Yom-Tov Samia, President and COO of the Baran Group Ltd., Announced That He Ends His Term of Office; Baran Group Ltd. Reports Second Quarter 2003 Financial Results

Business Wire, August 29, 2003

Baran's management adopted a strategic policy to expand the Group's global activities. This policy has been implemented, among other things, through the merger completed on November 2002, between Baran's subsidiary and o2wireless Solutions Inc., the acquisition in September 2001 of Westmontage Kable und Netzwerk GmbH, the establishment in March 2002 of Baran Raviv Telecom (Thailand) Ltd. and the establishment in April 2003 of BRJ Projects (Proprietary) Limited. This worldwide expansion has occurred within Communications division's field of operation.

Baran believes there is a substantial potential for growth of its business outside of Israel. In the recent years Baran has taken steps to expend its activities outside of Israel. Today, Baran is a worldwide company, which renders services in Asia, Europe, Africa and North America. Baran intends to continue in expanding its operations and revenues outside of Israel.

Revenues and Cost of Revenues Decreased by 32%

For the second quarter 2003, revenues decreased by 32% to $ 35 million from $ 51.1 million in the second quarter of 2002. The decrease in the Company's revenues is directly influenced by the local and worldwide recession and economic slow down. A considerable decrease in revenues occurred in the Semiconductors and Industry divisions, in which a large-scaled semiconductors project entered the final stages of completion, which is characterized by a decrease in revenues as opposed to increase in expenses and allowances for the completion of the project. Also contributing to the drop in revenue was the completion of the Beit-Dagan project and other large-scaled projects within the Industry division.

Cost of revenues decreased by 32%, exactly the same decrease as in the revenues, to $29.8 million in the three months ended June 30, 2003 from $ 43.8 million in the three months ended June 30, 2002. This decrease was primarily due to the large turnkey projects performed by the group, which had come to the final stages, as was mentioned in the Revenues paragraph.

Gross profit remained stable at 15%, similar to the 14% during the comparable period in 2002 and the same for the annual gross profit in 2002.

Income before taxes for the second quarter decreased to $0.274 million from $1.059 million in the second quarter of 2002.

Second quarter 2003 operating income decreased by 75% to $0.84 million and reached $1.8 million in the six months ended June 2003.

This decrease in the operating income is primarily attributable to a significant increase in the abovementioned expenses, which resulted from the reduction of o2wireless's goodwill, consequent to the merger between Baran Telecom Inc. and o2Wireless on November, 2002. Moreover, since the completion of the merger and the registration of Baran's shares on the Nasdaq, Baran incurred the general and administrative expenses of o2Wireless as well as additional expenses relate to the conformity with Securities and Exchange Commission requirements.

Additional increase occurred in the selling and marketing expenses, due to the Company's endeavors to expand its international activities to additional states, including but not limited to Romania, South Africa etc. Nevertheless, the management administrative expanses decreased in the three months ended June 30, 2003 comparable to the three months ended June 30, 2002, due to economizing and efficiency measures taken by the Company's management.