6-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

F O R M 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2004

ROBOGROUP T.E.K. LTD.
(Name of Registrant)


Rechov Hamelacha 13, Afeq Industrial Estate, Rosh HaAyin 48091 Israel
(Address of Principal Executive Office)

             Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x Form 40-F o

             Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):______

             Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):______

             Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o No x

             If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______

SIGNATURES


             Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ROBOGROUP T.E.K. LTD.
(Registrant)


By: /s/ Haim Schleifer
———————————
Haim Schleifer
General Manager

Date: November 8, 2004

Directors Report
At September 30, 2004

RoboGroup T.E.K. Limited

Directors’ Report
for the Nine-Month Period Ended September 30, 2004

  We are pleased to present the directors’ report on the financial condition of our company for the nine-month period ended September 30, 2004.

1. RoboGroup T.E.K. Limited and Its Business Environment

  RoboGroup T.E.K Ltd. (“RoboGroup”) and its subsidiaries will be referred to in this report as “the Company”.

  The Company operates through three business sectors.

— The first sector focuses on the Company’s traditional business activities – the education field. This sector includes the Company’s research and development departments, the operations department, and the marketing and sales department that handles the sale of the Company’s products and products manufactured by third parties to the training and education markets in Israel and around the world.

— The second sector includes the operations of YET, the Company’s 50% owned subsidiary. YET is engaged in the development, manufacturing, and marketing of motion control products for the industrial market.

— The third sector that is in limited operation includes the activities of both MemCall Ltd. and MemCall LLC (together “MemCall”). MemCall is developing new technology designed to shorten the length of time required to locate and retrieve information in computer and communications networks.

  The Education Sector

  In July 2004, the Company signed an agreement with Yaskawa Electric Corporation (“YEC”), a Japanese corporation that holds a 50% stake in YET, to supply an e-learning system, as well as custom e-learning content. The sales price for the e-learning system and content is US$ 750 thousand. During the third quarter of 2004 revenues of US $288 thousand were recognized from this project. We expect to complete the project within the next quarters.

  During the third quarter of 2004 the educational sector started implementing the cost-cutting plan that was decided upon in the second quarter of 2004.

  YET

  During the third quarter of 2004 YET supplied YEC with development services having a total value of US $588 thousand.

  YET has continued its investment in the development of sales and marketing channels in Europe and the USA. YET’s fully owned subsidiary, YET US Inc., continued its operations to distribute YET’s products in the US market. YET has entered into distribution agreements with multiple distributors in order to distribute its products across the United States. During the third quarter YET entered into an agreement with an American client for the purchase of YET products having a value of US $350 thousand over a two-year period. In addition, operations with the European partner continued to produce sales of YET products in Europe. YET sold products having a total value of US $660 thousand during this quarter. The majority of the sales were of YET’s products, both within Israel and globally. The remaining sales were of YEC’s products in the Israeli market.

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RoboGroup T.E.K. Limited

  In July 2004, YET’s Board of Directors approved a dividend distribution of US $800 thousand to its two shareholders. RoboGroup received approximately US $400 thousand in the dividend distribution in July 2004.

  MemCall

  In December 2003, RoboGroup’s Board of Directors decided to reduce its continued investment in MemCall, after realizing that negotiations with potential strategic partners (manufacturers and marketers in the global silicon market) were not leading to binding contracts.

  In accordance with that decision, during the first and second quarters of 2004 MemCall released most of its employees. It is continuing its activity on a limited basis while examining alternative means to implement solutions required by potential customers without investing in the development of a full custom chip.

  Equity Distribution Agreement

  In June 2004, RoboGroup has signed a Standby Equity Distribution Agreement (the”Agreement”) that allows it, at its discretion, to issue shares up to a maximum value of US$5.5 million to Cornell Capital Partners LP (“Cornell”).

  Under the terms of the Agreement, RoboGroup may, at its discretion, issue shares to Cornell at any time over the next two years. The maximum aggregate amount of the equity placements pursuant to the agreement is US$5.5 million. Subject to this limitation, RoboGroup may draw down up to US$250,000 per week. The facility may be used in whole or in part, entirely at RoboGroup’s discretion. RoboGroup is not committed, under the Agreement, to make any sales or to any minimum amount. The shares will be issued to Cornell at the market price as of the date of the issuance and in accordance with the terms of the Agreement.

  In August 2004 Robogroup’s shareholders approved the Agreement and in September 2004 a registration statement covering the resale of the ordinary shares to be issued was declared effective by the United States Securities and Exchange Commission. No shares have been issued to date.

  Backlog of Orders

  The Company’s backlog of orders at September 30, 2004 was NIS 12.8 million compared to approximately NIS 8.2 million at December 31, 2003.

2. The Financial Position of the Company

  a. At September 30, 2004 the Company had assets of approximately NIS 74.2 million, compared to assets of approximately NIS 83.8 million at December 31, 2003. The principal reason for the decrease was a decline of approximately NIS 7.8 million in cash and cash equivalents.

  b. The Company’s equity was approximately NIS 24.2 million as of September 30, 2004, compared to approximately NIS 30.4 million as of December 31, 2003. The decrease in equity is a result of a net loss of approximately NIS 6.4 million in the nine months ended September 30, 2004.

- 2 -

RoboGroup T.E.K. Limited

3. Operating Results

  Revenues

  The Company’s revenues for the third quarter of 2004 amounted to approximately NIS 14 million, compared to approximately NIS 18 million in the corresponding period last year.

