do not believe
that application of the Asset Test would have resulted in our classification as
a PFIC for any tax year prior to 2001.
	If we are treated as a PFIC for U.S. federal income tax purposes for
any year during a U.S. holder's holding period of ordinary shares and the U.S.
holder does not make a QEF election or a "mark-to-market " election (both as
described below), any gain recognized by the U.S. holder upon the sale of
ordinary shares (or the receipt of certain distributions) would be treated as
ordinary income. This income generally would be allocated over a U.S. holder's
holding period with respect to our ordinary shares. The amount allocated to
prior years will be subject to tax at the highest tax rate in effect for that
year and an interest charge would be imposed on the amount of deferred tax on
the income allocated to prior taxable years.
	Although we generally will be treated as a PFIC as to any U.S. holder if
we are a PFIC for any year during the U.S. holder's holding period, if we cease
to satisfy the requirements for PFIC classification, the U.S. holder may avoid
the consequences of PFIC classification for subsequent years if he elects to
recognize gain based on the unrealized appreciation in the ordinary shares
through the close of the tax year in which we cease to be a PFIC. Additionally,
if we are treated as a PFIC, a U.S. holder who acquires ordinary shares from a
decedent would be denied the normally available step-up in tax basis for these
ordinary shares to fair market value at the date of death and instead would
have a tax basis equal to the decedent's tax basis in these ordinary shares.
	A U.S. holder who beneficially owns shares of a PFIC must file Form 8621
(Return by a Shareholder of a Passive Foreign Investment Company or Qualified
Electing Fund) with the U.S. Internal Revenue Service for each tax year in which
he holds shares in a PFIC. This form describes any distributions received with
respect to these shares and any gain realized upon the disposition of these
shares.
	For any tax year in which we are treated as a PFIC, a U.S. holder may
elect to treat his, her or its ordinary shares as an interest in a qualified
electing fund, referred to as a QEF election. In that case, the U.S. holder
would be required to include in income currently his proportionate share of our
earnings and profits in years in which we are a PFIC regardless of whether
distributions of our earnings and profits are actually distributed to the U.S.
holder. Any gain subsequently recognized upon the sale by the U.S. holder of his
ordinary shares, however, generally would be taxed as capital gain and the
denial of the basis step-up at death described above would not apply.
	A shareholder may make a QEF election with respect to a PFIC for any
taxable year of the shareholder. A QEF election is effective for the year in
which the election is made and all subsequent taxable years of the shareholder.
Procedures exist for both retroactive elections and the filing of protective
statements. A U.S. holder making the QEF election must make the election on or
before the due date, as extended, for the filing of the shareholder's income
tax return for the first taxable year to which the election will apply.
	A U.S. holder must make a QEF election by completing Form 8621 and
attaching it to their U.S. federal income tax return, and must satisfy
additional filing requirements each year the election remains in effect. We will
provide to each shareholder, upon request, the tax information required to make
a QEF election and to make subsequent annual filings.
	As an alternative to a QEF election, a U.S. holder generally may elect
to mark his ordinary shares to market annually, recognizing ordinary income or
                                      -71-
loss (subject to certain limitations) equal to the difference between the fair
market value of his ordinary shares and the adjusted tax basis of his ordinary
shares. Losses would be allowed only to the extent of net mark-to-market gain
accrued under the election. If a mark-to-market election with respect to
ordinary shares is in effect on the date of a U.S. holder's death, the normally
available step-up in tax basis to fair market value will not be available.
Rather, the tax basis of the ordinary shares in the hands of a U.S. holder who
acquired them from a decedent will be the lesser of the decedent's tax basis or
the fair market value of the ordinary shares.
	The implementation of many aspects of the Code's PFIC rules requires the
issuance of regulations which in many instances have yet to be promulgated and
which may have retroactive effect. We cannot be sure that any of these
regulations will be promulgated or, if so, what form they will take or what
effect they will have on the foregoing discussion.
	Accordingly, and due to the complexity of the PFIC rules, U.S. holders
should consult their own tax advisors regarding our status as a PFIC for 2001
and 2002 and any subsequent years and the eligibility, manner and advisability
of making a QEF election or a mark-to-market election, and the effect of these
elections on the calculation of the amount of foreign tax credit that may be
available to a U.S. holder.

	Backup Withholding

	A U.S. holder may be subject to backup withholding at rate of 31% with
respect to dividend payments and receipt of the proceeds from the disposition of
the ordinary shares. Backup withholding will not apply with respect to payments
made to certain exempt recipients, such as corporations and tax-exempt
organizations, or if a U.S. holder provides a tax payer identification number
(or certifies that he has applied for a taxpayer identification number),
certifies that such holder is not subject to backup withholding or otherwise
establishes an exemption. Backup withholding is not an additional tax and may be
claimed as a credit against the U.S. federal income tax liability of a U.S.
holder, or alternatively, the U.S. holder may be eligible for a refund of any
excess amounts withheld under the backup withholding rules, in either case,
provided that the required information is furnished to the Internal Revenue
Service.
	Non-U.S. Holders of Ordinary Shares
	Except as provided below, a non-U.S. holder of ordinary shares except
certain former U.S. citizens and long-term residents of the United States
generally will not be subject to U.S. federal income or withholding tax on the
receipt of dividends on, and the proceeds from the disposition of, an ordinary
share, unless such item is effectively connected with the conduct by the
non-U.S. holder of a trade or business in the United States or, in the case of
a resident of a country which has an income tax treaty with the United States,
such item is attributable to a permanent establishment in the United States or,
in the case of an individual, a fixed place of business in the United States. In
addition, gain recognized by an individual non-U.S. holder will be subject to
tax in the United States if the non-U.S. holder is present in the United States
for 183 days or more in the taxable year of the sale and certain other
conditions are met.
	Non-U.S. holders will not be subject to information reporting or backup
withholding with respect to the payment of dividends on ordinary shares unless
the payment is made through a paying agent, or an office of a paying agent, in
the United States. Non-U.S. holders generally will be subject to information
                                      -72-
reporting and, under regulations generally effective January 1, 2001, to backup
withholding at a rate of 31% with respect to the payment within the United
States of dividends on the ordinary shares unless the holder provides its
taxpayer identification number, certifies to its foreign status, or otherwise
establishes an exemption.
	Non-U.S. holders generally will be subject to information reporting and
backup withholding at a rate of 31% on the receipt of the proceeds from the
disposition of the ordinary shares to, or through, the United States office of a
 broker, whether domestic or foreign, unless the holder provides a taxpayer
identification number, certifies to its foreign status or otherwise establishes
an exemption. Non-U.S. holders will not be subject to information reporting or
backup withholding with respect to the receipt of proceeds from the disposition
of the ordinary shares by a foreign office of a broker; provided, however, that
if the broker is a U.S. person or a "U.S. related person," information reporting
(but not backup withholding) will apply unless the broker has documentary
evidence in its records of the non-U.S. holder's foreign status or the non-U.S.
holder certifies to its foreign status under penalties of perjury or otherwise
establishes an exemption. For this purpose, a "U.S. related person" is a broker
or other intermediary that maintains one or more enumerated U.S. relationships.
Backup withholding is not an additional tax and may be claimed as a credit
against the U.S. federal income tax liability of a U.S. holder, or
alternatively, the U.S. holder may be eligible for a refund of any excess
amounts withheld under the backup withholding rules, in either case, provided
that the required information is furnished to the Internal Revenue Service.

F.	Dividends and paying agents
	Not applicable.

G.	Statement by Experts
	Not applicable.

H.	Documents on Display

	We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, applicable to foreign private issuers and
fulfill the obligations with respect to such requirements by filing reports
with the Securities and Exchange Commission, or SEC.  You may read and copy any
document we file, including any exhibits, with the SEC without charge at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such material may be obtained by mail from the Public Reference Branch
of the SEC at such address, at prescribed rates.  Please call the SEC at
1-800-SEC-0330 for further information on the public reference room.  Certain of
our SEC filings are also available to the public at the SEC's website at
http://www.sec.gov.
	You may request a copy of our U.S. Securities and Exchange Commission
filings, at no cost, by writing or calling us at MIND C.T.I. Ltd., Industrial
Park, Building 7, Yoqneam, 20692, Israel, Attention: Arie Ganot, Chief Financial
Officer, telephone 972-4-993-6666. A copy of each report submitted in accordance
with applicable United States law is available for review at our principal
executive offices.
	A copy of each document (or a translation thereof to the extent not in
English) concerning MIND that is referred to in this Annual Report on Form 20-F,
is available for public review at our principal executive offices at Industrial
Park, Building 7, Yoqneam, 20692, Israel.
                                      -73-
I.	Subsidiary Information
	Not applicable.

Item 11.	Quantitative and Qualitative Disclosures about Market Risk

	Market risk represents the risk of changes in the value of our financial
instruments as a result of fluctuations in foreign currency exchange rates. We
endeavor to limit our balance sheet exposure to the changes between the U.S.
dollar and other currencies by attempting to maintain a similar level of assets
and liabilities in any given currency, to the extent possible. However, this
method of matching levels of assets and liabilities of the same currency is not
always possible to achieve.
	The following table sets forth our consolidated balance sheet exposure
with respect to change in foreign currency exchange rates as of December 31,
2002.
                                                      Current
                                                      Monetary
                                                       Asset
Currency                                           (Liability-net)
----------                                         (In thousands)
                                                -------------------
NIS                                               $       (786)
Euro						  $	 1,962
Pound sterling					  $	   300
Romanian lei	   				  $	   (74)
Other non-dollar currencies                       $         10
                                                  ------------
                                                  $      1,412
                                                    ==========

	Our annual expenses paid in NIS are approximately $5.5 million.
Accordingly, we estimate that a hypothetical increase of the value of the NIS
against the U.S. dollar by 1% would result in an increase in our operating
expenses by approximately $55,000 for the year ended December 31 2002.
In March 2002, we deposited an amount of $ 30 million with a bank for a period
of three years. Under the arrangement with the bank, whether or not the deposits
bear interest depends upon the rate of the three-month U.S. dollar LIBOR, as
follows. For each day in which the three-month U.S. dollar LIBOR is below an
agreed annual fixed rate of 4% in the first year, 5% in the second year and 6%
in the third year, the deposits bear interest at the rate of 7.25% per annum.
On all other days the deposits do not bear any interest at all. The bank with
which we deposited these amounts called the deposits on March 17, 2003.
	As of December 31, 2002, we did not hold any financial instruments that
are subject to risk arising from changes in equity prices. Also, we did not hold
any derivative financial instruments for either trading or non-trading purposes.

Item 12.	Description of Securities Other Than Equity Securities
		Not applicable.

                                      PART II

Item 13.	Defaults, Dividend Arrearages and Delinquencies
		Not applicable.

                                      -74-
Item 14.	Material Modifications to the Rights of Security Holders and Use
		of Proceeds

	E.	Use of Proceeds

	The effective date of our first registration statement, filed on Form
F-1 under the Securities Act of 1933 (No. 333-12266) relating to the initial
public offering of our ordinary shares, was August 7, 2000. Net proceeds to us
were $29.9 million. From the time of receipt through December 31, 2002, all
proceeds have been invested in highly liquid bank deposits.

Item 15.	Controls and Procedures

	Within 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures are effective to ensure
that information required to be included in our periodic reports to the
Securities and Exchange Commission is recorded, processed, summarized and
reported in a timely manner.
	In addition, there have been no significant changes in our internal
controls or in other factors that could significantly affect those controls
subsequent to the date of their last evaluation.

Item 16A.	Audit Committee Financial Expert
		Not applicable.

Item 16B.	Code of Ethics
		Not applicable.

Item 16C.	Principal Accountant Fees And Services
		Not applicable.




















				      -75-
                                      PART III

Item 17.	Financial Statements
		Not applicable.

Item 18.	Financial Statements

	The following consolidated financial statements and related auditors'
report are filed as part of this Annual Report.


						Page
REPORT OF INDEPENDENT AUDITORS			F-2
CONSOLIDATED FINANCIAL STATEMENTS:
	Balance sheets 				F-3
	Statements of operations 		F-4
	Statements of changes in
	  shareholders' equity			F-5
	Statements of cash flows 		F-6
	Notes to financial statements		F-8

Item 19.	Exhibits

The following exhibits are filed as part of this Annual Report:

Exhibit No.	Exhibit
-----------	-------
1.1**		Memorandum of Association, as amended
1.2**		Articles of Association, as amended
4.1*		MIND 1998 Share Option Plan
4.2*		MIND 2000 Share Option Plan
8**		List of Subsidiaries
10.1*		Share Purchase Agreement by and among MIND C.T.I. Ltd., Lior
		Salansky, Monica Eisinger, ADC Teledata	Communications Ltd. and
		the Purchasers listed therein, dated March 30, 2000
10.2*		Registration Rights Agreement by and among MIND C.T.I. Ltd.,
		Lior Salansky, Monica Eisinger, ADC Teledata Communications Ltd.
		and the Investors listed therein, dated as of March 30, 2000
10.3*		Shareholders Agreement by and among MIND C.T.I. Ltd., Lior
		Salansky, Monica Eisinger, ADC Teledata Communications Ltd. and
		the Purchasers listed therein, as amended by an amendment
		agreement dated July 10, 2000
10.4*		Escrow Agreement by and among Lior Salansky, Oscar Gruss & Son,
		Yaron Amir, Ilan Melamed, the Purchasers listed therein and
		Ravillan, Volovelsky, Dinstein, Sneh & Co. as Trustees, dated
		April 6, 2000
10.5*		Share Purchase Agreement by and among Lior Salansky,
		Oscar Gruss & Son Inc., Yaron Amir, Ilan Melamed and the
		Purchasers listed therein, dated April 6, 2000
10.6*		Waiver between Summit, ADC Teledata Communications Ltd.,
		Monica Eisinger and Lior Salansky dated August 1, 2000
10.7**		Consent of Kesselman & Kesselman, independent auditors of
		MIND C.T.I. Ltd.
99.1**		Certification pursuant to Section 906 of the Sarbanes-Oxley Act
		of 2002
                                      -76-
99.2**		Certification pursuant to Section 906 of the Sarbanes-Oxley Act
		of 2002

*	Incorporated by reference to MIND C.T.I. Ltd.'s Registration Statement
	(File 333-12266) on Form F-1.
**	Filed herewith.


                                   SIGNATURES
	The Registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and has duly caused and authorized the undersigned to
sign this annual report on its behalf.

						MIND CTI LTD.

						/s/ Monica Eisinger
						_____________________________
						By: 		Monica Eisinger
						Title:		President & CEO
						Date:		June 26, 2003

































				      -77-
CERTIFICATIONS


I, Monica Eisinger, certify that:

1.	I have reviewed this annual report on Form 20-F of MIND C.T.I. Ltd.;

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

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

4.	The registrant's other certifying officers and I are responsible for
	establishing and maintaining disclosure controls and procedures (as
	defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
	have:
        i. designed such disclosure controls and procedures to ensure that
 	   material information relating to the registrant, including its
	   consolidated subsidiaries, is made known to us by others within those
	   entities, particularly during the period in which this annual report
	   is being prepared;
       ii. evaluated the effectiveness of the registrant's disclosure controls
	   and procedures as of a date within 90 days prior to the filing date
	   of this annual report (the "Evaluation Date"); and
      iii. presented in this annual report our conclusions about the
	   effectiveness of the disclosure controls and procedures based on our
	   evaluation as of the Evaluation Date;

5.	The registrant's other certifying officers and I have disclosed, based
	on our most recent evaluation, to the registrant's auditors and the
	audit committee of registrant's board of directors (or persons
	performing the equivalent function):
	i. all significant deficiencies in the design or operation of internal
	   controls which could adversely affect the registrant's ability to
	   record, process, summarize and report financial data and have
	   identified for the registrant's auditors any material weaknesses in
	   internal controls; and
       ii. any fraud, whether or not material, that involves management or other
	   employees who have a significant role in the registrant's internal
	   controls; and

6.	The registrant's other certifying officers and I have indicated in this
	annual report whether or not there were significant changes in internal
	controls or in other factors that could significantly affect internal
	controls subsequent to the date of our most recent evaluation, including
	any corrective actions with regard to significant deficiencies and
	material weaknesses.
                                      -78-

	Date: June 22, 2003

					/s/ Monica Eisinger
					_____________________________

					Monica Eisinger
					President and Chief Executive Officer














































				      -79-
I, Arie Ganot, certify that:

1.	I have reviewed this annual report on Form 20-F of MIND C.T.I. Ltd.;

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

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

4.	The registrant's other certifying officers and I are responsible for
	establishing and maintaining disclosure controls and procedures (as
	defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
	have:
	i. designed such disclosure controls and procedures to ensure that
	   material information relating to the registrant, including its
 	   consolidated subsidiaries, is made known to us by others within
	   those entities, particularly during the period in which this annual
	   report is being prepared;
       ii. evaluated the effectiveness of the registrant's disclosure controls
	   and procedures as of a date within 90 days prior to the filing date
	   of this annual report (the "Evaluation Date"); and
      iii. presented in this annual report our conclusions about the
	   effectiveness of the disclosure controls and procedures based on our
	   evaluation as of the Evaluation Date;

5.	The registrant's other certifying officers and I have disclosed, based
	on our most recent evaluation, to the registrant's auditors and the
	audit committee of registrant's board of directors (or persons
	performing the equivalent function):
	i. all significant deficiencies in the design or operation of internal
           controls which could adversely affect the registrant's ability to
           record, process, summarize and report financial data and have
           identified for the registrant's auditors any material weaknesses in
           internal controls; and
       ii. any fraud, whether or not material, that involves management or other
           employees who have a significant role in the registrant's internal
           controls; and

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

Date: June 23, 2003

                                      -80-
					/s/ Arie Ganot
					_____________________________
					Arie Ganot
					Chief Financial Officer


















































				      -81-
				EXHIBIT 1.1

[UNOFFICIAL CONVENIENCE TRANSLATION]   			[STAMP OF ISRAELI
							 REGISTRAR OF COMPANIES]

			The Companies Ordinance (New Version)
		Memorandum of Association of a Company Limited by Shares

1. Name of the Company:  MIND C.T.I. LTD.
2. The aims for which incorporated:
A. To engage in any kind of commercial business and/or productive business
   and/or business of providing services of any type or form. To engage in any
   action or endeavor which the Company's managers consider to be beneficial to
   the Company.
B. To engage in all the branches of the economy, trade, finance, personal
   services, industry, textile, wood, food, chemicals, computers, medicine,
   office supplies, agriculture, electricity, research, art, metal-works,
   transportation, construction and tourism.
C. To set up factories, shops and marketing chains so as to serve the aims of
   the Company.
D. To engage in industry, to market, sell and trade, import and export any
   product. To engage in market research, advertising, filing of patents and
   designs.
E. To engage in any matter so as to further the aims of the Company, to engage
   in general brokering and manage financing for the benefit of the aims of the
   Company.
F. To change the name of the Company in accordance with the needs of the owners
   and the aims of the Company's business.
3. The liability of the members of the Company is limited.
4. The share capital of the Company is NIS 880,000 divided into 88,000,000
   Ordinary Shares of a nominal value of NIS 0.01 each.

