20-F

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20 F

o    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

o    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended ___________

OR

o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report: January 2, 2008

For the transition period from _________ to ________

Commission File No. 0 13012

I.I.S. Intelligent Information Systems Limited
(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English)

ISRAEL
(Jurisdiction of incorporation or organization)

33 Jabotinsky Street, Ramat Gan, Israel
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

None

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Ordinary Shares, NIS 0.003 par value per share

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: As of January 2, 2008, the Registrant had 23,128,768 Ordinary Shares, NIS 0.003 par value per share, outstanding (“Ordinary Shares”).

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o   Yes      x   No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o   Yes      x   No

Note-Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filling requirements for the past 90 days.

o Yes     x No

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o     Accelerated filer o     Non-accelerated filer x

        Indicate by check mark which financial statement item the registrant has elected to follow.

o Item 17     x    Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes     o No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

o Yes     x No

This Shell Company Report on Form 20-F contains historical information and forward-looking statements. Statements looking forward in time are included in this Form 20-F pursuant to the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995. They involve known and unknown risks and uncertainties that may cause the actual results of I.I.S. Intelligent Information Systems Limited (the “Company”, “us” or “IIS”) in future periods to be materially different from any future performance suggested herein. Further, the Company operates in an industry sector where securities values may be volatile and may be influenced by economic and other factors beyond the Company’s control. In the context of the forward-looking information provided in this Form 20-F and in other reports, please refer to the discussions of risk factors detailed in, as well as the other information contained in, this Shell Company Report on Form 20-F and the Company’s other filings with the Securities and Exchange Commission during the past 12 months.

TABLE OF CONTENTS

Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	2
Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE	2
Item 3. KEY INFORMATION	2
Item 4. INFORMATION ON THE COMPANY	15
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	27
Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	36
Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	47
Item 8. FINANCIAL INFORMATION	50
Item 9. THE OFFER AND THE LISTING	50
Item 10. ADDITIONAL INFORMATION	51
Item 11. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	70
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	70
Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	70
Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	71
Item 15. CONTROLS AND PROCEDURES	71
Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT	71
Item 16B. CODE OF ETHICS	71
Item 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES	71
Item 16D. EXEMPTIONS FROM THE LISTING REQUIREMENTS AND STANDARD FOR AUDIT COMMITTEE	71
Item 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATES AND PURCHASERS	71
Item 17. FINANCIAL STATEMENTS	71
Item 18. FINANCIAL STATEMENTS	71
Item 19. FINANCIAL STATEMENTS AND EXHIBITS	72

i

PART I

Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A. Directors and Senior Management

See Item 6.

B. Advisers

Not relevant.

C. Auditors

        Kesselman & Kesselman Certified Public Accountants (Israel), a member of Pricewaterhouse Coopers, of Trade Tower, 25 Hamered Street, Tel Aviv 68125 Israel, have audited our consolidated financial statements for the years ended December 31, 2003, 2004, 2005 and 2006.

        Kost Forer Gabbay & Kasierer, an Israeli independent registered public accounting firm, a member of Ernst & Young Global, of 3 Aminadav St., Tel-Aviv 67067, Israel have audited our consolidated financial statements for the year ended December 31, 2002.

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE

        Not applicable.

Item 3. KEY INFORMATION

A. Selected Financial Data.

        The following selected financial data of the Company as of and for the years ended December 31, 2006, 2005 and 2004, are derived from the Company’s audited financial statements which were included in the Company’s Annual Report for the year ended December 31, 2006, are also included elsewhere in this Shell Company Report on Form 20-F and have been prepared in accordance with U.S. GAAP. The selected financial data of the Company as of and for the years ended December 31, 2003 and 2002 have been derived from audited financial statements not included in this Shell Company Report on Form 20-F and have also been prepared in accordance with U.S. GAAP. The following selected financial data for Witech Communications Ltd., an Israeli company (“Witech”) as of and for the years ended December 31, 2006 and 2005 are derived from Witech’s audited financial statements which are included elsewhere in this Shell Company Report on Form 20-F and have been prepared in accordance with U.S. GAAP. The following selected financial data of both the Company and Witech for the nine months ended September 30, 2007 and 2006 are derived from the Company’s and Witech’s unaudited financial statements which are included in this Shell Company Report on Form 20-F and have been prepared in accordance with U.S. GAAP. The following selected pro forma combined financial data of the Company and Witech as of September 30, 2007 and for the year ended December 31, 2006 and the nine months ended September 30, 2007 are derived from the combined pro forma financial statements included elsewhere in this Shell Company Report on Form 20-F in accordance with the requirements of SEC Regulation S-X. The Selected Financial Data set forth below should be read in conjunction with and are qualified by reference to Item 5 (Operating and Financial Review and Prospects), and the Financial Statements and Pro Forma Financial Statements included elsewhere in this Shell Company Report on Form 20-F.

        As a result of the decrease of the Company’s interest in StoreAge Networking Technologies Ltd. (“StoreAge”) to below 50%, after December 2000, the Company and StoreAge ceased reporting their operations on a consolidated basis and the Company’s investment in StoreAge was accounted for instead, in accordance with the hypothetical liquidation method. Investments in affiliates are investments in companies which are not subsidiaries, but are rather investments in companies where the investor holds more than 20% of the outstanding stock and can thereby exercise significant influence over operating and financial policy. As the Company had not guaranteed obligations and was not otherwise committed to provide further financial support for any of the associated companies, the Company discontinued applying the equity method when the investment account was reduced to zero.

2

Statement of Operations Data (in thousands, except per share data) of IIS:

	Year Ended December 31, Audited
	2006			2005			2004			2003			2002
Sales revenues		--			--			--			--		$	62
Revenues from research and
development services to an associated company														145
Total revenues														207
Cost of sales														38
Cost of revenues from research and
development services to an associated company														51
Total cost of revenues														89
Gross profit														118
Research and
development costs														548
Selling and marketing expenses														49
General and administrative expenses	$	91		$	103		$	200		$	441			577
Impairment of goodwill														186
Non recurring income														(122	)
Operating loss		(91	)		(103	)		(200	)		(441	)		(1,120	)
Financial income (expenses)- net		17			(3	)		(4	)		(3	)
Other income		4,713									330
Income (loss) before equity in losses of
associated companies		4,639			(106	)		(204	)		(114	)		(1,120	)
Equity in losses of associated companies											(20	)		(1,250	)
Minority interest in losses of subsidiary
Net income (loss)	$	4,639		$	(106	)	$	(204	)	$	(134	)	$	(2,370	)
Earnings (loss) per share - basic and
diluted	$	0.40		$	(0.01	)	$	(0.02	)	$	(0.01	)	$	(0.21	)
Weighted average number of shares (in
thousands) - basic and diluted		11,577			11,577			11,577			11,577			11,485

3

Balance Sheet Data (in thousands) of IIS:

	At December 31,
	2006		2005			2004			2003		2002
Working capital	$	4,449	$	(191	)	$	(86	)	$	113	$	198
Cash and cash equivalents		4,705		41			93		$	133	$	397
Total assets		4,713		43			105		$	335	$	549
Short-term bank credits											$	1
Shareholders' equity (capital deficiency)	$	4,447	$	(192	)	$	(86	)	$	118	$	252

Statement of Operations Data (in thousands, except per share data) of IIS:

For the nine month period ending September 30	2007			2006
	(Unaudited)			(Unaudited)
Income from Management Fee		33
General and Administrative Expenses		(479	)		(63	)
Financial Income (expenses)- net		251			8
Loss Before Tax on Income		(195	)		(55	)
Tax on Income		10
Net loss for the period		(205	)		(55	)
Loss per share - basic and diluted	$	(0.02	)	$	(0.01	)
Weighted average number of shares (in
thousands) - basic and diluted		11,577			11,577

Balance Sheet Data (in thousands) of IIS:

	September 30, 2007 (Unaudited)		December 31, 2006 (Audited)
Working capital	$	685	$	4,449
Cash and cash equivalents		881		4,705
Total current assets		952		4,710
Shareholders' equity (capital deficiency)		4,238		4,447

4

Statement of Operations Data (in thousands, except per share data) of Witech:

For the period ending	Nine month period ending September 30						Year Ended December 31,			Year Ended December 31,
	2007			2006			2006			2005
	Unaudited						Audited			Audited
Revenues	$	1,369		$	183		$	272		$	25
Cost of revenues		1,573			452			740			57
Gross loss		(205	)		(269	)		(468	)		(32	)
Research and
development costs, net		239			361			407			200
Selling, general and administrative		2,085			597			820			208
Operating loss		(2,528	)		(1,227	)		(1,695	)		(440	)
Financial expenses- net		(539	)		(214	)		(316	)		14
Loss before taxes on income		(3,067	)		(1,441	)		(2,011	)	$	(454	)
Taxes on income		77			4			5
Net loss	$	(3,144	)	$	(1,445	)	$	(2,016	)	$	(454	)
Loss per share - basic and diluted	$	(127.6	)	$	(77.2	)	$	(105.4	)	$	(29.4	)
Weighted average number of shares (in
thousands) - basic and diluted		24.6			18.7			19.1			15.4

Balance Sheet Data (in thousands) of Witech:

	At September 30,						At December 31,
	2007			2006			2006			2005
	Unaudited			Unaudited			Audited			Audited
Working capital	$	(4,778	)	$	(489	)	$	(873	)	$	30
Cash and cash equivalents		82			42			31			20
Total assets		3,177			1,112			963			288
Short-term bank credits		266			162			253			21
Shareholders' equity (capital deficiency)	$	(3,581	)	$	(937	)	$	(1,209	)	$	70

5

Pro-forma combined Statement of Operations (in thousands, except per share data) of the Company and Witech for the year ended December 31, 2006 and for the nine months ended September 30, 2007:

	Nine month period ending September 30, 2007			Year Ended December 31, 2006,
	Unaudited			Unaudited
Revenues		1,369			272
Cost of revenues		1,878			1,147
Gross income (loss)		(509	)		(875	)
Research and development costs, net		239			407
Selling, general and administrative		2,821			1,298
Operating loss		(3,569	)		(2,580	)
Capital gain from disposal of investment					4,713
Financial income (expenses)- net		(324	)		(400	)
Income (loss) before taxes on income		(3,893	)		1,733
Taxes on income		(38	)		(161	)
Net income (loss) for the period		(3,855	)		1,894
Earnings (loss) per share - basic and
diluted		(0.17	)		0.08
Weighted average number of shares (in
thousands) - basic		23,129			23,129
Weighted average number of shares (in
thousands) - diluted		23,129			25,675

Pro-forma Balance Sheet Data (in thousands) of the Company and Witech for the nine months ended September 30, 2007:

	At September 30, 2007, Unaudited
Working capital		968
Cash and cash equivalents		2,618
Total assets		16,066
Short-term bank credits		517
Shareholders' equity (Net of capital deficiency)	$	9,291

B. Capitalization and Indebtedness.

        The table below sets forth the unaudited consolidated debt and capitalization, determined in accordance with U.S. GAAP, as of September 30, 2007:

— On an actual basis

— On a pro-forma consolidated basis with Witech

        The information in this table should be read in conjunction with and is qualified by reference to the financial statements and notes thereto and other financial information incorporated in this Shell Company report on Form 20-F.

	IIS			IIS and Witech Consolidated			Proforma Adjustments			Pro forma
Short Term Debt	$	267		$	5,825		$	(3,441	)	$	2,384
Long Term Debt		19			1,219			3,172			4,391
Shareholders' Equity:
Share capital		55			56			(1	)		55
Additional paid in capital		41,417			43,734			3,269			47,003
Accumulated deficit		(37,234	)		(43,133	)		5,366			(37,767	)
Total shareholders' equity		4,238			657			8,634			9,291
Total Capitalization and Indebtedness		4,524.0			7,701			8,365			16,066

6

        The number of issued and outstanding shares as of September 30, 2007 in the table excludes:

— 3,300,000 Ordinary Shares issued or reserved for future issuance under our Share Option Plan (see "Item 6. Directors, Senior Management and Employees - D. Stock Options Plans");

— the issuance in November 2007 and January 2008 of convertible notes in the aggregate principal amount of $1,655,000 and related warrants to purchase 331,000 of our Ordinary Shares (see "Item 10. Addition Information - C. Material Contracts: Convertible Notes Financing"), except that this principal amount is included in the pro-forma of the long-term debt; and

— the contemplated issuance of warrants to purchase 4,600,000 of our Ordinary Shares (see "Item 10. Addition Information - C. Material Contracts: Intention to issue warrants").

C. Reasons for the Offer and Use of Proceeds.

        Not applicable.

D. Risk Factors.

        The following risk factors, among others, could in the future affect our actual results of operations and could cause our actual results to differ materially from those expressed in forward-looking statements made by us. These forward-looking statements are based on current expectations and we assume no obligation to update this information. Before you decide to buy, hold, or sell our Ordinary Shares, you should carefully consider the risks described below, in addition to the other information contained elsewhere in this annual report. The following risk factors are not the only risk factors facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. Our business, financial condition and results of operation could be seriously harmed if any of the events underlying any of these risks or uncertainties actually occurs. In that event, the market price for our Ordinary Shares could decline, and you may lose all or part of your investment.

        Our acquisition of Witech Communications Ltd contains various risks. On January 2, 2008 we acquired all the outstanding shares of Witech, which is engaged in the development, sale, operation and support of wireless video transmission systems for use on roller coasters and thrill rides in amusement parks as well as other moving attractions. The acquisition resulted in the dilution of our existing shareholders as the shareholders of Witech received approximately 50% of our issued and outstanding shares following the transaction. Witech’s business is subject to various risks such as rapid technological changes in technology, competition, need for substantial working capital, dependence on amusement park seasonality, risks relating to expansion of its business and international operations, risk of lawsuits and liability and dependence on relationships with a relatively small number of companies who own and operate amusement parks worldwide.

        Witech and we have a history of substantial recurring operating losses and we depend on Witech’s future success for any future income. IIS lost approximately $106,000 during the year ended December 31, 2005 and $204,000 during the year ended December 31, 2004. During the year ended December 31, 2006 we had an operating loss of $74,000, but showed a net income of $4,639,000 due to the sale of our holdings in StoreAge. Our operating costs have increased in 2007 due to the termination of our voluntary liquidation proceedings in April 2007 and these costs have further increased significantly due to the Witech transaction. We currently have no material assets other than a limited amount of cash and the shares of Witech. Our ability to achieve any future revenues and to generate profits or gains depends entirely on Witech’s revenues and profitability. We cannot assure you that Witech will prove commercially successful, or that our investment in Witech will be profitable.