  The Company’s revenues for the nine months ended September 30, 2004 amounted to approximately NIS 41.7 million, compared to approximately NIS 44.9 million in the corresponding period last year.

  The approximately NIS 4 million decrease in revenues in the third quarter of 2004 compared to the corresponding period in 2003, was primarily attributable to a decrease in revenues of the educational sector, which was offset in part by an increase in YET’s revenues.

  Gross Profit

  The Company’s gross profit for the third quarter of 2004 was approximately NIS 6.6 million (47% of total revenues), compared to approximately NIS 8.4 million (47% of total revenues) in the corresponding period last year.

  The Company’s gross profit for the nine months ended September 30, 2004 was approximately NIS 18.6 million (45% of total revenues), compared to approximately NIS 20.3 million (45% of total revenues) in the corresponding period last year.

  The decrease in the Company’s gross profit compared to the corresponding period in 2003 was primarily a result of decreased sales.

  Research and Development Expenses

  Research and development expenses, net, for the third quarter of 2004 were approximately NIS 1.7 million compared to approximately NIS 2.6 million in the corresponding period last year.

  Research and development expenses, net, for the nine months ended September 30, 2004 were approximately NIS 6 million compared to approximately NIS 9.3 million in the corresponding period last year.

  The decrease in research and development expenses, net, was due primarily to significant cutbacks in research and development expenses by MemCall and lower research and development expenses by the educational sector compared to the corresponding period last year.

  Marketing and Sales Expenses

  Marketing and sales expenses for the third quarter of 2004 were approximately NIS 3.1 million compared to approximately NIS 3.1 million in the corresponding period last year.

  Marketing and sales expenses for the nine months ended September 30, 2004 were approximately NIS 10.2 million compared to approximately NIS 9.7 million in the corresponding period last year.

  The increase in marketing and sales expenses for the nine months ended September 30, 2004 was mainly due to an increase in YET’s marketing and sales expenses, and was partially offset by a decrease in the educational sector’s marketing and sales expenses.

- 3 -

RoboGroup T.E.K. Limited

  General and Administration Expenses

  General and administrative expenses for the third quarter of 2004 were approximately NIS 2.3 million compared to approximately NIS 4 million in the corresponding period last year.

  General and administrative expenses for the nine months ended September 30, 2004 were approximately NIS 7.3 million compared to approximately NIS 11.3 million in the corresponding period last year.

  The decrease in general and administrative expenses was due primarily to lower general and administrative expenses in the educational sector and a significant cutback in MemCall.

  Operating Loss

  The Company’s operating loss for the third quarter of 2004 was approximately NIS 0.5 million compared to approximately NIS 1.3 million in the corresponding period last year.

  The Company’s operating loss for the nine months ended September 30, 2004 was approximately NIS 4.8 million compared to approximately NIS 10 million in the corresponding period last year.

  Financial Expenses, net

  Financial expenses, net for the third quarter of 2004 were approximately NIS 0.3 million compared to approximately NIS 1.2 million in the corresponding period last year.

  Financial expenses, net for the nine months ended September 30, 2004 were approximately NIS 1.3 million compared to approximately NIS 3.2 million in the corresponding period last year.

  The decrease in financial expenses, net was mainly due to a decrease in exchange rate differences.

  Other Income, net

  The Company’s other income in the third quarter of 2004 amounted to approximately NIS 0.2 million compared to other income of approximately NIS 0.4 million in the corresponding period last year.

  Net Loss

  The Company’s net loss for the third quarter of 2004 was approximately NIS 0.6 million compared to a net loss of approximately NIS 2.1 million in the corresponding period last year.

  The Company’s net loss for the nine months ended September 30, 2004 was approximately NIS 6.4 million compared to a net loss of approximately NIS 11.7 million in the corresponding period last year.

- 4 -

RoboGroup T.E.K. Limited

4. Liquidity

  a. The balance of cash and cash equivalents as at September 30, 2004 was approximately NIS 7.1 million compared to approximately NIS 14.9 million at December 31, 2003.

  b. Cash Flow from Operating Activities:

  In the first nine months of 2004 the Company had a negative cash flow from operating activities of approximately NIS 7.6 million compared to a negative cash flow of approximately NIS 7.7 million in the corresponding period last year.

  c. Cash Flow from Investment Activities:

  In the first nine months of 2004 the Company purchased fixed assets of approximately NIS 0.9 million compared to NIS 0.7 million in the corresponding period last year.

  d. Cash Flow from Financing Activities:

  In the first nine months of 2004 the Company had a surplus from financing activities of approximately NIS 0.1 million compared to a surplus of approximately NIS 1.2 million in the corresponding period last year.

5. Sources of Financing

  a. The Company had working capital of approximately NIS 4.3 million at September 30, 2004. The current ratio at September 30, 2004 was 1.13 compared with 1.23 at December 31, 2003. The quick ratio at September 30, 2004 was 0.74 compared with 0.85 at December 31, 2003.

  b. The Company’s shareholders’ equity at September 30, 2004 was approximately NIS 24.2 million, representing approximately 33% of its total balance sheet assets compared to NIS 30.4 million and 36% respectively at December 31, 2003.

  c. The average amount of credit granted to customers during the first nine months of 2004 was approximately NIS 13.4 million and the average amount of credit received from suppliers and providers of services was approximately NIS 5.5 million compared to NIS 16.4 million and NIS 7 million respectively at December 31, 2003.

  d. The average amount of short term credit from banking institutions during the first nine months of 2004 was approximately NIS 15.8 million compared to approximately NIS 14.3 million in the corresponding period last year.

  e. The average amount of long term credit from banking institutions during the first nine months of 2004 was approximately NIS 17.6 million compared to approximately NIS 19.2 million in the corresponding period last year.