The rights attached to the shares shall be specified in the Articles of
Association of the Company.

We the undersigned wish to be incorporated as a company in accordance with this
Memorandum of Association and agree to each take the number of shares of the
share capital as set forth next to our names.

		I.D.
Name of Member:	Number:	Address:	    No. of Shares:    Signature:
---------------	-------	----------------    ----------------  -----------------
Monica Eisinger	1664162	Mitzpeh Hoshaaya    50 ordinary shs.  /s/ M. Eisinger

Lior Salansky	5888825	Leiv Yafeh 30	    50 ordinary shs.  /s/ Lior Salansky
			Jerusalem

6.4.95

Witnessed by:
/s/ Avikam David
Avikam David - CPA


                                      -82-

				EXHIBIT 1.2

			THE COMPANIES LAW, 5759 - 1999

			A COMPANY LIMITED BY SHARES

			SECOND AMENDED AND RESTATED
			  ARTICLES OF ASSOCIATION

				     OF

			      MIND  C.T.I. LTD.
			    ____________________


	GENERAL PROVISIONS


1.	Object and Purpose of the Company

	The object and purpose of the Company shall be as set forth in the
	Company's Memorandum of Association, as the same shall be amended from
	time to time in accordance with applicable law.

2.	Limitation of Liability

	The liability of the shareholders is limited to the payment of the
	nominal value of the shares in the Company allotted to them and which
	remains unpaid, and only to that amount.  If the Company's share capital
	shall include at any time shares without a nominal value, the
	shareholders' liability in respect of such shares shall be limited to
	the payment of up to NIS 0.01 for each such share allotted to them and
	which remains unpaid, and only to that amount.

3.	Interpretation

	(a)	Unless the subject or the context otherwise requires: words and
	expressions defined in the Companies Law, 5759-1999 (the "Companies
	Law"), and in those sections of the Companies Ordinance [New Version],
	5743-1983 that are still in force (with respect to such sections), in
	force on the date when these Articles or any amendment thereto, as the
	case may be, first became effective shall have the same meanings herein;
	words and expressions importing the singular shall include the plural
	and vice versa; words and expressions importing the masculine gender
	shall include the feminine gender; and words and expressions importing
	persons shall include bodies corporate.

	(b)	The captions in these Articles are for convenience only and
	shall not be deemed a part hereof or affect the construction of any
	provision hereof.
	SHARE CAPITAL

4.	Share Capital
                                      -83-
	(a)	The share capital of the Company shall be eight hundred eighty
		thousand New Israeli Shekels (NIS 880,000) divided into
		eighty-eight million (88,000,000) ordinary shares of a nominal
		value of one Agora (NIS 0.01) each, which shall be designated as
		"Ordinary Shares".

	(b)	Rights of Ordinary Shares. The Ordinary Shares confer upon the
		holders thereof all rights accruing to a shareholder of the
		Company, as provided in these Articles, including, inter alia,
		the right to receive notices of, and to attend, meetings of the
		shareholders; for each share held - the right to one vote at all
		shareholders' meetings for all purposes, and to share equally,
		on a per share basis, in such dividends as may be declared by
		the Board of Directors in accordance with the terms of these
		Articles and the Companies Law, and upon liquidation or
		dissolution - in the assets of the Company legally available
		for distribution to shareholders after payment of all debts and
		other liabilities of the Company, in accordance with the terms
		of these Articles and applicable law. All Ordinary Shares rank
		pari passu in all respects with each other.

5.	Increase of Share Capital

	(a)	The Company may, from time to time, by resolution of the
		shareholders ("Shareholders Resolution"), whether or not all
		the shares then authorized have been issued, and whether or not
		all the shares theretofore issued have been called up for
		payment, increase its share capital by the creation of new
		shares.  Any such increase shall be in such amount and shall be
		divided into shares of such nominal amounts, and such shares
		shall confer such rights and preferences, and shall be subject
		to such restrictions, as such resolution shall provide.

	(b)	Except to the extent otherwise provided in such resolution, such
		new shares shall be subject to all the provisions applicable to
		the shares of the original capital.

6.	Special Rights; Modifications of Rights

	(a)	Without prejudice to any special rights previously conferred
		upon the holders of existing shares in the Company, the Company
		may, from time to time, by Shareholders Resolution, provide for
		shares with such preferred or deferred rights or rights of
		redemption or other special rights and/or such restrictions,
		whether in regard to dividends, voting, repayment of share
		capital or otherwise, as may be stipulated in such resolution.

	(b)	(i)	If at any time the share capital is divided into
			different classes of shares, the rights attached to any
			class, unless otherwise provided by these Articles, may
			be modified or abrogated by the Company, by Shareholders
			Resolution, subject to the sanction of a resolution
			passed by the holders of a majority of the shares of
			such class by written consent or at a separate General
	                                      -84-
			Meeting of the holders of the shares of such class.

		(ii)	The provisions of these Articles relating to General
			Meetings shall, mutatis mutandis, apply to any separate
			General Meeting of the holders of the shares of a
			particular class.

		(iii)	Unless otherwise provided by these Articles, the
			enlargement of an existing class of shares, or the
			issuance of additional shares thereof, shall not be
			deemed, for purposes of this Article 6(b), to modify or
			abrogate the rights attached to the previously issued
			shares of such class or of any other class.

7.	Consolidation, Subdivision, Cancellation and Reduction of Share Capital

	(a)	The Company may, from time to time, by Shareholders Resolution
		(subject, however, to the provisions of Article 6(b) hereof and
		to applicable law):

		(i)	consolidate and divide all or any of its issued or
			unissued share capital into shares of larger nominal
			value than its existing shares,

		(ii)	subdivide its shares (issued or unissued) or any of
			them, into shares of smaller nominal value than is fixed
			by these Articles of Association (subject, however, to
			the provisions of the Companies Law), and the
			Shareholders Resolution whereby any share is subdivided
			may determine that, as among the holders of the shares
			resulting from such subdivision, one or more of the
			shares may, as compared with the others, have any such
			preferred or deferred rights or rights of redemption or
			other special rights, or be subject to any such
			restrictions, as the Company has power to attach to
			unissued or new shares.

		(iii)	cancel any shares which, at the date of the adoption of
			such resolution, have not been taken or agreed to be
			taken by any person, and diminish the amount of its
			share capital by the amount of the shares so canceled,
			or

		(iv)	reduce its share capital in any manner, and with and
			subject to any incident authorized, and consent
			required, by law.

	(b)	With respect to any consolidation of issued shares into shares
		of larger nominal value, and with respect to any other action
		which may result in fractional shares, the Board of Directors
		may settle any difficulty which may arise with regard thereto,
		as it deems fit, including, inter alia, resort to one or more of
		 the following actions:

                                      -85-
		(i)	determine, as to the holder of shares so consolidated,
			which issued shares shall be consolidated into each
			share of larger nominal value;

		(ii)	allot, in contemplation of or subsequent to such
			consolidation or other action, such shares or fractional
			shares sufficient to preclude or remove fractional share
			holdings;

		(iii)	redeem, in the case of redeemable preference shares,
			and subject to applicable law, such shares or fractional
			shares sufficient to preclude or remove fractional share
			 holdings;

		(iv)	cause the transfer of fractional shares by certain
			shareholders of the Company to other shareholders
			thereof so as to most expediently preclude or remove any
			fractional shareholdings, and cause the transferees to
			pay the transferors the fair value of fractional shares
			so transferred, and the Board of Directors is hereby
			authorized to act as agent for the transferors and
			transferees with power of substitution for purposes of
			implementing the provisions of this
			sub-Article 7(b)(iv).


					SHARES

8.	Issuance of Share Certificates; Replacement of Lost Certificates

	(a)	Share certificates shall be issued under the seal or stamp of
		the Company and shall bear the signatures of the Company's
		chief executive officer and chief financial officer, or of any
		other person or persons authorized thereto by the Board of
		Directors.

	(b)	Each shareholder shall be entitled to one numbered certificate
		for all the shares of any class registered in his name, and if
		reasonably requested by such shareholder, to several
		certificates, each for one or more of such shares.

	(c)	A share certificate registered in the names of two or more
		persons shall be delivered to the person first named in the
		Registrar of Shareholders in respect of such co-ownership.

	(d)	If a share certificate is defaced, lost or destroyed, it may be
		replaced, upon payment of such fee, and upon the furnishing of
		such evidence of ownership and such indemnity, as the Board of
		Directors may think fit.

	(e)	The Company may issue bearer shares.

9.	Registered Holder

                                      -86-
	Except as otherwise provided in these Articles, the Company shall be
	entitled to treat the registered holder of any share as the absolute
	owner thereof, and, accordingly, shall not, except as ordered by a court
	of competent jurisdiction, or as required by statute, be bound to
	recognize any equitable or other claim to, or interest in such share on
	the part of any other person.

10.	Allotment of Shares

	The unissued shares from time to time shall be under the control of the
	Board of Directors, who shall have the power to allot shares or
	otherwise dispose of them to such persons, on such terms and conditions
	(including inter alia terms relating to calls as set forth in
	Article 12(f) hereof), and either at par or at a premium, or, subject to
	the provisions of the Companies Law, at a discount, and at such times,
	as the Board of Directors may think fit, and the power to give to any
	person the option to acquire from the Company any shares, either at par
	or at a premium, or, subject as aforesaid, at a discount, during such
	time and for such consideration as the Board of Directors may think fit.

11.	Payment in Installments

	If by the terms of allotment of any share, the whole or any part of the
	price thereof shall be payable in installments, every such installment
	shall, when due, be paid to the Company by the then registered holder(s)
	of the share of the person(s) entitled thereto.

12.	Calls on Shares

	(a)	The Board of Directors may, from time to time, make such calls
		as it may think fit upon shareholders in respect of any sum
		unpaid in respect of shares held by such shareholders which is
		not, by the terms of allotment thereof or otherwise, payable at
		a fixed time, and each shareholder shall pay the amount of every
		call so made upon him (and of each installment thereof if the
		same is payable in installments), to the person(s) and at the
		time(s) and place(s) designated by the Board of Directors, as
		any such time(s) may be thereafter extended and/or such
		person(s) or place(s) changed.  Unless otherwise stipulated in
		the resolution of the Board of Directors (and in the notice
		hereafter referred to), each payment in response to a call
		shall be deemed to constitute a pro rata payment on account of
		all shares in respect of which such call was made.

	(b)	Notice of any call shall be given in writing to the
		shareholder(s) in question not less than fourteen (14) days
		prior to the time of payment, specifying the time and place of
		payment, and designating the person to whom such payment shall
		be made, provided, however, that before the time for any such
		payment, the Board of Directors may, by notice in writing to
		such shareholder(s), revoke such call in whole or in part,
		extend such time, or alter such person and/or place.  In the
		event of a call payable in installments, only one notice
		thereof need be given.
                                      -87-
	(c)	If, by the terms of allotment of any share or otherwise, any
		amount is made payable at any fixed time, every such amount
		shall be payable at such time as if it were a call duly made by
		the Board of Directors and of which due notice had been given,
		and all the provisions herein contained with respect to such
		calls shall apply to each such amount.

	(d)	The joint holders of a share shall be jointly and severally
		liable to pay all calls in respect thereof and all interest
		payable thereon.

	(e)	Any amount unpaid in respect of a call shall bear interest from
		the date on which it is payable until actual payment thereof,
		at such rate (not exceeding the then prevailing debitory rate
		charged by leading commercial banks in Israel), and at such
		time(s) as the Board of Directors may prescribe.

	(f)	Upon the allotment of shares, the Board of Directors may
		provide for differences among the allottees of such shares as
		to the amount of calls and/or the times of payment thereof.

13.	Prepayment

	With the approval of the Board of Directors, any shareholder may pay to
	the Company any amount not yet payable in respect of his shares, and the
	Board of Directors may approve the payment of interest on any such
	amount until the same would be payable if it had not been paid in
	advance, at such rate and time(s) as may be approved by the Board of
	Directors.  The Board of Directors may at any time cause the Company to
	repay all or any part of the money so advanced, without premium or
	penalty.  Nothing in this Article 13 shall derogate from the right of
	the Board of Directors to make any call before or after receipt by the
	Company of any such advance.

14.	Forfeiture and Surrender

	(a)	If any shareholder fails to pay any amount payable in respect of
		a call, or interest thereon as provided for herein, on or before
		the day fixed for payment of the same, the Company, by
		resolution of the Board of Directors, may at any time
		thereafter, so long as the said amount or interest remains
		unpaid, forfeit all or any of the shares in respect of which
		said call had been made.  Any expense incurred by the Company
		in attempting to collect any such amount or interest, including,
		inter alia, attorneys' fees and costs of suit, shall be added
		to, and shall, for all purposes (including the accrual of
		interest thereon), constitute a part of the amount payable to
		the Company in respect of such call.

	(b)	Upon the adoption of a resolution of forfeiture, the Board of
		Directors shall cause notice thereof to be given to such
		shareholder, which notice shall state that, in the event of the
		failure to pay the entire amount so payable within a period
		stipulated in the notice (which period shall not be less than
                                      -88-
		fourteen (14) days and which may be extended by the Board of
		Directors), such shares shall be ipso facto forfeited,
		provided, however, that, prior to the expiration of such period,
		the Board of Directors may nullify such resolution of
		forfeiture, but no such nullification shall estop the Board of
		Directors from adopting a further resolution of forfeiture in
		respect of the non-payment of the same amount.

	(c)	Whenever shares are forfeited as herein provided, all
		dividends theretofore declared in respect thereof and not
		actually paid shall be deemed to have been forfeited at the
		same time.

	(d)	The Company, by resolution of the Board of Directors, may
		accept the voluntary surrender of any share.

	(e)	Any share forfeited or surrendered as provided herein shall
		become the property of the Company, and the same, subject to
		the provisions of these Articles, may be sold, re-allotted or
		otherwise disposed of as the Board of Directors thinks fit.

	(f)	Any shareholder whose shares have been forfeited or surrendered
		shall cease to be a shareholder in respect of the forfeited or
		surrendered shares, but shall, notwithstanding, be liable to
		pay, and shall forthwith pay, to the Company, all calls,
		interest and expenses owing upon or in respect of such shares
		at the time of forfeiture or surrender, together with interest
		thereon from the time of forfeiture or surrender until actual
		payment, at the rate prescribed in Article 12(e) above, and the
		Board of Directors, in its discretion, may enforce the payment
		of such moneys, or any part thereof, but shall not be under any
		obligation to do so.  In the event of such forfeiture or
		surrender, the Company, by resolution of the Board of Directors,
		may accelerate the date(s) of payment of any or all amounts
		then owing by the shareholder in question (but not yet due) in
		respect of all shares owned by such shareholder, solely or
		jointly with another, and in respect of any other matter or
		transaction whatsoever.

	(g)	The Board of Directors may at any time, before any share so
		forfeited or surrendered shall have been sold, re-allotted or
		otherwise disposed of, nullify the forfeiture or surrender on
		such conditions as it thinks fit, but no such nullification
		shall estop the Board of Directors from re-exercising its
		powers of forfeiture pursuant to this Article 14.

