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Amortization of intangible assets;

Stock-based compensation;

Onetime expenses related to cost saving plan and one time charges;

Revaluation of derivatives and discount amortization;

Gain on sales of subsidiaries and Appbuilder ;

Net loss from discontinued operation.

The presentation of these non-GAAP financial measures should be considered in addition to BluePhoenix' GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. BluePhoenix' management believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain charges and gains that may not be indicative of BluePhoenix' core business operating results. BluePhoenix believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing BluePhoenix' performance. These non-GAAP financial measures also facilitate comparisons to BluePhoenix' historical performance. BluePhoenix includes these non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. Non-GAAP measures are reconciled to comparable GAAP measures in the table entitled "Unaudited Reconciliation of GAAP to Non-GAAP."

About BluePhoenix Solutions

BluePhoenix Solutions Ltd. (NASDAQ: BPHX) is the leading provider of legacy language and database translation. The BluePhoenix portfolio includes a comprehensive suite of tools and services for automated database and application migration. Leveraging over 20 years of best-practice domain expertise, BluePhoenix works closely with its customers to minimize risk and provide a clear path from legacy platforms like COBOL, Natural/Adabas and others to modern solutions like SQL, DB2, Java and more. BluePhoenix customers come from diverse industries and vertical markets such as automotive, banking and financial services, insurance, manufacturing, and retail. BluePhoenix has 6 offices in the USA, UK, Italy, Romania, and Israel.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this release may be deemed forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and other Federal Securities laws. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “plans,” “believes,” “estimates,” “expects," “predicts”, “intends,” the negative of such terms, or other comparable terminology. Because such statements deal with future events, plans, projections, or future performance of the Company, they are subject to various risks and uncertainties that could cause actual results to differ materially from the Company’s current expectations. These risks and uncertainties include but are not limited to: the effects of the global economic and financial trends; market demand for the Company’s products; successful implementation of the Company’s products; changes in the competitive landscape, including new competitors or the impact of competitive pricing and products; and such other risks and uncertainties as identified in BluePhoenix’s most recent Annual Report on Form 20-F and other reports filed by it with the SEC. Except as otherwise required by law, BluePhoenix undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

This press release is also available at www.bphx.com. All names and trademarks are their owners’ property.

Company Contact:

Matt Bell

BluePhoenix Solutions

+972-9-9526110

investors@bphx.com

BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

	Three months ended						Twelve months ended
	December 31,						December 31,
	2012			2011*			2012				2011*
	Unaudited						Unaudited

Revenues	$	3,059		$	4,642		$	10,624		$	21,471
Cost of revenues		1,349			3,207			7,052			15,962
Gross profit		1,710			1,435			3,572			5,509
Research and development costs		327			542			691			3,056
Selling, general and administrative expenses		2,015			5,073			8,685			15,717
Gain on sales of subsidiaries and Appbuilder		(850	)		4,063			(1,195	)		4,063
Goodwill impairment		-			9,632			-			9,632
Total operating expenses		1,492			19,310			8,181			32,468
Operating loss		218			(17,875	)		(4,609	)		(26,959	)
Financial expenses, net		38			395			5,358			1,121
Other income		-			-			(580	)		-
Loss before taxes		180			(18,270	)		(9,387	)		(28,080	)
Taxes on income		57			3,233			221			3,272
Net loss from continued operation		123			(21,503	)		(9,608	)		(31,352	)
Net loss (profit) from discontinued operation		365			(255	)		1,469			1,115
Net loss		(242	)		(21,248	)		(11,077	)		(32,467	)
Net result attributable to noncontrolling interests		141			30			351			(91	)
Loss attributed to BluePhoenix shareholders	$	(383	)	$	(21,278	)	$	(11,428	)	$	(32,376	)
Loss per share:
From continued operation- basic and diluted	$	0.00		$	(3.44	)	$	(1.26	)	$	(5.08	)
From discontinued operation- basic and diluted	$	(0.04	)	$	0.05		$	(0.19	)	$	(0.18	)
Attributed to the shareholders	$	(0.04	)	$	(3.39	)	$	(1.45	)	$	(5.26	)
Shares used in per share calculation:
Basic and diluted **		10,594			6,268			7,897			6,158

* Presented after reclassification of Liacom Ltd. as discontinued operation.
On December 28, 2011 the company performed a one-for-four reverse split of its outstanding shares. * The goodwill valuation is currently underway by a third party appraisal. The Company expects that the valuation will be completed prior to the filing of its Annual Report on Form 20-F. Actual results may differ from the estimated amount in this press release.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share data)

	Three months ended						Twelve months ended
	December 31,						December 31,
	2012			2011			2012			2011
	Unaudited						Unaudited

GAAP Gross Profit	$	1,710		$	1,435		$	3,572		$	5,509
Amortization of intangible assets		266			758			1,531			3,708
Expenses related to cost saving plan and one time charges		-			1,376			36			5,613
Non-GAAP gross profit	$	1,976		$	3,569		$	5,139		$	14,830

GAAP operating loss	$	218		$	(17,875	)	$	(4,609	)	$	(26,959	)
Amortization of intangible assets		266			758			1,531			3,708
Expenses related to cost saving plan and one time charges		-			4,151			87			13,488
Stock-based compensation		294			261			1,703			1,208
Gain on sales of subsidiaries and Appbuilder		(850	)		4,063			(1,195	)		4,063
Goodwill impairment		-			9,632			-			9,632
Non-GAAP operating income (loss)	$	(72	)	$	990		$	(2,483	)	$	5,140