6. Exposure to Market Risks and Their Management

  No significant changes occurred during the period covered by this report in the area of the Company’s exposure to market risks and their management relative to the Company’s report on this issue in the Director’s report from June 30, 2004.

- 5 -

RoboGroup T.E.K. Limited

Linked Balances

September 30, 2004
 December 31,2003
Consolidated
 Linked
to
foreign
currency
(*)
 Linked
to
Japanese
Yen
 Linked
to
Swiss
Frank
 Linked
to CPI
 Unlinked
 Autonomous
Unit &
Non-monetary
items
 Total
 Linked
to
foreign
currency
(*)
 Linked to
Japanese
Yen
Linked
to
Swiss Frank
Linked
to the
 CPI
Unlinked
Autonomous
Unit &
Non-monetary
items
Total
NIS (K) Unedited, Reported amounts**
 NIS (K) Audited, adjusted to December 2003
Assets:                              
Cash and cash equivalents  4,966   -   -   -   1,036   1,052   7,054   13,266   -   -   -   1,304   308   14,878  
Trade receivables  5,962   -   -   -   2,537   5,097   13,596   6,076   -   -   -   2,806   4,335   13,217  
Other receivables 
and debit balances  38   -   -   -   2,709   199   2,946   52   -   -   -   1,934   306   2,292  
Inventories  -   -   -   -   -   12,751   12,751   -   -   -   -   -   13,603   13,603  
Investments in 
other companies  -   -   -   -   -   15   15   -   -   -   -   -   15   15  
Fixed assets  -   -   -   -   -   36,821   36,821   -   -   -   -   -   38,233   38,233  
Other Assets  -   -   -   -   -   270   270   -   -   -   -   -   428   428  
Deferred Taxes  -   -   -   -   -   420   420   -   -   -   -   682   415   1,097  
Fund in respect of 
employee rights 
upon retirement, net  -   -   -   329   -   -   329   -   -   -   81   -   -   81  
   10,966   -   -   329   6,282   56,625   74,202   19,394   -   -   81   6,726   57,643   83,844  
Liabilities: 
Short-term bank credits  721   630   2,491   1,090   7,564   3,261   15,757   1,226   1,112   2,486   1,425   7,447   2,245   15,941  
Trade payables  293   172   -   -   3,701   1,367   5,533   412   -   -   -   3,554   1,428   5,394  
Other payables and 
credit balances  3,564   -   -   -   6,195   1,031   10,790   5,755   -   -   -   8,045   545   14,345  
Long-term loans  6,134   5,353   -   6,253   -   -   17,740   5,824   5,280   -   6,412   -   -   17,516  
Liability for 
termination of 
employee/employer
relationship, net		  -   -   -   207   -   -   207   -   -   -   200   -   -   200  
   10,712   6,155   2,491   7,550   17,460   5,659   50,027   13,217   6,392   2,486   8,037   19,046   4,218   53,396  
Excess of assets 
(liabilities)  254   (6,155 ) (2,491 ) (7,221 ) (11,178 ) 50,966   24,175   6,177   (6,392 ) (2,486 ) (7,956 ) (12,320 ) 53,425   30,448  

(*)     The foreign currency balances are mainly in US Dollars.

(**)      Discontinuance of the adjustment for the effects of inflation according to the Israeli CPI, as of December 2003.

- 6 -

RoboGroup T.E.K. Limited

7. External Factors

  a. A substantial slowdown was observed in the last couple of years in the networking market, which is the principal potential market for MemCall’s products. This has brought about a reduction in the potential market and a slower penetration of new technologies and products into the market. The slowdown in the target markets for MemCall’s potential products has had an adverse effect on MemCall’s prospects.

  b. In the educational technology market in the U.S. and in the State of Israel, institutional investments in educational infrastructure has declined as a result of the lack of economic resources made available to educational institutions. The decrease in financial resources available for educational products has brought about a reduction in potential sales.

  c. The economic situation and security concerns in the State of Israel have had a detrimental impact on the Company’s business. Due the security situation partners and customers from abroad have hesitated to visit Israel and to continue developing their businesses in Israel. The recession in Israel and the cutbacks in the education budget have depressed the potential market for the Company’s products in Israel.



     Rafael Aravot
     Chairman of the Board and CEO 		     Haim Schleifer
     Director and Joint General Manager

  Date of approval of the financial statements: 7 November, 2004

Safe Harbor Statement under the U.S. Private Securities Litigation Reform Act of 1995: This report contains forward-looking statements, which express the beliefs and expectations of management. Such statements are based on current plans, estimates and expectations and involve a number of known and unknown risks and uncertainties that could cause the Company’s future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to , fluctuations in currency, exchange and interest rates, operating results, and other factors that are discussed in the Company’s Annual Report on Form 20-F and the Company’s other filings with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

- 7 -

RoboGroup T.E.K. Ltd.

