ELRON 867443

Who We Are   Elron's story

- Technology Investment With Vision High Tech Pioneers

A pioneer in Israeli high-tech since 1962, Elron has been instrumental in the success of high-growth enterprises in fields such as medical devices, medical imaging, advanced defense electronics, information technology, software and services, telecommunications and semiconductors.  

The Early Days  In its early years, Elron focused on defense, particularly electronics and avionics, as well as the emerging medical and technology sectors.

In 1966, Elron founded Elbit, which combined the expertise of the Ministry of Defense-Research Institute in special computer design with Elron's experience in electronic product design, manufacture and management.  Elbit steadily expanded developing and producing logistic-support weapon delivery and navigation systems for most Israeli aircraft, establishing a combat avionics package for the Lavi fighter aircraft, and producing a fire-control system for the Merkava tank.

Breaking New Boundaries Elron spun off Elscint in 1969, which forged a new technology in medical imaging:

Computer Tomography (CT). In just over 10 years, the company achieved major breakthroughs, overshadowing the competition by reducing the scanning operation to seconds. It also entered the realm of ultrasound.

In 1972, Elscint became the first Israeli company to list on the NASDAQ.

Elron followed suit: listing on the Tel Aviv Stock Exchange (TASE) in 1975 and on the NASDAQ in 1981. In 1990, Elbit's medical arm, which later became Elbit Medical Imaging, acquired a majority share in Elscint.

In 1996, Elbit spun off into three independent companies:

     *       Elbit Medical Imaging (NASDAQ: EMITF) - During 1999 to 2000 Elscint and Elbit Medical Imaging sold their imaging activities to General Electric Medical Systems (NYSE: GE) and to Picker (now Philips, NYSE: PHG) for approximately $600 million.

    *       Elbit Systems (NASDAQ: ESL) - In 2000 Elron was instrumental in the merger of Elbit Systems with El-Op, creating the largest non governmental defense electronics company in Israel and increasing significantly Elbit Systems' value which later in 2004 enabled Elron to sell its shares in Elbit Systems for approximately $200 million.

    *       Elbit - The company focused on communications activities and in 1999 led the consortium that founded Partner, Israel's first GSM operator (NASDAQ: PTNR), now with market cap in excess of $1 billion.

In 2002 Elbit was merged into Elron. Elron sold its shares in Partner during 2003-2006 for approximately $160 million.  Cutting-Edge Technologies Since its inception, Elron continuously invested in best-in-breed technologies. In 1978 it formed Fibronics, a company dedicated to developing fiber-optic technologies.

Three years later, Elron established Optrotech, which pioneered automated optical inspection of printed circuit boards. The Optrotech-Orbot merger formed Orbotech (NASDAQ: ORBK), a world leader in automated optical inspection (AOI) and imaging as well as computer-aided manufacturing (CAM) technologies.

In 1983, Elron was actively involved in the early stages of the establishement of Zoran (NASDAQ: ZRAN), a developer of digital signal processing (DSP) technology. Today, it is a leading provider of digital solutions-on-a-chip.

During 1999 to 2001, Elron sold its shares in Orbotech and Zoran for approximately $100 million.   In 1998, Given Imaging was founded by RDC, an Elron subsidiary.

Given Imaging has redefined gastrointestinal disease diagnosis by developing friendly products for detecting gastrointestinal disorders. Given Imaging's IPO in 2001 was the first to be listed on the NASDAQ Stock Market (GIVN) after the tragic events of September 11. Later on, during 2004, the company issued a second public offering.

 The Internet Age Elron continued to forge ahead, seeking out new technologies. In the early  90's, Elron was one of the Internet pioneers in Israel, expanding into information technologies and communications by the end of the decade.

Landmark companies founded during the 90's include 013 NetVision, Israel's largest Internet service provider (ISP), which became public in the TASE in 2005.

013 NetVision completed the merger with Barak and GlobCall, creating a provider of international telecommunications services, with over 1 billion NIS in revenues.

Two other companies in that field, Peach Networks and HyNEX, were sold during the year 2000 to Microsoft (NASDAQ: MSFT) and to Cisco (NASDAQ: CSCO) respectively for over $200 million.   Building Tomorrow's Leaders Over four decades Elron has been facilitating the growth of hi-tech ventures in diverse fields and stages, generating an impressive record of IPO's, M&A's and re-structuring deals.

Elron's exit record throughout the last 10 years totaled over $2 billion, of which Elron's proceeds were over $800 million.   Today, Elron has significant holdings in approximately 30 hi-tech companies in all stages of development, primarily in the fields of Medical Devices, Information & Communications Technology, Semiconductors and Clean Technology.

