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 June 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:   June 1, 2004

(Unaudited)

Interim Consolidated Financial Statements
and Directors Report
At March 31, 2004

RoboGroup T.E.K. Limited

Directors’ Report
for the three month Period ended March 31, 2004

We are pleased to present the Directors’ Report on the financial condition of our company for the three-month period ended March 31, 2004.

RoboGroup T.E.K. Limited and its Business Environment

1. The Company and its Business Environment

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 subsidiary YET. YET is engaged in the development, manufacturing, and marketing of motion control products for the industrial market.

• The third sector includes the activities of both MemCall Ltd. and MemCall LLC. (“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

During the first quarter of 2004 the Company recorded revenues of approximately US$ 720 thousands from out of an approximately US$1 million order for training products, received in November 2003.

In March 2004, the supply of the e-learning system sold to our subsidiary YET in October 2003 was completed. The transaction was in the amount of approximately US$ 850 thousands, out of which the Company recorded revenues of US$ 425 thousands.

Our Educational Sector has recently started implementing a cost-cutting plan to improve its profitability. The plan includes, among other things, a reduction in the number of personnel and consolidation of similar activities. By the implementation of this plan we expect to reduce our expenses for the next 12 months by approximately US$ 1 million. We expect that this plan will improve both financial results in the second half of 2004, and negative cash flow.

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RoboGroup T.E.K. Limited

YET

During the first quarter of 2004 YET received approximately US$ 590 thousands for development services from Yaskawa Electric Corporation (“YEC”).

During the first quarter of 2004, YET continued its investment in the development of sales and marketing channels in Europe and in the US. YET’s fully owned subsidiary, YET US Inc., has signed several distribution agreements with key factors in the US market, while activities in the European market has led to sales of YET’s products in Europe.

In the first quarter of 2004 YET recorded total sales of approximately US$ 340 thousands 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.

In May 2000, RoboGroup entered into a service agreement with YET under which YET pays RoboGroup for services and management fees. The payment amount is determined annually by mutual consent. In January 2004, a service agreement was signed by RoboGroup and YET for 2004, under which YET will pay RoboGroup approximately NIS 0.9 million for services and management fees.

MemCall

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

In accordance with that decision, during the first and second quarters of 2004 MemCall released most of its employees and is continuing its activity in a limited scope, while examining alternative means to implement solutions (required by potential customers) without investing in the development of a full custom chip. During this period, Memcall filed a new inscription patent with the Israeli Commissioner of Patents.

RoboGroup’s investment in MemCall in the first quarter of 2004 amounted to approximately US$ 140 thousands.

RoboGroup’s Building

The space in RoboGroup’s building in Rosh Ha’Ayin that is not occupied by the Company and its fully owned subsidiaries is leased to three outside tenants. During the first quarter of 2004, the Company recorded approximately US$ 140 thousands in rental payments from these tenants.

In the first quarter of 2004, the Company entered into a five-year lease with a fourth tenant for a 650 square meter space. As a result, the building is now fully occupied.

- 2 -

RoboGroup T.E.K. Limited

Exposure to and Management of Market Risks

a. Currency Risks

The majority of the Company’s products are exported, and as a result the bulk of the Company’s income is received in foreign currency. Consequently, the Company is subject to risks from changes in the exchange rates of foreign currencies (mainly US$ and Japanese YEN). The Company undertakes the following precautions measures in order to limit its exposure:

1. Daily monitoring of changes in the exchange rates of the various currencies as well as of factors that are bound to influence such currencies.

2. An evaluation of the Company’s quarterly position with respect to the general exposure to changes in the various currencies.