Interim Consolidated Financial Statements
At September 30, 2004

Financial statements:  

Balance Sheets		 2-3

Statements of Operations		 4

Statements of Changes in Shareholders' Equity		 5-6

Statements of Cash Flows		 7-8

Notes to the Financial Statements		 9-15

1

RoboGroup T.E.K. Ltd.
Balance Sheets

September 30
 December, 31
2004
 2004
 2003
 2003
US$ (K)
 NIS (K)
 NIS (K)
 NIS (K)
Unaudited
 Unaudited
 Unaudited
 Audited
Convenience
translation
to US dollars
 Reported
amounts (*)
 Adjusted amount for the
Israeli CPI as of
December 2003
ASSETS                    

Current assets		  

Cash and cash equivalents		    1,574    7,054    17,698    14,878  
Trade receivables    3,033    13,596    13,280    13,217  
Other receivables and debit balances    658    2,946    3,268    2,292  
Inventories    2,845    12,751    14,353    13,603  
     8,110    36,347    48,599    43,990  

Long-term investments		  

Investments in investee and other		  
companies    3    15    108    15  
Funds in respect of employee rights upon  
retirement, net    73    329    -    81  
     76    344    108    96  
Fixed assets    8,215    36,821    39,042    38,233  
Deferred taxes    94    420    764    1,097  
Other assets    60    270    551    428  
     16,555    74,202    89,064    83,844  

(*) Discontinuance of the adjustment for the effects of inflation according to the Israeli CPI as of December 2003 (see note 2).

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

2

RoboGroup T.E.K. Ltd.
Balance Sheets

September 30
 December, 31
2004
 2004
 2003
 2003
US$ (K)
 NIS (K)
 NIS (K)
 NIS (K)
Unaudited
 Unaudited
 Unaudited
 Audited
Convenience
translation
to US dollars
 Reported
amounts (*)
 Adjusted amount for the
Israeli CPI as of
December 2003
LIABILITIES                    

Current liabilities		  

Credit from banks		    3,516    15,757    16,625    15,941  
Trade payables    1,234    5,533    5,645    5,394  
Other payables and credit balances    2,407    10,790    11,482    14,345  
     7,157    32,080    33,752    35,680  
Long-term liabilities  

Loans from banks		    3,958    17,740    18,002    17,516  
Liability for termination of employee/employer  
 relationship, net    46    207    429    200  
     4,004    17,947    18,431    17,716  
Shareholders' equity  

Share capital		    2,544    11,400    11,399    11,399  
Capital reserves and premium on shares    9,853    44,159    44,150    44,021  
Accumulated deficit    (6,779 )  (30,381 )  (17,665 )  (23,969 )
Treasury stock    (224 )  (1,003 )  (1,003 )  (1,003 )
     5,394    24,175    36,881    30,448  
     16,555    74,202    89,064    83,844  




Rafael Aravot
Chairman of the Board and CEO 		Haim Schleifer
Director and Joint General Manager 		Hanan Eibushitz
Chief Financial Officer

Date of approval of the financial statements: November 7, 2004

(*) Discontinuance of the adjustment for the effects of inflation according to the Israeli CPI as of December 2003 (see note 2).

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

3

RoboGroup T.E.K. Ltd.
Statements of Operations

For the nine months ended
 For the three months ended
 Year ended
September 30
 September 30
 December, 31
2004
 2004
 2003
 2004
 2003
 2003
US$ (K)
 NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
Unaudited
 Unaudited
 Unaudited
 Unaudited
 Unaudited
 Audited
Convenience
translation
to US
dollars
 Reported
amounts (*)
 Adjusted
amount
for the
Israeli
CPI as of
December
2003
 Reported
amounts (*)
 Adjusted amount for the
Israeli CPI as of
December 2003
Revenues      9,300    41,682    44,942    14,001    17,992    56,116  
Cost of revenues    5,141    23,044    24,628    7,412    9,557    32,598  

Gross profit		    4,159    18,638    20,314    6,589    8,435    23,518  

Operating expenses		  
Research and development expenses, net    1,330    5,963    9,324    1,676    2,633    12,651  
Marketing and selling expenses    2,271    10,175    9,742    3,108    3,119    12,622  
Administrative and general expenses    1,639    7,348    11,278    2,328    3,982    14,569  
     5,240    23,486    30,344    7,112    9,734    39,842  
Operating loss    (1,081 )  (4,848 )  (10,030 )  (523 )  (1,299 )  (16,324 )
Financial expenses, net    (298 )  (1,334 )  (3,176 )  (259 )  (1,192 )  (3,783 )
Other income, net    150    671    1,533    173    409    2,032  
Loss before taxes on income    (1,229 )  (5,511 )  (11,653 )  (609 )  (2,082 )  (18,075 )
Income tax expenses (income)    201    901    36    -    -    (82 )
Net loss    (1,430 )  (6,412 )  (11,689 )  (609 )  (2,082 )  (17,993 )

Loss per share ("LPS")		    (0.13 )  (0.6 )  (1.09 )  (0.06 )  (0.19 )  (1.67 )

Weighted average number of shares used in		  
 computation of LPS (in thousands)    10,746    10,746    10,744    10,746    10,744    10,744  

(*) Discontinuance of the adjustment for the effects of inflation according to the Israeli CPI as of December 2003 (see note 2).