GAAP Net loss attributable to BluePhoenix	$	(383	)	$	(21,278	)	$	(11,428	)	$	(32,376	)
Amortization of intangible assets		266			758			1,531			3,708
Expenses related to cost saving plan and one time charges		-			4,151			87			13,488
Stock-based compensation		294			261			1,703			1,208
Gain on sales of subsidiaries and Appbuilder		(850	)		4,063			(1,195	)		4,063
Revaluation of derivatives and discount amortization		-			9,632			-			9,632
Net loss from discontinued operation		44			244			4,868			(45	)
Net loss from discontinued operation		365			(255	)		1,469			1,115
Non-GAAP Net income (loss) attributable to BluePhoenix	$	(264	)	$	(2,424	)	$	(2,965	)	$	793

Shares used in diluted earnings per share calculation		10,594			6,268			7,897			6,167

Non - GAAP Diluted Earnings per share	$	(0.02	)	$	(0.39	)	$	(0.38	)	$	0.13

BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

	December 31,		December 31,
	2012			2011*
	Unaudited
ASSETS
Current Assets:
Cash and cash equivalents	$	2,560	$	3,997
Restricted cash		33		-
Trade accounts receivable, net		2,445		7,675
Other current assets		581		1,041
Assets held for sale		791
Total Current Assets		6,410		12,713
Non-Current Assets:
Restricted cash		-		3,428
Property and equipment, net		562		1,021
Goodwill		12,501		14,238
Intangible assets and other, net		277		3,000
Total Non-Current Assets		13,340		21,687
TOTAL ASSETS	$	19,750	$	34,400

LIABILITIES AND EQUITY
Current Liabilities:
Short-term bank credit	$	217	$	6,983
Trade accounts payable		1,256		3,403
Deferred revenues		712		739
Other current liabilities		950		3,272
Liabilities held for sale		467		-
Total Current Liabilities		3,602		14,397
Non-Current Liabilities
Accrued severance pay, net		408		410
Loans from banks and others		281		3,945
Derivative liabilities - Warrants		370		53
Total Non-Current Liabilities		1,059		4,408
Total Equity		15,089		15,595
TOTAL LIABILITIES AND EQUITY	$	19,750	$	34,400

* The goodwill valuation is currently underway by a third party appraisal. The Company expects that the valuation will be completed prior to the filing of its Annual Report on Form 20-F. Actual results may differ from the estimated amount in this press release.

BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Three months ended						Twelve months ended
	December 31,						December 31,
	2012			2011*			2012				2011*
	Unaudited						Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(242	)	$	(21,248	)	$	(11,077	)	$	(32,467	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		309			917			1,867			4,332
Goodwill impairment		-			9,632			-			9,632
Decrease in accrued severance pay, net		(16	)		(154	)		(32	)		(874	)
Stock–based compensation		294			261			1,703			1,208
Change in fair value of derivatives and discount amortization		44			243			4,868			(45	)
Gain on sales of subsidiaries and Appbuilder		(787	)		4,063			(426	)		4,063
Loss on sale of property and equipment		-			18			12			18
Deferred income taxes, net		-			2,805			-			2,791
Long term receivable		-			20			-			-

Changes in operating assets and liabilities:
Decrease (increase) in trade receivables		(145	)		755			610			5,780
Decrease (increase) in other current assets		48			1,282			(676	)		948
Decrease in trade payables		(162	)		(352	)		(1,268	)		(1,723	)
Decrease in other current liabilities and deferred revenues		376			(225	)		127			(2,053	)
Net cash used in operating activities		(281	)		(1,983	)		(4,292	)		(8,390	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash		46			(3,428	)		4,077			(3,428	)
Purchase of property and equipment		(53	)		(140	)		(111	)		(301	)
Proceeds from sale of property and equipment		-			-			50			32
Additional consideration of previously acquired subsidiaries		-			-			-			(1,163	)
Proceeds from sales of subsidiaries and Appbuilder		1,009			8,586			3,959			8,586
Net cash provided by (used) in investing activities		1,002			5,018			7,975			3,726

CASH FLOWS FROM FINANCING ACTIVITIES:
Short term bank credit and convertible notes, net		(86	)		3,899			(1,687	)		(2,155	)
Issuance of shares and loan		-			(5,000	)		-			-
Exercise of warrants		-			-			120			-
Repayment of long-term loans		-			(1,838	)		(3,553	)		(2,264	)
Receipt of long term loans		-			1,002			-			1,002
Dividend paid to noncontrolling interest		-			-			-			(217	)
Net cash used in financing activities		(86	)		(1,937	)		(5,120	)		(3,634	)
NET CASH DECREASE FROM CONTINUED OPERATION		635			1,098			(1,437	)		(8,298	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,925			2,899			3,997			12,295
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,560		$	3,997		$	2,560		$	3,997

	BLUEPHOENIX SOLUTIONS LTD. (Registrant)

	By:	/s/ Rama Sheffer
		Rama Sheffer
		Director of Finance

Non-GAAP Results (in thousands US$)	Q4 2012	*	Q3 2012	*	Q4/2011	*
Sales	3,059		2,679		4,642
Operating profit (loss)	(72	)	(130	)	990
Net (Loss) Income	(264	)	(241	)	(2,424	)
Earnings (Loss) per share, diluted*	(0.02	)	(0.03	)	(0.39	)

GAAP Results (in thousands US$)	Q4 2012	*	Q3 2012	*	Q4 2011	*
Sales	3,059		2,679		4,642
Operating profit (loss)	218	**	(789	)	(17,875	)
Net loss	(383	)**	(3,685	)	(21,278	)
Loss per share, diluted*	(0.04	)	(0.46	)	(3.39	)