7

        Witech’s net sales revenues in the years that ended December 31, 2005, 2006 and for the nine months that ended September 30, 2007 were $25,000, $272,000 and $1,369,000 respectively. However, Witech’s net losses for the years that ended December 31, 2005, 2006 and for the nine months that ended September 30, 2007 were $454,000, $2,016,000 and $3,144,000 respectively. On a pro forma combined basis giving effect to the Witech acquisition as if it had occurred on January 1, 2006, the Company and Witech had net losses of $3,855,000 for the nine months ended September 30, 2007.

        We have very limited cash resources and any additional raising of capital may lead to significant dilution; Witech may have to cease operations if it does not receive additional funding. We anticipate that we will have to raise at least $4,500,000 of additional financing (net of expenses) to grow the business of Witech in the next twelve months. Presently, Witech does not have sufficient cash resources to meet its requirements in the twelve months following January 8, 2008. These factors raise substantial doubt about Witech’s ability to continue as a going concern. Management is in the process of evaluating various financing alternatives as Witech will need to finance future operating expenses, research and development activities and general and administrative expenses through fund raising in the public or private equity markets. Witech’s financial statements do not include any adjustments that may be necessary should it be unable to continue as a going concern. Witech’s continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability.

        Since Witech has a limited number of customers, loss of any one customer in the future as they build their customer base could hurt its business. Approximately 76% of revenues of Witech in 2007 were derived from two customers operating 11 amusement parks. Although Witech generally enters into long-term contracts with most of its customers, loss of one or more of these principal customers or a material decrease in orders could materially and adversely affect its business, financial position and results of operations.

        Our future growth will depend upon market acceptance of Witech and the development of the market for its products. Witech’s success depends on the acceptance of its products and technologies, development of new products and features and the development of the targeted markets. In 2005, Witech launched its on-ride video system, which we believe to be one of the first and leading on-ride technologies. During 2005, 2006 and 2007 Witech invested, and we expect to continue to invest in 2008, in developing Witech’s on-ride video system and in creating and increasing its market acceptance. There is no assurance that the market or demand for on-ride technologies, such as Witech’s on-ride video system, will develop as rapidly as we expect or at all, or even if such market develops, that we will be successful in marketing and selling Witech’s on-ride video system and growing revenues to justify our investments. In particular, we believe that successful positioning of Witech’s on-ride video system is a critical factor in its ability to achieve growth.

        Our results may be adversely affected by competition. The market for our products is fragmented and intensely competitive. Competition in the industry is generally based on product performance, technical support and price. We compete with international providers, many of whom have significantly greater financial, technical and marketing resources than we have. We anticipate continued growth and competition in the on-ride technology market and, consequently, the entrance of new competitors into the market. Our existing and potential competitors, such as Ridercam GmbH and Socrates Digital Video B.V. who compete with our on-ride video system and Yourday and Colorvison who have off-ride video systems who also compete with our on-ride video system, may be able to develop software products and services that are as effective as, or more effective or easier to use than those offered by us. Such existing and potential competitors may also enjoy substantial advantages over us in terms of research and development expertise, manufacturing efficiency, name recognition, sales and marketing expertise and distribution channels. In addition, three of the largest ride photo companies, Kodak, Colorvision and Picsolve, currently have corporate sponsorship agreements with a number of large park chains. These sponsorship agreements often give the sponsor exclusive rights for all digital media services in the parks. When supplying systems to parks with sponsorship agreements, we may have to split part of the revenues with the sponsor. These agreements may limit Witech’s potential growth into new park chains. We anticipate the need of Witech to enter into its own sponsorship agreements in the future, but it may need to wait for the current agreements to expire. Although these agreements are typically for three years, there is no assurance that the agreements will not be renewed with the current sponsors. There can be no assurance that we will be able to compete successfully against current or future competitors or that competition will not have a material adverse effect on our future revenues and, consequently, on our business, operating results and financial condition.

8

        Our operating results may vary quarterly and seasonally. Witech recognizes a substantial portion of its revenues in the months of June through September.     Our operating results reflect seasonal trends and we expect to continue to be affected by such trends in the future, primarily in the first and fourth quarters, when we expect to continue to experience relatively lower sales as a result of reduced sales activity in North America during the winter months. Due to the foregoing factors, in some future quarters our operating results may be below the expectations of public market analysts and investors. In such event, it is likely that the price of our Ordinary Shares would be materially adversely affected.

        Our operating results fluctuate significantly.  Our quarterly results have fluctuated significantly in the past and are likely to fluctuate significantly in the future. Our future operating results will depend on many factors, including, but not limited to, the following:

— the size and timing of significant orders and their fulfillment;

— demand for our products;

— changes in our pricing policies or those of our competitors;

— the number, timing and significance of product enhancements;

— new product announcements by us and our competitors;

— our ability to successfully market newly acquired products and technologies;

— our ability to develop, introduce and market new and enhanced products on a timely basis;

— changes in the level of our operating expenses;

— budgeting cycles of our customers;

— customer order deferrals in anticipation of enhancements or new products that we or our competitors offer;

— product life cycles;

— software bugs and other product quality problems;

— personnel changes;

— changes in our strategy;

— seasonal trends and general domestic and international economic and political conditions, among others;

— currency exchange rate fluctuations and economic conditions in the geographic areas where we operate; and

— the inherent uncertainty in marketing new products or technologies.

        Due to the foregoing factors, quarterly revenues and operating results are difficult to forecast, and it is likely that these or other factors will adversely affect our future operating results.

        Revenues are also difficult to forecast because our sales cycle varies from customer to customer. In light of the foregoing, we cannot predict revenues for any future quarter with any significant degree of accuracy. Accordingly, we believe that period-to-period comparisons of our operating results are not necessarily meaningful and you should not rely upon them as indications of future performance. Although we have experienced revenue growth in the past, we may not be able to sustain this growth rate, and you should not consider such past growth indicative of future revenue growth, or of future operating results.

        We are subject to risks associated with international operations. Witech and we are based in Israel, but Witech generates almost all its revenues from North America. We intend to increase Witech’s marketing and sales efforts in Europe and the Far East in order to sign agreements with customers in these areas. Although we commit significant management time and financial resources to developing direct and indirect international sales and support channels, we cannot be certain that we will be able to generate or maintain international market demand for our products. To the extent that we cannot do so in a timely manner, our business, operating results and financial condition may be adversely affected.

9

        As we conduct business globally, our future results could also be adversely affected by a variety of uncontrollable and changing factors and inherent risks, including the following:

— the impact of possible recessionary environments in multiple foreign markets;

— unexpected changes in regulatory requirements;

— difficulties and costs of staffing and managing foreign operations;

— reduced protection for intellectual property rights in some countries;

— potentially adverse tax consequences; and

— political and economic instability.

        We cannot be certain that we will be able to sustain or increase revenues from international operations or that the foregoing factors will not have a material adverse effect on our future revenues and, as a result, on our business, operating results and financial condition.

        The loss of the services of our key personnel may negatively affect our business. Our future success depends to a large extent on the continued services of our senior management and key personnel, including, in particular, Charles Moss, David Elooz, Eliyahu Cohen and Ronen Segal. Any loss of the services of members of our senior management or other key personnel, and especially those of Messrs. Moss, Elooz, Cohen and Segal, particularly to a competitor, may adversely affect our business.

        Witech is subject to risks relating to proprietary rights and risks of infringement. Witech has limited patent protection. It is dependent upon its proprietary software technology and Witech relies primarily on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights. Except for Witech’s pending patent applications for a system and method for filming and recording attractions in the United States, Europe and Japan, it does not have any trademark, patent or copyright registrations. To protect Witech’s software, documentation and other written materials, it relies on trade secret and copyright laws, which afford only limited protection. It is possible that others will develop technologies that are similar or superior to Witech’s technology. Despite its efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of Witech’s products or to obtain and use information that Witech regards as proprietary. It is difficult to police the unauthorized use of products in our field, and Witech expects software piracy to be a persistent problem, although it is unable to determine the extent to which piracy of its software products exists. In addition, the laws of some foreign countries do not protect Witech’s proprietary rights as fully as do the laws of the United States. Witech cannot be certain that its means of protecting its proprietary rights in the United States or abroad will be adequate or that its competition will not independently develop similar technology.

        Witech is not aware if it has infringed any proprietary rights of third parties. It is possible, however, that third parties will claim that Witech has infringed upon their intellectual property rights. Witech believes that software product developers will increasingly be subject to infringement claims as the number of products and competitors in its industry segment grows and the functionality of products in different industry segments overlaps. It would be time consuming for Witech to defend any such claims, with or without merit, and any such claims could:

— result in costly litigation;

— divert management's attention and resources;

— cause product shipment delays; and

— require us to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us, if at all.

        If there is a successful claim of infringement against us and we are not able to license the infringed or similar technology or other intellectual property, our business, operating results and financial condition would be materially adversely affected.

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        Technological changes may adversely affect the market acceptance of our products and services. We compete in a market that is characterized by technological changes and improvements and frequent new product introductions and enhancements. The introduction of new technologies and products could render existing products and services obsolete and unmarketable and could exert price pressures on our products and services. Any future success will depend upon our ability to address the increasingly sophisticated needs of our customers by, among others:

— supporting existing and emerging hardware, software, databases and networking platforms; and

— developing and introducing new and enhanced applications that keep pace with such technological developments, emerging new markets and changing customer requirements.

        Witech’s products may contain defects that may be costly to correct, delay market acceptance of its products, harm our reputation and expose us to litigation. Despite testing by Witech, errors may be found in its software products. If defects are discovered, Witech may not be able to successfully correct them in a timely manner, or at all. Defects and failures in its products could result in a loss of, or delay in, market acceptance of Witech’s products and could damage its reputation. Although Witech’s standard license agreement with its customers contains provisions designed to limit our exposure to potential product liability claims, it is possible that these provisions may not be effective or enforceable under the laws of some jurisdictions, and Witech could fail to realize revenues and suffer damage to its reputation as a result of, or in defense of, a substantial claim.

        Our efforts to increase our presence in the North America, Europe and Asia may not be profitable. Our success in becoming a stronger competitor in the sale of our on-ride technology is dependent upon our ability to increase our sales in the North America, Europe and Asia. Our efforts to increase our penetration to these markets are subject to risks inherent to such markets, including the high cost of doing business in such locations.

        We do not anticipate paying cash dividends on our Ordinary Shares in the foreseeable future. We do not anticipate paying any cash dividends on our Ordinary Shares in the foreseeable future under our current financial condition. Future dividend distributions are subject to the discretion of our board of directors and will depend on various factors, including our operating results, future earnings, capital requirements, financial condition, tax implications of dividend distributions on our income, future prospects and any other factors deemed relevant by our board of directors. The distribution of dividends also may be limited by Israeli law, which permits the distribution of dividends only out of profits (as defined by Israeli law) or otherwise upon the permission of the court. You should not rely on an investment in our company if you require dividend income from your investment. The success of your investment will likely depend entirely upon any future appreciation of the market price of our Ordinary Shares, which is uncertain and unpredictable. There is no guarantee that our Ordinary Shares will appreciate in value or even maintain the price at which you purchased your Ordinary Shares.

        A substantial number of our shares can be sold in the future under Rule 144, which could lower the price of our shares. Existing shareholders may sell Ordinary Shares pursuant to Rule 144 promulgated under the Securities Act of 1933, or otherwise. Such sales could adversely affect the price of the Ordinary Shares. We cannot predict the effect that future sales of the Ordinary Shares, or the availability of the Ordinary Shares for future sales, will have on the market price of the Ordinary Shares. Prevailing market prices for the Ordinary Shares could drop if substantial amounts of the Ordinary Shares are sold, or if others perceive that such sales could occur.

        The delisting of our Ordinary Shares from the Nasdaq SmallCap Market has decreased the liquidity and increased the volatility of our Ordinary Shares. Our Ordinary Shares were delisted from the Nasdaq SmallCap Market effective January 23, 2003. In addition, after being traded on the OTC Bulletin Board from January 23, 2003 until August 23, 2004, the Company’s Ordinary Shares were delisted from the OTC Bulletin Board and have thereafter been traded on the Pink Sheets Electronic Quotation Service (“Pink Sheets”). The delisting of the Company’s Ordinary Shares from The Nasdaq SmallCap Market and the OTC Bulletin Board has materially and adversely decreased the liquidity and market price of the Ordinary Shares, and may increase both volatility and the “spread” between bid and asked prices of the shares. Our share price may be volatile. The market price of our Ordinary Shares may fluctuate following the announcement of financial results or new product introductions by Witech or its competitors or other matters such as military, political or economic developments in the Middle East and the market for technology stocks generally.

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        Our financial results may be adversely affected by inflation and currency fluctuations. Since our functional currency is the U.S dollar and we report our financial results in dollars, fluctuations in rates of exchange between the dollar and non-dollar currencies (including the NIS) may have a material adverse affect on our results of operations. We are exposed to the risk of fluctuation in the U.S. dollar/shekel exchange rate. In 2007, we derived almost all of our revenues in U.S. dollars, however, most of our expenses were denominated in shekels. Our NIS-denominated expenses consist principally of salaries and related personnel expenses. We anticipate that a material portion of our expenses will continue to be denominated in shekels. If the U.S. dollar depreciates against the NIS, this will adversely effect our profit margins. We do not currently engage in any currency hedging transactions intended to reduce the effect of fluctuations in foreign currency exchange rates on our results of operations. We cannot guarantee that we will not enter into such transactions in the future or that such measures will adequately protect us from serious harm due to the impact of inflation in Israel or the United States.

        The future issuance of warrants to certain IIS shareholders will dilute other shareholders. As previously determined by our Board of Directors and publicly announced, subject to and following compliance with applicable Israeli and United States securities laws and regulations, we issued, for no additional consideration, to all shareholders of IIS of record as of November 9, 2007, warrants to purchase an aggregate of 4,600,000 of our Ordinary Shares, on a pro-rata basis according to the percentage holding of each such shareholder in the issued and outstanding share capital of IIS on such date. These warrants will be exercisable at the price of $0.44 per share. These warrants, when issued, will dilute all our shareholders who are not entitled to such warrants.