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

4

RoboGroup T.E.K. Ltd.
Statements of Changes in Shareholders’ Equity

Number of
shares
 Share
capital
 Premium
on shares
 Capital
reserves
 Adjustments
on
translation
of
financial
statement
of an
autonomous
consolidated
company
 Shares
purchase
cost &
assigned
loans
guaranteed
by
company's
shares
 Accumulated
deficit
 Total
NIS
 NIS
 NIS
 NIS
 NIS
 NIS
 NIS
Reported amounts (*)
For the nine months ended                                    
  September 30, 2004 (Unaudited)  

Balance as of January 1, 2004		    10,744,031    11,399    42,214    2,260    (453 )  (1,003 )  (23,969 )  30,448  
Exercise of options    1,600    1    3    -    -    -    -    4  
Adjustments on translation of  
  financial statement of an  
  autonomous consolidated  
  company    -    -    -    -    135    -    -    135  
Net loss    -    -    -    -    -    -    (6,412 )  (6,412 )

Balance at September 30, 2004		    10,745,631    11,400    42,217    2,260    (318 )  (1,003 )  (30,381 )  24,175  


Adjusted amount for the Israeli CPI as of December 2003
For the nine months ended                                    
  September 30, 2003 (Unaudited)  

Balance as of January 1, 2003		    10,730,831    11,392    42,195    2,260    120    (1,003 )  (5,976 )  48,988  
Exercise of options    13,200    7    19    -    -    -    -    26  
Adjustments on translation of  
  financial statement of an  
  autonomous consolidated  
  company    -    -    -    -    (444 )  -    -    (444 )
Net loss    -    -    -    -    -    -    (11,689 )  (11,689 )

Balance at September 30, 2003		    10,744,031    11,399    42,214    2,260    (324 )  (1,003 )  (17,665 )  36,881  

(*) Discontinuance of the adjustment for the effects of inflation according to the Israeli CPI as of December 2003 (see note 2).

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

5

RoboGroup T.E.K. Ltd.
Statements of Changes in Shareholders’ Equity

Number of
shares
 Share
capital
 Premium
on shares
 Capital
reserves
 Adjustments
on
translation
of
financial
statement
of an
autonomous
consolidated
company
 Shares
purchase
cost &
assigned
loans
guaranteed
by
company's
shares
 Accumulated
deficit
 Total
NIS
 NIS
 NIS
 NIS
 NIS
 NIS
 NIS
Reported amounts (*)
For the three months ended                                    
  September 30, 2004 (Unaudited)  

Balance as of July 1, 2004		    10,745,631    11,400    42,217    2,260    (299 )  (1,003 )  (29,772 )  24,803  
Exercise of options    -    -    -    -    -    -    -    -  
Adjustments on translation of  
  financial statement of an  
  autonomous consolidated  
  company    -    -    -    -    (19 )  -    -    (19 )
Net loss    -    -    -    -    -    -    (609 )  (609 )

Balance at September 30, 2004		    10,745,631    11,400    42,217    2,260    (318 )  (1,003 )  (30,381 )  24,175  

Adjusted amount for the Israeli CPI as of December 2003

For the three months ended		  
  September 30, 2003 (Unaudited)  

Balance as of July 1, 2003		    10,744,031    11,399    42,214    2,260    (630 )  (1,003 )  (15,583 )  38,657  
Exercise of options    -    -    -    -    -    -    -    -  
Adjustments on translation of  
  financial statement of an  
  autonomous consolidated  
  company    -    -    -    -    306    -    -    306  
Net loss    -    -    -    -    -    -    (2,082 )  (2,082 )

Balance at September 30, 2003		    10,744,031    11,399    42,214    2,260    (324 )  (1,003 )  (17,665 )  36,881  

Adjusted amount for the Israeli CPI as of December 2003

For the year ended December 31,		  
  2003 (Audited)  

Balance at January 1, 2003		    10,730,831    11,392    42,195    2,260    120    (1,003 )  (5,976 )  48,988  
Exercise of options    13,200    7    19    -    -    -    -    26  
Adjustments on translation of  
  financial statement of an  
  autonomous consolidated  
  company    -    -    -    -    (573 )  -    -    (573 )
Net loss    -    -    -    -    -    -    (17,993 )  (17,993 )

Balance at December 31, 2003		    10,744,031    11,399    42,214    2,260    (453 )  (1,003 )  (23,969 )  30,448  

(*) Discontinuance of the adjustment for the effects of inflation according to the Israeli CPI as of December 2003 (see note 2).

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

6

RoboGroup T.E.K. Ltd.
Statements of Cash Flows

For the nine months ended
 For the three months ended
 Year ended
September 30
 September 30
 December, 31
2004
 2004
 2003
 2004
 2003
 2003
US$ (K)
 NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
Unaudited
 Unaudited
 Unaudited
 Unaudited
 Unaudited
 Audited
Convenience
translation
to US
dollars
 Reported
amounts (*)
 Adjusted
amount
for the
Israeli
CPI as of
December
2003
 Reported
amounts (*)
 Adjusted amount for the
Israeli CPI as of
December 2003
Cash flows from operating activities:                            
Net loss    (1,430 )  (6,412 )  (11,689 )  (609 )  (2,082 )  (17,993 )
Adjustments to reconcile net loss to net  
 cash provided by (used in) operating  
 activities (Appendix A):    (252 )  (1,129 )  4,038    966    4,629    8,776  
Net cash provided by (used in) operating  
 activities    (1,682 )  (7,541 )  (7,651 )  357    2,547    (9,217 )
Cash flows from investing activities:  
Acquisition of fixed assets    (187 )  (840 )  (725 )  (242 )  (59 )  (1,075 )
Proceeds from sales of fixed assets    156    700    245    162    -    384  
Sale of short-term investments, net    -    -    340    -    51    334  
Net cash used in investing activities    (31 )  (140 )  (140 )  (80 )  (8 )  (357 )
Cash flows from financing activities:  
Increase (decrease) in short term credit  
 from banks, net    254    1,137    4,147    (261 )  (1,413 )  3,926  
Long-term loans received    4,777    21,414    -    -    -    -  
Repayment of long -term loans    (5,066 )  (22,704 )  (2,974 )  (617 )  (1,190 )  (3,778 )
Exercise of options by employees    1    4    26    -    -    26  
Net cash provided by (used in) financing  
 activities    (34 )  (149 )  1,199    (878 )  (2,603 )  174  
Effect of exchange rate changes on cash  
 and cash equivalents    1    6    (43 )  (1 )  73    (55 )
Increase (decrease) in cash and cash  
 equivalents    (1,746 )  (7,824 )  (6,635 )  (602 )  9    (9,455 )
Cash and cash equivalents at the  
 beginning of the year    3,320    14,878    24,333    7,656    17,689    24,333  
Cash and cash equivalents at the end of  
 the year    1,574    7,054    17,698    7,054    17,698    14,878  

