BluePhoneix Solutions

Net income for the second quarter grew sixfold and reached $1.1 million or $0.08 per share, as compared to $186,000 or $0.01 per share in the second quarter of 2005, and increased by 16% from $949,000 or $0.07 per share in the prior quarter.

For the first half of fiscal 2006, BluePhoenix reported record sales of $32.6 million, up 14% from $28.5 million in the same period a year ago. Operating income for the first six months of 2006 rose 140% to $3.6 million, from $1.5 million in the first six months of 2005. As a percentage of revenues, operating income for the first half climbed to 11% as compared to 5% in the first half of 2005

This fifth quarter of sequential growth is evidence that our previous market and technology analyses are accurate and being realized. Major Fortune 15,000 enterprises worldwide that are built around legacy IT systems are steadily developing the understanding of the inevitability of IT modernization. Being risk averse, these enterprises are seeking a reliable and efficient solution that will leverage their previous investments and maintain their business rules, while achieving the required flexibility of a modern system that supports their current and future 21st century business and technological requirements. Over the past three years, we have invested heavily in developing our comprehensive suite of automated tools, creating awareness of and interest in our unique solutions, building the global, support infrastructure, and proving our superior positioning in this market."