3. Establishing foreign currency linked loans for the financing of the Company’s investments in its building.

Notwithstanding these precautions, the Company cannot insure full protection against foreign currency risks and the Company is exposed to exchange rate fluctuations between various foreign currencies and the Israeli shekel.

b. Interest and Index Risks

Given that the majority of the Company’s income is in foreign currency, the Company does not enter into specific hedging contracts against exposure due to changes of interest and index rates. However, the Company is accustomed to investing a portion of its monetary balances in accordance with its periodic evaluations with respect to expectations in the area of interest and index rates.

c. Marketable Securities

In 2003, the Company liquidated its investment portfolio. In the event the Company will decide to invest in securities in the future, it will be exposed to fluctuations in the prices of the securities in its investment portfolio.

d. The Responsible Officer

The Company’s chief financial officer is responsible for managing the Company’s market risks.

- 3 -

RoboGroup T.E.K. Limited

d. Supervision and Application of Policy

The Company’s management and the finance committee of the Board of Directors constantly monitor the extent of the Company’s exposure to market risks, and determine if it is necessary to modify the Company’s risk management policy and, if necessary, adopt protective measures.

e. Futures Contracts

As of March 31, 2004 the Company had no outstanding futures contracts. The Company did not enter into any futures contracts in the first three months of 2004.

- 4 -

RoboGroup T.E.K. Limited

Linked Balances

March 31, 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  9,920   -   -   -   1,676   495   12,091   13,266   -   -   -   1,304   308   14,878  
Short-term 
investments  -   -   -   -   -   -   -   -   -   -   -   -   -   -  
Trade receivables  4,821   -   -   -   2,017   3,642   10,480   6,076   -   -   -   2,806   4,335   13,217  
Other receivables 
and debit balances  43   -   -   -   3,125   454   3,622   52   -   -   -   1,934   306   2,292  
Inventories  -   -   -   -   -   13,301   13,301   -   -   -   -   -   13,603   13,603  
Investments in 
other companies  -   -   -   -   -   15   15   -   -   -   -   -   15   15  
Fixed assets  -   -   -   -   -   38,115   38,115   -   -   -   -   -   38,233   38,233  
Other Assets  -   -   -   -   -   384   384   -   -   -   -   -   428   428  
Deferred Taxes  -   -   -   652   -   415   1,067   -   -   -   -   682   415   1,097  
Fund in respect of 
employee rights 
upon retirement, net  -   -   -   236   -   -   236   -   -   -   81   -   -   81  
   14,784   -   -   888   6,818   56,821   79,311   19,394   -   -   81   6,726   57,643   83,844  
Liabilities: 
Short-term bank 
credits  729   680   2,485   1,422   6,985   3,001   15,302   1,226   1,112   2,486   1,425   7,447   2,245   15,941  
Trade payables  598   -   -   -   4,027   1,673   6,298   412   -   -   -   3,554   1,428   5,394  
Other payables and 
credit balances  3,781   -   -   -   6,740   553   11,074   5,755   -   -   -   8,045   545   14,345  
Long-term loans  6,561   6,122   -   6,044   -   -   18,727   5,824   5,280   -   6,412   -   -   17,516  
Liability for 
termination of 
employee/employer 
relationship, net  -   -   -   204   -   -   204   -   -   -   200   -   -   200  
   11,669   6,802   2,485   7,670   17,752   5,557   51,605   13,217   6,392   2,486   8,037   19,046   4,218   53,396  
Excess of assets  
(liabilities)   3,115   (6,799 ) (2,485 ) (6,782 ) (10,934 ) 51,594   27,706   6,177   (6,392 ) (7,956 ) (2,486 ) (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.

- 5 -

RoboGroup T.E.K. Limited

Backlog of Orders

The Company’s backlog of orders as at March 31, 2004 was approximately NIS 14.2 million compared to approximately NIS 8.2 million at December 31, 2003.

2. The Financial Position of the Company

  a. As at March 31,2004 the Company had assets of approximately NIS 79.3 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 2.8 million in cash and cash equivalents and a decrease of an approximately NIS 2.7 million in accounts receivables.

  b. The Company’s equity was approximately NIS 27.7 million as of March 31,2004, 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 2.9 million in the period.

3. Operating Results

  The Company’s revenues for the first three months of 2004 amounted to approximately NIS 14.3 million, as compared to approximately NIS 12.7 million in the corresponding period last year.