(*) Discontinuance of the adjustment for the effects of inflation according to the Israeli CPI as of December 2003 (see note 2).

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

7

RoboGroup T.E.K. Ltd.
Statements of Cash Flows

Appendix A: Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

For the nine months ended
 For the three months ended
 Year ended
September 30
 September 30
 December, 31
2004
 2004
 2003
 2004
 2003
 2003
US$ (K)
 NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
Unaudited
 Unaudited
 Unaudited
 Unaudited
 Unaudited
 Audited
Convenience
translation
to US
dollars
 Reported
amounts (*)
 Adjusted
amount
for the
Israeli
CPI as of
December
2003
 Reported
amounts (*)
 Adjusted amount for the
Israeli CPI as of
December 2003
Income and expenses not involving                            
cash flows:  
Depreciation and amortization    400    1,795    1,603    650    581    2,597  
Gain on sale of fixed assets    (5 )  (21 )  -    (21 )  -    -  
Decrease in liability for termination of  
 employee/employer relationship    (54 )  (241 )  (558 )  (95 )  (29 )  (869 )
Erosion of long term loans    43    193    (116 )  (155 )  1,323    (259 )
Decrease in value of marketable securities    -    -    148    -    -    155  
Decrease (increase) in deferred taxes    151    677    (5 )  (6 )  (4 )  444  
Other    -    -    (143 )  -    -    71  

 		    535    2,403    929    373    1,871    2,139  
Changes in assets and liabilities:  
Decrease (increase) in trade receivables    (62 )  (279 )  6,128    1,116    2,151    6,141  
Decrease (increase) in other receivables  
 and debit balances    (145 )  (647 )  (938 )  12    167    (752 )
Decrease in inventories    232    1,042    720    42    2,476    1,391  
Increase (decrease) in trade payables    31    139    (2,929 )  (533 )  (1,258 )  (3,178 )
Increase (decrease) in other payables  
 and credit balances    (843 )  (3,787 )  128    (44 )  (778 )  3,035  
     (787 )  (3,532 )  3,109    593    2,758    6,637  
     (252 )  (1,129 )  4,038    966    4,629    8,776  

(*) Discontinuance of the adjustment for the effects of inflation according to the Israeli CPI as of December 2003 (see note 2).

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

8

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements

NOTE 1 – GENERAL

  (a) These financial statements have been prepared in a condensed format as of September 30, 2004, and for the three and nine months then ended (“interim financial statements”). These financial statements should be read in conjunction with the Company’s audited annual financial statements and accompanying notes as of December 31, 2003 and for the year then ended.

  (b) These financial statements have been reviewed by the Company’s certified public accountants. The review was conducted in accordance with the procedures established by the Institute of Certified Public Accountants in Israel regarding interim periods. The review was limited in scope and did not constitute an audit in accordance with generally accepted auditing standards and therefore no opinion was expressed by the Company’s certified public accountants.

  (c) In management’s opinion all necessary adjustments were made in order to present correctly these interim financial statements.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

  a. The interim financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in Accounting Standard No. 14 of the Israel Accounting Standards Board.

  The significant accounting policies and methods of computation followed in the preparation of the interim financial statements are identical to those followed in the preparation of the latest annual financial statements, except as described below.

  b. Discontinuance of the adjustment of financial statements for the effects of inflation and financial reporting in reported amounts:

  In 2001, the Israel Accounting Standards Board published Accounting Standard No. 12 with respect to the discontinuance of the adjustment of financial statements (“Standard No. 12”). According to this Standard (as amended by Accounting Standard No. 17), the adjustment of financial statements for the effects of inflation should be discontinued beginning January 1, 2004. The Company applied the provisions of the Standard, and accordingly, the adjustment for the effects of inflation was discontinued as from January 1, 2004.

  1. Starting point for the preparation of financial statements:

  a) In the past, the Company prepared its financial statements on the basis of the historical cost convention, adjusted for the changes in the general purchasing power of the Israeli currency based on the changes in the Israeli Consumer Price Index (“Israeli CPI”). These adjusted amounts, as included in the financial statements as of December 31, 2003 (the transition date), served as a starting point for nominal financial reporting beginning January 1, 2004. Additions made after the transition date are included at nominal values.

  b) The amounts for non-monetary assets do not necessarily represent realizable value or current economic value, but only the reported amounts for those assets.

  c) In the financial statements “cost” represents cost in the reported amount (see 2 below).

  d) All comparative data for previous periods are presented after adjustment for the Israeli CPI as of the transition date (the Israeli CPI for December 2003).