15.	Lien

	(a)	Except to the extent the same may be waived or subordinated in
		writing, the Company shall have a first and paramount lien upon
		all the shares registered in the name of each shareholder
		(without regard to any equitable or other claim or interest in
		such shares on the part of any other person), and upon the
		proceeds of the sale thereof, for his debts, liabilities and
                                      -89-
		engagements arising from any cause whatsoever, solely or jointly
		with another, to or with the Company, whether the period for
		the payment, fulfillment or discharge thereof shall have
		actually arrived or not.  Such lien shall extend to all
		dividends from time to time declared in respect of such share.
		Unless otherwise provided, the registration by the Company of a
		transfer of shares shall be deemed to be a waiver on the part of
		the Company of the lien (if any) existing on such shares
		immediately prior to such transfer.

	(b)	The Board of Directors may cause the Company to sell any shares
		subject to such lien when any such debt, liability or engagement
		has matured, in such manner as the Board of Directors may think
		fit, but no such sale shall be made unless such debt, liability
		or engagement has not been satisfied within seven (7) days after
		written notice of the intention to sell shall have been served
		on such shareholder, his executors or administrators.

	(c)	The net proceeds of any such sale, after payment of the costs
		thereof, shall be applied in or toward satisfaction of the
		debts, liabilities or engagements of such shareholder  (whether
		or not the same have matured), or any specific part of the same
		(as the Company may determine), and the residue (if any) shall
		be paid to the shareholder, his executors, administrators or
		assigns.

16.	Sale after Forfeiture or Surrender or in Enforcement of Lien

	Upon any sale of shares after forfeiture or surrender or for enforcing
	a lien, the Board of Directors may appoint some person to execute an
	instrument of transfer of the shares so sold and cause the purchaser's
	name to be entered in the Register of Shareholders in respect of such
	shares, and the purchaser shall not be bound to see to the regularity
	of the proceedings, or to the application of the purchase money, and
	after his name has been entered in the Register of Shareholders in
	respect of such shares, the validity of the sale shall not be impeached
	by any person, and the remedy of any person aggrieved by the sale shall
	be in damages only and against the Company exclusively.

17.	Redeemable Shares

	The Company may, subject to applicable law, issue redeemable shares and
	redeem the same.

18.	[reserved]

	TRANSFER OF SHARES

19.	Effectiveness and Registration

	(a)	No transfer of shares shall be registered unless a proper
		instrument of transfer (in form and substance satisfactory to
		the Board of Directors) has been submitted to the Company or its
		agent, together with any share certificate(s) and such other
                                      -90-
		evidence of title as the Board of Directors may reasonably
		require.  Until the transferee has been registered in the
		Register of Shareholders in respect of the shares so
		transferred, the Company may continue to regard the transferor
		as the owner thereof.  The Board of Directors, may, from time to
		time, prescribe a fee for the registration of a transfer.

	(b)	The Board of Directors may, in its discretion and to the extent
		that it deems necessary, close the Register of Shareholders for
		the registration of transfer of shares for such periods as may
		be determined by the Board of Directors, and no transfers of
		shares shall be registered during any period in which the
		Register of Shareholders is so closed.

20.	Record Date for General Meetings

	Notwithstanding any provision to the contrary in these Articles, for the
	determination of the shareholders entitled to receive notice of and to
	participate in and vote at a General Meeting, or to express consent to
	or dissent from any corporate action in writing, or to receive payment
	of any dividend or other distribution or allotment of any rights or to
	exercise any rights in respect of shares of the Company, the Board of
	Directors may fix, in advance, a record date, which, subject to
	applicable law, shall not be earlier than ninety (90) days prior to the
	General Meeting or other action, as the case may be.  No persons other
	than holders of record of shares as of such record date shall be
	entitled to notice of and to participate in and vote at such General
	Meeting, or to exercise such other right or receive such other benefit,
	as the case may be. A determination of shareholders of record with
	respect to a General Meeting shall apply to any adjournment of such
	meeting, provided that the Board of Directors may fix a new record date
	for an adjourned meeting.


	TRANSMISSION OF SHARES

21.	Decedents' Shares

	(a)	In case of a share registered in the names of two or more
		holders, the Company may recognize the survivor(s) as the sole
		owner(s) thereof unless and until the provisions of Article
		21(b) have been effectively invoked.

	(b)	Any person becoming entitled to a share in consequence of the
		death of any person, upon producing evidence of the grant of
		probate or letters of administration or declaration of
		succession (or such other evidence as the Board of Directors
		may reasonably deem sufficient that he sustains the character
		in respect of which he proposes to act under this Article or of
		his title), shall be registered as a shareholder in respect of
		such share, or may, subject to the regulations as to transfer
		herein contained, transfer such share.

22.	Receivers and Liquidators
                                      -91-
	(a)	The Company may recognize the receiver or liquidator of any
		corporate shareholder in winding-up or dissolution, or the
		receiver or trustee in bankruptcy of any shareholder, as being
		entitled to the shares registered in the name of such
		shareholder.

	(b)	The receiver or liquidator of a corporate shareholder in
		winding-up or dissolution, or the receiver or trustee in
		bankruptcy of any shareholder, upon producing such evidence as
		the Board of Directors may deem sufficient that he sustains the
		character in respect of which he proposes to act under this
		Article or of his title, shall with the consent of the Board of
		Directors (which the Board of Directors may grant or refuse in
		its absolute discretion), be registered as a shareholder in
		respect of such shares, or may, subject to the regulations as to
		transfer herein contained, transfer such shares.


				GENERAL MEETINGS

23.	Annual General Meeting

	An Annual General Meeting shall be held once in every calendar year at
	such time (within a period of not more than fifteen (15) months after
	the last preceding Annual General Meeting) and at such place either
	within or without the State of Israel as may be determined by the Board
	of Directors.

24.	Extraordinary General Meetings

	All General Meetings other than Annual General Meetings shall be called
	"Extraordinary General Meetings."  The Board of Directors may, whenever
	it thinks fit, convene an Extraordinary General Meeting at such time and
	place, within or without the State of Israel, as may be determined by
	the Board of Directors, and shall be obliged to do so upon a
	requisition in writing in accordance with Sections 63(b)(1) or (2) of
	the Companies Law.

25.	Notice of General Meetings

	The Company is not required to give notice under Section 69(b) of the
	Companies Law.


			PROCEEDINGS AT GENERAL MEETINGS

26.	Quorum

	(a)	Two or more shareholders (not in default in payment of any sum
		referred to in Article 32(a) hereof), present in person or by
		proxy and holding shares conferring in the aggregate at least
		twenty-five percent (25%) of the voting power of the Company
		(subject to rules and regulations, if any, applicable to the
		Company), shall constitute a quorum at General Meetings.  No
                                      -92-
		business shall be transacted at a General Meeting, or at any
		adjournment thereof, unless the requisite quorum is present
		when the meeting proceeds to business.

	(b)	If within an hour from the time appointed for the meeting a
		quorum is not present, the meeting, if convened upon
		requisition under Sections 63(b)(1) or (2), 64 or 65 of the
		Companies Law, shall be dissolved, but in any other case it
		shall stand adjourned to the same day in the next week, at the
		same time and place, or to such day and at such time and place
		as the Chairman may determine with the consent of the holders of
		a majority of the voting power represented at the meeting in
		person or by proxy and voting on the question of adjournment.
		No business shall be transacted at any adjourned meeting except
		business which might lawfully have been transacted at the
		meeting as originally called.  At such adjourned meeting, any
		two (2) shareholders (not in default as aforesaid) present in
		person or by proxy, shall constitute a quorum (subject to rules
		and regulations, if any, applicable to the Company).

	(c)	The Board of Directors may determine, in its discretion,
		the matters that may be voted upon at the meeting by proxy in
		addition to the matters listed in Section 87(a) to the Companies
		 Law.
27.	Chairman

	The Chairman, if any, of the Board of Directors shall preside as
	Chairman at every General Meeting of the Company.  If there is no
	such Chairman, or if at any meeting he is not present within fifteen
	(15) minutes after the time fixed for holding the meeting or is
	unwilling to act as Chairman, the shareholders present shall choose
	someone of their number to be Chairman.  The office of Chairman shall
	not, by itself, entitle the holder thereof to vote at any General
	Meeting nor shall it entitle such holder to a second or casting vote
	(without derogating, however, from the rights of such Chairman to vote
	as a shareholder or proxy of a shareholder if, in fact, he is also a
	shareholder or such proxy).

28.	Adoption of Resolutions at General Meetings

	(a)	Unless other provided herein, a Shareholders Resolution shall be
		deemed adopted if approved by the holders of a majority of the
		voting power represented at the meeting in person or by proxy
		and voting thereon.

	(b)	A Shareholders Resolution approving a merger (as defined in the
		Companies Law) of the Company shall be deemed adopted if
		approved by the holders of a majority of the voting power
		represented at the meeting in person or by proxy and voting
		thereon.

	(c)	Every question submitted to a General Meeting shall be decided
		by a show of hands, but if a written ballot is demanded by any
		shareholder present in person or by proxy and entitled to vote
                                      -92-
		at the meeting, the same shall be decided by such ballot.
		A written ballot may be demanded before the proposed resolution
		is voted upon or immediately after the declaration by the
		Chairman of the results of the vote by a show of hands.
		If a vote by written ballot is taken after such declaration,
		the results of the vote by a show of hands shall be of no
		effect, and the proposed resolution shall be decided by such
		written ballot.  The demand for a written ballot may be
		withdrawn at any time before the same is conducted, in which
		event another shareholder may then demand such written ballot.
		The demand for a written ballot shall not prevent the
		continuance of the meeting for the transaction of business
		other than the question on which the written ballot has been
		demanded.

	(d)	A declaration by the Chairman of the meeting that a resolution
		has been carried unanimously, or carried by a particular
		majority, or lost, and an entry to that effect in the minute
		book of the Company, shall be conclusive evidence of the fact
		without proof of the number or proportion of the votes recorded
		in favor of or against such resolution.

29.	Resolutions in Writing

	A resolution in writing signed by all shareholders of the Company then
	entitled to attend and vote at General Meetings or to which all such
	shareholders have given their written consent (by letter, facsimile
	[telecopier], telegram, telex or otherwise), or their oral consent by
	telephone (provided that a written summary thereof has been approved and
	signed by the Chairman of the Board of Directors of the Company) shall
	be deemed to have been unanimously adopted by a General Meeting duly
	convened and held.

30.	Power to Adjourn

	(a)	The Chairman of a General Meeting at which a quorum is present
		may, with the consent of the holders of a majority of the voting
		power represented in person or by proxy and voting on the
		question of adjournment (and shall if so directed by the
		meeting), adjourn the meeting from time to time and from place
		to place, but no business shall be transacted at any adjourned
		meeting except business which might lawfully have been
		transacted at the meeting as originally called.

	(b)	It shall not be necessary to give any notice of an adjournment,
		whether pursuant to Article 26(b) or Article 30(a), unless the
		meeting is adjourned for thirty (30) days or more in which event
		notice thereof shall be given in the manner required for the
		meeting as originally called.

31.	Voting Power

	Subject to the provisions of Article 32(a) and subject to any provision
	hereof conferring special rights as to voting, or restricting the righT
                                      -94-
	to vote, every shareholder shall have one vote for each share held by
	him of record, on every resolution, without regard to whether the vote
	hereon is conducted by a show of hands, by written ballot or by any
	other means.

32.	Voting Rights

	(a)	No shareholder shall be entitled to vote at any General Meeting
		(or be counted as a part of the quorum thereat), unless all
		calls and other sums then payable by him in respect of his
		shares in the Company have been paid, but this Article shall
		not apply to separate General Meetings of the holders of a
		particular class of shares pursuant to Article 6(b).

	(b)	A company or other corporate body being a shareholder of the
		Company may, by resolution of its directors or any other
		managing body thereof, authorize any person to be its
		representative at any meeting of the Company.  Any person so
		authorized shall be entitled to exercise on behalf of such
		shareholder all the power which the latter could have exercised
		if it were an individual shareholder.  Upon the request of the
		Chairman of the meeting, written evidence of such authorization
		(in form acceptable to the Chairman) shall be delivered to him
		prior to the conclusion of the meeting.

	(c)	Any shareholder entitled to vote may vote either personally or
		by proxy (who need not be a shareholder of the Company), or, if
		the shareholder is a company or other corporate body, by a
		representative authorized pursuant to Article 32(b).

	(d)	If two or more persons are registered as joint holders of any
		share, the vote of the senior who tenders a vote, in person or
		by proxy, shall be accepted to the exclusion of the vote(s) of
		the other joint holder(s); and for this purpose seniority shall
		be determined by the order in which the names stand in the
		Register of Shareholders.


















				      -95-
					PROXIES

33.	Instrument of Appointment

	(a)	The instrument appointing a proxy shall be in writing and shall
		be substantially in the following form:

	"I _____________________ of __________________________________
	    (Name of Shareholder)                       (Address of Shareholder)
	being a shareholder of ___________________________ hereby appoint
		                         (Name of the Company)
	________________________of _____________________________
	  (Name of Proxy)	(Address of Proxy)
	as my proxy to vote for me and on my behalf at the General Meeting of
	the Company to be held on the _____ day of ___________, 19__ and at any
	adjournment(s) thereof.

		Signed this ______ day of ____________, 19__.

				_________________________
				(Signature of Appointer)"

or in any usual or common form or in such other form as may be approved by the
Board of Directors.  It shall be duly signed by the appointer or his duly
authorized attorney or, if such appointer is a company or other corporate body,
under its common seal or stamp or the hand of its duly authorized agent(s) or
attorney(s). Upon the request of the Company, written evidence of such
authorization (in form acceptable to the Company) shall be delivered to the
Company prior to the conclusion of the meeting.


	(b)	The instrument appointing a proxy (and the power of attorney or
		other authority, if any, under which such instrument has been
		signed) shall either be delivered to the Company (at its
		Registered Office, or at its principal place of business or at
		the offices of its registrar and/or transfer agent or at such
		place as the Board of Directors may specify) not less than
		seventy two (72) hours (or such shorter period as determined by
		the Board of Directors) before the time fixed for the meeting
		at which the person named in the instrument proposes to vote.

	(c)	For as long as any of the Company's securities are publicly
		traded on a U.S. market or exchange, all proxy solicitations by
		persons other than the Board of Directors shall be undertaken
		pursuant to the U.S. Proxy Rules, whether or not applicable to
		the Company under U.S. law.

34.	Effect of Death of Appointor or Revocation of Appointment

	A vote cast pursuant to an instrument appointing a proxy shall be valid
	notwithstanding the previous death of the appointing shareholder (or of
	his attorney-in-fact, if any, who signed such instrument), or the
	revocation of the appointment or the transfer of the share in respect
	of which the vote is cast, provided no written intimation of such death,
                                      -96-
	revocation or transfer shall have been received by the Company or by the
	Chairman of the meeting before such vote is cast and provided, further,
	that the appointing shareholder, if present in person at said meeting,
	may revoke the appointment by means of a writing, oral notification to
	the Chairman, or otherwise.


				BOARD OF DIRECTORS

35.	Powers of Board of Directors

	(a)	In General

		The management of the business of the Company shall be vested in
		the Board of Directors, which may exercise all such powers and
		do all such acts and things as the Company is authorized to
		exercise and do, and are not hereby or by law required to be
		exercised or done by the Company in General Meeting.  The
		authority conferred on the Board of Directors by this
		Article 35 shall be subject to the provisions of the Companies
		Law, of these Articles and any regulation or resolution
		consistent with these Articles adopted from time to time by the
		Company in General Meeting, provided, however, that no such
		regulation or resolution shall invalidate any prior act done by
		or pursuant to a decision of the Board of Directors which would
		have been valid if such regulation or resolution had not been
		adopted.

	(b)	Borrowing Power

		The Board of Directors may from time to time, in its discretion,
		cause the Company to borrow or secure the payment of any sum or
		sums of money for the purposes of the Company, and may secure or
		provide for the repayment of such sum or sums in such manner, at
		such times and upon such terms and conditions in all respects as
		it thinks fit, and, in particular, by the issuance of bonds,
		perpetual or redeemable debentures, debenture stock, or any
		mortgages, charges, or other securities on the undertaking or
		the whole or any part of the property of the Company, both
		present and future, including its uncalled or called but unpaid
		capital for the time being.

	(c)	Reserves

		The Board of Directors may, from time to time, set aside any
		amount(s) out of the profits of the Company as a reserve or
		reserves for any purpose(s) which the Board of Directors, in its
		absolute discretion, shall think fit, and may invest any sum so
		set aside in any manner and from time to time deal with and
		vary such investments, and dispose of all or any part thereof,
		and employ any such reserve or any part thereof in the business
		of the Company without being bound to keep the same separate
		from other assets of the Company, and may subdivide or
		redesignate any reserve or cancel the same or apply the funds
                                      -97-
		therein for another purpose, all as the Board of Directors may
		from time to time think fit.

	(d)	Protective Measures

		The Board of Directors may, at any time in its sole discretion,
		adopt protective measures to prevent or delay a coercive
		takeover of the Company, including without limitation the
		adoption of a "Shareholder Rights Plan."