        A group of shareholders beneficially owns a substantial amount of our shares and may influence our affairs. Although no agreement has yet been signed between Mr. Robi Hartman, CDC Holdings Ltd. (“CDC”), Charles Moss (and a company owned by him), David Elooz, Eliyahu Cohen and Ronen Segal, such parties have informed us that they are negotiating a voting agreement. It has been agreed in principle that without derogating from the rights of any of the other shareholders of the Company, Hartman and CDC and their affiliates, on the one hand, and Messrs. Moss, Elooz, Cohen and Segal and their affiliates, on the other hand, shall have the right to nominate fifty percent (50%) of the nominees to the Board of Directors of the Company (excluding the “External Directors” as defined in the Israeli Companies Law). These shareholders own an aggregate of approximately 35.17% of our outstanding voting power (and beneficially owns, including Ordinary Shares issuable upon the exercise of warrants, convertible notes and options, an aggregate of approximately 34.96% of our outstanding Ordinary Shares). As a result, this group of shareholders has a significant influence on the election of our directors. This concentration of ownership of our Ordinary Shares could delay or prevent proxy contests, mergers, tender offers, or other purchases of our ordinary shares that might otherwise give our shareholders the opportunity to realize a premium over the then-prevailing market price for our Ordinary Shares. This concentration of ownership may also adversely affect our share price. It is contemplated that this agreement shall continue until the earlier of (i) January 1, 2013, and (ii) the date upon which the shareholding of Mr. Hartman and CDC, and their affiliates, on the one hand, and Messrs. Moss, Elooz, Cohen and Segal and their affiliates, on the other hand, is reduced below 10% of the one our the issued and outstanding share capital.

Risk Factors Relating to Our Operations in Israel

        Conducting business in Israel entails special risks. We are incorporated under the laws of, and our executive offices and research and development facilities, and those of Witech are located in the State of Israel. Although most of Witech’s sales are made to customers outside Israel, it is nonetheless directly affected by the political, economic and military conditions affecting Israel. Any of Witech’s manufacturing operations would be heavily dependent upon components imported from outside of Israel. Any major hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could have a material adverse effect on our business, financial condition and results of operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors, as well as incidents of civil unrest. During the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. This conflict involved missile strikes against civilian targets in northern Israel that resulted in economic losses. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could adversely affect our operations. Since September 2000, terrorist violence in Israel has increased significantly and negotiations between Israel and Palestinian representatives have effectively ceased. The establishment of a government in the Palestinian Authority in early 2006 by representatives of the Hamas militant group has created additional unrest and uncertainty in the region. We can give no assurance that security and political conditions will not have an impact on our business in the future. Hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could adversely affect our operations and could make it more difficult for us to raise capital.

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        Our results of operations may be negatively affected by the obligation of our personnel to perform military service. Many of our executive officers and employees in Israel are obligated to perform annual reserve duty in the Israeli Defense Forces and may be called for active duty under emergency circumstances at any time. If a military conflict or war arises, these individuals could be required to serve in the military for extended periods of time. Our operations could be disrupted by the absence for a significant period of one or more of our executive officers or key employees or a significant number of other employees due to military service. Any disruption in our operations could adversely affect our business.

        Because Witech received grants from the Israeli Office of the Chief Scientist, it is subject to ongoing restrictions. Witech received royalty-bearing grants from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor for research and development programs that meet specified criteria. Witech is obligated to pay royalties with respect to the grants received. In addition, the terms of the Chief Scientist grants limit its ability to manufacture products or transfer technologies outside of Israel if such products or technologies were developed using know-how developed with or based upon Chief Scientist grants. Any non-Israeli who becomes a holder of 5% or more of Witech’s share capital is generally required to notify the Chief Scientist and to undertake to observe the law governing the grant programs of the Chief Scientist, the principal restrictions of which are the transferability limits described above.

        We may be adversely affected if the rate of inflation in Israel exceeds the rate of devaluation of the new Israeli shekel against the U.S. dollar. A portion of our expenses, primarily labor expenses, is incurred in NIS. As a result, we are exposed to the risk that the rate of inflation in Israel will exceed the rate of devaluation of the NIS in relation to the U.S. dollar or that the timing of this devaluation lags behind inflation in Israel. In 2004, 2006 and 2007 the U.S. dollar devaluated against the NIS by 1.6%, 8.2% and 8.97%, respectively, while in 2005, the U.S. dollar appreciated against the NIS by 6.8%. We may be materially and adversely affected in the future if the rate of inflation in Israel exceeds the devaluation of the NIS against the U.S. dollar or if the timing of this devaluation lags behind increases in inflation in Israel.

        Anti takeover provisions could negatively impact our shareholders. Some of the provisions of Israeli law could:

— discourage potential acquisition proposals;

— delay or prevent a change in control over us; and

— limit the price that investors might be willing to pay in the future for our Ordinary Shares.

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Generally, under Israeli corporate law, the board of directors and the shareholders of each of the merging companies must approve a merger. If the share capital of the non-surviving company consisted of more than one class of shares, the approval of each class is also required. In certain cases, court approval is also required. Under the Companies Law, a merger may be completed only after 50 days have elapsed from the date all the necessary approvals and the merger proposals have been submitted to the Israeli Companies Registrar and at least 30 days have passed from the shareholders approval of each of the merging companies. The Companies Law also provides that an acquisition of shares of a public company must be made by means of a tender offer if, as a result of such acquisition, the purchaser would become a 25% or more shareholder of the company. This rule does not apply if there is already another 25% shareholder of the company. Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of tender offer if, as a result of the acquisition, the purchaser would become a 45% shareholder of the company, unless someone else already holds a majority of the voting power of the company. These rules may not apply if the acquisition is made by way of a merger. The requirements of Israeli corporate law generally make these forms of acquisition significantly more difficult than under United States corporate laws. Other potential means of acquiring a public Israeli company might involve significant obstacles, such as a requirement for court approval for the acquisition. In addition, a significant body of case law has not yet developed with respect to many aspects of the new Companies Law. Until this happens, uncertainties will exist regarding its interpretation.

        Service and enforcement of legal process on us and our directors and officers may be difficult to obtain. Service of process upon our directors and officers and the Israeli experts named herein, all of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, all of our assets, and all of our directors and the Israeli experts named in this annual report are located outside the United States, any judgment obtained in the United States against us or these individuals or entities may not be collectible within the United States. There is doubt as to the enforceability of civil liabilities under the Securities Act and the Securities Exchange Act in original actions instituted in Israel. However, subject to certain time limitations and other conditions, Israeli courts may enforce final judgments of U.S. courts for liquidated amounts in civil matters, including judgments based upon the civil liability provisions of those acts. If a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency. Judgment creditors must bear the risk of unfavorable exchange rates.

        Your rights and responsibilities as a shareholder will be governed by Israeli Law and differ in some respects from the rights and responsibilities of Shareholders under U.S. law. We are incorporated under Israeli law. The rights and responsibilities of holders of our Ordinary Shares are governed by our memorandum of association, articles of association and by Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith in exercising his or her rights and fulfilling his or her obligations toward the company and other shareholders and to refrain from abusing his power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters. Israeli law provides that these duties are applicable in shareholder votes at the general meeting with respect to, among other things, amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and actions and transactions involving interests of officers, directors or other interested parties which require the shareholders’ general meeting’s approval. In addition, a controlling shareholder of an Israeli company or a shareholder who knows that he or she possesses the power to determine the outcome of a vote at a meeting of our shareholders, or who has, by virtue of the company’s articles of association, the power to appoint or prevent the appointment of an office holder in the company, or any other power with respect to the company, has a duty of fairness toward the company. The Israeli Companies Law does not establish criteria for determining whether or not a shareholder has acted in good faith. Moreover, the law is relatively new and there is no case law available on the duty of a non-controlling shareholder to act in good faith.

        As a foreign private issuer, we may follow certain home country corporate governance practices. As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of certain requirements applicable to domestic private issuers. As a foreign private issuer, we may follow home country practice with regard to, among other things, composition of the board of directors, director nomination procedure, compensation of officers, quorum at shareholders’ meetings and contents of proxy statements. In addition, we may follow our home country law, which requires that we obtain shareholder approval for certain dilutive events, such as for the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company.

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Item 4. INFORMATION ON THE COMPANY

A. Share Exchange Agreement with Witech

        The following description describes certain of the material terms of the Share Exchange Agreement between the Company, Witech and the shareholders of Witech dated November 5, 2007, as amended on January 2, 2008 (the “Exchange Agreement”). This description of the Exchange Agreement is qualified in its entirety by reference to the full text of the Exchange Agreement, which is attached as an Exhibit to this Shell Company Report on Form 20-F.

        The Exchange of Shares

        Pursuant to the Exchange Agreement, we acquired all the issued and outstanding shares of Witech, in consideration for the issuance of 11,552,229 of our Ordinary Shares, with NIS 0.003 nominal value each (“Ordinary Shares” and the “Exchange Shares”, respectively) to the shareholders of Witech (the “Witech Shareholders”) and Witech became our wholly owned subsidiary. The Exchange Shares constitute approximately 50% of our total issued and outstanding share capital and approximately 34.07% of the outstanding share capital, on a fully-diluted basis, including the reservation of 3,300,000 Ordinary Shares under our 2007 Israeli Share Option Plan, the contemplated issuance of warrants to purchase 4,600,000 Ordinary Shares to all our shareholders of record on November 9, 2007 and the convertible notes and related warrants issued by us in November 2007. See “Item 10. Addition Information – C. Material Contracts”.

        Termination of Witech Options

        Each of the options, warrants and other rights to purchase Witech Shares or other non-cash compensation to the Witech Shareholders or the employees of Witech (which included all outstanding options granted under Witech’s stock option plans and Witech’s stock option agreements) that were outstanding at the closing were terminated without any liability or obligation on the part of Witech or to us.

        Limitation of Assumed Liabilities

        At the date of signing the Exchange Agreement and except as agreed in writing by IIS, the aggregate total liabilities (of any kind or nature whatsoever) of Witech (on a consolidated basis), including any of the Witech Shareholders or any of their affiliates, on a consolidated basis (including interest calculated up to the scheduled repayment date) were not to exceed $2,357,815 according to the breakdown approved by IIS. At the closing of the Exchange Agreement, we agreed to accept total liabilities of Witech in the aggregate amount of $2,443,782 out of which liabilities in the aggregate amount of approximately $630,000 are only to be paid after the Company raised at least $6,000,000 in equity or convertible debt financing ($1,655,000 of this amount have already been invested). All shareholders and all holders of any other rights to shares of Witech signed waivers and releases in favor of Witech and IIS, except with respect to the liabilities agreed by IIS.

        Representations and Warranties

        The Exchange Agreement contains certain representations and warranties by IIS relating to, among other things: organization and qualifications of IIS; approvals; capitalization; liabilities; intellectual property; legal proceedings; changes of operations of IIS; compliance with Laws; material contracts; assets; loans and encumbrances; employment matters; finder’s fee; tax returns filed and taxes paid; tax claims and liens.

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        The Exchange Agreement contains representations and warranties by Witech and certain Witech Shareholders relating to, among other things: organization and standing; authorization and enforceability; approvals; no violation; capitalization; subsidiaries; financial statements; liabilities; employee compensation plans; compensation; employee agreements; guarantees; contracts; financial change; property damage; dividends; labor disputes; employee arrangement; securities; amendments to charter documents; taxes; change of accounting method; intellectual property; personnel; software performance; software contracts; marketing agreements; third-party rights; other agreements; title to properties; litigation; environmental compliance; finder’s fee; employment matters; product warranty; customers and suppliers; relationships with related persons; restrictions on business activities; grant incentives and subsidies.

        Indemnification

        The Witech Shareholders, severally and jointly, have agreed to indemnify and hold us and our shareholders, officers, directors, representatives, agents, successors and assigns harmless from and against any of the liabilities and obligations in excess of the amounts specified in the agreement or that are not assumed by us (collectively, the “Excluded Liabilities”), provided however that the sole source of such indemnification shall be the proceeds from the sale of twenty five percent (25%) of the Exchange Shares (the “Escrow Shares”) except in the case of fraud and breaches of the capitalization and ownership of shares for which the remedy would not exceed the aggregate monetary value of the representations regarding Exchange Shares at the closing and for which claims could be made until the expiration of the applicable statute of limitations. The Escrow Shares shall be placed in escrow during the Restrictive Period (as defined below) and will be used as collateral to satisfy any claims, demands or actions related to the Excluded Liabilities and/or liabilities, costs and expenses relating to any breach of the representations, warranties and covenants of Witech and the Shareholders (collectively, “Claims”). In the event of any Claims, the escrow agent may sell the Escrow Shares to satisfy the Claims.

        Witech Shareholder Non Compete

        All the shareholders of Witech who are employees or consultants of Witech or its subsidiary (directly or through affiliates), as well as certain officers and directors of Witech undertook not to compete, directly or indirectly, with respect to Witech’s business until December 31, 2009. This will not derogate from any non-compete undertakings that will be included in employment agreements between any such persons and IIS.

        Restriction on resale of Exchange Shares

        According to an amendment to the Exchange Agreement dated January 2, 2008, the parties decided that the share exchange will not be a tax-free exchange required an Israeli tax ruling that would restrict sales of the Exchange Shares and all our shares held by our other shareholders holding 5% or more of the issued and outstanding shares of IIS immediately following the closing of the Exchange Agreement for a period of 24 months following the closing of the Exchange Agreement. However, former Witech shareholders holding 7,341,470 of the Exchange Shares, except for an amount of Exchange Shares not exceeding 250,000 as shall be specified in writing in a notice from the shareholders’ representative on behalf of such shareholders to IIS and except as may otherwise be agreed in writing by IIS, such shareholders shall not directly or indirectly (1) offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of), or (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of, the Exchange Shares, or (3) publicly disclose the intention to do any of the foregoing, for a period commencing on the date of the Closing and the ending twelve (12) months following the closing. In order to ensure compliance with this restriction, all the Exchange Shares subject to this restriction shall be held in escrow during the relevant 12-month period.

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B. History and Development of the Company

        We were incorporated in Israel on January 28, 1980.

        Until early 1999, we were engaged in the development, manufacture, marketing and service of data communication and intelligent peripheral products targeted at the International Business Machines (“IBM”) midrange, IBM mainframe and open systems computing environments. In late 1998, the Company implemented a restructuring plan (the “Restructuring”) which resulted in the disposition of most of the assets of the Company, substantial changes in the Company’s structure and a focus exclusively on storage area networking (“SAN”). For information regarding our products prior to completion (in early 1999) of the Restructuring, please refer to our Annual Report on Form 20-F for the fiscal year ended December 31, 1997.

–        For information regarding our operations and various corporate disposition transactions in which we engaged from 1999 through 2003, please refer to our Annual Report on Form 20-F for the fiscal year ended December 31, 2003.

–        As of December 31, 2003 we were no longer engaged in any operational business activity other than managing our minority holdings in StoreAge and Enargis. See Item 4. “C. Business Overview – Sale of StoreAge and Sale of Enargis”. On July 29, 2004 approximately 96% of our shareholders present and voting at a general meeting of shareholders, approved our voluntary liquidation and the appointment of Messrs. Robi Hartman and Aharon Jacobowitz as our joint liquidators.

–        From 2005 through 2007 we engaged in the following transactions:

–        In February 2005, StoreAge raised $5,900,000 in convertible bridge loan financing from its shareholders. We did not participate in that financing.