  The NIS 1.6 million increase in revenues in the three months ended March 31 ,2004, as compared to the corresponding period in 2003, was primarily attributable to an increase of revenues by the educational sector and YET.

  The Company’s gross profit percentage for the three months ended March 31 ,2004 was approximately 43%, compared to approximately 39% in the corresponding period last year. The increase in gross profit percentage was mainly attributable to the revenues of the highly profitable e-learning products and from a change in the products mix of the Company.

  The Company’s operating expenses during the three months ended March 31,2004 were approximately NIS 8.6 million as compared to approximately NIS 10.7 million in the corresponding period last year. The principal changes are as follows:

  Research and development expenses, net, for the three months ended March 31 ,2004 decreased by approximately NIS 1.4 million as compared to the corresponding period last year, due primarily to lower research and development expenses by MemCall.

  Marketing and selling expenses for the three months ended March 31,2004 increased by approximately NIS 0.2 million, as compared with to the corresponding period in the previous year.

  General and administrative expenses for the first three months of 2004 decreased by approximately NIS 1 million as compared to the corresponding period last year, due primarily to lower general and administrative expenses in the educational sector and MemCall.

- 6 -

RoboGroup T.E.K. Limited

  The Company incurred an operating loss of approximately NIS 2.4 million for the three months ended March 31,2004 compared to an operating loss of approximately NIS 5.7 million in the corresponding period in 2003.

  The Company had net financial expenses of approximately NIS 0.8 million in the first three months of 2004 compared with net financial expenses of approximately NIS 0.6 million in the corresponding period in 2003.

  The Company’s other income in the first three months of 2004 amounted to approximately NIS 0.3 million compared to other income of approximately NIS 0.7 million in the corresponding period last year.

  The Company’s net loss for the three months ended March 31,2004 amounted to approximately NIS 2.9 million compared to a net loss of approximately NIS 5.7 million in the corresponding period last year.

4. Liquidity

  a. The balance of cash, cash equivalents and marketable securities as at March 31, 2004 was approximately NIS 12.1 million compared to approximately NIS 14.9 million at December 31, 2003.

  b. Cash flows from operating activities:

  In the three months of 2004 the Company had negative cash flow from operating activities of approximately NIS 2.4 million compared to negative cash flow of approximately NIS 20 thousands in the corresponding period last year.

  c. Cash flows from investing activities:

  In the first three months of 2004 the Company purchased fixed assets of approximately NIS 0.4 million (the same as in the corresponding period last year).

  d. Cash flows from financing activities:

  In the first three months of 2004 the Company had negative cash flow from financing activities of approximately NIS 73 thousands as compared to a surplus of approximately NIS 0.5 million in the corresponding period last year.

5. Sources of Financing

  a. The Company had positive working capital at March 31, 2004 . The current ratio as at March 31, 2004 was 1.21 compared with 1.23 as at December 31, 2003. The quick ratio as at March 31, 2004 was 0.8 compared with 0.85 as at December 31, 2003.

  b. The Company’s shareholders’ equity as at March 31, 2004 was approximately NIS 27.7 million, representing approximately 35% of its total balance sheet assets compared with NIS 30.4 million and 36% respectively as at December 31, 2003.

  c. The average amount of credit granted to customers during the first three months of 2004 was approximately NIS 11.8 million and the average amount of credit received from suppliers and providers of services was approximately NIS 5.8 million compared with NIS 16.4 million and NIS 7 million respectively as at December 31, 2003.

- 7 -

RoboGroup T.E.K. Limited

  d. The average amount of short term credit from banking institutions during the first three months of 2004 was approximately NIS 15.6 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 three months of 2004 was approximately NIS 18.1 million compared to approximately NIS 19.2 million in the corresponding period last year.

6. Option Plans for Employees, Directors and Interested Parties

  In the first quarter of 2004 there were no allotments of shares due to realization of options in Robogroup, according to the option plans for employees and directors in the Company.