9

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont.)

  b. Discontinuance of the adjustment of financial statements for the effects of inflation and financial reporting in reported amounts: (cont.)

  2. Financial statements in reported amounts:

  a) Definitions:

  Adjusted amount – historical nominal amount adjusted for the Israeli CPI as of December 2003, according to the provisions of Opinions No. 23 and No. 36 of the Institute of Certified Public Accountants in Israel.

  Reported amount – adjusted amount as of the transition date, plus additions in nominal values after the transition date and less amounts deducted after the transition date. The amounts deducted after the transition date are in historical nominal values, adjusted amounts as of the transition date or in a combination of historical nominal values and adjusted amounts as of the transition date, according to the relevant situation.

  b) Balance sheet:

  1) Non-monetary items are presented in reported amounts.

  2) Monetary items are presented in nominal values as of the balance sheet date.

  c) Statement of operations:

  1) Income and expenses relating to non-monetary items are derived from the change in the reported amount between the opening balance and the closing balance.

  2) Other items in the statement of operations are presented in nominal values.

  3. Following are data regarding the Israeli CPI and the exchange rate of the U.S. dollar:

As of
 Israeli CPI
 Exchange rate of
one U.S. dollar
Points
 NIS
September 30, 2004      100.6    4.482  
September 30, 2003    99.8    4.441  
December 31, 2003    99.4    4.379  

Change during the period		    %    %  

Nine months ended September 30, 2004		    1.2    2.4  
Nine months ended September 30, 2003    (1.48 )  (6.2 )
Three months ended September 30, 2004    (0.2 )  (0.33 )
Three months ended September 30, 2003    (1 )  3  
December 2003 (12 months)    (1.9 )  (7.6 )

10

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont.)

  b. Discontinuance of the adjustment of financial statements for the effects of inflation and financial reporting in reported amounts: (cont.)

  4. Translation of financial statements of foreign operations (to be added only if relevant):

  a) As stated above, on January 1, 2004, Accounting Standard No. 13 with respect to the effect of changes in foreign exchange rates became effective. Standard No. 13 replaces Interpretations No. 8 and No. 9 of Opinion No. 36 of the Institute of Certified Public Accountants in Israel, which were superseded when Accounting Standard No. 12, as described above, became effective.

  Standard No. 13 deals with the translation of foreign currency transactions and with the translation of financial statements of foreign operations for incorporation into the financial statements of the Company.

  b) Foreign operation that is classified as a foreign autonomous entity (“the entity”):

  In accordance with Standard No. 13, assets and liabilities, both monetary and non-monetary, of the entity are translated at the closing rate. The components of the statement of operations and of the statement of cash flows of the entity are translated at the exchange rates at the dates of the transactions or at average exchange rates for the period if such exchange rates approximate the actual exchange rates. All exchange rate differences resulting from the translation, as above, are classified as a separate item in shareholders’ equity (“foreign currency translation adjustments for autonomous entities”) until the disposal of the investment.

  c. First time application of Accounting Standard No. 20 “Goodwill’s amortization period”

  The company applies accounting standard No. 20, which determines the amortization period of goodwill. The standard states that goodwill will be amortized in a systematic manner over its estimated useful life.

  In accordance to the standard the amortization period should be the best-estimated period in which future economic benefits would emanate from the goodwill.

  The standard determines that the amortization period should not pass over the limit of 20 years since the initial goodwill recognition date.

  The change in the amortization period of goodwill as of January 1, 2004 will be applied as a prospective estimate change (“from here and after”).

  The application of the standard did not have significant effect on the company’s statements.

11

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont.)

  d. Taxes on income

  1. Income tax expenses for the three months and nine months periods ended September 30, 2004, include NIS 240 thousand due to a dividend distribution from an approved enterprise’s income of a proportionally consolidated company and NIS 660 thousand due to a reduction in the Company’s deferred taxes as a result of uncertainly of its realization in the foreseeable future.

  2. On June 29, 2004 the Israeli parliament adopted an income tax ordinance amendment.

  The amendment determines a gradual reduction in the rate of corporate tax commencing from January 1, 2004. In accordance with the amendment the Company’s nominal tax rate from 2004 has been reduced from 36% to 35%. In addition future reduction will come into effect at the beginning of 2005 (34%), 2006 (32%) and 2007 until a final tax rate of 30% is achieved. The adoption of the amendment did not have significant effect on the Company’s statements.

  e. Disclosure of Effect of New Accounting Standards in the Period Prior to Their Application

  On July 2004, the Israeli Accounting Standards Board published Accounting Standard No. 19, “Taxes on Income”. The Standard provides that a liability for deferred taxes is to be recorded for all temporary differences subject to tax, except for a limited number of exceptions. In addition, a deferred tax asset is to be recorded for all temporary differences that may be deducted, losses for tax purposes and tax benefits not yet utilized, if it is anticipated that there will be taxable income against which they can be offset, except for a limited number of exceptions. The new Standard applies to financial statements for periods beginning on January 1, 2005. The Standard provides that it is to be implemented by means of a cumulative effect of a change in accounting method. The Company estimates that the implementation of the Standard will not have a significant effect on the Company’s statements

  f. The financial statements at September 30, 2004, and for the three and nine months then ended have been translated into US dollars solely for the convenience of the American reader. This translation was made at the US Dollar/New Israeli Shekel exchange rate in effect on the said date, i.e. US$ 1 = NIS4.482.

NOTE 3 – COMMITMENTS

  On June 22, 2004 the Company entered into a standby equity distribution agreement with Cornell Capital Partners LP (“Cornell”).