–        In October 2005, in contemplation of an initial public offering of StoreAge on the Alternative Investment Market of the London Stock Exchange, all classes of preferred shares of StoreAge and outstanding bridge loans were converted into ordinary shares of StoreAge based on the amount actually invested in StoreAge and all preferential shareholder rights were cancelled. Following this conversion we held 13% of the issued and outstanding share capital of StoreAge (11.74% on a fully diluted basis). The proposed initial public offering of StoreAge was aborted in November 2005 due to the inability of StoreAge to meet its sales forecast and decreased expected sales forecast.

–        On March 26, 2006, StoreAge received a loan in the amount of $4,000,000 from an Israeli venture lending fund. The loan principal was to be repaid in 24 equal monthly installments, beginning 12 months from the closing date. The loan bore annual interest of LIBOR +5%, to be repaid on a quarterly basis. In consideration, the lender received warrants to purchase shares of the StoreAge equal to 2.6% of its outstanding fully diluted share capital. A first-ranking floating charge and specific charge on the assets of StoreAge was registered on behalf of the lender to secure the loan.

–        In October 2006, all shareholders of StoreAge, including us, signed a share purchase agreement with LSI Logic Corporation (“LSI”) for the sale of all issued and outstanding shares of StoreAge to LSI. In November 2006, the sale was closed and LSI paid us gross proceeds of $5,416,692 for all our shares, out of which $703,793 is held in escrow to satisfy certain possible future claims for a period of 18 months following the closing. At the time of this closing, we held 12.68% of the issued and outstanding share capital of StoreAge (10.89% on a fully diluted basis). This additional dilution resulted from the issuance of shares, the issuance of warrants to an Israeli venture lending fund that provided the $4,000,000 to StoreAge in March 2006 (that was repaid by LSI) and the increase of shares reserved for options pursuant to StoreAge’s incentive share option plans. For a discussion of the agreement with LSI, see Item 4. “Information on the Company – Sale of StoreAge”.

–        In February 2007, we signed an MOA with Witech with respect to a contemplated acquisition of Witech.

–        On April 17, 2007, at our general meeting of shareholders, the termination of our voluntary liquidation was approved by an almost unanimous vote of a majority of the shareholders present and voting at the meeting.

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–        On April 17, 2007, we entered into a Memorandum of Agreement with Witech and its shareholders for the merger of Witech into IIS in consideration for the issuance of 50% of our issued and outstanding Ordinary Shares.

–        From April 23, 2007 through December 31, 2007, we provided various loans to Witech in the aggregate amount of $4,590,000.

–        On May 15, 2007, the board of directors approved the future distribution of five-year warrants for no consideration on a pro-rata basis to all shareholders of the Company who were holders of record at the record date for the purpose of voting at the general shareholders meeting of the Company for the purpose of approving the Exchange Agreement, to purchase an aggregate of 2,300,000 of our shares, at an exercise price equal to the average closing price of our shares 20 days prior to the date of closing of the Witech acquisition. These warrants will be issued following the closing date of the acquisition and will be non-transferable and non-exercisable until a registration statement covering their resale and exercise is filed and declared effective by the SEC.

–        On May 23, 2007, we, together with all the other shareholders of Enargis, transferred all our shares in Enargis to West End Technology Investments Ltd. (an affiliate of our chief executive officer and principal shareholder) for no consideration other than the assumption by West End of all Enargis’ liabilities. (See Item 4. “C. Business Overview – Sale of Enargis”).

–        On November 5, 2007, our Board of Directors approved, subject to and following compliance with applicable Israeli and United States securities laws and regulations, the issuance, for no additional consideration, to all our shareholders at the record date determined for the purpose of the shareholders’ meeting convened to approve the Exchange Agreement (November 9, 2007), and the warrants to purchase an aggregate of 4,600,000 of our Ordinary Shares, on a pro-rata basis according to the percentage holding of each such shareholder in our issued and outstanding share capital on such record date. This includes the warrants to purchase 2,300,000 Ordinary Shares previously authorized in May 2007. The exercise price of each warrant is $0.44 (the average trading price per share of our Ordinary Shares during the twenty trading days prior to the closing of the Exchange Agreement). The warrants will be exercisable for cash or on a cash-less exercise basis. These warrants will be exercisable until the earlier of (i) five years from the date of issuance, and (ii) the closing of a Transaction. A “Transaction” shall mean either (i) the merger of the Company into another company in which the Company is not the surviving entity, or (ii) the purchase of all or substantially all of our shares. These warrants will be non-transferable and non-exercisable until all applicable Israeli and United States securities laws and regulations have been complied with in connection with the warrants and the underlying shares, including without limitation, that a registration statement covering the issuance of the underlying shares is declared effective by the SEC.

–        On November 5, 2007, we signed the Exchange Agreement with Witech and its shareholders. On December 20, 2007, our stockholders approved the Exchange Agreement and all transactions contemplated therein. On January 2, 2008, pursuant to this agreement, we acquired all the issued and outstanding shares of Witech, in consideration for the issuance of approximately 50% of our issued and outstanding Ordinary Shares to the shareholders of Witech and Witech became our wholly-owned subsidiary.

–        On November 15, 2007, we signed definitive agreements with private investors for the issuance of convertible notes in the principal amount of $1,655,000, out of which $827,500 was invested on November 2007 and the remaining 50% was invested at the beginning of January 2008 following the closing of the Exchange Agreement. We issued warrants to purchase 331,000 of our Ordinary Shares to the purchasers of the notes at an exercise price of $0.44 per share. For a detailed description of the terms of the notes and warrants, see “Item 4. Additional Information- C. Material Contracts”.

        Our executive offices are located at 33 Jabotinsky Street, Ramat Gan, Israel, our telephone number is (+972) 3-751-0007 and our facsimile number is (+972) 3-575-0595. Our agent for service of process in the United States is Thelen Reid Brown Raysman & Steiner LLP located at 875 Third Avenue, New York, New York 10022.

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C. Business Overview

        Prior to January 2, 2008, we had no operating business other than providing management services to Witech. All business activities are currently conducted through Witech, which became our wholly-owned subsidiary as of January 2, 2008. We have another wholly-owned Israeli subsidiary, IIS Manufacturing Ltd., which has no assets and has been inactive since 1999.

        Sale of StoreAge

        In order to enable total focus on the new fast growing, large storage area networks (“SANs”) and fibre channel market, in January 1999, we formed StoreAge, a separate entity whose sole purpose was to concentrate on storage networking development, production and marketing activities.

        StoreAge was engaged in the development, marketing, sale and support of products and services in areas such as (i) virtualization of storage networks for Open Systems (including Windows 2000, NT, Linux and UNIX), (ii) storage networking middleware (distributed RAID, volume management), (iii) storage management software, and (iv) storage related applications including disaster recovery and backup solutions, such as snapshot, remote mirroring and others.

        In February 2005, StoreAge raised $5,900,000 in convertible bridge loan financing from its shareholders. We did not participate in that financing.

        In October 2005, in contemplation of an initial public offering of StoreAge on the Alternative Investment Market of the London Stock Exchange, all classes of preferred shares of StoreAge and outstanding bridge loans were converted into ordinary shares of StoreAge based on the amount actually invested in StoreAge and all preferential shareholder rights were cancelled. Following this conversion we held 13% of the issued and outstanding share capital of StoreAge (11.74% on a fully diluted basis). The proposed initial public offering of StoreAge was aborted in November 2005 due to the inability of StoreAge to meet its sales forecast and decreased expected sales forecasts.

        In October 2006, all shareholders of StoreAge, including us, signed a share purchase agreement with LSI Logic Corporation (“LSI”) for the sale of all issued and outstanding shares of StoreAge to LSI. In November 2006, the sale was closed and LSI paid us gross proceeds of $5,416,692 for all our shares, out of which $703,793 is being held in escrow to satisfy certain possible future claims until May 2008. At the time of this closing, we held 12.68% of the issued and outstanding share capital of StoreAge (10.89% on a fully diluted basis). This additional dilution resulted from the issuance of shares, the issuance of warrants to the Israeli venture lending fund that provided a $4,000,000 loan to StoreAge in March 2006 (that was repaid by LSI) and the increase of shares reserved for options pursuant to StoreAge’s incentive share option plans.

        Sale of Enargis

        On May 23, 2007, considering the bleak business prospects of Enargis and the costs involved of maintaining our shareholding in Enargis, we, together with all the other shareholders of Enargis, transferred all our shares in Enargis to West End Technology Investments Ltd., a company owned and controlled by Robi Hartman, for no consideration other than the assumption by West End of all Enargis liabilities. (For a further discussion of Enargis and our disposition of shares in Enargis, please refer to our Annual Report on form 20-F for year ended December 31, 2006).

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        Witech

a. Witech’s Business Overview

        Witech is an Israeli company that was incorporated in February 2004. Together with its wholly owned Delaware subsidiary, CDRide Corp., Witech is engaged in the field of video transmission using wireless communications. Witech develops, manufactures, installs, operates and supports on-ride video systems for use on thrill rides and other attractions in amusement parks. Witech’s current product is a proprietary wireless video transmission system for use on various moving attractions. It is a small video camera and a wireless transmitter that is attached to each car of a roller coaster. The camera films the riders during the ride and transmits the video data to a wireless receiver and a computer. The video file is then edited and can be burned to a DVD for purchase. In addition to a DVD, the rider is also given the opportunity to purchase a set of four to sixteen printed pictures captured from various video frames during the ride.

        Generally, Witech installs the relevant equipment such as the computer server, wireless infrastructure, plasma screens and a point-of-sale area in return for compensation that is derived from a percentage of the revenues received by the amusement park operator or from the sale of the DVDs. However, Witech also has the ability to sell the complete on-ride photographic system and provide support services. As of October 31, 2007, Witech had systems installed on twenty-six rides in most of the major amusement park chains in the United States and Canada including Cedar Fair, Six Flags, Busch Entertainment and the MGM Grand. One of Witech’s systems has been installed in France.

b. Industry Background

        Today there are approximately 2,100 roller coasters worldwide. There are three main types of roller coasters: thrill rides, family rides and kiddy rides. Thrill rides are the most prevalent type of roller coaster. These are the famous roller coasters that are usually the flagship rides in most parks. They tend to be large and have annual capacities in the ranges of 1,000,000 – 2,000,000 riders per year. Family coasters tend to be smaller than large thrill rides. Family coasters will have annual capacities of 1,000,000 riders or less. Kiddy coasters tend to be the smallest and have riders that are between 3-13 years old. Kiddy coasters generally have annual capacities of 200,000 to 700,000 riders per year. In addition to these roller coasters there are more than 1,000 log-flumes (water coasters) and another 1,000 active attractions that can use on-ride photographic systems. Although accurate figures are unavailable, it is estimated that a significant and growing proportion of all roller coasters utilize a photographic system. Ride photographic systems first appeared in the industry almost twenty years ago and have been growing in popularity with time. The current standard is a fixed system whereby the camera is in a static position and takes photographs of the roller coaster as the roller coaster passes the position of the camera. There are limitations to photographic systems. Since, the camera is fixed, it is only able to capture the riders once during the ride. As the coaster passes the camera the rider may not be in the optimum position or have the preferred facial expression and as a result the opportunity to capture such an experience is lost. Additionally, since only one picture is taken, the rider is unable to fully capture his/her experience from a still photograph of only a small portion of the ride. Difficulties have also arisen in hanging or inverted roller coasters, as picture quality is often poor due to the inability to have the proper camera locations and angles.

c. Witech’s Solution

        As an alternative to a fixed photographic system, Witech offers an exciting next-generation product that is already filling a natural slot among today’s young, hi-tech riders. With Witech’s product, customers can purchase both DVDs and pictures. It is Witech’s assumption that riders will prefer to purchase a DVD of the ride (or a DVD and a set of photographs) rather than just one photograph.

        Unlike fixed photographic systems that can only offer one photograph at fixed locations, multiple action photographs can be provided by Witech’s system, thus giving the rider a better selection of possible positions and facial expressions. Additionally, a DVD as opposed to a single photograph, captures the whole ride and enables the viewer to relive the entire experience instead of only one particular moment. A DVD also has a high-tech appeal and riders will be attracted by the ease with which they can share the movie of their ride with their friends.

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        Another benefit of the Witech system over the single photograph static systems is that the DVD is interspersed with other scenes from the roller coaster and the park, providing much more of the day’s experience. Further, movies from other rides can also be stored on the same DVD giving a virtual “album” of a whole day at the park.

        Since Witech’s system is installed on the cars of the roller coaster it also does not suffer from the same limitations of fixed photographic systems. The Witech system can be attached to inverted or hanging roller coasters and provide the proper angles and clarity for the images.

        An additional benefit of the Witech System is that the DVD video can provide advertisement clips for the park or its affiliates.

d. Witech’s Strategy

        It is Witech’s goal to firmly establish itself as the market leader for on-ride video systems. Witech’s strategy for achieving this objective includes the following elements:

– Capitalize on Viral Video Growth. An increasing number of people are uploading their personal experiences on websites such as Youtube, Metacafe and Myspace. Witech intends to capitalize on this growth opportunity through Witech’s ability to provide riders with videos that can be posted on the Internet. Witech is also looking to develop a number of new technologies that are designed to further enable riders to download or upload their video in a simpler manner.

– Expand Distribution, Consulting and Implementation Through Strategic Alliances. Witech intends to seek strategic alliances with leading camera companies and to increase its market penetration. An alliance with a major camera company, if consummated, would be expected to provide qualified customer introductions and enhance the generation of license revenues.

– Enhance Presence in Targeted Vertical Markets. Witech’s product is designed to be easily adaptable to different vertical markets, and Witech’s products can be adopted by customers across a broad range of industry segments, including video games, racecars as well as in helicopter and plane rides. Witech intends to penetrate vertical markets that it believes represent significant revenue opportunities. Witech intends to dedicate sales and marketing resources targeted at specific vertical markets.

– Build Upon Witech Awareness. Witech intends to leverage its installed base of customers and to make substantial investments in sales and marketing to increase its visibility and market share. Witech will focus on increasing its sales to existing customers and new customers. Witech also intends to expand its geographic coverage by increasing its presence, including in Europe, the Middle East and the Pacific Rim.

– Maintain Technological Leadership. Witech believes that it is a leader in on-ride videos and it intends to continue its leadership in this area. The second generation of its core product will be produced at a lower cost allowing it to be installed on many rides that are currently not fiscally viable for its current product. Witech will continue to invest in its products to enhance their quality and profitability. Witech intends to incorporate new technologies for providing the riders with on-ride videos of their experiences.

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e. Products

        Witech’s current system is based on a video camera, a small digital video processor and a wireless transmitter unit that is installed on each car of a roller coaster or other ride. Once the ride starts, the camera starts filming the riders (typically 2 riders per camera). The recorded footage is stored on the on-board processor. The video file is processed in real-time and transmitted wirelessly to the “base station” when the car returns to the starting point.