7. Law suit against Fourier Systems (1989) Ltd. (“Fourier”)

  In Decmber 2003, RoboGroup and its subsidiary, RTL, filed a suit in the District Court of Tel-Aviv against Fourier. The suit seeks injunctions, mandamus and damages of NIS 2.6 million. In the suit we have alleged the theft of our commercial secrets, other commercial torts and the violation of a distribution agreement between RTL and Fourier. In February 2004, Fuorier filed a counter claim seeking damages of approximately NIS 3 million against the Company and RTL.

  On March 11, 2004, the Court determined that certain information, including commercial secrets of RTL and the Company, were found in Fourier’s offices and computers, and that Fourier had breached the Israeli Commercial Torts Law, 1999. The Court also determined that Fourier was acting in bad faith by trying to annul its exclusive distribution agreement in Israel with RTL. The court ordered Fourier to avoid using the information that came from RTL and the Company. The court also ordered Fourier to fulfill its obligation under its agreement to supply products to RTL according to the original price list agreed to by the two companies.

8. External factors

• A substantial slowdown was observed in the last few 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.

- 8 -

RoboGroup T.E.K. Limited

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

• The security and economic situation in the State of Israel has 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: May 30, 2004

Safe Harbor Statement under the U.S. Private Securities Litigation Reform Act of 1995: This release 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 such differences include the impact of pharmaceutical industry regulation, the difficulty of predicting FDA and other regulatory authority approvals, the regulatory environment and changes in the health policies and structure of various countries, acceptance and demand for new pharmaceutical products and new therapies, the impact of competitive products and pricing, the availability and pricing of ingredients used in the manufacture of pharmaceutical products, uncertainties regarding market acceptance of innovative products, newly launched, currently being set or in development, the impact of constructing of clients, reliance on a strategy of acquiring companies and on strategic alliances, exposure to product liability claims, dependence on patent and other protections for our innovative products, 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.

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RoboGroup T.E.K. Ltd.

Interim Consolidated Financial Statements
At March 31, 2004

Financial statements:  
Balance Sheets 2-3
Statement of Operations 4
Statement of Changes in Shareholders' Equity 5
Statement of Cash Flows 6-7
Notes to the Financial Statements 8-12

1

RoboGroup T.E.K. Ltd.
Balance Sheets
NIS in Thousands

March, 31
 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    2,670    12,091    24,713    14,878  
 Short-term investments    -    -    123    -  
 Trade receivables    2,314    10,480    13,596    13,217  
 Other receivables and debit balances    800    3,622    3,522    2,292  
 Inventories    2,937    13,301    16,811    13,603  
     8,721    39,494    58,765    43,990  
 Long-term investments   
   
 Investments in investee and other  
 companies    3    15    107    15  
 Funds in respect of employee rights upon  
 retirement, net    52    236    -    81  
     55    251    107    96  
 Fixed assets     8,418    38,115    39,976    38,233  
 Deferred taxes     236    1,067    754    1,097  
 Other assets     85    384    646    428  
     17,515    79,311    100,248    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
NIS in Thousands

March, 31
 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    3,379    15,302    14,063    15,941  
 Trade payables    1,391    6,298    10,232    5,394  
 Other payables and credit balances    2,445    11,074    12,539    14,345  
     7,215    32,674    36,834    35,680  
 Long-term liabilities   
   
 Loans from banks    4,136    18,727    19,656    17,516  
 Liability for termination of employee/employer  
  relationship, net    45    204    714    200  
     4,181    18,931    20,370    17,716  
 Shareholders' equity   
   
 Share capital    2,517    11,399    11,393    11,399  
 Capital reserves and premium on shares    9,763    44,207    44,342    44,021  
 Accumulated deficit    (5,940 )  (26,897 )  (11,688 )  (23,969 )
 Treasury stock    (221 )  (1,003 )  (1,003 )  (1,003 )
     6,119    27,706    43,044    30,448  
     17,515    79,311    100,248    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: May 30, 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.
Statement of Operations
NIS in Thousands

