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.

ELRONS Q-2 Ergebnisse 2008 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