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RADA Electronic Industries, Ltd. (RADA)
Business Summary excerpt from SEC filing dated: March 30, 2007

RADA Electronic Industries Ltd. develops, manufactures and sells automated test equipment, avionics products and ground debriefing systems and provides manufacturing services for military and commercial use, mainly in Israel, the U.S. and Europe. We also provide test and repair services using our CATS(TM) testers and test program sets through our Chinese subsidiary. In February 2005, we purchased certain assets and assumed certain liabilities related to the operations of Vectop Ltd., an Israeli company specializing in the design, development, marketing and sale of electro-optic equipment and debriefing systems. Such assets included the know-how, intellectual property and patents that were used by, or connected to Vectop Ltd.'s business. Our products include our Net Centric Digital Recorder and related recording devices, ground information management systems, optronic products, based on technology that we acquired from Vectop Ltd., inertial navigation products and advanced training solutions.

We have been using CATS(TM), ACE(TM) and FACE(TM) as trade names. We have acquired the rights to the Israeli trademark VDS(R) and to the U.S. trademark application for the same trademark in connection with the assets we acquired from Vectop Ltd. in February 2005.

INDUSTRY OVERVIEW

Our activity is focused on the market for defense electronics products. This market has been growing in recent years and is currently a large part of the defense business. Two contradictory forces control the defense electronics market. On the one hand, new military aircraft are equipped with significantly more avionics systems than they used to carry ten to twenty years ago. In addition, the increasing usage of advanced avionics in modern aircraft, including upgrades of existing technology and growing number of unmanned aerial vehicles, or UAVs, has provided significant growth to the market. On the other hand, the significant reduction in the price of electronic systems is shrinking the dollar value of the market.

Advanced defense electronics systems are, typically, derivatives or enhancements of consumer electronic systems. Most of the defense electronics systems are built for commercial components and even sub-systems, a fact that reduces the overall price and, at the same time, generates complex obsolescence issues.

Customers for defense electronics products in the aerospace field are either governments or major integrators. Doing business with these customers is complex, has a long sales cycle and requires long term commitments for future support of delivered hardware. Production batches of these products are, usually small, especially in the retrofit market.

Suppliers of defense electronic systems are either providers of sub-systems to major integrators or providers of integrated systems to the aircraft industry or to air forces. These companies are typically very large and have diversified product offerings.

New products in the defense electronic market are usually developed utilizing internal research and development funds of customers and are tailored to specific customers' needs. In many cases, the customer who pays for the design and adaptation limits the use of intellectual property that was funded by it for other applications, due to either financial or security reasons.


PRODUCTS AND SERVICES

We provide integrated avionic solutions. Our aim is to provide not only state of the art products but also comprehensive end- to- end solutions for one or more avionic systems. The first integrated system that we provided was for the A-4 avionics upgrade program of the Israeli Air Force, or IAF. This program was the first comprehensive and complete avionics system to be provided entirely by us. During 2004, we increased our involvement and development efforts in the area of unmanned aircraft vehicles. Currently we have four new product lines:
  • Net-Centric Digital Recorder and related recording devices;
  • Ground information management systems that support our recording products and provide advanced data management capabilities;
  • Optronic products based on technology we acquired as part of the Vectop transaction; and
  • Inertial navigation products based on ring laser gyros, or RLG, fiber optic gyros, or FOG, and micro-electro mechanical sensors, or MEMS.
In addition, we continue to sell and support our traditional products including:
  • Advanced training solutions;
  • Integrated trainer aircraft avionics packages;
  • Flight data recorders and supporting ground analysis;
  • Unmanned aerial vehicle avionics; and
  • Automatic testing solutions.
We also provide manufacturing services to original equipment manufacturers in Israel and in the United States, using the manufacturing capabilities of our Beit She'an plant. We offer production of turnkey solutions, in "build to print" or "build to specification" modes. To date, we have provided manufacturing services to, among others, Smiths, Israel Aircraft Industries, or IAI, and RAFAEL Armament Development Authority Ltd., or RAFAEL. Our China-based subsidiary provides test and repair services using our CATS(TM) testers and test program sets.


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