For the three months ended
March, 31
 Year ended
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
Revenues      3,172    14,365    12,729    56,116  
Cost of revenues     1,818    8,231    7,757    32,598  
Gross profit    1,354    6,134    4,972    23,518  
Operating expenses   
Research and development expenses, net    508    2,302    3,682    12,651  
Marketing and selling expenses    770    3,485    3,270    12,622  
Administrative and general expenses    617    2,792    3,782    14,569  
     1,895    8,579    10,734    39,842  
Operating loss     (541 )  (2,445 )  (5,762 )  (16,324 )
Financial expenses, net    (168 )  (765 )  (626 )  (3,783 )
Other income, net    62    282    712    2,032  
Loss before taxes on income     (647 )  (2,928 )  (5,676 )  (18,075 )
Income tax expenses (income)    -    -    36    (82 )
Net loss     (647 )  (2,928 )  (5,712 )  (17,993 )
Loss per share ("EPS")     (0.06 )  (0.27 )  (0.54 )  (1.67 )
Weighted average number of shares used in   
 computation of EPS (in thousands)     10,744    10,744    10,731    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.
Statement of Changes in Shareholders' Equity
NIS in Thousands

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
earnings
(deficit)
 Total
  NIS
 NIS
 NIS
 NIS
 NIS
 NIS
 NIS
  Reported amounts (*)
For the three months ended                                    
  March 31, 2004 (Unaudited)   
Balance as of January 1, 2004    10,744,031    11,399    42,214    2,260    (453 )  (1,003 )  (23,969 )  30,448  
Adjustments on translation of  
  financial statement of an  
  autonomous consolidated  
  company    -    -    -    -    186    -    -    186  
Net loss    -    -    -    -    -    -    (2,928 )  (2,928 )
Balance at March 31, 2004     10,744,031    11,399    42,214    2,260    (267 )  (1,003 )  (26,897 )  27,706  
 
Adjusted amount for the Israeli CPI as of December 2003
  
For the three months ended   
  March 31, 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    4,000    1    -    -    -    -    -    1  
Adjustments on translation of  
  financial statement of an  
  autonomous consolidated  
  company    -    -    -    -    (233 )  -    -    (233 )
Net loss    -    -    -    -    -    -    (5,712 )  (5,712 )
Balance at March 31, 2003     10,734,831    11,393    42,195    2,260    (113 )  (1,003 )  (11,688 )  43,044  
 
Adjusted amount for the Israeli CPI as of December 2003
  
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.

5

RoboGroup T.E.K. Ltd.
Statement of Cash Flows
NIS in Thousands

For the three months ended
March, 31
 Year ended
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
Cash flows from operating activities:                    
Net loss    (647 )  (2,928 )  (5,712 )  (17,993 )
Adjustments to reconcile net loss to net cash  
 provided by operating activities (Appendix A):    109    493    5,693    8,776  
Net cash provided by (used in) operating activities     (538 )  (2,435 )  (19 )  (9,217 )
Cash flows from investing activities:   
Acquisition of fixed assets    (90 )  (409 )  (380 )  (1,075 )
Proceeds from sales of fixed assets    26    119    13    384  
Sale of short-term investments, net    -    -    247    334  
Net cash used in investing activities     (64 )  (290 )  (120 )  (357 )
Cash flows from financing activities:   
Increase in short term credit from banks, net    64    292    1,456    3,926  
Long-term loans received    3,072    13,908    -    -  
Repayment of long -term loans    (3,152 )  (14,273 )  (915 )  (3,778 )
Loan repayment by interested parties to acquire  
 shares in the Company    -    -    2    -  
Exercise of options by employees    -    -    -    26  
Net cash provided by (used in) financing activities     (16 )  (73 )  543    174  
Effect of exchange rate changes on cash and cash   
 equivalents     2    11    (24 )  (55 )
Increase (decrease) in cash and cash equivalents     (616 )  (2,787 )  380    (9,455 )
Cash and cash equivalents at the beginning of the year     3,286    14,878    24,333    24,333  
Cash and cash equivalents at the end of the year     2,670    12,091    24,713    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.