36.	Exercise of Powers of Directors

	(a)	A meeting of the Board of Directors at which a quorum is present
		(whether in person, by conference call or by any other device
		allowing the participating Directors to hear each other
		simultaneously) shall be competent to exercise all the
		authorities, powers and discretions vested in or exercisable by
		the Board of Directors,

	(b)	A resolution proposed at any meeting of the Board of Directors
		shall be deemed adopted if approved by a majority of the
		Directors present when such resolution is put to a vote and
		voting thereon.

	(c)	A resolution in writing signed by all Directors then in office
		and lawfully entitled to vote thereon (as conclusively
		determined by the Chairman of the Audit Committee or, in the
		absence of such determination, by the Chairman of the Board of
		Directors) or to which all such Directors have given their
		consent (by letter, telegram, telex, facsimile, telecopier or
		otherwise), or their oral consent by telephone (provided that a
		written summary thereof has been approved and signed by the
		Chairman of the Board of Directors of the Company) shall be
		deemed to have been unanimously adopted by a meeting of the
		Board of Directors duly convened and held.

37.	Delegation of Powers

	(a)	The Board of Directors may, subject to the provisions of the
		Companies Law, delegate any or all of its powers to committees,
		each consisting of two or more persons (all of whose members
		must be Directors), and it may from time to time revoke such
		delegation or alter the composition of any such committee.  Any
		Committee so formed (in these Articles referred to as a
		"Committee of the Board of Directors"), shall, in the exercise
		of the powers so delegated, conform to any regulations imposed
		on it by the Board of Directors.  The meetings and proceedings
		of any such Committee of the Board of Directors shall, mutatis
		mutandis, be governed by the provisions herein contained for
		regulating the meetings of the Board of Directors, so far as not
		superseded by any regulations adopted by the Board of Directors
		under this Article.  Unless otherwise expressly provided by the
		Board of Directors in delegating powers to a Committee of the
		Board of Directors, such Committee shall not be empowered to
                                      -98-
		further delegate such powers.

	(b)	Without derogating from the provisions of Article 50, the Board
		of Directors may, subject to the provisions of the Companie
		Law, from time to time appoint a Secretary to the Company, as
		well as officers, agents, employees and independent contractors,
		as the Board of Directors may think fit, and may terminate the
		service of any such person.  The Board of Directors may, subject
		to the provisions of the Companies Law, determine the powers and
		duties, as well as the salaries and emoluments, of all suc
		persons, and may require security in such cases and in such
		amounts as it thinks fit.

	(c)	The Board of Directors may from time to time, by power of
		attorney or otherwise, appoint any person, company, firm or body
		of persons to be the attorney or attorneys of the Company at
		law or in fact for such purpose(s) and with such powers,
		authorities and discretions, and for such period and subject to
		such conditions, as it thinks fit, and any such power of
		attorney or other appointment may contain such provisions for
		the protection and convenience of persons dealing with any such
		attorney as the Board of Directors may think fit, and may also
		authorize any such attorney to delegate all or any of the
		powers, authorities and discretions vested in him.

38.	Number of Directors

	Until otherwise determined by Shareholders Resolution of the Company,
	the Board of Directors shall consist of not less than three (3) nor more
	than nine (9) Directors, at least two (2) of which shall be External
	Directors in accordance with the Companies Law (the "External
	Directors").

39.	Election and Removal of Directors

	(a)	The Board of Directors of the Company shall be divided into
		three (3) classes of Directors, designated as Class I, Class II,
		and Class III, which shall be differentiated by the dates of
		commencement and expiration of the terms of office of their
		respective Directors.  The number of Directors in each class
		shall be divided equally, so far as practicable, among the
		classes. The initial terms of office of the Directors of the
		respective classes shall be as follows:

(A)  Class I Directors shall serve until the Annual General Meeting to be
     convened in 2001;

(B)  Class II Directors shall serve until the Annual General Meeting to be
     convened in 2002; and

(C)  Class III Directors shall serve until the Annual General Meeting to be
    convened in 2003,

until their respective successors shall be duly elected. At each Annual General
                                      -99-
Meeting, beginning with the Annual General Meeting to be convened in 2001, the
Directors elected or re-elected to the class whose term expires at such meeting
shall serve until the Annual General Meeting to be convened in the third year
following such election or re-election.

	(b)	Directors shall be elected at General Meetings by the vote of
		the holders of a majority of the voting power represented at
		such meeting in person or by proxy and voting on the election of
		directors.

	(c)	Notwithstanding anything to the contrary in these Articles of
		Association, the affirmative vote of at least 75% of the shares
		present, in person or by proxy, and voting on the matter shall
		be required to amend or repeal this Article 39 or to remove any
		Director prior to the expiration of his or her term.

	(d)	Notwithstanding anything to the contrary in this Article 39,
		the provisions of this Article 39 shall not apply to the
		Company's External Directors, who shall not be members of any
		class and shall serve pursuant to the provisions of the
		Companies Law.

40.	Qualification of Directors

	No person shall be disqualified to serve as a Director by reason of his
	not holding shares in the Company or by reason of his having served as
	a Director in the past.

41.	Continuing Directors in the Event of Vacancies

	In the event of one or more vacancies in any class of Directors, the
	continuing Directors may continue to act in every matter and may
	temporarily fill any such vacancy in such class, provided, however, that
	if the continuing Directors number less than a majority of the number
	provided for pursuant to Article 38 hereof, they may only act in an
	emergency, and may call a General Meeting of the Company for the purpose
	of electing Directors to fill any or all vacancies, so that at least a
	majority of the number of Directors provided for pursuant to Article 38
	hereof are in office as a result of said meeting.

42.	Vacation of Office

	(a)	The office of a Director shall be vacated, ipso facto, upon his
		death, or if he be found lunatic or become of unsound mind, or
		if he become bankrupt, or, if the Director is a company, upon
		its winding-up.

	(b)	The office of a Director shall be vacated by his written
		resignation.  Such resignation shall become effective on the
		date fixed therein, or upon the delivery thereof to the Company,
		whichever is later.

43.	Remuneration of Directors

                                      -100-
	No Director shall be paid any remuneration by the Company for his
	services as Director except as may be approved by a Shareholders
	Resolution, except for reimbursement of expenses incurred in connection
	with fulfilling his duties as a Director.

44.	Conflict of Interests

	Subject to the provisions of the Companies Law, the Company may enter
	into any contract or otherwise transact any business with any Director
	in which contract or business such Director has a personal interest,
	directly or indirectly; and may enter into any contract of otherwise
	transact any business with any third party in which contract or business
	a Director has a personal interest, directly or indirectly.  Any
	Director who has such a personal interest shall notify the other
	Directors with respect thereto prior to any discussion or vote on the
	matter by the Board of Directors.

45.	[reserved]

			PROCEEDINGS OF THE BOARD OF DIRECTORS

46.	Meetings

	The Board of Directors may meet and adjourn its meetings and otherwise
	regulate such meetings and proceedings as the Board of Directors think
	fit. Notice of the meetings of the Board of Directors shall be sent to
	each Director at the last address that the Director provided to the
	Company.


47.	Quorum

	Until otherwise unanimously decided by the Board of Directors, a quorum
	at a meeting of the Board of Directors shall be constituted by the
	presence of a majority of the Directors then in office who are lawfully
	entitled to participate in the meeting (as conclusively determined by
	the Chairman of the Audit Committee and in the absence of such
	determination - by the Chairman of the Board of Directors), but shall
	not be less than two.

48.	Chairman of the Board of Directors

	The Board of Directors may from time to time elect one of its members to
	 be the Chairman of the Board of Directors, remove such Chairman from
	office and appoint another in its place.  The Chairman of the Board of
	Directors shall preside at every meeting of the Board of Directors, but
	if there is no such Chairman, or if at any meeting he is not present
	within fifteen (15) minutes of the time fixed for the meeting, or if he
	is unwilling to take the chair, the Directors present shall choose one
	of their number to be the chairman of such meeting.  The Chairman shall
	not have a casting vote.

49.	Validity of Acts Despite Defects

                                      -101-
	Subject to the provisions of the Companies Law, all acts done bona fide
	at any meeting of the Board of Directors, or of a Committee of the
	Board of Directors, or by any person(s) acting as Director(s), shall,
	notwithstanding that it may afterwards be discovered that there was some
	defect in the appointment of the participants in such meetings or any
	of them or any person(s) acting as aforesaid, or that they or any of
	them were disqualified, be as valid as if there were no such defect or
	disqualification.


	GENERAL MANAGER

50.	General Manager

	The Board of Directors may from time to time appoint one or more
	persons, whether or not Directors, as General Manager(s) of the Company
	and may confer upon such person(s), and from time to time modify or
	revoke, such title(s) (including Managing Director, Director General or
	any similar or dissimilar title) and such duties and authorities of the
	Board of Directors as the Board of Directors may deem fit, subject to
	such limitations and restrictions as the Board of Directors may from
	time to time prescribe.  Such appointment(s) may be either for a fixed
	term or without any limitation of time, and the Board of Directors may
	from time to time (subject to the provisions of the Companies Law and
	of any contract between any such person and the Company) fix his or
	their salaries and emoluments, remove or dismiss him or them from
	office and appoint another or others in his or their place or places.


					MINUTES

51.	Minutes

	(a)	Minutes of each General Meeting and of each meeting of the Board
		of Directors shall be recorded and duly entered in books
		provided for that purpose.  Such minutes shall, in all events,
		set forth the names of the persons present at the meeting and
		all resolutions adopted thereat.

	(b)	Any minutes as aforesaid, if purporting to be signed by the
		chairman of the meeting or by the chairman of the next
		succeeding meeting, shall constitute prima facia evidence of
		the matters recorded therein.


					DIVIDENDS

52.	Declaration and Payment of Dividends

	The Board of Directors may from time to time declare, and cause the
	Company to pay, such dividend as may appear to the Board of Directors
	to be justified.  The Board of Directors shall determine the time for
	payment of such dividends, and the record date for determining the
	shareholders entitled thereto.
                                      -102-
53.	[reserved]

54.	Amount Payable by Way of Dividends

	Subject to the rights of the holders of shares with special rights as
	to dividends and without derogating from the provisions of Article 35(d)
	above, any dividend paid by the Company shall be allocated among the
	shareholders entitled thereto in proportion to their respective
	holdings of the shares in respect of which such dividend is being paid.

55.	Interest

	No dividend shall carry interest as against the Company.

56.	Payment in Specie

	Upon the declaration of the Board of Directors, a dividend may be paid,
	wholly or partly, by the distribution of specific assets of the Company
	or by distribution of paid up shares, debentures or debenture stock of
	the Company or of any other companies, or in any one or more of such
	ways.

57.	Capitalization of Profits, Reserves etc.

	Upon the resolution of the Board of Directors, the Company -

	(a)	may cause any moneys, investments, or other assets forming part
		of the undivided profits of the Company, standing to the credit
		of a reserve fund, or to the credit of a reserve fund for the
		redemption of capital, or in the hands of the Company and
		available for dividends, or representing premiums received on
		the issuance of shares and standing to the credit of the share
		premium account, to be capitalized and distributed among such of
		the shareholders as would be entitled to receive the same if
		distributed by way of dividend and in the same proportion, on
		the footing that they become entitled thereto as capital, or
		may cause any part of such capitalized fund to be applied on
		behalf of such shareholders in paying up in full, either at par
		or at such premium as the resolution may provide, any unissued
		shares or debentures or debenture stock of the Company which
		shall be distributed accordingly, in payment, in full or in
		part, of the uncalled liability on any issued shares or
		debentures or debenture stock; and

	(b)	may cause such distribution or payment to be accepted by such
		shareholders in full satisfaction of their interest in the said
		capitalized sum.

58.	Implementation of Powers under Articles 56 and 57

	For the purpose of giving full effect to any resolution under
	Articles 56 or 57, and without derogating from the provisions of
	Article 7(b) hereof, and subject to applicable law, the Board of
	Directors may settle any difficulty which may arise in regard to the
                                      -103-
	distribution as it thinks expedient, and, in particular, may issue
	fractional certificates, and may fix the value for distribution of any
	specific assets, and may determine that cash payments shall be made to
	any shareholders upon the footing of the value so fixed, or that
	fractions of less value than the nominal value of one share may be
	disregarded in order to adjust the rights of all parties, and may vest
	any such cash, shares, debentures, debenture stock or specific assets
	in trustees upon such trusts for the persons entitled to the dividend
	or capitalized fund as may seem expedient to the Board of Directors.

59.	Deductions from Dividends

	The Board of Directors may deduct from any dividend or other moneys
	payable to any shareholder in respect of a share any and all sums of
	money then payable by him to the Company on account of calls or
	otherwise in respect of shares of the Company and/or on account of any
	other matter of transaction whatsoever.

60.	Retention of Dividends

	(a)	The Board of Directors may retain any dividend or other moneys
		payable or property distributable in respect of a share on which
		 the Company has a lien, and may apply the same in or toward
		satisfaction of the debts, liabilities, or engagements in
		respect of which the lien exists.

	(b)	The Board of Directors may retain any dividend or other moneys
		payable or property distributable in respect of a share in
		respect of which any person is, under Articles 21 or 22,
		entitled to become a shareholder, or which any person is, under
		said Articles, entitled to transfer, until such person shall
		become a shareholder in respect of such share or shall transfer
		the same.

61.	Unclaimed Dividends

	All unclaimed dividends or other moneys payable in respect of a share
	may be invested or otherwise made use of by the Board of Directors for
	the benefit of the Company until claimed.  The payment by the Directors
	of any unclaimed dividend or such other moneys into a separate account
	shall not constitute the Company a trustee in respect thereof, and any
	dividend unclaimed after a period of seven (7) years from the date of
	declaration of such dividend, and any such other moneys unclaimed after
	a like period from the date the same were payable, shall be forfeited
	and shall revert to the Company, provided, however, that the Board of
	Directors may, at its discretion, cause the Company to pay any such
	dividend or such other moneys, or any part thereof, to a person who
	would have been entitled thereto had the same not reverted to the
	Company.

62.	Mechanics of Payment

	Any dividend or other moneys payable in cash in respect of a share may
	be paid by check or warrant sent through the post to, or left at, the
                                      -104-
	registered address of the person entitled thereto or by transfer to a
	bank account specified by such person (or, if two or more persons are
	registered as joint holders of such share or are entitled jointly
	thereto in consequence of the death or bankruptcy of the holder or
	otherwise, to any one of such persons or to his bank account), or to
	such person and at such address as the person entitled thereto may by
	writing direct.  Every such check or warrant shall be made payable to
	the order of the person to whom it is sent, or to such person as the
	person entitled thereto as aforesaid may direct, and payment of the
	check or warrant by the banker upon whom it is drawn shall be a good
	discharge to the Company.  Every such check or warrant shall be sent at
	the risk of the person entitled to the money represented thereby.

63.	Receipt from a Joint Holder

	If two or more persons are registered as joint holders of any share, or
	are entitled jointly thereto in consequence of the death or bankruptcy
	of the holder or otherwise, any one of them may give effectual receipts
	for any dividend or other moneys payable or property distributable in
	respect of such share.


	ACCOUNTS

64.	Books of Account

	The Board of Directors shall cause accurate books of account to be kept
	in accordance with the provisions of the Companies Law and of any other
	applicable law.  Such books of account shall be kept at the Registered
	Office of the Company, or at such other place or places as the Board of
	Directors may think fit, and they shall always be open to inspection by
	all Directors.  No shareholder, not being a Director, shall have any
	right to inspect any account or book or other similar document of the
	Company, except as conferred by law or authorized by the Board of
	Directors or by a Shareholders Resolution.

65.	Audit

	At least once in every fiscal year the accounts of the Company shall be
	audited and the correctness of the profit and loss account and balance
	sheet certified by one or more duly qualified auditors.

66.	Auditors

	The appointment, authorities, rights and duties of the auditor(s) of the
	Company, shall be regulated by applicable law.  The Audit Committee of
	the Company shall have the authority to fix, in its discretion, the
	remuneration of the auditor(s) for the auditing services.


	BRANCH REGISTERS

67.	Branch Registers

                                      -105-
	Subject to and in accordance with the provisions of the Companies Law
	and to all orders and regulations issued thereunder, the Company may
	cause branch registers to be kept in any place outside Israel as the
	Board of Directors may think fit, and, subject to all applicable
	requirements of law, the Board of Directors may from time to time
	adopt such rules and procedures as it may think fit in connection with
	the keeping of such branch registers.



			RIGHTS OF SIGNATURE, STAMP AND SEAL

68.	Rights of Signature, Stamp and Seal

	(a)	The Board of Directors shall be entitled to authorize any
		person or persons (who need not be Directors) to act and sign on
		behalf of the Company, and the acts and signature of such
		person(s) on behalf of the Company shall bind the Company
		insofar as such person(s) acted and signed within the scope of
		his or their authority.

	(b)	The Company shall have at least one official stamp.

	(c)	The Board of Directors may provide for a seal.  If the Board of
		Directors so provides, it shall also provide for the safe
		custody thereof.  Such seal shall not be used except by the
		authority of the Board of Directors and in the presence of the
		person(s) authorized to sign on behalf of the Company, who shall
		sign every instrument to which such seal is affixed.