        The video file is processed and interleaved with pre-filmed video clips of the roller coaster ride taken from different vantage points. Thereafter, a short preview with a video clip of each rider is displayed on a bank of video monitors located in the sales booth at the exit ramp of the ride. As the riders disembark from the ride, they walk past the sales booth and each rider is able to choose his video clip on a numbered screen, in the same manner that still photographs are displayed today. When a rider places an order, the sales attendant will copy the processed file onto a DVD and give it to the customer. The video editing/copying are all part of Witech’s proprietary software. The DVD format will enable playback either on a personal computer or on a standard home DVD player.

        Witech’s additional products include four to sixteen passport-size photographs taken from different locations on the ride and a movie down-loaded onto a Disc-on-Key (“DOK”).

f. Professional Services

        Witech’s customers do not typically purchase consulting services, as Witech is usually responsible for the Witech system. Although Witech offers professional services with the initial deployment of its product, as well as on an ongoing basis to address the continuing needs of its customers these services are regarded as part of the overall product. Witech does however provide yearly service contracts to parks that purchase systems. As of December 31, 2007, Witech’s professional services organization consisted of six experienced professionals. Many of its service professionals have advanced degrees or considerable experience in digital video processing and wireless communications. Witech expects that the number of service professionals and the scope of the services that it offers will increase as Witech continues to address the expanding enterprise infrastructure needs of large amusement parks.

g. Customers

        More than 20 customers are currently using Witech’s systems including but not limited to Six Flags, Cedar Fair, the MGM Grand, Adventuredome and Sesame Place. In 2007, 3 amusement parks accounted for more than 56% of Witech’s revenues. Approximately 76% of revenues of Witech in 2007 were derived from two customers operating 11 amusement parks. Revenues from the sale of Witech’s products and services in North America accounted for $262,000, or 96% of Witech’s total revenues in 2006 and up to September 30, 2007 were $1,369,000 million, or approximately 100% of Witech’s total revenues in during this period in 2007. The Israeli market is negligible and Witech believes that revenues from sales outside Israel will continue to account for the predominant portion of its total revenues for the foreseeable future.

        As of December 31, 2007, Witech has installed 26 video/photo on-ride systems (video and still pictures) and 3 photo-only on-ride systems (without video).

h. Sales and Marketing

        Witech offers its products and services primarily through a direct sales force in the United States and Israel. Its sales efforts in North America are conducted from its office in Atlanta, GA. Witech conducts comprehensive marketing programs that include advertising, direct mail, public relations, trade shows and customer relations from its headquarters in Or Yehuda, Israel. Witech’s sales and marketing organization consists of 5 employees as of December 31, 2007.

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        Witech believes that its continued growth and profitability will require it to expand its existing international operations and enter new international markets. Witech’s strategy is to substantially expand its network of salespeople to provide a worldwide sales and marketing presence for its products. In particular, Witech intends to expand its distribution capabilities in the Asian and European markets.

i. Product Development

        Witech has a product development plan to reduce the cost of the on-ride computer, camera and wireless transmitter. The next generation of the camera/computer module is contemplated to be much smaller than the current version and will require much less power. One of the limitations of Witech’s present system is that it has to be recharged every night. The new version will require charging only once a week. With the low-cost version of the camera/computer, servicing is expected to be easier and Witech expects that the systems will require less technical supervision. With the low-cost, next-generation system, Witech will also be able to install systems on many more rides since not all rides generate revenues that justify the current costs of the system.

        It is also anticipated that in the future Witech will adapt its on-ride system to many other rides and attractions such as helicopters, airplanes, arcade games, go-karts, race cars, water slides, log flumes and climbing walls.

        It is anticipated that Witech will record 20,000,000 personal videos in 2008. As such, Witech is currently exploring ways of using this video content to increase revenues. Web-based commerce and video and picture storage are some of the ideas Witech is investigating. Partnering with the parks on interactive web sites based on the park visitors’ videos and photos is another possibility.

        Witech has identified the need to design and operate web-based storage of the movies recorded. It is anticipated that the web will allow riders to purchase movies of their ride using the Internet, but Witech is still developing its business model for this service. Witech is also contemplating the development of an interactive web site that would host the photos and videos of the rides at different parks.

Grants from the Office of the Chief Scientist

        Under the Law for the Encouragement of Industrial Research and Development, 1984 (the “Research Law”), research and development programs approved by a research committee of the Office of the Chief Scientist (“OCS”) of Israel’s Ministry of Industry, Trade and Labor, are eligible for grants in exchange for payment to the Government of royalties from the sale of products developed in accordance with the Program. In order to be eligible, the applicant must be an Israeli company that proposes to invest in the development of industrial know-how, the development of new products, the development of new processing or manufacturing procedures or the development of significant improvements to an existing process or product. A committee of the OCS reviews the applications, evaluates the feasibility of the proposal, determines whether or not to approve a grant, and also determines the extent of Chief Scientist funding (within a range specified by the law) for approved projects. Depending on the nature of the project, the OCS grants generally amount up to 50% of the approved research expenses.

        Under the terms of the grants we received from the OCS we are obligated to pay royalties of 3.5% on sales of products incorporating know-how developed within the framework of each funded program or derived therefrom (including ancillary services in connection therewith), up to an aggregate of 100% of the dollar-linked value of the total grants received. Royalties payable with respect to grants received under programs approved by the OCS after January 1, 1999, are subject to interest on the U.S. dollar-linked value of the total grants received at the annual rate of LIBOR applicable to U.S. dollar deposits at the date the grants received.

        The Research Law requires that the manufacture of any product developed as a result of research and development funded by the Israeli Government take place in Israel. If any of the manufacturing is performed outside of Israel, the company would ordinarily be required to pay royalties at an increased rate and to increase the aggregate repayment amount to between 120% and 300% of the grant amount, depending on the manufacturing volume that is performed outside Israel, except in special cases that receive the prior approval of the research committee, and subject to certain payments to be made to the Israeli Government (generally an amount no less that the aggregate grants plus interest less royalties paid).

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        The Research Law also provides that know-how from the research may not be transferred to third parties in Israel without prior approval of the research committee. This approval, however, is not required for the sale or export of any products resulting from such research and development. Approval of such transfer of know-how may be granted in specific circumstances, only if the recipient abides by the provisions of the R&D Law and related regulations, including the restrictions on the transfer of know-how and the obligation to pay royalties in an amount that may be increased. The R&D Law further provides that the know-how developed under an approved research and development program may not be transferred to any third parties outside Israel.

The Research Law imposes reporting requirements with respect to certain changes in the ownership of a grant recipient. The law requires the grant recipient and its controlling shareholders and interested parties to notify the OCS of any change in control of the recipient or a change in the holdings of the significant stockholders of the recipient that results in a non-Israeli becoming an interested party directly in the recipient and requires the new interested party to undertake to the OCS to comply with the Research Law. In addition, the rules of the OCS may require prior approval of the OCS or additional information or representations in respect of certain of such events.

        The funds available for OCS grants out of the annual budget of the State of Israel have been reduced, and the Israeli authorities have indicated that the government may further reduce OCS grants in the future.

        In 2005 and 2006 Witech received grants from the Chief Scientist aggregating $128,912 for a certain research and development project. As of December 31, 2006, Witech has outstanding contingent obligations to pay royalties in amount of $133,000 in respect of future sales of products derived from such research and development.

j. Customer Service and Support

        Witech’s support centers are located in Israel and the United States. Its customer service group handles incoming calls, shipping requests, call logging, maintaining customer information and responding to basic product questions. Witech’s technical support engineering group is responsible for all technical cases. Witech’s technical support engineering group interfaces with its research and development group for product maintenance and bug fixing. As of December 31, 2007, Witech’s support organization consisted of 6 employees.

k. Competition

        The markets for on-ride video systems are intensely competitive and are characterized by rapid technological advances, frequent new product introductions, evolving industry standards and price erosion.

        We believe that the principal competitive factors in our market include:

— high-quality performance of products;

— ease of use;

— level of integration with existing equipment;

— cost of products;

— effective sales, marketing and distribution;

— brand awareness;

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— training, service and support; and

— intellectual property leadership and superiority.

        We consider our primary competition in on-ride video systems to be existing ride photography in which a photograph is taken of riders at some point on the ride and offered to every rider for sale at the disembarkation point. Witech’s alternative to the fixed photographic system is its on-ride video product that enables customers to purchase both DVDs and pictures. .

        Unlike fixed photographic systems that can only offer one photograph at a fixed location, multiple action photographs can be provided by Witech’s system, thus giving the rider a better selection of possible positions and facial expressions. Additionally, a DVD opposed to a single photograph captures the whole ride and enables the viewer to relive the entire experience instead of only one particular moment.

        Another benefit of the Witech system over the single photograph static systems is that the DVD is interspersed with other scenes from the roller coaster and the park, providing much more of the day’s experience. Further, movies form other rides can also be stored on the same DVD giving a virtual “album” of a whole day at the park. However, regardless of Witech’s product’s perceived benefits, our success depends in part on convincing amusement parks to convert from existing static photographic systems to our on-ride video system.

        Moreover, despite Witech’s competitive edge over still photographs, other companies such as Ridercam GmbH and Socrates Digital Video B.V. are developing on-ride video products and as far as we know have installed systems in one park each. Also, as far as Witech is aware, two companies- Yourday (in the UK) and Colorvison (in Florida)- have installed a small number off-ride video systems that film the riders at different points of the ride from cameras installed close to where the ride passes and produce a slow motion video of the recordings. We believe that Witech’s on-ride system is in a significantly more advanced stage of development relative to its competitors and provides a superior technical solution and record of the riders’ experience. Furthermore, Witech has a much larger installed base of systems and greater operating experience than its competitors.

        In addition, three of the largest ride photo companies, Kodak, Colorvision and Picsolve, currently have corporate sponsorship agreements with a number of large park chains. These sponsorship agreements often give the sponsor exclusive rights for all digital media services in the parks. When supplying systems to parks with sponsorship agreements, we may have to split part of the revenues with the sponsor. These agreements may limit Witech’s potential growth into new park chains. We anticipate the need of Witech to enter into its own sponsorship agreements in the future, but it may need to wait for the current agreements to expire. Although these agreements are typically for three years, there is no assurance that the agreements will not be renewed with the current sponsors.

        Furthermore, we may face direct and indirect competition from a number of competitors that have significantly greater financial and human resources than we do and have established relationships with amusement parks worldwide. Many of these competitors may also have established distributor networks, greater resources for product development, and sales and marketing capabilities than we do.

l. Intellectual Property and Proprietary Rights and Licenses

        Witech’s success is dependent upon the technological and creative skills of its personnel in developing and enhancing its software products, as well as its ability to protect the related proprietary technology and intellectual proprietary rights. Witech relies primarily on a combination of contractual provisions, confidentiality procedures, trade secrets, copyright and trademark laws to accomplish these goals. Witech does not currently hold any patents. Witech has filed patent applications in the United States, Europe and Japan and may file additional patent applications in the future. We cannot assure you that a patent will be issued from any patent application Witech submits. Moreover, we cannot assure you that we will develop proprietary products or technologies that are patentable, that any patent issued to us will provide us with any competitive advantages, or that the patents of others will not seriously harm our ability to do business.

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        Witech licenses its products pursuant to license agreements that prohibit reverse engineering or decompilation of its software, impose restrictions on the licensee’s ability to utilize the software and provide for specific remedies in the event of a breach of these restrictions. In addition, Witech takes measures to avoid disclosure of its trade secrets, including but not limited to requiring employees, customers and others with access to its proprietary information to execute confidentiality agreements with Witech which define the unauthorized uses and disclosures of its trade secrets and other proprietary materials and information. Additionally, it restricts access to its source code.

        Witech asserts copyright in software, documentation and other works of authorship. Witech asserts trademark rights in and to its name, product names, logos and other markings that are designed to permit consumers to identify its goods and services.

m. Government Regulations

        The installation of Witech’s systems on rides generally requires regulatory approvals at the state or county level in the United States. To date neither Witech nor the amusement parks have experienced any significant difficulties in obtaining the required approvals.

        Israel has the benefit of a free trade agreement with the United States, which, generally, permits tariff-free access into the United States for products produced by us in Israel. In addition, as a result of an agreement entered into by Israel with the European Union, or the EU, and countries remaining in the European Free Trade Association, or EFTA, the EU and EFTA have abolished customs duties on Israeli industrial products. However, there can be no assurance that these agreements will not be terminated, changed, amended or otherwise declared non-applicable to all or some of our Israeli operations, thereby materially harming our and their businesses.          

D. Legal Proceedings

        In June 2007, Witech entered into a lease for 960 square meters at an office complex in Israel at a monthly rental of $20,000 commencing from March 2008 for 121 months. In September 2007, due to a change in its staffing requirements in Israel, Witech notified the landlord of its intention not to occupy the premises. Witech has not made any payments under the lease and has not provided any guarantees to the lessor. Witech is currently seeking an alternative lessee for the premises and believes that the landlord is doing the same. Although the landlord has not instituted any legal proceeding against Witech, we believe that there may be potential exposure in this matter that could be material to Witech. Except for the above, neither Witech nor IIS is presently a party to any litigation that would, individually or in the aggregate, have a material adverse effect on Witech or IIS or their business, and they are not aware that any such litigation is threatened. However, litigation is common in the technology industry, and they may become involved in material litigation in the future.

E. Properties, Plants and Facilities

        The Company is headquartered in Ramat Gan, Israel, where it leases an aggregate of 85 square meters of space at an annual rent of $17,340 (see Item 7. “Major Shareholders and Related Party Transactions – B. Related Party Transactions”). Witech leases an aggregate of 600 square meters of space in Or Yehuda, Israel for general management, product development and support operations at an annual rent of $79,200. This lease expires at the end of February 2008 without an option for renewal but we are negotiating with the landlord to renew the lease for another 12 months. In addition, Witech’s subsidiary, CDRide leases premises in three locations in the United States (in Minneapolis, Minnesota, Glenview, Illinois and Atlanta Georgia) at an aggregate annual rent of $42,000.

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Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Forward-Looking Statements

        Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “expect”, “anticipate”, “believe”, “seek”, “estimate” and similar words. Statements that we make in this section that are not statements of historical fact also may be forward looking statements. Forward-looking statements are not guarantees of our future performance, and involve risks, uncertainties and assumptions that may cause our actual results to differ materially from the expectations we describe in our forward looking statements. There may be events in the future that we are not accurately able to predict, or over which we have no control. You should not place undue reliance on forward-looking statements. We do not promise to notify you if we learn that our assumptions or projections are wrong for any reason. We disclaim any obligation to update our forward-looking statements. See “Risk Factors” for more information.