6

RoboGroup T.E.K. Ltd.
Statement of Cash Flows
NIS in Thousands

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

For the three months ended March, 31
 Year ended
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
Income and expenses not involving cash flows:                    
Depreciation and amortization    120    543    615    2,597  
Decrease in liability for termination of  
 employee/employer relationship    (33 )  (151 )  (274 )  (869 )
Write-down of loans    142    645    (390 )  (259 )
Decrease in value of marketable securities    -    -    119    155  
Decrease in deferred taxes    7    30    6    444  
Other    -    -    (190 )  71  
     236    1,067    (114 )  2,139  
Changes in assets and liabilities:   
Decrease in trade receivables    637    2,884    5,930    6,141  
Increase in other receivables and debit balances    (297 )  (1,320 )  (1,079 )  (752 )
Decrease (increase) in inventories    127    576    (1,421 )  1,391  
Increase (decrease) in trade payables    200    904    1,661    (3,178 )
Increase (decrease) in other payables and credit  
 balances    (799 )  (3,618 )  716    3,035  
     (127 )  (574 )  5,807    6,637  
     109    493    5,693    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.

7

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements
NIS in Thousands

NOTE 1 – GENERAL

  (a) These financial statements have been prepared in a condensed format as of March 31, 2004, and for the three 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).

8

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements
NIS in Thousands

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
March 31, 2004 106.1 4.528
March 31, 2003 109.0 4.687
December 31, 2003 106.2 4.379


Change during the period
 %
 %
March 2004 (three months) (0.1) 3.4
March 2003 (three months) 0.8 (1.1)
December 2003 (12 months) (1.9) (7.6)
 
(*) The index on an average basis of 2000 = 100.

9

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements
NIS in Thousands

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. The adjusted financial statements at March 31, 2004 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 = NIS4.528.

NOTE 3 – TRANSACTION WITH INTERESTED RELATED PARTIES

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

10

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements
NIS in Thousands

NOTE 5 – FINANCIAL INFORMATION IN REGARD TO BUSINESS SEGMENTS

For the three months ended March 31, 2004
Segment A
 Segment B
 Segment C
 Adjustments
 Total
NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
 NIS (K)
Reported amounts (*)
Revenues from customers      12,263    2,102    -    -    14,365  
Inter segment revenues    -    66    -    (66 )  -  
     12,263    2,168    -    (66 )  14,365  
Segment loss    (2,393 )  (204 )  (331 )  -    (2,928 )


For the three months ended March 31, 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      2,708    464    -    -    3,172  
Inter segment revenues    -    15    -    (15 )  -  
     2,708    479    -    (15 )  3,172  
Segment loss    (528 )  (45 )  (74 )  -    (647 )


For the three months ended March 31, 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      11,263    1,465    -    -    12,728  
Inter segment revenues    769    122    -    (891 )  -  
     12,032    1,587    -    (891 )  12,728  
Segment loss    (3,509 )  (707 )  (1,496 )  -    (5,712 )


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

11

RoboGroup T.E.K. Ltd.
Notes to the Financial Statements
NIS in Thousands

NOTE 6 — PRO FORMA INFORMATION WITH REGARD TO THE EFFECT OF FAS-123

  Following is the pro forma data of the net loss and basic loss per share had the company chosen to apply FAS 123 and calculated the cost of the benefits of the stock option plan to the employees according to their fair value.

For the three months ended
March 31
 Year ended
December, 31
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
Financial loss      647    2,928    5,712    17,993  
Influence option cost    106    483    -    352  
Pro forma loss    753    3,411    5,712    18,345  
Loss per share    0.07    0.32    0.54    1.71  


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

  According to the rules set forth in FAS 123, the fair value of the options is calculated at presentation date according to the Black & Scholes Option Pricing Model.

  The assumptions used are:

  1. Expected life length of the options – 4 years.
  2. Expected dividend distribution rate – 0%.
  3. Expected standard deviation – 110%.
  4. No-risk interest rate – 2%.

12