					NOTICES

69.	Notices

	(a)	Any written notice or other document may be served by the
		Company upon any shareholder either personally or by sending it
		by prepaid mail addressed to such shareholder at his address as
		described in the Register of Shareholders or such other address
		as he may have designated in writing for the receipt of notices
		and other documents.  Any written notice or other document may
		be served by any shareholder upon the Company by tendering the
		same in person to the Secretary or the General Manager of the
		Company at the principal office of the Company or by sending it
		by prepaid registered mail (airmail if posted outside Israel) to
		the Company at its Registered Address. Any such notice or other
		document shall be deemed to have been served (i) in the case of
		mailing, two (2) business days after it has been posted (seven
		(7) business days if sent internationally), or when actually
		received by the addressee if sooner than two (2) days or seven
		(7)  days, as the case may be, after it has been posted; (ii) in
		the case of overnight air courier, on the third (3rd) business
		day following the day sent, with receipt confirmed by the
		courier, or when actually received by the addressee if sooner
                                      -106-
		than three (3) business days after it has been sent; (iii) in
		the case of personal delivery, on the date such notice was
		actually tendered in person to such shareholder (or to the
		Secretary or the General Manager); (iv) in the case of facsimile
		transmission, on the date on which the sender receives
		automatic electronic confirmation by the recipient's facsimile
		machine that such notice was received by the addressee.  The
		mailing date or publication date and the date of the meeting
		shall be counted as part of the days comprising any notice
		period.  Notice may be sent by cablegram, telex, telecopier
		(facsimile) or other electronic means and confirmed by
		registered mail as aforesaid.  If a notice is, in fact, received
		by the addressee, it shall be deemed to have been duly served,
		when received, notwithstanding that it was defectively addressed
		or failed, in some respect, to comply with the provisions of
		this Article 69(a).

	(b)	All notices to be given to the shareholders shall, with respect
		to any share to which persons are jointly entitled, be given to
		whichever of such persons is named first in the Register of
		Shareholders, and any notice so given shall be sufficient notice
		to the holders of such share.

	(c)	Any shareholder whose address is not described in the Register
		of Shareholders, and who shall not have designated in writing
		an address for the receipt of notices, shall not be entitled to
		receive any notice from the Company.

	(d)	Notwithstanding anything to the contrary herein: notice by the
		Company of a General Meeting which is published in two daily
		newspapers in Israel, if at all, shall be deemed to have been
		duly given on the date of such publication to any shareholder
		whose address as registered in the Register of Shareholders (or
		as designated in writing for the receipt of notices and other
		documents) is located in the State of Israel, and notice by the
		Company of a General Meeting which is published in one daily
		newspaper in New York, New York, U.S.A. or in one international
		wire service shall be deemed to have been duly given on the date
		of such publication to any shareholder whose address as
		registered in the Register of Shareholders (or as designated in
		writing for the receipt of notices and other documents) is
		located outside Israel.



				INSURANCE AND INDEMNITY

70.	Exculpation, Indemnity and Insurance

	(a)	For purposes of these Articles, the term "Office Holder" shall
		mean every Director and every officer of the Company, including,
		without limitation, each of the persons defined as "Nosei Misra"
		in the Companies Law.

                                      -107-
	(b)	Subject to the provisions of the Companies Law, the Company may
		prospectively exculpate an Office Holder from all or some of the
		Office Holder's responsibility for damage resulting from the
		Office Holder's breach of the Office Holder's duty of care to
		the Company.

	(c)	Subject to the provisions of the Companies Law, the Company may
		indemnify an Office Holder in respect of an obligation or
		expense specified below imposed on the Office Holder in respect
		of an act performed in his capacity as an Office Holder, as
		follows:

		(i)	a financial obligation imposed on him in favor of
			another person by a court judgment, including a
			compromise judgment or an arbitrator's award approved by
			court;

		(ii)	reasonable litigation expenses, including attorneys'
			fees, expended by an Office Holder or charged to the
			Office Holder by a court, in a proceeding instituted
			against the Office Holder by the Company or on its
			behalf or by another person, or in a criminal charge
			from which the Office Holder was acquitted, or in a
			criminal proceeding in which the Office Holder was
			convicted of an offense that does not require proof of
			criminal intent.

The Company may undertake to indemnify an Office Holder as aforesaid, (aa)
prospectively, provided that the undertaking is limited to categories of events
which in the opinion of the Board of Directors can be foreseen when the
undertaking to indemnify is given, and to an amount set by the Board of
Directors as reasonable under the circumstances and (bb) retroactively.

	(d)	Subject to the provisions of the Companies Law, the Company may
		enter into a contract for the insurance of all or part of the
		liability of any Office Holder imposed on the Office Holder in
		respect of an act performed in his capacity as an Office Holder,
		in respect of each of the following:

		(i)	a breach of his duty of care to the Company or to
			another person;

		(ii)	a breach of his duty of loyalty to the Company, provided
			that the Office Holder acted in good faith and had
			reasonable cause to assume that such act would not
			prejudice the interests of the Company;

		(iii)	a financial obligation imposed on him in favor of
			another person.

	(e)	The provisions of Articles 70(a), 70(b) and 70(c) above are not
		intended, and shall not be interpreted, to restrict the Company
		in any manner in respect of the procurement of insurance and/or
		in respect of indemnification (i) in connection with any person
                                      -108-
		who is not an Office Holder, including, without limitation, any
		employee, agent, consultant or contractor of the Company who is
		not an Office Holder, and/or (ii) in connection with any Office
		Holder to the extent that such insurance and/or indemnification
		is not specifically prohibited under law; provided that the
		procurement of any such insurance and/or the provision of any
		such indemnification shall be approved by the Audit Committee of
		the Company.



					WINDING UP

71.	Winding Up

	If the Company be wound up, then, subject to applicable law and to the
	rights of the holders of shares with special rights upon winding up, the
	assets of the Company available for distribution among the shareholders
	shall be distributed to them in proportion to the nominal value of their
	respective holdings of the shares in respect of which such distribution
	is being made.


* * * * *


					EXHIBIT 8

				List of Subsidiaries

	Name of Subsidiary		Jurisdiction of Incorporation
	------------------		-----------------------------
	  MIND C.T.I. Inc.		  New Jersey
	  MIND Software SRL		  Romania




















				      -109-


					EXHIBIT 10.7


				CONSENT OF INDEPENDENT AUDITORS



We hereby consent to the incorporation by reference in the Registration
Statement  on Form S-8 (Registration No. 333-54632) of  MIND C.T.I. Ltd. of our
report dated February 12, 2003 relating the consolidated financial statements,
which appears in this Form 20-F.




Tel-Aviv, Israel			     Kesselman & Kesselman
June 2003				     Certified Public Accountants (Isr.)



* * * * *



				EXHIBIT 99.1

      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 20-F MIND C.T.I. Ltd. (the
"Company") for the period ending December 31, 2002 (the "Report"), I, Monica
Eisinger, President and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of
   the Securities Exchange Act of 1934; and

2.  the information contained in the Report fairly presents, in all material
    respects, the financial condition and results of operations of the Company.

Date: June 22, 2003



					   /s/ Monica Eisinger
					   _____________________________
					   Monica Eisinger
					   President and Chief Executive Officer




                                      -110-
	A signed original of this written statement required by Section 906, or
other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to MIND C.T.I. Ltd.
and will be retained by MIND C.T.I. Ltd. and furnished to the Securities and
Exchange Commission or its staff upon request.



* * * * *



				EXHIBIT 99.2

      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 20-F of MIND C.T.I. Ltd. (the
"Company") for the period ending December 31, 2002 (the "Report"), I, Arie
Ganot, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of
  the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material
   respects, the financial condition and results of operations of the Company.

Date: June 23, 2003



						 	 /s/ Arie Ganot
						      __________________________
							 Arie Ganot
							 Chief Financial Officer




	A signed original of this written statement required by Section 906, or
other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to MIND C.T.I. Ltd.
and will be retained by MIND C.T.I. Ltd. and furnished to the Securities and
Exchange Commission or its staff upon request.







                                      -111-
				    MIND C.T.I. LTD.
				(An Israeli Corporation)
			2002 CONSOLIDATED FINANCIAL STATEMENTS








				TABLE OF CONTENTS




								Page
	REPORT OF INDEPENDENT AUDITORS				F-2
	CONSOLIDATED FINANCIAL STATEMENTS:
	  Balance sheets 					F-3
	  Statements of operations 				F-5
	  Statements of changes in shareholders' equity 	F-7
	  Statements of cash flows 				F-8
	  Notes to financial statements				F-9



The amounts are stated in U.S. dollars ($) in thousands.



























					     Kesselman & Kesselman
					     Certified Public Accountants (Isr.)
					     Trade Tower, 25 Hamered Street
					     Tel Aviv 68125 Israel
					     P.O Box 452 Tel Aviv 61003 Israe
					     Telephone +972-3-7954555
					     Facsimile +972-3-7954556


			REPORT OF INDEPENDENT AUDITORS


To the shareholders of
MIND C.T.I. LTD.


We have audited the consolidated balance sheets of MIND C.T.I. Ltd. (the
"Company") and its subsidiaries as of December 31, 2002 and 2001 and the
consolidated statements of operations, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 2002. These
financial statements are the responsibility of the Company's Board of Directors
and management.  Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in Israel and in the United States of America, including those prescribed by the
Israeli Auditors (Mode of Performance) Regulations, 1973. 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 the Company's Board
of Directors and management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

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



Tel-Aviv, Israel			     Kesselman & Kesselman
February 12, 2003			     Certified Public Accountants (Isr.)

Kesselman & Kesselman is a member of PricewaterhouseCoopers International
Limited, a company limited by guarantee registered in England and Wales.




                                      -F-2-
			      CONSOLIDATED BALANCE SHEETS

							December 31,

							2002		2001
						       ________	       ________
						  (In thousands of U.S. dollars)
A  s  s  e  t  s
----------------
CURRENT ASSETS (note 8):
  Cash and cash equivalents (note 9a)			$11,312		$39,723
	Accounts receivable (note 9b):
	Trade						  2,026  	  2,914
	Other						    658		    948
	Inventories					     14		     26
  =============================================================================
	  T o t a l  current assets			 14,010		 43,611
LONG-TERM BANK DEPOSITS (note 9c)			 31,631
PROPERTY AND EQUIPMENT, net of accumulated
------------------------------------------
  depreciation and amortization (note 2)		  1,363		  1,990
  OTHER ASSETS, net of accumulated amortization (note 3)    963		  1,133
  =============================================================================
	  T o t a l  assets				$47,967		$46,734

Liabilities and shareholders' equity
CURRENT LIABILITIES (note 8) -
------------------------------------
  accounts payable and accruals:
	Trade						   $167		   $485
	Other (note 9d)					  2,509		  1,486
  =============================================================================
	  T o t a l  current liabilities		  2,676		  1,971
EMPLOYEE RIGHTS UPON RETIREMENT (note 4)		    809		    772
----------------------------------------
COMMITMENTS (note 5)
	  T o t a l  liabilities			  3,485		  2,743

SHAREHOLDERS' EQUITY (note 6):
------------------------------
  Share capital - ordinary shares of
  NIS 0.01 par value (authorized - 88,000,000
  shares; issued and outstanding:
  December 31, 2002 - 20,686,220 shares;
	December 31, 2001 - 20,654,220 shares)		     52		     52
	Additional paid-in capital			 61,090		 61,078
	Deferred stock compensation					   (145)
	Accumulated deficit				(16,660)	(16,994)
  =============================================================================
	  T o t a l  shareholders' equity		 44,482		 43,991
	  T o t a l  liabilities and shareholders'
	    equity					$47,967		$46,734


                                      -F-3-
	/s/ Monica Eisinger	) Chairperson of the Board of Directors,
	___________________
	Monica Eisinger		) President and Chief Executive Officer




	/s/ Amnon Neubach	)
	___________________
	Amnon Neubach		) Director





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






































				      -F-4-
			CONSOLIDATED STATEMENTS OF OPERATIONS

					    Years ended December 31,
					   2002		   2001		   2000
					  ______          ______          ______
					(In thousands of U.S. dollars,
					except per share data)
REVENUES (note 10a):
  Sales of licenses			 $6,535		 $7,108		$12,476
  Services 				  3,473		  3,361		  3,137
					========	========       =========
					 10,008		 10,469		 15,613
COST OF REVENUES			  2,479		  2,242		  2,203
					________	________       _________
GROSS PROFIT				  7,529		  8,227		 13,410
RESEARCH AND DEVELOPMENT EXPENSES
  (note 10b)				  3,723		  4,423		  3,795
SELLING, GENERAL AND ADMINISTRATIVE
  EXPENSES:
  Selling				  4,154		  6,767		  4,774
  General and administrative (note 10c)   1,279		  3,097		  1,931
					________	________       _________
OPERATING INCOME (LOSS)			 (1,627)	 (6,060)	  2,910
FINANCIAL AND OTHER INCOME - net
  (note 10d)				  2,078		  1,588		  1,083
					________	________       _________
INCOME (LOSS) BEFORE TAXES ON INCOME	    451		 (4,472)	  3,993
TAXES ON INCOME (note 7)		    117		      7		    245
INCOME (LOSS) BEFORE MINORITY INTEREST	    334		 (4,479)	  3,748
MINORITY INTEREST IN LOSSES OF A SUBSIDIARY		     89
					________	________       _________
NET INCOME (LOSS)			    334          (4,390)	  3,748
ACCRETION OF MANDATORILY REDEEMABLE
  CONVERTIBLE A PREFERRED SHARES TO
  MANDATORY REDEMPTION VALUE (note 6b)					 (8,894)
AMORTIZATION OF BENEFICIAL CONVERSION
  FEATURE OF MANDATORILY REDEEMABLE
  CONVERTIBLE PREFERRED SHARES (note 6b)				 (7,223)
					________	________       _________
NET INCOME (LOSS) APPLICABLE TO
  	ORDINARY SHARES			   $334		$(4,390)       $(12,369)
	---------------
					________	________       _________
EARNINGS (LOSS) PER ORDINARY SHARE
  (note 10e) - basic and diluted	  $0.02		 $(0.21)	 $(0.73)
					________	________       _________
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
  USED IN COMPUTATION OF EARNINGS (LOSS)
  PER ORDINARY SHARE - IN THOUSANDS (note 10e):
	Basic				 20,677		 20,654		 16,897
					________	________       _________
	Diluted				 20,761		 20,654		 16,897
					________	________       _________
The accompanying notes are an integral part of the financial statements.
                                      -F-5-
	    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


								Retained
		Share capital	 Additional	Deferred	earnings
		Number		 paid-in	stock		(accumulated
		of shares|Amount|capital	compensation	deficit)   Total
		--------- ------ ----------	------------	--------  ------
		(In thousands)	(In thousands of U.S. dollars)
BALANCE AT
 JANUARY 1, 2000  $14,892    $36    $3,680	$(274)		$1,778	 $5,220
CHANGES DURING 2000:
_______________________________________________________________________________
 Net income							 3,748	  3,748
_______________________________________________________________________________
  Dividend 							(2,013)	 (2,013)
_______________________________________________________________________________
  Deemed purchase and cancellation on March 30, 2000 of ordinary shares which
   were exchanged for mandatorily redeemable B preferred shares
   (note 6b) 	     (556)     *    (3,000)				 (3,000)
_______________________________________________________________________________
  Accretion of mandatorily redeemable
   convertible A preferred shares to mandatory redemption value (note 6b)
								(8,894)  (8,894)
_______________________________________________________________________________
  Amortization of beneficial conversion feature of redeemable convertible
   preferred shares		     7,223       (7,223)		    -,-
_______________________________________________________________________________
 Employee stock options exercised and
  paid			2      *	 1				      1
_______________________________________________________________________________
 Conversion of mandatorily redeemable
  A and B preferred shares into ordinary
  shares (note 6b)  2,778      7    22,993				 23,000
_______________________________________________________________________________
 Issuance of share capital under an initial public offering, net of
  underwriters' discount and issuance costs of $ 4,561,000
  (note 6a(4))      3,450      8    29,930				 29,938
_______________________________________________________________________________
 Deferred compensation related to employee stock option grants - net
				       406         (406)		    -,-
_______________________________________________________________________________
 Amortization of deferred compensation related to employee stock option grants
						    227			    227
===============================================================================

BALANCE AT DECEMBER 31, 2000
		   20,566     51    61,233	   (453)	(16,204) 48,227
CHANGES DURING 2001:
_______________________________________________________________________________
 Net loss							 (4,390) (4,390)
 Employee stock options exercised and paid
		       88      1	32				     33
_______________________________________________________________________________
                                      -F-5-
 Decrease in deferred compensation related to employee stock option grants as a
 result of forfeiting of options
				      (187)	    187			    -,-
_______________________________________________________________________________
 Amortization of deferred compensation related to employee stock option grants
						    121			    121
===============================================================================

BALANCE AT DECEMBER 31, 2001
		   20,654     52    61,078	   (145)	(16,994) 43,991
CHANGES DURING 2002:
_______________________________________________________________________________
 Net income							    334     334
_______________________________________________________________________________
 Employee stock options exercised and paid
		       32      *	19				     19
_______________________________________________________________________________
 Decrease in deferred compensation related to employee stock option grants as a
 result of forfeiting of options
					(7)	     7			    -,-
_______________________________________________________________________________
 Amortization of deferred compensation related to employee stock option grants
						   138	 		    138
===============================================================================

BALANCE AT DECEMBER 31, 2002
		  $20,686    $52   $61,090	  $ -	      $(16,660) $44,482
===============================================================================

			* Represents an amount less than $1,000.

