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Use of proceeds

Estimate net proceeds to company from this offering will be approximately $67.5 million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by company. A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share would increase (decrease) the net proceeds from this offering by approximately $5.4 million, assuming that the number of shares offered by company remains the same.

• Company may use a portion of the net proceeds to expand its current business through acquisitions of complementary companies, assets or technologies. Company currently have no agreements or commitments for any acquisitions.

• Company intend to use the net proceeds of this offering for research and development activities, expand its business development and marketing activities, and for general corporate purposes and working capital.

• Company also intend to use a portion of the net proceeds to repay in full a loan with an outstanding principal amount of $5.0 million, which is required to be repaid in 24 equal monthly installments of principal and accrued interest commencing January 1, 2008. The loan bears interest at the Wall Street Journal prime-lending rate plus 4.00%, which totaled 12.25% as of March 31, 2007.

• Company may also use a portion of the net proceeds to acquire or invest in complementary companies, products or technologies, although company currently do not have any acquisitions or investments planned.

The amounts that company actually spend for the purposes described above may vary significantly and will depend, in part, on the timing and amount of its future revenues. Pending use of the net proceeds as described above, company intend to invest the net proceeds in interestbearing, investment-grade instruments with maturities of less than one year or deposit the net proceeds in bank accounts in Israel or outside of Israel. 

Company will not receive any of the proceeds from the sale of shares by the selling shareholders.

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The number of ordinary shares to be outstanding after this offering excludes as of July 9, 2007:

• 3,768,508 ordinary shares reserved for issuance under share option plans, of which options to purchase 3,469,007 ordinary shares at a weighted average exercise price of $2.41 per share and options to purchase 2,931 ordinary shares at an exercise price of $320.00 per share have been granted; and

• 140,625 ordinary shares issuable upon the exercise of warrants to purchase Series E preferred shares granted to an entity that made a loan to company at an exercise price of $4.00 per share and 59 ordinary shares issuable upon the exercise of warrants to purchase ordinary shares granted to an Israeli nonprofit organization at an exercise price of $1,270 per share.