Elron is constantly and actively looking at new exciting ventures in order to continue and build tomorrow's global leaders.

Elron Electronic Industries Announces
Second Quarter 2008 Results

TEL AVIV, Israel--(BUSINESS WIRE)--Elron Electronic Industries Ltd. (Nasdaq: ELRN) (TASE: ELRN) ("Elron" or the "Company") today reported financial results for the second quarter and first half of 2008.

Elron’s net loss in the second quarter and first half of 2008 amounted to $16.0 million, or $0.54 per share, and $28.1 million, or $0.95 per share, respectively. Net income in the second quarter and first half of 2007 amounted to $0.8 million, or $0.03 per share, and $3.4 million, or $0.11 per share, respectively.

The net loss Elron reported in the second quarter and first half of 2008 resulted mainly from $13.7 million and $23.8 million of losses, respectively, recorded with respect to Elron's group of companies.

The net income which Elron reported in the second quarter of 2007 resulted mainly from a gain, net of tax, of approximately $4.1 million from the sale of real estate in Carmiel, Israel, by Elron's wholly owned subsidiary, Elbit Ltd. The net income Elron reported in the first half of 2007 also included a $9.1 million gain (net of tax) from the merger between NetVision, Barak and GlobCall which was completed in the first quarter of 2007. The above gains were offset by losses, net, which Elron recorded with respect to its group companies in the amount of $6.6 million and $14.0 million, respectively, in the second quarter and first half of 2007.

INVESTMENTS DURING THE FIRST HALF OF 2008:

During the first half of 2008, Elron invested $64.3 million in its group companies (of which $35.7 million was invested in the second quarter) which included mainly the purchase of 5% of Given Imaging Ltd. shares for $24.5 million. Other investments in group companies included BrainsGate Ltd., Medingo Ltd., Aqwise – Wise Water Solutions Ltd., BPT (Bio-Pure Technology) Ltd., Safend Ltd., Impliant Inc., Pocared Diagnostics Ltd., Wavion Inc., Atlantium Inc., ChipX, Inc. and 3DV Systems Inc., as well as investments in two new companies, PLYmedia Inc. and Kyma Medical Technologies Ltd.

In addition, Elron invested $4 million in RDC – Rafael Development Corporation Ltd. ("RDC"), Elron's 50.1% held subsidiary, in connection with the agreement between Elron and Rafael Advanced Defense Systems Ltd. signed in December 2007.

During the second half of 2007, RDC established two new companies: Sync-Rx Ltd., which develops medical devices for improving trans-catheter cardiovascular interventions, and XSIGHTS Media Ltd. (formerly PaperLnx Ltd.) which develops a visual search engine for connecting printed media via a camera phone to the Internet. A third company, established by RDC during the first half of 2008, is ActySafe Ltd., which is developing short-range radar and other safety systems for the automotive industry in cooperation with a leading automotive manufacturer.

RECENT NOTABLE DEVELOPMENTS IN SEVERAL OF ELRON'S GROUP COMPANIES:

   * Starling Advanced Communications Ltd., a developer and manufacturer of innovative airborne broadband antenna systems, received notice from an American satellite communications systems manufacturer that an international services provider has chosen the communication systems manufacturer to supply it with two-way Ku band antenna systems for aircraft following its tender offer. This award is subject to the execution of a detailed non-binding framework agreement for the supply of innovative antenna systems over a period of seven years. Starling estimates that the value of its share in the non-binding agreement, if executed, may be up to $60 million.
   * BrainsGate, a developer of a broad treatment platform technology for brain diseases, completed a $27.5 million financing round led by Johnson & Johnson Development Corporation (JJDC) joined by VC-Fund Agate Medical Investments LP. Elron's portion in this round amounted to $6.5 million. Following the financing round, Elron holds 23.3% of BrainsGate's outstanding shares.
   * Impliant, a developer of a novel posterior motion preservation system for spine surgery, which due to adverse clinical trial events which occurred in the third quarter of 2007 had ceased clinical trials, received approval from the FDA to renew the clinical trial process. During the first half of 2008 Elron invested $6 million in Impliant and became the company's major shareholder.

As of June 30, 2008, Elron's cash, debentures and deposits amounted to approximately $11.8 million compared with $55.2 million at December 31, 2007. In the second quarter of 2008, Elron secured a $30 million bank credit facility, of which $24 million was utilized as a long-term loan, as of June 30, 2008.

Shareholders' equity at June 30, 2008, was approximately $240.4 million, which represented approximately 75% of Elron's total assets, compared to approximately $265.8 million, representing approximately 89% of Elron's total assets at December 31, 2007.