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






















				      -F-6-
						Years ended December 31,
					2002		2001		2000
					(In thousands of U.S. dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)			$334	    $(4,390)	      $3,748
  Adjustments to reconcile net income
   or loss to net cash provided by or
   used in operating activities:
   Minority interest in losses of a
    subsidiary 						(89)

   Depreciation and amortization	 944		805		 379
   Deferred income taxes - net 		  16		 (4)		(485)
   Compensation expense resulting
   from options granted to employees	 138		121		 227
   Accrued severance pay - net		 		 83		 229
   Capital loss (gain) on sale of
    property and equipment - net	  14		 (2)		   3
   Write-off of an investment in a company		 93
   Loss (gain) from trading securities			  2		 (13)
   Interest accrued on long-term bank
    deposits			      (1,631)				  (3)
   Changes in operating asset and liability items:
    Proceeds from sale of trading securities		101		  36
    Decrease (increase) in accounts receivable:
	Trade				 888	      2,675	      (3,012)
	Other				 281		514	      (1,203)
    Increase (decrease) in accounts payable and accruals:
	Trade				(318)	       (470)		 754
	Other			       1,023	     (1,415)	       1,744
    Decrease (increase) in inventories	  12		 (6)		  17
_____________________________________________________________________________
Net cash provided by (used in)
 operating activities		       1,701	     (1,982)	       2,421
_____________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment	(180)	       (831)	      (1,355)
  Purchase of intangible assets, see note 3	     (1,000)
  Investment in long-term bank
   deposits, see note 9c 	     (30,000)
  Withdrawal of short-term bank deposits				 631
  Investment in a company 						 (93)
  Proceeds from sale of property
   and equipment			  49		130		   2
_____________________________________________________________________________
Net cash used in investing
 activities			     (30,131)	     (1,701)		(815)







                                      -F-7-
_____________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of share capital 	      				      29,938
  Issuance of mandatorily redeemable
   convertible A preferred shares  				      11,106
  Employee stock options exercised
   and paid				  19		 33		   1
  Issuance of shares to minority
   shareholders in a subsidiary						  89
  Dividends paid						      (2,013)
_____________________________________________________________________________
Net cash provided by financing
 activities				  19		 33	      39,121
_____________________________________________________________________________
NET INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS		     (28,411)	     (3,650)	      40,727
BALANCE OF CASH AND CASH EQUIVALENTS
 AT BEGINNING OF YEAR		      39,723	     43,373	       2,646
_____________________________________________________________________________
BALANCE OF CASH AND CASH EQUIVALENTS
 AT END OF YEAR			     $11,312	    $39,723	     $43,373
_____________________________________________________________________________
SUPPLEMENTAL DISCLOSURE OF CASH
 FLOW AND NON-CASH ACTIVITIES:
	Cash paid during the year
	for income tax			 $60 	       $125		$894
_____________________________________________________________________________
	Accretion of mandatorily
	redeemable convertible A
	preferred shares to mandatory
	redemption value					      $8,894
_____________________________________________________________________________
	Amortization of beneficial
	conversion feature of
	mandatorily redeemable
	convertible preferred shares				      $7,223
_____________________________________________________________________________
	Conversion of mandatorily
	redeemable convertible preferred
	shares into ordinary shares				     $23,000
_____________________________________________________________________________







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





                                      -F-8-
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES;

a.	General:

1)	Nature of operations

	MIND C.T.I. Ltd. (the "Company") is an Israeli company, which together
	with its subsidiaries, develops, manufactures and markets billing and
	customer care software products for wireless, wire-line and
	next-generation carriers that provide voice, data and   internet
	protocol ("IP") services. The Company also provides a call management
	system used by enterprises for call accounting, traffic analysis and
	fraud detection.

	As to the acquisition of the VeraBill product-line in March 2001, see
	note 3.

	In the years ended December 31, 2002 and 2001, 21% and 29%,
	respectively, of total revenues were derived from two major customers,
	see note 10a.

	The Company has wholly-owned subsidiaries in the United States, the
	Netherlands and Romania and an 80%-owned subsidiary in Japan. In the
	year ended December 31, 2002 the operations of the Dutch and Japanese
	subsidiaries, which operated as marketing companies, were ceased.

2)	Accounting principles

	The consolidated financial statements are prepared in accordance with
	generally accepted accounting principles ("GAAP") in the United States
	of America.

3)	Use of estimates in preparation of financial statements

	The preparation of financial statements in conformity with GAAP
	requires management to make estimates and assumptions that affect the
	reported amounts of assets and liabilities and disclosure of contingent
	assets and liabilities at the dates of the financial statements and the
	reported amounts of revenues and expenses during the reporting years.
	Actual results could differ from those estimates.

4)	Functional currency

	The currency of the primary economic environment in which the operations
	of the Company and its subsidiaries are conducted is the U.S. dollar
	("dollar" or "$").  Most of the Company's revenues are derived from
	sales outside of Israel, which are denominated primarily in dollars. In
	addition, most marketing costs are incurred outside Israel, primarily
	in dollars.  Thus, the functional currency of the Company and its
	subsidiaries is the dollar.


                                      -F-9-
	Transactions and balances originally denominated in dollars are
	presented at their original amounts.  Balances in non-dollar currencies
	are translated into dollars using historical and current exchange rates
	for non-monetary and monetary balances, respectively.  For non-dollar
	transactions and other items (detailed below) reflected in the
	statements of operations, the following exchange rates are used: (i) for
	transactions: exchange rates at transaction dates or average rates; and
	(ii) for other items (derived from non-monetary balance sheet items,
	such as depreciation and amortization, changes in inventories, etc.) -
	historical exchange rates.  The resulting currency translation gains or
	losses are carried to financial income or expenses, as appropriate.



NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

b.	Principles of consolidation:

1)	The consolidated financial statements include the accounts of the
	Company and its subsidiaries.

2) 	Intercompany balances and transactions have been eliminated in
	consolidation. Profits from intercompany sales, not yet realized
	outside the Company and its subsidiaries, have also been eliminated.

c.	Cash equivalents

	The Company and its subsidiaries consider all highly liquid investments,
	which include short-term bank deposits (up to three months from date of
	deposit) that are not restricted as to withdrawal or use, to be cash
	equivalents.

d.	Inventories

	Inventories are valued at the lower of cost or market value.  Cost is
	determined by the "first-in, first-out" method.

e.	Property and equipment:

1)	These assets are stated at cost.

2)	The assets are depreciated by the straight-line method, on basis of
	their estimated useful life.

	Annual rates of depreciation are as follows:


							%
	Computers and electronic equipment		15-33
							(mainly 33)
	Office furniture and equipment			6-7
	Vehicles					15


	                                      -F-9-
	Leasehold improvements are amortized by the straight-line method over
	the term of the lease, which is shorter than the estimated useful life
	of the improvements.

f.	Intangible assets

	Intangible assets represent the cost of acquisition of a product line
	and are stated at cost and amortized by the straight-line method over a
	period of five years (see note 3).




NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

g.	Impairment of long-lived assets

	In 2002, the Company adopted Statement of Financial Accounting Standards
	("FASB") No. 144 of the Financial Accounting Standards Board of the
	United States ("FASB"), "Accounting for the Impairment or Disposal of
	Long-Lived Assets". FAS 144 requires that long-lived assets held and
	used by an entity be reviewed for impairment whenever events or changes
	in circumstances indicate that the carrying amount of the assets may not
	be recoverable. Under FAS 144, if the sum of the expected future cash
	flows (undiscounted and without interest charges) of the long-lived
	assets is less than the carrying amount of such assets, an impairment
	loss would be recognized, and the assets are written down to their
	estimated fair values.

	The adoption of FAS 144 did not have any material impact on the
	financial position and results of operations of the Company.


h.	Deferred income taxes:

  1)	  Deferred taxes are determined utilizing the asset and liability method
	  based on the estimated future tax effects of differences between the
	  financial accounting and tax bases of assets and liabilities under the
	  applicable tax laws. Deferred income tax provisions and benefits are
	  based on the changes in the deferred tax asset or tax liability from
	  period to period. Valuation allowance is included in respect of
	  deferred tax assets when it is more likely than not that such assets
	  will not be realized.

  2)	  The Company may incur additional tax liability in the event of
	  intercompany dividend distribution by non-Israeli subsidiaries. Such
	  additional tax liability has not been provided for in these financial
	  statements, as the Company does not expect these companies to
	  distribute dividends in the foreseeable future.

  3)	  Taxes which would apply in the event of disposal of investments in
	  non-Israeli subsidiaries have not been taken into account in computing
	  the deferred taxes, as it is the Company's policy to hold these
	  investments, and not to realize them.
                                      -F-10-
  4)	  The Company intends permanently to reinvest the amounts of tax-exempt
	  income of approved enterprises and does not intend to cause dividend
	  distribution from such income (see also note 7a). Therefore, no
	  deferred taxes have been provided in respect of such tax-exempt
	  income.

i.	Revenue recognition

	The Company applies the provisions of Statement of Position 97-2 of the
	American Institute of Certified Public Accounts ("SOP 97-2"), "Software
	Revenue Recognition", as follows:

  1)	  Sales of licenses
	  Revenue from sale of products is recognized when delivery has
	  occurred, persuasive evidence of an arrangement exists, the sales
	  price is fixed or determinable and collectability is probable.



NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

	  Customization of the product, if any, is performed before delivery
	  occurs. If collectibility is not considered probable, revenue is
	  recognized when the fee is collected.

	  In cases where the Company installs the product, the revenue
	  recognition is deferred until the installation is completed.

	  The Company does not grant a right of return on products sold to
	  customers, distributors and resellers.

	  The Company renders maintenance and support services to its customers,
	  mainly for a period of one year from delivery or installation. When
	  revenue on sale of the products is recognized, the Company defers a
	  portion of the sales price (which is presented in the balance sheet
	  as deferred revenues among "accounts payable and accruals - other")
	  and recognizes it as maintenance and support service revenue ratably
	  over the above period. The portion of the sales price that is
	  deferred is determined based on the fair value of the service as
	  priced in following transactions in which the Company renders solely
	  maintenance and support services.

  2)	  Services

	  The services the Company provides consist of maintenance, support and
	  project management.

	  Project management consists of advice to the Company's customers
	  regarding the development of billing and customer care software over
	  their IP networks.

	  Service revenues are priced on a fixed price basis and are recognized
	  ratably over the service period or as services are performed. See also
	  (1) above.
                                      -F-11-

j.	Research and development expenses

	Pursuant to FAS No. 86, "Accounting for the Costs of Computer Software
	to be Sold, Leased, or Otherwise Marketed", development costs related
	to software products are expensed as incurred until the "technological
	feasibility" of the product has been established. Because of the
	relatively short time period between "technological feasibility" and
	product release, and the insignificant amount of costs incurred during
	such period, no software development costs have been capitalized.

k.	Allowance for doubtful accounts

	The allowance is determined for specific debts doubtful of collection.

l.	Stock based compensation

	Stock options granted to employees are accounted for under the
	recognition and measurement principles of Accounting Principles Board
	Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees", and
	related interpretations.  Under APB 25, compensation cost for employee
	stock option plans is measured using the intrinsic value based method of
	accounting.



NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

	Accordingly, the difference, if any, between the quoted market price of
	the Ordinary Shares on the date of grant of the options and the exercise
	price of such options is charged on the date of grant to shareholders'
	equity under "deferred stock compensation", and thereafter amortized by
	the straight line basis, against income, over the vesting period.

	The following table illustrates the effect on net income (loss) and
	earnings (loss) per share assuming the Company had applied the fair
	value recognition provisions of FAS No. 123, "Accounting for Stock-Based
	Compensation", to its stock-based employee compensation:
















                                      -F-12-
						Years ended December 31,
						2002	  2001	    2000
					  (In thousands of U.S. dollars,
					      except for per share data)
Net income (loss), applicable to ordinary
 shares, as reported				$334   $(4,390) $(12,369)
Add - stock-based employee compensation
 expense, included in reported net income
 (loss), net of related tax effect		 138	   121	     227
Deduct - stock-based employee compensation
 expense determined under fair value method,
 net of related tax effect		      (1,906)	(1,153)	  (1,000)
					      _______	_______	  _______
Pro forma net loss applicable to ordinary
 shares					     $(1,434)	$(5,422)$(13,142)
					      _______	_______	  _______
Earnings (loss) per share:
	Basic and diluted - as reported	       $0.02	 $(0.21)  $(0.73)
Basic and diluted - pro forma		      $(0.07)	 $(0.26)  $(0.78)

m.	Advertising expenses

	These expenses are charged to income as incurred. Advertising expenses
	totaled $ 55,000,
	$ 159,000 and $ 533,000 in the years ended December 31, 2002, 2001 and
	2000, respectively.

n.	Comprehensive income

	The Company has no comprehensive income components other than net
	income or loss.



NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

o.	Earnings (loss) per share ("EPS")

	Basic EPS are computed based on the net income (loss) applicable to
	ordinary shares divided by the weighted average number of ordinary
	shares outstanding during each year. In computing diluted EPS, account
	was taken of the dilutive effect of the outstanding stock options,
	using the treasury stock method.

	Diluted EPS for the years ended December 31, 2001 and 2000 does not
	include 2,019,320 and 738,220 options, respectively, because of their
	anti-dilutive effect, since the Company had net loss applicable to
	ordinary shares.

p.	Recently issued accounting pronouncements:

  1)	  FAS 145


	                                        -F-13-
	  In April 2002, the FASB issued FAS No. 145, "Revision of FASB
	  statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
	  Technical Connections". Among other amendments and rescissions,
	  FAS 145 eliminates the requirement that gains and losses from the
	  extinguishments of debt be aggregated and, if material, classified as
	  an extraordinary item, net of the related income tax effect, unless
	  such gains and losses meet the criteria in paragraph 20 of APB
	  No. 30, "Reporting the Results of Operation - Reporting the Effects of
	  Disposal of a Segment of a Business, and Extraordinary, Unusual and
	  Infrequently Occurring Events and Transactions". FAS 145 is partially
	  effective for transactions occurring after May 15, 2002 and partially
	  effective for fiscal years beginning after May 15, 2002.

	  The Company does not expect the adoption of FAS 145 to have a material
	  effect on its consolidated financial statements.

  2)	  FAS 146

	  In June 2002, the FASB issued FAS No. 146, 'Accounting for Costs
	  Associated with Exit or Disposal Activities". FAS 146 addresses
	  financial accounting and reporting for costs associated with exit or
	  disposal activities and nullifies Emerging Issues Task Force ("EITF")
	  Issue No. 94-3, "Liability Recognition for Certain Employee
	  Termination Benefits and other Costs to Exit an Activity (including
	  Certain Costs Incurred in a Restructuring)". FAS 146 requires that a
	  liability for a cost associated with an exit or disposal activity to
	  be recognized when the liability is incurred. Under EITF 94-3, a
	  liability for an exit cost as generally defined in EITF 94-3 was to
	  be recognized at the date of the commitment to an exit plan. FAS 146
	  states that a commitment to a plan, by itself, does not create an
	  obligation that meets the definition of a liability. Therefore,
	  FAS 146 eliminates the definition and requirements for recognition of
	  exit costs in EITF 94-3. It also establishes that fair value is the
	  objective for initial measurement of the liability. FAS 146 is to be
	  applied prospectively to exit or disposal activities initiated after
	  December 31, 2002.

	  The Company does not expect the adoption of FAS 146 to have a material
	  effect on its consolidated financial statements.



NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

  3)	  FAS 148

	  In December 2002, the FASB issued FAS No. 148, "Accounting for
	  Stock-Based Compensation - Transition and Disclosure - an amendment
	  of FASB Statement No. 123". FAS 148 amends FAS 123 to provide
	  alternative methods of transition for a voluntary change to the fair
	  value based method of accounting for stock-based employee
	  compensation. In addition, FAS 148 amends the disclosure requirements
	  of FAS 123 to require prominent disclosures in the financial
	  statements about the method of accounting for stock-based employee
                                      -F-14-
	  compensation and the effect of the method used on reported results.
	  The transition guidance and annual disclosure provisions of FAS 148
	  are effective for financial statements issued for fiscal years ending
	  after December 15, 2002..

	  The Company has elected to continue accounting for employee stock
	  based compensation in accordance with APB 25 and related
	  interpretations and has applied the disclosure provisions in FAS 148
	  in these consolidated financial statements.

  4)	  FIN 45

	  In November 2002, the FASB issued FASB Interpretation No. 45
	  "Guarantor's Accounting and Disclosure Requirements for Guarantees,
	  Including Indirect Guarantees of Indebtedness of Others" ("FIN 45").
	  FIN 45 requires the guarantor to recognize, at the inception of a
	  guarantee, a liability for the fair value of the obligation undertaken
	  in issuing the guarantee. It also elaborates on the disclosures to be
	  made by a guarantor in its financial statements about its obligations
	  under certain guarantees that it has issued and to be made in regard
	  of product warranties. Disclosures required under FIN 45 are already
	  included in these financial statements; however, the initial
	  recognition and measurement provisions of FIN 45 are applicable on a
	  prospective basis to guarantees issued or modified after December 31,
	  2002.