Critical Accounting Policies

        The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Under different assumptions or conditions, actual results may differ from these estimates.

IIS

Accounting for uncertainty in income taxes

        Effective January 1, 2007, the Company adopted FIN 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FAS 109", which was issued in June 2006. FIN 48 clarifies the accounting for uncertainty in income taxes, and prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company’s accounting policy, pursuant to the adoption of FIN 48, is to classify interest and penalties recognized in the financial statements relating to uncertain tax positions, under provision for income taxes. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and consequently, affect the net loss of the Company.

        As of the date of adoption, the tax years that remain subject to examination by tax authorities are between years 2002 and 2006. As a result of the implementation of FIN 48, the Company recognized $4 thousands as a long-term liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007 balance of accumulated deficit. During of the nine months ended September 30, 2007, the Company recorded an increase of its unrecognized tax benefits of $10 thousands. Both amounts would result in a reduction of the Company’s effective tax rate, if recognized.

        As of the date of adoption, the tax years that remain subject to examination by tax authorities are between years 2002 and 2006.

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Witech

Accounting for uncertainty in income taxes

        Effective January 1, 2007, the Witech and its subsidiary, CDRide (the “Group”) adopted FIN 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FAS 109", which was issued in June 2006. FIN 48 clarifies the accounting for uncertainty in income taxes, and prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Group’s accounting policy, pursuant to the adoption of FIN 48, is to classify interest and penalties recognized in the financial statements relating to uncertain tax positions, under provision for income taxes. Changes in judgement as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and consequently, affect the net loss of the Group.

        Changes in judgment as to recognition or measurement of tax positions can materially affect the   estimate of the effective tax rate and consequently, affect the net loss of the Company.

        As of the date of adoption, the tax years that remain subject to examination by tax authorities are between years 2004 and 2006. As a result of the implementation of FIN 48, the Group recognized $10 thousands as a long-term liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007 balance of accumulated deficit. During the nine months ended September 30, 2007, the Company recorded an increase of its unrecognized tax benefits of $50 thousands. Both amounts would result a reduction of the Group’s effective tax rate, if recognized.

        Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its financial statements.

Intangible Assets and Goodwill

        On December 31, 2002, all goodwill was impaired by the cessation of IIS’s business activity. Thus during the years 2003 through 2006 and for the period ended September 30, 2007 we had no goodwill or intangible asset impairment.

        Witech did not record intangible assets or goodwill in its financial statements.

        For information on intangible assets and goodwill that arose as a result of the allocation of the purchase price according to the Exchange Agreement, see the Company’s and Witech’s unaudited financial statements, which are included in this Shell Company Report on Form 20-F and have been prepared in accordance with U.S. GAAP.

Investment in StoreAge and Enargis

        During 2002, our investment in StoreAge was reduced to zero and in 2003 the Company’s investment in Enargis was also reduced to zero. The Company has not guaranteed the obligations of StoreAge and/or Enargis and is not otherwise committed to provide further financial support to any of these companies. See Notes 2.a and 2.b to the Company’s Financial Statements included herewith.

Deferred Taxes

        The Company records a full valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made.

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A. Operating Results.

General

        As of December 31, 2003, we were no longer engaged in any operating business activity other than managing the minority holdings in StoreAge and Enargis until we disposed of our holdings in these companies and since April 2007, also providing certain management services to Witech.

        The functional currency of the Company and its subsidiaries is the U.S dollar, as the U.S. dollar is the primary currency of the economic environment in which the Company and its subsidiaries have operated and expect to continue to operate in the foreseeable future. The majority of the Company’s operations are currently conducted in Israel and most of the Israeli expenses are currently paid in new Israeli shekels (“NIS”); however, most of the expenses are denominated and determined in U.S. dollars. Accordingly, monetary accounts maintained in currencies other than the dollar are remeasured into dollars in accordance with Statement of Financial Accounting Standard No. 52, “Foreign Currency Translation” (“SFAS No. 52”). All transaction gains and losses of the remeasurement of monetary balance sheet items are reflected in the statement of operations as financial income or expenses, as appropriate.

Results of Operations

Witech Historical

Nine months Ended September 30, 2007 and 2006

        Revenues. Our revenues are derived primarily from participation in revenues from sales of CDs and other media products that were filmed by the systems of Witech installed on rides at amusement parks.

        Total revenues increased by approximately 648% to $1,369,000 during the first nine months of 2007 from $183,000 during the same period in 2006. This increase is mainly attributable to the increase of systems that Witech installed during this period from 12 to 26 as well as increased revenues from systems installed in 2005 and 2006.

        Cost of Revenues. Cost of revenues consist primarily of technical support, second installations and systems dismantles, operational costs and depreciation of on-ride installed systems.   Our cost of revenues increased by approximately 248% to $1,573,000 in the first nine months of 2007 from $452,000 during the same period of 2006 primarily due to the increase in number of systems installed and operating costs during this period.

        Gross Loss. Gross loss decreased by 24% to $204,000 in the first nine months of 2007 from $269,000 during the same period of 2006. The decrease in gross loss in this period was the result of Witech’s management’s strategic decision to remove unprofitable systems. The Company expects to increase its gross income in the future as a result of its management’s decision to focus on more profitable rides.

        Research and Development, Net. Research and development expenses consist primarily of salaries of employees engaged in on-going research and development activities and other related costs.   Total research and development costs, decreased by approximately 34% to $239,000 during this period in 2007 from $361,000 during the same period in 2006 primarily due to a one time charge at the amount of $232,000 of stock based compensation costs accrued at September 2006. The one time charge effect was partly offset by an increase in payroll costs derived by an increase in the number of employees. We expect that our expenditures for research and development will increase in 2008 for the development of our next generation camera/computer module.

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        Marketing, General and Administrative. Marketing, general and administrative expenses consist primarily of costs relating to sales and marketing compensation, marketing and business development efforts, travel and related expenses, overhead, and administrative costs, including professional fees, communication and IT costs, and other general expenses. Marketing, general and administrative expenses increased by 268% to $2,194,000 during this period in 2007 from $597,000 during the same period in 2006. This increase was due to an overall increase in Witech’s activity, including a rise in direct sales personnel, travel expenses, management payroll expenses and legal and audit fees. We expect that our Marketing, general and administrative expenses will increase in 2008 as a result of our decision to add sales personnel and to increase our marketing expenses as part of our plan to increase the installation of our systems and to penetrate the European and Asian markets.

        Operating Income (Loss). Based on the foregoing, the operating loss increased by approximately 106% to $2,528,000 for this period in 2007 from $1,227,000 for the same period in 2006.

        Financial Income (Expenses), Net. For the first nine months of 2007, we had net financial expenses increase by approximately 152% to $539,000 as compared to net financial expenses of $214,000 for the same period in 2006. This increase in financial expenses is attributable primarily to an increase in debts due to the receipt of loans from IIS in an amount of $3,400,000.

Years Ended December 31, 2006 and 2005

        Revenues. Total revenues increased approximately 988% to $272,000 in 2006 from $25,000 for 2005. This increase is mainly attributable to the increase in systems installed by Witech during this period from 3 to 12 as well as increased revenues from systems installed in 2005.

        Cost of Revenues. Our cost of revenues increased approximately 1200% to $740,000 in 2006 from $57,000 in 2005 primarily due to the increase in the number of systems installed and operated during this period resulting in an increase in technical support, second installations, systems dismantles, operational costs and depreciation of on-ride installed systems.

        Gross Loss. Gross loss increased by 1,362% to $468,000 in 2006 from $32,000 in 2005. The gross losses in these periods were due to Witech’s management’s strategic decision to install a large number of systems, regardless of profitability. The Company expects to increase its gross income in the future as a result of its management’s decision to focus on more profitable rides.

        Research and Development, Net. Total research and development costs, increased by 104% to $407,000 during 2006 from $200,000 during 2005 mainly due to a one time charge at the amount of $232,000 of stock based compensation costs at September 2006 and as a result of the end of financial support received from the Government of Israel.

        Marketing, General and Administrative. Marketing,general and administrative expenses increased by approximately 294% to $820,000 during 2006 from $208,000 during 2005. This increase is due to the hire of additional people in the direct sales department as well as higher marketing costs.

        Operating Loss. Based on the foregoing, the operating loss increased by approximately 285% to $1,695,000 for 2006 from $440,000 in 2005.

        Financial Income (Expenses), Net. For 2006, net financial expenses increased to $316,000 as compared to net financial expenses of $14,000 for 2005. This increase in financial expenses is attributable primarily to an increase in debts due to receipt of loans from a bank and others.

        Loss. For 2006 our losses increased by approximately 344% to $2,016,000 compared to the loss of $454,000 for 2005, primarily due to the increase in cost of revenues, general and administrative expenses and financial expenses as specified above that was not offset by income.

IIS Historical

Nine months Ended September 30, 2007 compared to the Nine Months Ended September 30, 2006

        Revenues. We had $33,000 in revenues during this period in 2007 from management fees was primarily due to our management agreement with Witech, effective April 17, 2007 compared to no revenues during this period in 2006.

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        General and Administrative. General and administrative expenses consist primarily of professional fees, rent, office maintenance, payroll related expenses and liquidators’ and directors’ fees. General and administrative expenses increased by 660% to $479,000 in 2007 from $63,000 in 2006. The increase is attributable mainly to an increase in legal and accounting fees due to the filing of delinquent annual reports with the SEC and professional fees relating to the transaction with Witech as well as payments of fees to directors, the Chairman of the Board and the CEO and for directors’ and officers’ Insurance.

        Financial Income, Net. In the first nine months of 2007, our financial income increased to $251,000 as compared to financial income of $8,000 for the same period in 2006. This increase in financial income is attributable to financial income earned from bank deposits of funds received in November 2006 from the sale of our holdings in StoreAge and primarily from the interest accrued on the loans to Witech.

        Loss. For the nine month period ending September 30, 2007 our losses increased approximately by 273% to $205,000 compared to the loss of $55,000 for the same period in 2006, primarily due to the increase in general and administrative expenses as specified above that was not offset by income.

Years Ended December 31, 2006, 2005, and 2004

        The Company had no revenues in each of the years 2004, 2005 and 2006.

        In 2005 we incurred general and administrative expenses of $103,000 compared to $200,000 in 2004. This reduction was due to a reduction in all expenses, due to cessation of our operating activities during 2003 and our entry into voluntary liquidation at the end of July 2004. The main reductions were in the directors’ fees, insurance expenses and professional fees. During 2005 and 2006 the general and administrative expenses were $103,000 and $91,000, respectively, consisting mainly of liquidators’ and professional fees, rent and office maintenance as well as payroll related expenses. The expenses for 2006 also include approximately $13,000 paid to the Israeli tax authorities as a result of a VAT audit and related settlement.

        Our net financial expenses in 2004 and 2005 were $4,000 and $3,000, primarily due to exchange rate conversions and open bank balances. In 2006 we had financial income of $17,000 due to the interest received on the proceeds of the sale of our holdings in StoreAge in November 2006.

        We incurred non-recurring income of $4,713,000 in 2006, from the sale of all our holdings in StoreAge in November 2006 and an additional amount of $703,793 held in escrow to satisfy certain possible future claims for a period of 18 months following the closing.

        In 2004, we recorded a loss of approximately $204,000 and in 2005 a loss of approximately $106,000 was realized due to no income and a continued reduction in expenses due to voluntary liquidation.

        The $4,639,000 profit for 2006 primarily reflects the proceeds from the sale of our holdings in StoreAge in November 2006 and a continued reduction in general and administrative expenses due to our being in voluntary liquidation.

        The Company does not expect to be profitable in the near future.

Pro Forma Combined

Nine months Ended September 30, 2007 and Year Ended December 31, 2006, on a 3/4 Basis

        Revenues. Total revenues increased by approximately 571% to $1,369,000 during the first nine months of 2007 from $204,000 during the relevant period in 2006. This increase is mainly attributable to the increase of systems that Witech installed during this period (from 12 to 26) as well as the increased revenues from systems installed in 2005 and 2006. IIS did not generate any revenues in the relevant periods.         

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         Cost of Revenues. Cost of revenues consist primarily of technical support, second installations and systems dismantles, operational costs and depreciation of on-ride installed systems.   The cost of revenues presented in the pro forma statements is attributed solely to Witech’s operations. The relevant costs increased by approximately 118% to $1,878,000 in the first nine months of 2007 from $860,000 during the relevant period in 2006, primarily due to the increase in the number of systems installed and the operational costs associated with such installations during this period.

         Research and Development, Net. Research and development expenses consist primarily of salaries of Witech’s employees engaged in on-going research and development activities and other related costs.   Total research and development costs, decreased by approximately 22% to $239,000 during this period in 2007 from $305,000 during the relevant period in 2006, primarily due to a one-time charge in the amount of $232,000 of stock based compensation costs accrued in September 2006. The one time charge effect was partly offset by an increase in payroll costs derived from an increase in the number of employees.

        Marketing, General and Administrative. The combined marketing, general and administrative expenses increased by 190% to $2,821,000 during this period in 2007 from $973,000 during the relevant period in 2006. This increase is mainly explained by the overall increase in Witech’s activities, as well as an increase in legal and audit fees.

        IIS incurred non-recurring income of $4,713,000 in 2006, from the sale of all IIS holdings in StoreAge in November 2006 and an additional amount of $703,793 held in escrow to satisfy certain possible future claims for a period of 18 months following the closing.

         Operating Loss. Based on the foregoing, the operating loss increased by approximately 84% to $3,569,000 for this period in 2007 from $1,935,000 during the relevant period in 2006.

        Financial Income Expenses, Net. For the first nine months of 2007, we had net financial expenses increase by 8% to $324,000 as compared to net financial expenses of $300,000 for during the relevant period in 2006.

Impact of Inflation and Exchange Rates

        The dollar cost of the Company’s operations in Israel is related to the extent to which the rate of inflation in Israel is offset by the devaluation of Israeli currency in relation to the dollar without significant timing delays. The Company’s dollar costs in Israel will increase if devaluation fails to keep pace with the rate of inflation. Conversely, those costs will decrease if the rate at which Israeli currency devalues against the dollar exceeds the rate of inflation in Israel on a relatively even basis.

        During 2005, 2006 and 2007 (until April 30 when the Bank of Israel ceased to publish this data), the NIS was devalued (appreciated) approximately 1.66%, 8.21% and 3.927%, respectively, against the currency basket, and approximately 6.85%, 8.21% and 8.26%, respectively, against the U.S. dollar. Our operations could be adversely affected if we are unable to guard against currency fluctuations in the future. We do not currently engage in any currency hedging transactions intended to reduce the effect of fluctuations in foreign currency exchange rates on our results of operations. We cannot guarantee that we will not enter into such transactions in the future or that such measures will adequately protect us from serious harm due to the impact of inflation in Israel.

