Eltek uses EBITDA as a non-GAAP financial performance measurement. EBITDA is calculated by adding back to net profit (loss), interest, taxes, depreciation and impairment loss. EBITDA is provided to investors to complement results provided in accordance with GAAP, as management believes the measure helps illustrate underlying operating trends in the Company’s business and uses the measure to establish internal budgets and goals, manage the business and evaluate performance. EBITDA should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP.

Effective January 1, 2007 the Company is reporting under U.S. GAAP. All comparative data was adjusted accordingly and is presented in these financial statements in accordance with U.S. GAAP. Also effective January 1, 2007, the Company changed its reporting currency from NIS to the U.S. dollar. The change in reporting currency was accounted for in accordance with Financial Accounting Standards (SFAS) No. 52, “Foreign Currency Translation” (SFAS No. 52). Assets and liabilities of the Company have been translated using the exchange rate at the balance sheet date except for equity accounts which were translated using historical exchange rates. The average exchange rate for the period has been used to translate revenues and expenses. Translation adjustments were reported separately as a component of comprehensive income (cumulative translation adjustment). The Company believes that presenting the financial statements in U.S. dollars and under US-GAAP delivers more meaningful and relevant financial information to its shareholders.

Management Comments:

Arieh Reichart, President and Chief Executive Officer of Eltek, commented: “In the fourth quarter we made an important step forward in our efforts to rapidly overcome the adverse revenue impact of the discontinued customer product, as fourth quarter revenue grew nicely over the third quarter. This achievement is a further testament to the continuing strengthening of our global market position as well as to the robustness of our growth strategy.”

“In 2007, our penetration into the strategic U.S. high–end PCB market substantially gained momentum. We nearly doubled our U.S. revenues to $4.3 million, won 13 new tier-one customers, and expanded our distributor network. Based on recent wins and marketing initiatives, we currently believe that we will continue to grow our U.S. revenues in 2008.”

“Since the second quarter, we obtained sufficient orders from new and existing customers to almost completely compensate for the reduction in sales associated with the former principal customer and are now very encouraged with our progress in diversifying our serial production customer base. Our top ten customers accounted for 48% of our total sales in 2007 as compared with 60% and 63% in the years ended December 31, 2006 and 2005, respectively. In addition, although our operating measures are in line with the industry for the high-end products, we are working on improving our manufacturing processes in order to achieve better operating performance, and expect to see the positive outcome from these steps in the second quarter of 2008 and onwards.”

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