	  The Company does not expect the adoption of FIN 45 to have a material
	  effect on its consolidated financial statements.

  5)	  FIN 46

	  In January 2003, the FASB issued FIN No. 46, "Consolidation of
	  Variable Interest Entities". Under FIN 46 entities are separated into
	  two categories: (i) those for which voting interests are used to
	  determine consolidation (this is the most common situation); and (ii)
	  those for which variable interests are used to determine
	  consolidation. FIN 46 explains how to identify Variable Interest
	  Entities ("VIE") and how to determine when a business enterprise
	  should include the assets, liabilities, non-controlling interests and
	  results of activities of a VIE in its consolidated financial
	  statements.

	  FIN 46 is effective as follows: for variable interests in VIEs created
	  after January 31, 2003, FIN 46 shall apply immediately, for variable
	  interests in VIEs created before that date, FIN 46 shall apply - in
	  the case of publicly traded entities - as of the beginning of the
	  first interim or annual reporting period beginning after June 15,
	  2003.

	  The Company does not expect the adoption of FIN 46 to have a material
	  effect on its consolidated financial statements


NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
                                      -F-15-
  6)	  FAS 149

	  In April 2003, the FASB issued FAS No. 149, "Amendment of Statement
	  133 on Derivative Instruments and Hedging Activities". FAS 149 amends
	  and clarifies financial accounting and reporting for derivative
	  instruments, including certain derivative instruments embedded in
	  other contracts (collectively referred to as derivatives) and for
	  hedging activities under FAS 133, "Accounting for Derivative
	  Instruments and Hedging Activities". FAS 149 is effective
	  prospectively for contracts entered into or modified after June 30,
	  2003 and prospectively for hedging relationships designated after
	  June 30, 2003.

	  The Company is currently analyzing the impact of FAS 149 on its
	  consolidated financial statements but does not believe that on
	  adoption, it will have a material impact on its results of operations
	  or financial position.

  7)	  FAS 150

	  In May 2003, the FASB issued FAS No. 150, "Accounting for Certain
	  Financial Instruments with Characteristics of both Liabilities and
	  Equity". FAS 150 establishes standards for classification and
	  measurement in the statement of financial position of certain
	  financial instruments with characteristics of both liabilities and
	  equity. It requires classification of a financial instrument that is
	  within its scope as a liability (or an asset in some circumstances)
	  because that financial instrument embodies an obligation of the
	  issuer. FAS 150 is effective for financial instruments entered into
	  or modified after May 31, 2003, and otherwise is effective on the
	  first interim period beginning after June 15, 2003.

	  The Company is currently analyzing the impact of FAS 150 on its
	  consolidated financial statements but does not believe that on
	  adoption, it will have a material impact on its results of operations
	  or financial position.


















                                      -F-16-
NOTE 2 - PROPERTY AND EQUIPMENT:

a.	Composition of assets, grouped by major classification, is as follows:


							December 31
							2002		2001
						(In thousands of U.S. dollars)
	Computers and electronic equipment	      $1,978	      $1,887
	Office furniture and equipment			 495		 446
	Vehicles					 903	       1,011
	Leasehold improvements				  19		  19
						      ======	      ======
						       3,395	       3,363
	Less - accumulated depreciation
	 and amortization			       2,032	       1,373
						      ======	      ======
						      $3,395	      $3,363
						      ======	      ======

b.	Depreciation and amortization expenses totaled $ 744,000, $ 655,000 and
	$ 379,000 in the years ended December 31, 2002, 2001 and 2000,
	respectively.

NOTE 3 - OTHER ASSETS:

a.	Composed as follows:

							December 31
							2002		2001
						(In thousands of U.S. dollars)
Amounts funded with severance pay funds and by
  insurance policies in respect of liability for
  employee Rights upon retirement, see note 4		$313		$276
Deferred income taxes, see note 7e					   7
Intangible assets, net of accumulated amortization,
  see b. below						 650		 850
							====		====
							$963	      $1,133


b. 	In March 2001, the Company acquired from Veramark Technologies Inc., all
	of the rights for the VeraBill product line, for one million dollars
	in cash.  VeraBill is a mediating, provisioning and billing solution for
	wireline and wireless mid-size carriers.  The acquisition provides the
	Company with complementary technology for mediation and provisioning for
	traditional wireline and wireless switches and an existing customer
	base.

	The acquisition was accounted for under the purchase method and the
	purchase price was allocated to technology and customer base. In view of
	the inter-related nature of the acquired assets and their similar useful
	life, the Company amortizes these assets over the same period of five
	years.
                                      -F-17-
	As of December 31, 2002 and 2001, the accumulated amortization amounted
	to $ 350,000 and $ 150,000, respectively.


NOTE 4 - EMPLOYEE RIGHTS UPON RETIREMENT:

a.	Israeli law generally requires payment of severance pay upon dismissal
	of an employee or upon termination of employment in certain other
	circumstances. The severance pay liability of the Company to its Israeli
	employees, based upon the number of years of service and the latest
	monthly salary, is partly covered by regular deposits with severance pay
	funds and pension funds, and by purchase of insurance policies; under
	labor agreements, the deposits with recognized pension funds and the
	insurance policies, as above, are in the employees' names and are,
	subject to certain limitations, the property of the employees.

	The severance pay liabilities covered by the pension funds are not
	reflected in the financial statements as the severance pay risks have
	been irrevocably transferred to the pension funds.

	The amounts accrued and the portion funded with severance pay funds and
	by the insurance policies are reflected in the financial statements as
	follows:

							December 31
							2002		2001
						(In thousands of U.S. dollars)
Accrued severance pay					$809		$772
L e s s - amounts funded (presented in "other assets")  (313)		(276)
							====		====
Unfunded balance					$496		$496

	The amounts of accrued severance pay as above cover the Company's
	severance pay liability in accordance with labor agreements in force and
	based on salary components which, in management's opinion, create
	entitlement to severance pay. The Company records the obligation as if
	it was payable at each balance sheet date on an undiscounted basis.

	The Company may only make withdrawals from the funds for the purpose of
	paying severance pay.

b.	The severance pay expenses were $ 225,000, $ 448,000 and  $ 491,000 in
	the years ended December 31, 2002, 2001 and 2000, respectively.

c.	The earnings on the amounts funded were $ 12,000 $ 14,000 and $ 22,000
	in the years ended December 31, 2002, 2001 and 2000, respectively.



NOTE 5 - COMMITMENTS:

a.	Lease commitments


                                      -F-18-
	The premises occupied by the Company and its subsidiaries are rented
	under various operating lease agreements. The lease agreements for the
	premises expire on various dates between 2003 and 2006.

	The rental payments for the premises in Israel, which constitute most
	of the above amounts, are payable in Israeli currency linked to the
	Israeli consumer price index (the "Israeli CPI").

	The Company entered into operating lease agreements for use of motor
	vehicles.

	Future minimum lease commitments of the Company and its subsidiaries
	under the above leases, at exchange rates in effect on December 31,
	2002, are as follows:


	Years ending December 31:		(In thousands of U.S. dollars)
	2003					$ 773
	2004					  419
	2005					  176
	2006					   29
					      _________
					      $ 1,397

	Rental expense totaled $ 614,000, $ 662,000 and $ 446,000 in the years
	ended December 31, 2002, 2001 and 2000, respectively.

b.	Royalty commitment

	The Company was committed to pay royalties to the Israeli Government on
	proceeds from sales of products in the research and development of which
	 the Government participated by way of grants. Under the terms of
	Company's funding from the Israeli Government, royalties of 4% were
	payable on sales of products developed from a project so funded, up to
	100% of the amount of the grant received by the Company. The Company
	paid the entire amount of royalties in respect of such participations.

	In the event that any of the manufacturing rights or technology are
	transferred out of Israel, subject to the approval of the Israeli
	Government, the Company would be required to pay the Israeli Government
	an amount in the range of 120% to 300% of the grants received.




NOTE 6 - SHAREHOLDERS' EQUITY (continued):

a.	Share capital:

  1)	  The Company's ordinary shares are traded in the United States on the
	  Nasdaq National Market, under the symbol MNDO and as from July 2002
	  also on the Tel-Aviv Stock Exchange under the symbol MNDO.


                                        -F-18-
  2)	  On April 30, 2000, the shareholders of the Company resolved to
	  increase the authorized share capital to 88,000,000 shares of
	  NIS 0.01 par value (85,222,220 ordinary shares, 2,222,220 mandatorily
	  redeemable convertible A preferred shares and 555,560 mandatorily
	  redeemable convertible B preferred shares).

	  As a result of the conversion of the mandatorily redeemable
	  convertible shares to ordinary shares on August 2000, the Company's
	  authorized share capital is composed of 88,000,000 ordinary shares.

	  On April 30, 2000, the Board of Directors of the Company resolved to
	  allot a stock dividend (bonus shares) at the rate of 19 ordinary
	  shares for each ordinary share. All per ordinary share amounts and
	  ordinary shares outstanding in these financial statements have been
	  adjusted to give retroactive effect to the stock dividend.

  3)	  Initial public offering

	  On August 8, 2000, 3,000,000 ordinary shares of NIS 0.01 par value
	  were offered by the Company in an initial public offering ("IPO") at
	  a price of $ 10 per share (before underwriting discount and offering
	  costs). An additional 450,000 ordinary shares of NIS 0.01 par value
	  were purchased by the underwriters in September 2000, pursuant to an
	  over allotment option which was fully exercised at the same price per
	  share. The proceeds to the Company, $ 29.9 million, are net of 7%
	  underwriting discount and offering costs of $ 2.1 million.

	  Upon the closing of the IPO, all the mandatorily redeemable
	  convertible A and B preferred shares were automatically converted into
	  ordinary shares of NIS 0.01 par value (see b. below).



NOTE 6 - SHAREHOLDERS' EQUITY (continued):

b.	Mandatorily redeemable convertible A and B shares:

  1)	  On March 30, 2000, the Company issued mandatorily redeemable
	  convertible preferred shares, composed as follows:



								Original
						Issued and	gross
						outstanding	proceeds
						(Number of 	(U.S. dollars in
						 shares) 	 thousands)
A preferred shares of NIS 0.01 par value	111,111		$ 12,000
B preferred shares of NIS 0.01 par value	 27,778		$  3,000
						=======		========
						138,889		$ 15,000



                                      -F-19-
	  The A preferred shares were issued under an investment agreement among
	  new investors, the Company and principal shareholders, dated March 30,
	  2000, for consideration of $12 million.

	  Issuance costs of $ 894,000 were charged against the recorded amount
	  of the A preferred shares before any accretion.

	  The B preferred shares were issued on March 30, 2000 in exchange for
	  ordinary shares held by one of the Company's principal shareholders.
	  Concurrent with the exchange, this principal shareholder sold the B
	  preferred shares to an investor group which was the same as the
	  investors in the A preferred shares. The Company received no cash as
	  a result of this sale.

  2)	  The A and B preferred shares conferred upon their holders the same
	  rights as the ordinary shares (see a(3) above), as well as conversion
	  rights, redemption rights and a preference in liquidation as
	  stipulated in the Articles of Association of the Company and a
	  mechanism of anti-dilution in the event of issuance of shares at a
	  price per share lower than the price paid by the holders of the prefer
	  red shares.

	  The A and B preferred shares were convertible into ordinary shares,
	  at the holder's option, at any time after 12 months from the date of
	  issuance. The A and B preferred shares were to be automatically
	  converted into ordinary shares upon the occurrence of a liquidity
	  event, including an IPO (see also below). In this case, the
	  conversion ratio of the B preferred shares was to be one to twenty
	  and the number of ordinary shares into which the B preferred shares
	  were to be converted was 555,560 ordinary shares. The conversion ratio
	  of the A preferred shares was to be between one to sixteen and one to
	  twenty, depending on the IPO price per ordinary share.



NOTE 6 - SHAREHOLDERS' EQUITY (continued):

	  Under the Articles of Association of the Company, in the event of a
	  liquidity event as defined, the holders of the A and B preferred
	  shares were to receive an amount in cash, before the holders of the
	  ordinary shares receive any distribution, equal to the greater of (a)
	  the sum of $108 per preferred share plus an amount equivalent to a
	  dividend of 4.5% compounded annually since March 30, 2000, or (b) an
	  amount such preferred holder would have received had the preferred
	  shares been converted into ordinary shares immediately prior to the
	  liquidity event. These rights expired upon the conversion of the A
	  and B preferred shares into ordinary shares, which automatically
	  occurred upon the IPO, see a(5) above.

  3)	  In connection with the issuance of the A and B preferred shares, an
	  amount of $ 7,223,000, representing the beneficial conversion feature,
	  was amortized against retained earnings (accumulated deficit) over a
	  period commencing upon issuance (March 30, 2000) and ending on the
	  date of the IPO. The amount of $ 7,223,000 was calculated as the
                                      -F-20-
	  difference between the per share conversion price and the deemed fair
	  value of an ordinary share at the issuance date multiplied by the
	  applicable number of equivalent ordinary shares.

  4)	  The Company, its existing shareholders at March 30, 2000 and the
	  investors in the A and B preferred shares entered into a redemption
	  agreement on March 30, 2000, concurrently with the purchase of the A
	  and B preferred shares. The redemption agreement provided that, if a
	  liquidity event would not occur by March 30, 2005, the holders of the
	  A and B preferred shares would be entitled to cause a sale of the
	  Company or redemption of the A and B preferred shares at an amount
	  equal to the higher of (a) fair market value of the preferred shares
	  (as determined by appraisal, if requested), or (b) the amount as
	  determined in the case of a liquidity event as described above.
	  However, any amount paid in redemption of the B preferred shares
	  would have been payable only to the extent of profits of the Company
	  earned since the date of issuance (March 30, 2000). As a result of
	  the IPO, these rights have expired.

	  Accordingly, the A preferred shares were classified outside of
	  permanent shareholders' equity prior to their conversion into ordinary
	  shares at their expected mandatory redemption value of $ 20 million.
	  In addition, as a result of the forgoing, an amount of $ 8,894,000
	  accrued in 2000, was charged to accumulated deficit. This amount
	  reflects the difference between the redemption value of the A
	  preferred shares and the net proceeds received by the Company for the
	  issuance of those shares. The B preferred shares were also classified
	  outside of permanent shareholders' equity at their estimated fair
	  value of $ 3,000,000 at March 30, 2000, with a similar amount
	  recorded as a reduction of additional paid-in capital representing the
	  deemed purchase and cancellation of the ordinary shares which were
	  exchanged for the B preferred shares. The carrying amount of the B
	  preferred shares would have been increased by a charge to retained
	  earnings (accumulated deficit) in the future, to the extent that the
	  Company had net income, up to the redemption amounts as determined in
	  the preceding paragraph.



NOTE 6 - SHAREHOLDERS' EQUITY (continued):

c.	Stock option plans:

  1)	  In December 1995, an employee was granted an option to purchase 50,000
	  ordinary shares of NIS 0.01 par value for $ 7,500 ($ 0.15 per share).
	  This option was exercised in the year ended December 31, 2001.

  2)	  In December 1998, the Board of Directors approved an employee stock
	  option plan, which was amended in 2000 (the "1998 Plan"). Under the
	  1998 Plan (as amended in 2000), options for up to 3,308,000 ordinary
	  shares of NIS 0.01 par value are to be granted to employees of the
	  Company and its subsidiaries.

	  Immediately upon issuance, the ordinary shares issuable upon the
                                      -F-21-
	  exercise of the options will confer on holders the same rights as the
	  other ordinary shares.

	  The Board of Directors determines the exercise price and the vesting
	  period of the options granted.

	  The options vest over three to five years.

	  Generally, options not exercised will expire approximately 7 years
	  after they are granted.

	  The 1998 Plan, in respect of Israeli employees, is subject to the
	  terms stipulated by Section 102 of the Israeli Income Tax Ordinance.
	  Inter alia, the Ordinance provides that the Company will be allowed to
	  claim, as an expense for tax purposes, the amounts credited to the
	  employees as a benefit upon sale of shares allotted under the plan at
	  a price exceeding the exercise price, when the related capital gains
	  tax is payable by the employee. The Company has not recorded a tax
	  benefit because it anticipates that the tax benefit will be nominal,
	  as most of its income during the period the options may be exercised
	  will be tax exempt (see Note 7a).