CONFERENCE CALL DETAILS:

Elron will be hosting a conference call on Thursday, August 14, 2008 at 10:00 am ET (7:00am PT, 3:00pm UK time, 5:00 pm Israel time) to discuss its second quarter 2008 results. To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences.

US: 1 866 345 5855, UK: 0 800 404 8418; Israel: 03 918 0610; International: +972 3 918 0610.

For your convenience, a replay of the call will be available for two days following the call. The replay numbers are:

1 888 269 0005 (US), 0 800 917 1246 (UK) and +972 3 925 5943 (International).

A replay of the call will also be available from a link on Elron's website.

Elron Electronic Industries Ltd. (TASE & NASDAQ: ELRN), a member of the IDB Holding group, is a leading Israel-based technology holding company directly involved in the long-term performance of its group companies. Elron identifies potential technologies, creates strategic partnerships, secures financing, and recruits highly qualified management teams. Elron's group companies currently comprise a diverse range of publicly-traded and privately held companies primarily in the fields of medical devices, information & communications technology, clean technology and semiconductors. For further information, please visit www.elron.com

Any statements in this press release that may be considered forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Actual results may differ from such forward-looking statements due to the risk factors discussed in the Company’s Annual Report on Form 20-F and other periodic reports filed by the Company with the Securities and Exchange Commission, which the Company urges investors to consider.

**** FINANCIAL TABLES FOLLOW ****

ELRON ELECTRONIC INDUSTRIES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands of U.S. Dollars
          §   June 30,   December 31,
                    §2008 2007
                    §Unaudited
                                                  §
ASSETS
Total current assets $ 58,579 $ 82,406
                                                  §
INVESTMENTS AND LONG-TERM RECEIVABLES
Investments in affiliated companies 158,172 131,351
Investments in other companies and long-term receivables 87,616 73,718
Deferred taxes 934 2,204
Severance pay deposits 3,740 1,808
                                                  §
Total long-term assets 250,462 209,081
                                                  §
PROPERTY AND EQUIPMENT, NET 4,264 1,936
                                                  §
INTANGIBLE ASSETS 9,435 5,524
                                                  §
Total assets $ 322,740 $ 298,947
                                        §
                                                  §

LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                  §
Total current liabilities $ 35,678 $ 21,448
                                                  §
LONG-TERM LIABILITIES
Long-term loans from banks and others 28,251 2,244
Accrued severance pay and retirement obligations 4,783 2,451
Deferred taxes - 373
                                                  §
Total long-term liabilities 33,034 5,068
                                                  §
MINORITY INTEREST 13,638 6,614
                                                  §
Total Shareholders' Equity 240,390 265,817
                                                  §
Total liabilities and shareholders' equity $ 322,740 $ 298,947

ELRON ELECTRONIC INDUSTRIES LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands of U.S. Dollars, except share and per share data
          §   Six months ended   Three months ended   Year ended
                    §June 30, June 30, December 31,
                    §2008   2007 2008   2007 2007
                    §Unaudited
                                                                                                              §
INCOME
Net revenues $ 2,273 $ 2,164 $ 1,241 $ 1,183 $ 4,371
Equity in losses of affiliated companies (9,989) (8,347) (3,604) (3,039) (20,416)
Gain from disposal of businesses and affiliated companies and changes in holdings in affiliated companies, net 153


          §12,541 52 824 14,854
Other income (expenses), net (1,841)


          §6,130 (2,565) 5,657 (3,214)
Financial income, net 1,240 1,805 1,549 408 3,945
                    §(8,164) 14,293 (3,327) 5,033 (460)
                                                                                                              §
COSTS AND EXPENSES 32,453 13,558 15,879 6,753 34,341
                                                                                                              §
Income (loss) before taxes on income (40,617) 735 (19,206) (1,720) (34,801)
Tax benefit (Taxes on income) (98) (568) 34 954 (7,544)
Income (loss) from continuing operations after taxes on income (40,715) 167 (19,172) (766) (42,345)
Minority interest in losses of subsidiaries 12,637 3,209 3,217 1,574 5,250
                                                                                                              §
Net income (loss) (28,078) 3,376 (15,955) 808 (37,095)
                                                                                                              §
Income (loss) per share:
Basic:
                                                                                                              §
Net income (loss) (0.95) 0.11 (0.54) 0.03 (1.25)
                                                                                                              §
Diluted:
                                                                                                              §
Net income (loss) (0.95) 0.11 (0.54) 0.02 (1.27)
                                                                                                              §
Weighted average number of ordinary shares used in computing basic net income (loss) per share (thousands) 29,650


          §29,603 29,650 29,605 29,619
Weighted average number of ordinary shares used in computing diluted net income (loss) per share (thousands) 29,650 29,704 29,650 29,713 29,619