RADA Electronic Industries Announces Q2 2006 Results

RADA Electronic Industries Ltd. (Nasdaq SmallCap: RADI) today reported its financial results for the six month period ended June 30, 2006. The company reported revenues in the six month period of $4.6 million, compared to revenues of $6.6 million for the same period in 2005. For the six months ended June 30, 2006 cost of revenues increased to $5.5 million from $5.4 million in the comparable period in 2005, while operating expenses decreased to $1.3 million from $1.5 million in the first six months of 2005. As a result, the company reported a net loss of $2.5 million for the six months ended June 30, 2006 compared to a net loss of $0.6 million in the first six months of 2005.

Commenting on the results, Major General (Ret.) Herzle Bodinger, RADA's CEO said, "The loss in the first half of 2006 was greater than originally expected due to delays in the receipt of orders that the company still anticipates that it will receive in 2006. The company continues to believe that there will be an improvement in its financial results in the second half of 2006. As a result of the timing delays in the receipt of the anticipated orders, and in order to bridge the gap, the company received a $850K three month loan from its controlling shareholders. This loan further demonstrates the confidence and continuing support by our shareholders. As indicated in our financials, we maintain a relative steady cost structure and we are continuing to monitor and tighten our expenses. We believe that we have the right cost structure and that any increase of revenue will generate increased profit margins

MR. Bodinger noted, "We are continuing to see an increasing demand for our products, in particular the Net Centric Digital Recorder (NCDR). RADA has already won new program awards this year for additional NCDR programs that were not included in our 2006 forecast. We are also receiving additional Requests For Proposals (RFPs). During the last six months we have increased our backlog by over $9 million and expect to further increase our backlog during the remainder of the year from a number of significant programs."

"We continue to focus our marketing efforts on our strategic markets in the US, India, and Israel. Reflected in our backlog this year are key contracts in the US with Lockheed Martin, Smiths, and Boeing. In India, we won a contract for the NCDR and we expect to further increase our presence in that market," concluded Mr. Bodinger

About RADA

RADA Electronic Industries Ltd. is an Israel based company involved in the military and commercial aerospace industries. The company specializes in Avionics, Ground Debriefing Stations (Video, ACMI and Maintenance) and Automatic Test Equipment.

Note: Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risk uncertainties and other factors include, but are not limited to, changes in general economic conditions, risks in product and technology developments, market acceptance of new products and continuing product demand, level of competition and other factors described in the Company's Annual Reports on Form 20-F and other filings with the Securities and Exchange Commission.

Contact: Elan Sigal- C.F.O

RADA Electronic Industries Ltd.

Tel: +972-9-8921111

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands, except share and per share data

June 30, December

2006 31, 2005

Unaudited Audited

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $ 1,312 $ 350

Restricted cash 1,050 1,017

Trade receivables (net of allowance for doubtful

accounts of $ 0 and $ 6 at June 30, 2006 and

December 31, 2005, respectively) 1,961 4,920

Other receivables and prepaid expenses 321 156

Costs and estimated earnings in excess of billings

on uncompleted contracts 1,229 1,396

Inventories 2,208 1,942

Total current assets 8,081 9,781

LONG-TERM RECEIVABLES AND DEPOSITS:

Long-term receivables 983 983

Leasing deposits 77 72

Severance pay fund 1,688 1,614

Total long-term receivables and deposits 2,748 2,669

PROPERTY AND EQUIPMENT, NET 3,578 3,931

OTHER ASSETS:

Intangible assets, net 2,210 2,469

Deferred charges, net 30 40

Total other assets 2,240 2,509

Total assets $ 16,647 $ 18,890

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Short-term bank credit and loans $ 943 $ 877

Trade payables 1,867 1,671

Other payables and accrued expenses 3,286 3,217

Deferred revenues - 50

Billings in excess of costs and estimated earnings

on uncompleted contracts 182 391

Total current liabilities 6,278 6,206

LONG-TERM LIABILITIES:

Convertible note 2,672 2,560

Accrued severance pay 2,077 2,009

Total long-term liabilities 4,749 4,569

MINORITY INTERESTS 380 380

SHAREHOLDERS' EQUITY:

Share capital

Ordinary shares of NIS 0.005 par value -

Authorized: 47,500,000 shares at March 31, 2006 and

December 31, 2005; Issued and outstanding:

26,170,527 and 26,144,027 shares at June 30, 2006

and December 31, 2005, respectively 116 116

Additional paid-in capital 66,955 66,900

Accumulated deficit (61,831) (59,281)

Total shareholders' equity 5,240 7,735

Total liabilities and shareholders' equity $ 16,647 $ 18,890

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands, except per share data

Six months Three months Year

ended ended ended

June 30, June 30, December 31,

2006 2005 2006 2005 2005

(Unaudited) (Audited)

Revenues:

Products $ 3,661 $ 5,426 $ 2,151 $ 3,178 $ 11,303

Services 916 1,222 419 628 2,118

4,577 6,648 2,570 3,806 13,421

Cost of revenues:

Products 4,957 4,817 2,749 2,590 10,829

Services 581 596 295 290 1,481

5,538 5,413 3,044 2,880 12,310

Gross profit (loss) (961) 1,235 (474) 926 1,111

Operating expenses:

Research and

development 69 - 44 - -

Marketing and selling 440 538 213 360 927

General and

administrative 800 997 405 469 1,939

Total operating

expenses: 1,309 1,535 662 829 2,866

Operating income

(loss) (2,270) (300) (1,136) 97 (1,755)

Financial expense, net (347) (297) (227) (178) (624)

Other income

(expenses), net 68 - (3) - 33

(2,549) (597) (1,366) (81) (2,346)

Minority interests in

losses of subsidiary - 11 9 3 17

Net loss $ (2,549) $ (586) $ (1,357) $ (78) $ (2,329)

Net loss per share:

Basic and diluted net

loss per share $ (0.10) $ (0.03) $ (0.05) $ (0.004) $ (0.10)

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