NOTE 6 - SHAREHOLDERS' EQUITY (continued):

	  The following is a summary of the status of the 1998 Plan as of
	  December 31, 2002, 2001 and 2000, and changes during the years ended
	  on those dates:


				Years ended December 31,
				2002		2001		2000
					Weighted	Weighted	Weighted
					average		average		average
					exercise	exercise	exercise
			        Number	price 	 Number	price	Number	price
Options outstanding at
 beginning of year  	     2,019,320  $3.45   738,220	$4.36  413,220  $1.16
Changes during year:
	Granted(a)(b)		22,000   1.23 2,206,300  3.28  518,000   6.68
	Exercised	       (32,000)  0.57   (38,000) 0.64   (2,000)  0.57
	Forfeited	      (332,600)  4.64  (887,200) 3.89 (191,000)  3.77
			    ___________	_____ __________ ____ _________ _____
Options outstanding at
 end of year		     1,676,720  $3.24 2,019,320 $3.45  738,220  $4.36
			    ___________	_____ __________ ____ _________ _____
Options exercisable at
 end of year		       575,475  $3.01   297,820 $1.50  237,000  $1.58
			    ___________	_____ __________ ____ _________ _____
Weighted average fair
 value of options
 granted during the Year(c)      $0.46  	  $3.28		 $4.20
			    ___________	_____ __________ ____ _________ _____
                                      -F-22-
(a) Including options
 granted to:
	The Company's
	 Chairperson of
	 the Board of
	 Directors,
	 President and
	 Chief Executive
	 Officer				 80,000 $1.65
			    ___________	_____ __________ ____ _________ _____
	Another director			 		30,000	$5.00


NOTE 6 - SHAREHOLDERS' EQUITY (continued):

(b)	Composed as follows:

(1*) - Weighted average exercise price
(2*) - Weighted average fair value
				Years ended December 31,
		    		2002		2001		2000
		    Number (1*)  (2*)  Number    (1*)  (2*)  Number  (1*)  (2*)
		    ______ ____  _____ _________ _____ _____ _______ _____ _____
Options granted during
 the year at the
 following exercise
 prices:
 Below market value					  (e)316,200 $4.93 $7.94
		    ______ ____  _____ _________ _____ _____ _______ _____ _____
 At market value    22,000 $1.23 $0.46 2,206,300 $3.28 $3.28 201,800 $8.74 $8.74

(c)	The fair value of each option grant is estimated on the date of grant
	using the Black-Scholes option-pricing model with the following
	assumptions:

					Years ended December 31,
					2002	2001	2000
Dividend yield				0%	0%	0%
Expected volatility			29%	121%	53%
Risk-free interest rate			3%	5%	5%
Expected average lives - in years	2	2	2

(d)	Approved by the Company's shareholders on June 27, 2002.

(e)	As of December 31, 2002, there are no more options outstanding which
	were issued below market value.

  3)	  The following table summarizes information about options outstanding
	  and exercisable at December 31, 2002:





				      -F-23-
	Options outstanding				Options exercisable
_____________________________________________  _________________________________
			Weighted			    Weighted
	  Number	average	     Weighted  Number	    average	Weighted
Range of  outstanding	remaining    average   exercisable  remaining	average
exercise  at   		contractual  exercise  at	    contractual exercise
price	  December 31,	life	     price     December 31, life	prices
	  2002				       2002
________  ___________  ____________  ________  ____________ ___________ ________
	  		Years				     Years

$0.57	      155,220		3	$0.57	    155,220	    3	   $0.57
$1.23-1.65    639,000		3	$1.58	    219,000	    3	   $1.49
$2.32	      294,200		3	$2.32
$5-5.875      470,100		3	$5.70	    155,775	    3	   $5.53
$10.00	      118,200		3	$10.00	     45,480	    3	  $10.00
	     ________				   ________
	    1,676,720		3	$3.37	    575,475	    3	   $3.01

  4)	  In the year ended December 31, 2000, the Company recorded $ 406,000
	  of deferred stock compensation for the excess of the deemed fair value
	  of the ordinary shares over the exercise price at the date of grant of
	  options to employees. In the years ended December 31, 2002 and 2001 no
	  deferred compensation was recorded.

	  In the years ended December 31, 2002 and 2001 due to the forfeiting of
	  certain options, the Company wrote-off $ 7,000 and $ 187,000,
	  respectively, of deferred stock compensation, which was recorded in
	  previous years.

d.	Dividends

	In the event cash dividends are declared by the Company, such dividends
	will be paid in Israeli currency. Under current Israeli regulations, any
	cash dividend paid in Israeli currency in respect of ordinary shares
	purchased by non-residents of Israel with non-Israeli currency may be
	freely repatriated in such non-Israeli currency, at the rate of exchange
	prevailing at the time of conversion. As of December 31, 2002, the
	Company has accumulated deficit. See also note 7a.


NOTE 7 - TAXES ON INCOME:

a.	Tax benefits under the Law for the Encouragement of Capital Investments,
	1959

	Substantially all of the Company's production facilities have been
	granted "approved enterprise" status under the above law. Income derived
	from the approved enterprise is tax exempt for a period of ten years
	commencing in the first year in which the Company earns taxable income
	from the approved enterprise, since the Company has elected the
	"alternative benefits" scheme (involving waiver of investment grants).

	The Company has currently two approved enterprises.  The period of tax
                                      -F-24-
	benefits of the first approved enterprise, which commenced operations
	in 1995, will expire in 2004. The period of benefits of the second
	approved enterprise has not yet commenced.

	In the event of distribution of cash dividends from income that was tax
	exempt as above, the Company would have to pay the 25% tax in respect
	of the amount distributed.

	Through March 31, 2000, the Company distributed as dividends the entire
	retained earnings derived from tax exempt income. Therefore, the Company
	recorded deferred and current taxes at the rate of 25% in respect of the
	amounts distributed. Most of such dividends were declared in March 2000.
	From April 1, 2000, the Company does not intend to distribute dividends
	to its shareholders in the foreseeable future.

	The entitlement to the above benefits is conditional upon the Company's
	fulfilling the conditions stipulated by the above law, regulations
	published thereunder and the certificate of approval for the specific
	investments in approved enterprises. In the event of failure to comply
	with these conditions, the benefits may be canceled and the Company may
	be required to refund the amount of the benefits, in whole or in part,
	with the addition of linkage differences to the Israeli CPI and
	interest.



NOTE 7 - TAXES ON INCOME (continued):

b.	Measurement of results for tax purposes under the Income Tax
	(Inflationary Adjustments) Law, 1985  (the "Inflationary Adjustments
	Law")

	Under the Inflationary Adjustments Law, results for tax purposes are
	measured in real terms, in accordance with the changes in the Israeli
	CPI.  The Company is taxed under this law. As explained in note 1a(4),
	the financial statements are measured in dollars. The difference between
	the changes in the Israeli CPI and in the exchange rate of the dollar
	relative to Israeli currency - both on annual and cumulative bases -
	causes a difference between taxable income and income reflected in
	these financial statements.

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

	The Company is an "industrial company" as defined by this law and as
	such is entitled to certain tax benefits, consisting mainly of
	accelerated depreciation as prescribed by regulations published under
	the Inflationary Adjustments Law, and amortization of patents and
	certain other intangible property rights.

d.	Other applicable tax rates:

  1)	  Income from other sources in Israel
	  Income not eligible for approved enterprise benefits is taxed at the
                                      -F-25-
	  regular corporate tax rate of 36%.
2)	  Income of non-Israeli subsidiaries
	  Non-Israeli subsidiaries are taxed according to tax laws in their
	  countries of residence.

e.	Deferred income taxes:

						December 31
						2002		2001
					(In thousands of U.S. dollars)
1) Provided in respect of the following:
Accrued severance pay				$2		$2
Research and development expenses		12		14
Amortization in respect of VeraBill
  product line					90		90
Carryforward tax losses				26		19
					      _______	      _______
					       130	       125
L e s s - valuation allowance		      (130)	      (109)
					      _______	      _______
						$ -	       $16
					      _______	      _______
2) The deferred taxes are presented in the
   balance sheets as follows:
Among current assets 				-		$9
As non-current assets 				-		 7
					     ________	      _______
						$  -	       $16


f.	Taxes on income included in the income statements:

1)	As follows:


						Years ended December 31,

					2002		2001		2000
					(In thousands of U.S. dollars)
Current:
	Israeli*			$-		$-  		$691
	Non-Israeli			101		11		  39
				      _______	      _______	      _______
					101		11		 730
	Deferred, see e. above		 16		(4)		(485)
				      _______	      _______	      _______
				       $117		$7		$245


*  See a. above.




                                      -F-26-
NOTE 7 - TAXES ON INCOME (continued):

  2)	  Following is a reconciliation of the theoretical tax expense, assuming
	  all income is taxed at the regular tax rates applicable to companies
	  in Israel (see d. above), and the actual tax expense:



					Years ended December 31,
					2002	    2001	    2000
					(In thousands of U.S. dollars)
Income (loss) before taxes on income,
as reported in the statements of
  income*		                $451  100%  $(4,472)  100%  $3,993  100%
					____  ____  ________  ____ _______ _____
Theoretical tax expense (tax saving)	 162   36%   (1,610)   36%  $1,438   36%
L e s s - tax benefits arising from
  approved enterprise status, see a.
  above					(158) (35)    1,565   (35)  (1,397) (35)
					____  ____  ________  ____ _______ _____
					   4	1	(45)	1	41    1
Increase (decrease) in taxes resulting
  from permanent differences:
 Income taxed at special rates					       157    4
Non-Israeli tax withholding which can
  not be offset against	Israeli income
  tax					 101	22
Disallowable deductions					  8	-	10    -
Differences between the basis of
  measurement of income reported for
  tax purposes, and the basis of
  measurement of income for financial
  reporting purposes - net, see b. above		 38    (1)	 1    -
Increase in taxes in respect of tax
  losses incurred in the reported year
  for which deferred taxes were not
  created				  21	 5	 19	-
Other					  (9)   (2)	(13)    -	36    1
					____  ____  ________  ____ _______ _____
Taxes on income 		        $117    26%     $7      -%    $245    6%
					____  ____  ________  ____ _______ _____
* As follows:
	Taxable in Israel		$441	    $(4,482)	    $3,985
	Taxable outside Israel 		  10 		 10		 8
					____  ____  ________  ____ _______ _____
					$451	    $(4,472)	    $3,993
					____  ____  ________  ____ _______ _____


NOTE 7 - TAXES ON INCOME (continued):


g.	Tax assessments

                                      -F-26-
	The Company has received final assessments from the tax authorities,
	following their audit, through the year ended December 31, 1998. The
	subsidiaries have not been assessed since incorporation. Any resulting
	taxes are recorded in the period the assessments are received.



NOTE 8 - MONETARY BALANCES IN NON-DOLLAR CURRENCIES:

							December 31, 2002



								    Other
					    Israeli currency	    non-dollar
					  Linked*     Unlinked      currencies**
	  					(In thousands of U.S. dollars)
Current assets:
	Cash and cash equivalents		$ -	$328		$1,386
	Accounts receivable:
		Trade					 640		   946
		Other					 567		    91
					___________   _________       __________
					      $567    $1,059		$2,332
					___________   _________       __________
Current liabilities -
	accounts payable and accruals:
		Trade					$147		   $20
		Other				       2,265		   114
					___________   _________       __________
						      $2,412		  $134


				*  To the Israeli CPI.
				** Mainly Euro


NOTE 9 - SUPPLEMENTARY BALANCE SHEET INFORMATION:

a.	Cash and cash equivalents

	The balance as of December 31, 2002 and 2001 includes $ 9.3 million and
	$ 38.0 million, respectively, of highly liquid bank deposits. The
	deposits are denominated in dollars and, as of December 31, 2002, bear
	weighted average annual interest of 1.45% .

b.	Accounts receivable:







				      -F-27-
							     December 31,
							2002		2001
						  (In thousands of U.S. dollars)
1)	Trade:
	Open accounts					$2,426		$3,614
	Less - allowance for doubtful accounts,
	  see also note 10c				  (400)		  (700)
							________       ________
							$2,026		$2,914
							________       ________
2)	Other:
	Government of Israel				  $568		  $566
	Prepaid expenses				    46		   256
	Employees					    43		    57
	Deferred income taxes, see note 7e				     9
	Related parties					     1		    59
	Sundry								     1
							________       ________
							  $658		  $948


c.	Long-term bank deposits

	In March 2002, the Company deposited an amount of $ 30 million with a
	bank for a period of three years. Under the arrangement with the bank,
	whether or not the deposits bear interest depends upon the rate of the
	three months LIBOR, as follows. For each day in which the three months
	dollar LIBOR is below an agreed annual fixed rate of 4% in the first
	year, 5% in the second year and 6% in the third year, the deposits bear
	interest at the rate of 7.25% per annum. On all other days the deposits
	do not bear any interest at all. The balance as of December 31, 2002,
	includes accrued interest of approximately $ 1.6 million. The bank has
	a right to refund the deposits, and terminate this arrangement at each
	anniversary of the deposits. The Company does not have the right to
	terminate the deposits prior to the third anniversary of the deposits.



NOTE 9 - SUPPLEMENTARY BALANCE SHEET INFORMATION:

d.	Accounts payable and accruals - other:


							December 31,
							2002		2001
						  (In thousands of U.S. dollars)
	Payroll and related expenses			$664		$506
	Accrued vacation pay				  44		  57
	Deferred revenues (see note 1i)*	       1,526		 826
	Related parties 				  		  59
	Accrued expenses and sundry 			 275		  38
						    _________       _________
						      $2,509          $1,486

                                      -F-27-
*	The changes in deferred revenues during the year ended December 31, 2002:


					(In thousands of U.S. dollars)
	Balance at beginning of year			  826
	Revenue recognized during the year		 (736)
	Deferred revenue relating to new sales		1,436
							_______
	Balance at end of year				1,526


e.	Concentration of credit risks

	Most of the Company's cash and cash equivalents at December 31, 2002 and
	2001 were deposited with Israeli and U.S. banks.  The Company is of the
	opinion that the credit risk in respect of those balances is
	insignificant.

	Most of the Company's revenues have historically been from a large
	number of customers.  Consequently, the exposure to credit risks
	relating to trade receivables is limited.  The Company performs ongoing
	credit evaluations of its customers for the purpose of determining the
	appropriate allowance for doubtful accounts.

f.	Fair value of financial instruments

	The fair value of the financial instruments included in the working
	capital of the Company and its subsidiaries is identical or close to
	their carrying value.



NOTE 10 - SELECTED STATEMENT OF OPERATIONS DATA:

a.	Revenues:

  1)	  The Company has two product lines: (i) product line "A" - real-time
	  billing and customer care solutions for service providers; and (ii)
	  product line "B" - software product to enterprises - a call
	  management system used by organizations for call accounting, traffic
	  analysis and fraud detection.  The VeraBill product (see note 3b) is
	  included in product line "A".

	  Following are data regarding revenues classified by product lines:


						Years ended December 31,
					2002		2001		2000
					(In thousands of U.S. dollars)
Product line "A"		      $7,447	      $7,859	     $12,178
Product line "B"		       2,561	       2,610	       3,435
				       -----           -----          ------
				     $10,008        $10,469	     $15,613

                                      -F-28-
2)	Following are data regarding geographical revenues classified by
	geographical location of the customers:

						Years ended December 31,
					2002		2001		2000
					(In thousands of U.S. dollars)
America (mainly United States)	      $2,869	      $2,520	      $5,777
Asia Pacific and Africa		       2,860	       3,693	       3,435
Europe				       3,364	       3,176	       4,840
Israel				         915	       1,080	       1,561
				       -----           -----          ------
				    $ 10,008        $ 10,469        $ 15,613


Most of the Company's assets are located in Israel.



NOTE 10 - SELECTED INCOME STATEMENT DATA (continued):


3)	Revenues from principal customers - revenues from single customers each
	of which exceeds 10% of total revenues in the relevant year:


						Years ended December 31,
					  2002	      2001	2000
					(In thousands of U.S. dollars)
Customer A				$1,033	    $1,826	$836
					______	    ______	____
Customer B					    $1,180	$861
					______	    ______	____
Customer C				$1,083

b. Research and development expenses:
	Expenses incurred:
	Payroll and related expenses	$2,525	    $3,276    $2,920
 	Depreciation and amortization      430	       335       174
	Non-cash compensation		    43		57	  52
	Other				   725	       755	 649
					______	    ______	____
					$3,723	    $4,423    $3,795

c. General and administrative expenses:
     The changes in allowance for doubtful
     accounts are composed as follows:
	Balance at beginning of year	 $700	      $850	$230
	Increase during the year	  107	     1,053	 773
	Bad debt written off		 (407)	    (1,203)	(153)
					______	    ______	____
Balance at end of year			 $400	      $700	$850



                                      -F-29-
d. financial and other income - net:
	Income:
	Gain on sale of, and unrealized
	 gain on, trading securities	  $ -	       $ - 	 $13
	Interest on bank deposits	1,931	     1,627     1,325
	Non-dollar currency gains - net   171		79
					______	    ______	____
					2,102	     1,706     1,338
					______	    ______	____
	Expenses:
	Loss on sale of trading
	  securities					 2
	Bank commissions		   24		23	  17
	Non-dollar currency losses - net			 238
	Capital loss on write-off of an
	  investment					93
					______	    ______	____

					   24	       118	 255
					______	    ______	____
					$2,078	    $1,588    $1,083

e. Earnings (loss) per ordinary share ("EPS")
  Following are data relating to the weighted
  average number of shares for the purpose of
  computing EPS:
	Weighted average number of shares
	  issued and outstanding - used
	  in computation of basic EPS  20,677	    20,654    16,897
	A d d - incremental shares
	  from assumed exercise of
	  options			   84
					______	    ______	____
	Weighted average number of
	  shares used in computation of
	  diluted EPS		        20,761	    20,654    16,897
					______	    ______	____

















                                      -F-30-