        The relationship between the Company’s assets and liabilities in Israeli currency and whether they are linked to a foreign currency or price index also affects the Company’s financial results. In the past IIS has managed its exposure in Israeli currency so that unlinked liabilities generally exceeded unlinked monetary assets in Israeli currency. The Company cannot predict whether it will be able to continue to manage its assets and liabilities in this manner in the future.

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Effective Corporate Tax Rate

        The income tax obligations of IIS and Witech in Israel are based upon earnings determined for Israeli statutory purposes and not as determined from the amounts reported in dollars. Pursuant to an amendment to the income Tax Ordinance, approved by the Israeli parliament on July 25, 2005, Israeli companies are generally subject to income tax on their taxable income at the rate of 31% for the year 2006, 29% for 2007, 27% for 2008, 26% for 2009 and 25% for year 2010 and thereafter.

        As of December 31, 2006, the Company has carryforward tax losses in the amount of approximately $ 41 million (and approximately $44 million at September 30, 2007), which may be carried forward and offset against taxable income in the future for an indefinite period. In addition, as of December 31, 2006, the Company has accumulated capital losses for tax purposes carryforward in a total amount of $ 38 million (and approximately $40 million at September 30, 2007), which may offset against future capital gains for tax purposes for an indefinite period. These losses have not been audited and approved by the relevant tax authorities.

        As of December 31, 2006, Witech has carryforward tax losses in the amount of approximately $2,200,000 (and approximately $5,000,000 at September 30, 2007), which may be carried forward and offset against taxable income in the future for an indefinite period.

Quarterly Results

        The Company’s operating results in the near future may vary significantly from quarter to quarter, in part because of the substantial changes in the Company’s structure and its recent share exchange with Witech. The Company’s operating results for any particular quarter are not necessarily indicative of any future results. The nature of the Company’s industry and business has changed, and the accelerated and unpredictable pace of new product introduction and market trends, which is expected to continue, limits management’s ability to accurately forecast short-term results of operations.

Governmental, Economic, Fiscal, Monetary or Political Factors

        Our principal offices and our principal facilities and those of Witech are located in Israel, and each of us is directly affected by the political, economic and military conditions to which that country is subject. Any of Witech’s manufacturing operations would be heavily dependent upon components imported from outside of Israel. Almost all of Witech’s sales will be made outside of Israel. Accordingly, our operations and those of Witech could be materially adversely affected if major hostilities involving Israel should occur or if trade between Israel and its present trading partners were interrupted or curtailed. In addition, termination or reduction of certain governmental grants, programs and tax benefits could have a material adverse effect on Witech and us.

Political Conditions

        Since the establishment of the State of Israel in 1948, a state of hostility has existed, varying in degree and intensity, between Israel and the Arab countries. While Israel has entered into peace agreements with both Egypt and Jordan and several other countries have announced their intentions to establish trade and other relations with Israel, Israel has not entered into any peace arrangement with Syria or Lebanon. During the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. This conflict involved missile strikes against civilian targets in northern Israel that resulted in economic losses. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could adversely affect our operations. Since September 2000, terrorist violence in Israel has increased significantly and negotiations between Israel and Palestinian representatives have effectively ceased. The establishment of a government in the Palestinian Authority in early 2006 by representatives of the Hamas militant group has created additional unrest and uncertainty in the region. We can give no assurance that security and political conditions will not have an impact on our business in the future. Hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could adversely affect our operations and could make it more difficult for us to raise capital.

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        Despite the peace between Israel and Egypt and Jordan, some countries, companies and organizations continue to participate in a boycott of Israeli firms and others doing business with Israel or with Israeli companies. Although we are precluded from marketing our products to such countries, we believe that in the past the boycott has not had a material adverse effect on us.

        All male adult citizens and permanent residents of Israel under the age of 48 are, unless exempt, obligated to perform up to 30 days of military reserve duty annually. Additionally, all such residents are subject to being called to active duty at any time under emergency circumstances. Many of our officers and employees and those of Witech are currently obligated to perform annual reserve duty. While we have operated effectively under these requirements since we began operations, we cannot assess the full impact of such requirements on our workforce or business if conditions should change, and we cannot predict the effect on us of any expansion or reduction of such obligations.

Economic Conditions

        Israel’s economy has been subject to numerous destabilizing factors, including a period of rampant inflation in the early to mid-1980s, low foreign exchange reserves, fluctuations in world commodity prices, military conflicts and civil unrest. The Israeli government has, for these and other reasons, intervened in various sectors of the economy, by utilizing, among other means, fiscal and monetary policies, import duties, foreign currency restrictions and control of wages, prices and foreign currency exchange rates. In 1998, the Israeli currency control regulations were liberalized significantly and as a result Israeli residents were permitted to deal in foreign currency and non-residents of Israel were permitted to purchase and sell Israeli currency and assets. The Israeli government has periodically changed its policies in these areas. There are currently no Israeli currency control restrictions on remittances of dividends on ordinary shares or the proceeds from the sale of shares; however, legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time. In addition, Israeli residents are required to file reports pertaining to specific types of actions or transactions.

B. Liquidity and Capital Resources.

        The Company had current assets of approximately $952,000 on September 30, 2007, $4,710,000 on December 31, 2006, $41,000 on December 31, 2005 and $103,000 on December 31, 2004. The ratio of assets to liabilities was 3.566 on September 30, 2007, 18.046 on December 31, 2006, 0.177 on December 31, 2005 and 0.545 on December 31, 2004. The decrease in the current ratio as of September 30, 2007 was primarily due to a reduction in our cash on hand and an increase in our accounts payable and accruals due to ongoing operational expenses. The increase in the current ratio in 2006 was primarily due to the receipt of $4,713,000 from the sale of our shares in StoreAge. The decrease in the current ratio in 2004 and 2005 was mainly a result of a reduction in cash due to operating activities and the accumulation of the Liquidators’ and directors’ fees payable.

        For a discussion of the primary currency in which the operations of the Company and Witech are conducted see Item 5.A., “Operating Results,” above.

        In 2004, 2005 and 2006, the Company recorded a net negative cash flow from operations of approximately $88,000, $52,000 and $49,000, respectively. In January 2004 we received the final payment of the lawsuit settlement from 2003 in the amount of $110,000. Excluding this amount, the net negative cash flow from operations in 2004 would have been approximately $198,000.

        The Company currently has no available lines of credit or other credit facilities.

        We anticipate that our existing cash on hand, will be sufficient, at the business levels presently projected, to meet our working capital requirements, including normal capital expenditures, at least until December 31, 2008. However, Witech is dependent on receipt of financing from IIS for its future operations. We anticipate that we will need to raise additional financing in the first quarter of 2008 to maintain and expand Witech’s future. Witech currently does not have sufficient cash resources to meet its requirements in the next twelve months and without additional financing there is substantial doubt as to its ability to continue as a going concern. Any additional financing may not be available when required or at acceptable terms and may result in significant dilution to our shareholders. If financing is not available when required or is not available on acceptable terms, Witech’s business will suffer, it will need to scale back its activities and may need to cease its operations.

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C. Research and Development, Patents and Licenses, etc.

        Since December 31, 2002 we have not carried out any research and/or development activities. We currently hold no patents, licenses and other intellectual property assets. Witech has a patent pending in the United States, EU and Japan for a system and method for filming and recording attractions. Witech does not license its software to third parties.

D. Trend Information.

        As of December 31, 2006, we were no longer engaged in any operational business activity other than managing our minority holding in Enargis, which was disposed of in May 2007. We consummated the share exchange transaction with Witech on January 2, 2008.

        Witech and the industry is witnessing an increased interest in video products for rides at amusement parks as well as an upward trend in customers’ preferences for DVDs over still photographs. However, three of the largest ride photo companies, Kodak, Colorvision and Picsolve, currently have corporate sponsorship agreements with a number of large park chains. These sponsorship agreements often give the sponsor exclusive rights for all digital media services in the parks. When supplying systems to parks with sponsorship agreements, we may have to split part of the revenues with the sponsor. These agreements may limit Witech’s potential growth into new park chains. We anticipate the need of Witech to enter into its own sponsorship agreements in the future, but it may need to wait for the current agreements to expire. Although these agreements are typically for three years, there is no assurance that the agreements will not be renewed with the current sponsors. Other than the above, we do not expect any material variation in revenue sharing arrangements with potential future customers relative to the arrangements we have with existing customers.

        Although the gross margins for Witech’s sales in 2007, 2006 and 2005 were negative, this was based on a strategic decision to install a large number of systems regardless of expected profitability. Installation of a large amount of systems gave Witech the opportunity to prove that their systems would operate smoothly and out sell single photograph static systems. It also provided Witech with an understanding regarding installation, operation support and profitability. As a result of this decision, Witech gained credibility and increased its market presence. With the approval of the parks, Witech is ceasing operations of systems on rides that were not profitable in 2007 and in 2008 intends to install only systems that it believes will be profitable. Based on Witech’s experiences, Witech intends to focus its efforts on parks that have a high percentage of tourist visitors as opposed to locals as this dramatically increases the revenues from Witech’s system per ride. In addition based on its experiences , Witech is moving to regional maintenance centers in the U.S. with an aim to significantly reduce its operations costs.

        For additional information please see the “Risk Factors” listed in Item 3 above and the description of Witech’s Business in Item 4 “Information on the Company C. Witech”.

E. Off-Balance Sheet Arrangements.

Neither IIS nor Witech have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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F. Tabular Disclosure of Contractual Obligations

        The following table summarizes Witech’s outstanding contractual obligations as of September 30, 2007 and the effect those obligations are expected to have on Witech’s liquidity and cash flows in future periods:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 Year		1-3 Years	3-5 Years	More than 5 Years
Lease of facilities	$	75,000	$	75,000	$	$	$
Total	$	75,000	$	75,000	$	$	$

        The table above reflects only payment obligations that are fixed and determinable.

Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management.

        The Company’s executive officers and directors are as follows:

Name	Age		Expiration of office		Number of Shares Beneficially Owned
Charles Moss - Chairman of the Board of
the Company and Chief Executive Officer
of Witech		52		2008		1,012,141	(1)
Robi Hartman - Director and Chief
Executive Officer of the Company and
Acting Chief Financial Officer		46		2008		2,748,901
Aharon Jacobowitz -Director		59		2008		0
Alon Wulkan -Director		35		2008		0
Iris Weller-Weiss - External Director		33		2010		0
Adrian Auman(2)-External Director		53		2010		0
David Elooz - Director and Chief
Operations Officer of Witech		35		2008		1,094,097
Eliyahu Cohen - Director and Chief
Technology Officer of Witech		35		2008		1,010,521
Ronen Segal - Vice President Sales of
Witech		35		-		1,010,521

(1) Including shares of Opcom Ltd,; a company controlled by Mr. Moss.

(2) Mr. Auman replaced Mr. Phillip Stein who resigned on December 20, 2007.

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        Charles Moss has acted as a director of the Company since January 2, 2008 and as Chief Executive Officer and Chairman of the Board of Witech since its formation in February 2004. He is also the founder and owner of Opcom Ltd., an Israeli fiber optic company developing custom test solutions and served as Chief Executive Officer and Chairman of the Board of this company from 1986 until February 2004. He also served on the board of directors of MaxBill during 2006. Mr. Moss holds a Bachelors of Science and Masters of Science degree from the Massachusetts Institute of Technology (MIT) in Mechanical Engineering and Materials Science.

        Robi Hartman has 24 years of experience as an entrepreneur in the field of technology and as an executive for leading technology companies, with wide experience in public markets, finance and accounting. He has been the Company’s Chairman and Chief Executive Officer since the Company terminated its voluntary liquidation proceedings in April 2007 and fulfilled these duties until January 2, 2008 where at such time he began acting as the Chief Executive Officer, a Director as well as Chairman of the Board of Witech. He served as a Director of the Company from September 1998 until its entry into voluntary liquidation in July 2004, Vice Chairman of the Board from October 1998 to March 2000, Acting Chief Financial Officer from December 1998 until July 2004, and Chairman of the Board and Chief Executive Officer of the Company from March 2000 until July 2004, and joint liquidator of the Company from July 2004 until April 2007. He has also served as the Vice Chairman of the Board of Teledata Networks since the management buyout from ADC Telecommunications in February 2004 and was Chairman of StoreAge Networking Technologies from its inception in 1999 until 2006.  Before joining the Company, from 1987 to 1996, Mr. Hartman was the manager of Teledata Communications Ltd., a leading supplier of advanced access solutions, beginning as a manager and advancing to the Chief Financial Officer and finally as Chief Executive Officer and President.  From 1996 to 1997, Mr. Hartman was the President of VCON Telecommunications, a pioneer in PC based teleconferencing.  Since 1997 he owns and manages West End Technology Investments Ltd. Mr. Hartman received his B.A. in Political Science and Economics from Bar Ilan University and his Masters in Business Administration (MBA) from Bentley College.

        Aharon Jacobowitz has served as a director of the Company since the Company terminated its voluntary liquidation proceedings in April 2007. He served as a director of the Company from May 1995 until its entry into voluntary liquidation in July 2004 and as a joint-liquidator of the Company from July 2004 until April 2007.  Since 1989, Mr. Jacobowitz has been a management consultant to large organizations on data processing and management issues.  In addition to his consultancy business, Mr. Jacobowitz served three periods as general manager of two high-tech start up companies and the Israeli branch of Coopers and Lybrand consultancy firm. Prior to 1989, Mr. Jacobowitz was employed for 14 years in various capacities in the marketing division of IBM Israel Ltd.  His main specialties are networking, midrange systems and project management. He holds a BSc in Mathematics and Physics and an MSc in computer sciences (with distinction) both from the Hebrew University of Jerusalem.

        Alon Wulkan has served as a director of the Company since the Company terminated its voluntary liquidation proceedings in April 2007. During the last five years he has served in various positions in Kardan Israel Ltd. and its subsidiaries, including Vice President of Finance, economist and economic advisor and acts as a director of Kardan Trade and Retail Ltd., Tuxedo Holdings (1999) Ltd.; Kardan Securities Ltd. and Kardan Financial Holdings Ltd. Mr. Wulkan is the son-in-law of Mr. Schnur who is one of the beneficiaries of a trust that holds the shares of CDC Holdings Ltd. (the holder of approximately 5.44% of the issued and outstanding shares of the Company). Mr. Wulkan holds a BA in Social Sciences and Economics from the Open University in Israel and a Masters in Business Administration (MBA) from Tel Aviv University.