  According to the agreement, Cornell committed to purchase up to 5.5 million dollars of the Company’s ordinary shares from time to time over the course of twenty-four months after an effective registration of the shares.

  The Company is entitled to request an equity investment by Cornell during the contract period, pursuant to which the Company will issue common stock to Cornell. The timing and amounts of the requested purchases shall be at the discretion of the Company. The maximum amount of each purchase shall be 250 thousand dollars and there will be a minimum week between each purchase.

12

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements

NOTE 3 – COMMITMENTS (cont.)

  The market price of shares purchased by Cornell will be the lowest daily volume weighted average price of the common stock during the five consecutive trading days period beginning on the first trading day after the requested purchase date.

  Pursuant to the agreement the Company did not obligate to issue common stock to Cornell in a minimum somewhat amount.

  Upon the initial purchase of shares and all subsequent purchases, Cornell shall receive a compensation equal to five percent (5%) of the gross proceeds of the purchase, and additional payments as shown hereunder:

  1) Upon and subject to the Company’s shareholders approval and effectiveness of the registration statement from the SEC the Company shall issue Cornell 90 thousand dollars in cash.

  2) The Company shall issue Cornell an additional 111 thousand dollars in cash at the earlier of the following:

  A) The day the Company draws more than 2 million dollars from proceeds of its shares.

  B) The day on which an initial purchase statement will be published after the first anniversary to this agreement.

  The agreement states that in any case Cornell can purchase and hold up to 5% of the Company’s ordinary shares.

  The agreement was approved by the company’s general assembly on August 11, 2004.

  In September 2004 the American Security Stock Exchange (SEC) validated the registration of the proposed stocks for trade (Form F-2).

NOTE 4 – TRANSACTION WITH INTERESTED RELATED PARTIES

  1. In October 2003 the Company entered into a contract with a proportionally consolidated company for the supply of a Learnmate platform, in consideration of US $850 thousand. The platform was supplied until March 2004.

  Accordingly, in the first quarter of 2004 the income (50%) from this contract was included in the total amount of US $425 thousand.

  2. In July 2004 the Company entered into a contract with Yaskawa Electric Corporation (“YEC”) for the supply of an E-learning system in consideration of 750 thousand US dollars The system will be supplied gradually during several quarters.

  The Company and YEC own 50% each of the share capital of a proportionally consolidated company Yaskawa Eshed Technology Ltd. (“YET”).

  In the third quarter of 2004, the revenues from this contract were included in the total amount of US $288 thousand.

  3. The Board of Directors of a proportionally consolidated company approved on July 7, 2004 a distribution of dividend to the Company’s shareholders in the amount of US $800 thousand. The net dividend received by the Company amounted to US $346 thousand.

13

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements

NOTE 5 – FINANCIAL INFORMATION IN REGARD TO BUSINESS SEGMENTS

For the nine months ended September 30, 2004
Segment A
 Segment B
 Segment C
 Adjustments
 Total
NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
Reported amounts (*)
Revenues from customers      34,219    7,463    -    -    41,682  
Inter segment revenues    -    86    -    (86 )  -  
     34,219    7,549    -    (86 )  41,682  
Segment loss    (4,917 )  (971 )  (524 )  -    (6,412 )


For the nine months ended September 30, 2004
Segment A
 Segment B
 Segment C
 Adjustments
 Total
U.S.$ (K)
 U.S.$ (K)
 U.S.$ (K)
 U.S.$ (K)
 U.S.$ (K)
Adjusted amount for the Israeli CPI as of December 2003
Revenues from customers      7,635    1,665    -    -    9,300  
Inter segment revenues    -    19    -    (19 )  -  
     7,635    1,684    -    (19 )  9,300  
Segment loss    (1,097 )  (216 )  (117 )  -    (1,430 )


For the nine months ended September 30, 2003
Segment A
 Segment B
 Adjustments
 Segment C
 Total
NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
Adjusted amount for the Israeli CPI as of December 2003
Revenues from customers      40,554    4,388    -    -    44,942  
Inter segment revenues    5,825    111    -    (5,936 )  -  
     46,379    4,499    -    (5,936 )  44,942  
Segment loss    (5,518 )  (2,013 )  (4,158 )  -    (11,689 )

(*) Discontinuance of the adjustment for the effects of inflation according to the Israeli CPI as of December 2003 (see note 2).

14

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements

NOTE 5 – FINANCIAL INFORMATION IN REGARD TO BUSINESS SEGMENTS (cont.)

For the three months ended September 30, 2004
Segment A
 Segment B
 Segment C
 Adjustments
 Total
NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
Reported amounts (*)
Revenues from customers      11,225    2,776    -    -    14,001  
Inter segment revenues    -    12    -    (12 )  -  
     11,225    2,788    -    (12 )  14,001  
Segment loss    (243 )  (269 )  (97 )  -    (609 )

For the three months ended September 30, 2003
Segment A
 Segment B
 Segment C
 Adjustments
 Total
NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
Adjusted amount for the Israeli CPI as of December 2003
Revenues from customers      16,482    1,510    -    -    17,992  
Inter segment revenues    1,690    19    -    (1,709 )  -  
     18,172    1,529    -    (1,709 )  17,992  
Segment loss    (788 )  (329 )  (965 )  -    (2,082 )

(*) Discontinuance of the adjustment for the effects of inflation according to the Israeli CPI as of December 2003 (see note 2).

15