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        Iris Weller-Weiss has served as a director of the Company since the Company terminated its voluntary liquidation proceedings in April 2007. She has been acting since January 2006 as the Legal Consultant & Personal Assistant to Mr. Avner Schnur. Mr. Schnur is one of the beneficiaries of a trust that holds the shares of CDC Holdings Ltd. (the holder of approximately 5.44% of the issued and outstanding shares of the Company) and a principal shareholder and director of Kardan NV, a company traded on the Amsterdam Euronext and Tel-Aviv Stock Exchange. Kardan NV is actively involved in real estate, financial services, infrastructure, communications & technologies, and the automotive industry. From 2003- 2006, Mrs. Weller was a prosecutor with the District Attorney’s Office. Between the years 1999-2002, Mrs. Weller managed the Los Angeles branch of Kelly Law Registry, a leading American legal consulting and placement firm. Mrs. Weller received her LLB degree from Haifa University School of Law and her LLM degree from UCLA School of Law. She is a member of both the Israeli Bar Association and the State Bar of California.

        Adrian Auman has acted as an External Director of the Company since December 20, 2007. Mr. Auman has been Corporate Vice President for Finance and Investor Relations of Orbotech (NASDAQ:ORBK) since May 2006, prior to which he had served, since January 2000, as Director of Finance and Investor Relations and, from July 1997, has been Director of Finance. He was financial controller of the Company from October 1992 to July 1997 and was the financial controller of Orbot from 1988 until the Merger. Prior to joining Orbot, he was an audit supervisor at Kesselman & Kesselman, independent registered public accountants in Israel, from 1986 to 1988 and a tax manager at Goldstein, Golub, Kessler & Co., certified public accountants, from 1979 to 1985. Mr. Auman serves on the Board of Directors of Coreflow Ltd, which develops and sells aerochemical products and subsystems. Mr. Auman was among the founders and a member of the Board of Directors of Terem Emergency Medical Center Israel Ltd. which owns and runs 5 urgent care clinics throughout the Jerusalem region. He is a certified public accountant both in Israel and the United States and has a master’s of science degree from Pace University in New York.

        David Elooz has acted as a director of the Company since January 2, 2008 and as Chief Operations Officer of Witech since February 2007. Mr. Elooz served from 2001 until 2003 as Optical Engineering Manager and Senior Systems Engineer in Chiaro Networks Ltd., an Israeli company developing and managing optical design and production of fiberoptic switches. He also served from 2003 until 2006, as Team Leader and Project Manager for Applied Materials Ltd. (a subsidiary of Applied Materials Inc.), developing new inspection tools. Mr. Elooz holds a Bachelor of Science degree in Physics from the Jerusalem College of Technology.

        Eliyahu Cohen has acted as a director of the Company since January 2, 2008 and as Chief Technology Officer of Witech since its formation in February 2004. Mr. Cohen served from 2002 until joining Witech, as Projects Manager and Vice President R&D in ODF Optronics, an Israeli company developing visioning systems for the military and defense market. Mr. Cohen holds a Bachelor of Science degree in Electrical Engineering from the Jerusalem College of Technology, and a Masters Degree in Business Administration from Bar Ilan University.

        Ronen Segal has acted as the Vice President of Sales for Witech since its formation in February 2004. From 1994 to 1998 he worked for the Israeli Ministry of Defense, Advanced Technology Unit, where he was responsible for the development and integration of a data communications link with a radar system. From 1998 to October 2000 he also worked for the Israeli Navy on the integration of submarine communication systems. From November 2000 until January 2004, he was the project leader for OpTun Inc. with responsibility for development of test systems for optical components. Mr. Segal has a Bachelors of Science degree in Electro-Optical Engineering and Applied Physics, from the Jerusalem Technology College and is also a certified WiFi system engineer.

        There is no family relationship between any of the persons named above.

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        Although no agreement has yet been signed between Mr. Robi Hartman, CDC Holdings Ltd., Charles Moss, David Elooz, Eliyahu Cohen and Ronen Segal, such parties have informed us that they are negotiating a voting agreement. It has been agreed in principle that without derogating from the rights of any other shareholders of the Company, Hartman, CDC and their affiliates, on the one hand, and Messrs. Moss, Elooz, Cohen and Segal and their affiliates, on the other hand, shall have the right to nominate fifty percent (50%) of the nominees to the Board of Directors of the Company (excluding the “External Directors” as defined in the Israeli Companies Law)(the “IIS Directors”). These parties further agreed in principle that unless otherwise agreed between them in writing, they will take the necessary actions to cause the number of IIS Directors to be six (6). All nominees shall be submitted to the Company on a timely basis in accordance with the Company’s Articles of Association. At each meeting (or written action in lieu of a meeting) of the Company’s shareholders at or by which directors are to be elected by the shareholders, they undertake to vote all of their shares to elect as directors of the Company, all the IIS Directors nominated in the manner provided above, unless such nominee is legally disqualified from serving as a director of IIS. If an IIS Director shall cease to serve for any reason, the parties which designated such director (in accordance with the above provisions) shall have the right to designate a successor and each of the other holders of shares shall use its best efforts (to the extent it is entitled to vote) to ensure that such successor IIS Director is duly elected as a director. The parties have also undertaken to make their best efforts to (to the extent applicable) vote their shares in a manner as to ensure that an IIS Director designated by Messrs. Moss, Elooz, Cohen and Segal (initially Charles Moss) will act as Chairman of the Board of IIS and a person designated by Mr. Hartman and CDC (initially Robi Hartman) will act as the CEO of IIS. It is contemplated that this agreement shall continue until the earlier of (i) January 1, 2012, and (ii) the date upon which the shareholding of Mr. Hartman and CDC and their affiliates, on the one hand, and Messrs. Moss, Elooz, Cohen and Segal and their affiliates, on the other hand, is below 10% of the issued and outstanding share capital. The Company will not be a party to this agreement and the agreement is not expected to relate to the disposition of shares.

        Except as above, there are no arrangements or understandings with any of the major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management.

B. Compensation.

        At our general meeting of the shareholders held in July 2004, Messrs. Hartman and Jacobowitz were appointed as joint liquidators with a shareholders’ approved fee of $1,000 per month (plus VAT, if applicable), to each commencing from the appointment of the liquidation and continuing until distribution of all proceeds of the liquidation to our shareholders. These fees in the aggregate amount of $58,000 were paid in May 2007. The deferral of these fees represented a significant savings in cash expenses for the Company during 2004, 2005 and 2006. In addition, our shareholders in July 2004 approved a bonus to Messrs. Hartman and Jacobowitz as liquidators depending on the per share amount distributed to our shareholders, however since the liquidation proceedings were terminated, the bonus was not payable. Our shareholders further approved that (i) we would indemnify the liquidators for any liability, costs and expenses (including legal costs and expenses) relating to claims or demands against them in their capacity as liquidators to the fullest extent permitted by applicable law and subject to the same restrictions and qualifications as currently applicable to indemnification of our directors and officers, and (ii) we would waive any liabilities, claims, demands and causes of action against the liquidators in their capacity as liquidators to the fullest extent permitted by applicable law, with the exception of actions constituting gross negligence or willful misconduct.

        Effective as of April 1, 2003, all of the directors of the Company agreed to suspend their compensation until the Company either received a settlement from an ongoing lawsuit which at that time was in mediation or received proceeds from the sale/exit of StoreAge or Enargis or the raising of additional financial resources. Following settlement of this lawsuit, the directors of the Company did not take their compensation and agreed that compensation would be paid only from receipt of the proceeds from the sale/exit of our holdings in StoreAge or Enargis or the raising of additional financial resources. The amount of compensation due but unpaid to our officers and directors as of December 31, 2006 according to this arrangement was approximately $172,000 (these amounts were paid in May 2007). In addition until January 2006, Mr. Hartman received compensation from StoreAge for services he performed as Chairman of the Board of StoreAge in the amounts equal to approximately $60,000, $57,000, and $4,800 for the years 2004, 2005 and 2006, respectively. Mr. Hartman did not receive any compensation from Enargis.

        No options were granted to officers or directors during the fiscal years ended December 31, 2004, 2005 and 2006 and all options issued prior to such time have expired. We have issued 2,435,000 options pursuant to our 2007 Israeli Stock Option Plan. For information on the Company’s 2007 stock option plan, see “Stock Option Plans” below.

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        Effective as of April 1, 1999, StoreAge granted to Mr. Hartman in his capacity as Chairman of the Board, acting Chief Financial Officer and Secretary of StoreAge the option to purchase 310,000 non-voting ordinary shares of StoreAge at an exercise price of $0.1 per share. Effective as of January, 2006, Mr. Hartman received additional options to purchase 91,539 non-voting ordinary shares of StoreAge at an exercise price of $0.25 per share bringing the amount of his options in StoreAge to a total of 401,359 shares, constituting approximately 0.69% of the fully-diluted shares of StoreAge at the time of its sale to LSI. The net (pre tax) proceeds received by Mr. Hartman from the LSI transaction as a result of the exercise of these options was approximately $314,000, out of which approximately $45,000 is deposited in escrow for 18 months following the closing of the sale.

        On April 17, 2007, our shareholders approved (i) a proposal that the compensation to our external directors, Mr. Philip Stein and Ms. Iris Weller, shall be the greater of $12,000 per annum or the lowest cash compensation paid to any other of our directors of who receives cash and who is not an employee, consultant, service provider or controlling shareholder (or office holder of such controlling shareholder) of our company (the “Other Directors”), but in any case, their compensation shall not exceed the average cash compensation paid to the Other Directors, and (ii) the proposal to grant to each such external director options to purchase 45,000 of our Ordinary Shares, as a part of an incentive option plan to be adopted for all directors who are not external directors and other officers of our company, or, if greater, the lowest option compensation granted to Other Directors who receive options from our company, but in any case, not to exceed the average option compensation granted to the Other Directors, all as determined in accordance with the Israeli Companies Law and regulations. The options shall vest annually in equal shares over three years following the grant date, and the exercise price shall be equal to the exercise price of the options first granted after April 17, 2007 to any Other Director, all as may be adjusted in accordance with the Israeli Companies Law and regulations.

        Mr. Stein resigned and Mr. Adrian Auman was appointed as an external director, both effective as of December 20, 2007. Mr. Auman’s compensation as approved by our shareholders on December 20, 2007 is the same as specified above. The exercise price of the options to our external directors is $0.44 per share (the same price at which options were granted to our Other Directors).

        On May 15, 2007 and November 5, 2007, our board of directors and audit committee approved, subject to the shareholders approval that was given on December 20, 2007, the monthly compensation to West End Technology Investments Ltd. for the services of Mr. Hartman as our CEO in the amount (total cost to the Company) of NIS 60,000 plus VAT. In addition, in the event that the Company terminates the Agreement after April 16, 2011 (but not prior to this date), except in the case of a substantial breach, West End Technology Investments Ltd. will be paid a one-time payment equal to an additional 400% of the monthly fee. The Agreement includes confidentiality undertakings and a 12-month non-competition and non-solicitation undertaking by Mr. Hartman and West End Technology Investments Ltd. The Agreement commenced on April 17, 2007 and continues until either party terminates the Agreement at any time, at its sole discretion, by giving the other party at least 180-days advance written notice. In addition, on November 5, 2007, our board of directors and audit committee approved subject to the shareholders approval that was provided on December 20, 2007, the grant of options to purchase 15,000 Ordinary Shares of the Company to Mr. Hartman for each year in which Mr. Hartman serves as a director of the Company, commencing April 17, 2007. The exercise price of such options shall be $ 0.44 (the average closing price of the Company’s shares (as quoted by Yahoo Financial or other similar service) on the last 20 trading days, prior to the date of the shareholder resolution).

        Since our general meeting of the shareholders resolved at its meeting held on April 17, 2007 to terminate the voluntary liquidation proceedings, no bonus was payable to the liquidators according to the shareholder resolution of July 2004. As such, on June 17, 2007 our Audit Committee and Board of Directors approved and on December 20, 2007, our general meeting of shareholders approved, that (i) we pay Aharon Jacobowitz a cash bonus as follows: $25,000 (plus VAT, if applicable) if the PPS (as defined below) is above $0.50 per share, $50,000 (plus VAT, if applicable) if the PPS is above $1.00 per share and $75,000 (plus VAT, if applicable) if the PPS is above $1.30 per share, and (ii) we pay Robi Hartman a cash bonus of $100,000 (plus VAT, if applicable) if the PPS is above $1.30 per share. For the purposes of this resolution “PPS” means the average closing price of our shares on the “Pink Sheets” (as quoted by Yahoo Financial or other similar service) during the twenty (20) trading days following the approval of this resolution by our general meeting of shareholders which was provided on December 20, 2007.

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        The following table summarizes the terms of employment of Charles Moss, David Elooz and Eliyahu Cohen that were approved by our shareholders on December 20, 2007:

Name	Initial Term*	Job description**	Basic Salary per month in 2007 and 2008***	Basic Salary per month in 2009****	Benefits	Bonus ($)
						Profit after tax	Bonus
Charles Moss	January 1, 2008-	CEO of Witech	NIS 42,000 or	NIS 44,000 or	- Managers Insurance equal to 15.83% of the Salary	$500,000-$1,000,000	$15,000
	January 31, 2011.		$ 10,475	$ 11,000	- Education Fund equal to 7.5% of the Salary	$1,000,000-$1,500,000	$37,500
					- Cellular Phone	$1,500,000-$2,000,000	$45,000
	Automatically				- Company car up to Category 5, provided that the cost	$2,000,000-$3,000,000	$50,000
	renewed if not				of such car will not exceed NIS 4,200 per month	$3,000,000-$5,000,000	$100,000
	terminated earlier.				- 4 months salary ("adjustment pay")	$5,000,000-$8,000,000	$100,000
					after February 1, 2011 in addition	$8,000,000-$10,000,000	$200,000
	Termination Notice				to any statutory severance pay	>$10,000,000	$250,000
	period of at least				-Vacation of 20 days per each 12-month period
	120 days.
David Elooz	January 1, 2008-	COO of Witech	NIS 42,000 or	NIS 44,000 or	- Managers Insurance equal to 15.83% of the Salary	$500,000-$1,000,000	$15,000
	January 31, 2011		$ 10,475	$ 11,000	- Education Fund equal to 7.5% of the Salary	$1,000,000-$1,500,000	$37,500
					- Cellular Phone	$1,500,000-$2,000,000	$45,000
	Automatically				- Company car up to Category 5,	$2,000,000-$3,000,000	$50,000
	renewed if not				provided that the cost of such car	$3,000,000-$5,000,000	$100,000
	terminated earlier.				will not exceed NIS 4,200 per month	$5,000,000-$8,000,000	$100,000
					- 4 months salary ("adjustment pay")	$8,000,000-$10,000,000	$200,000
	Termination Notice				after February 1, 2011 in addition	>$10,000,000	$250,000
	period of at least				to any statutory severance pay
	120 days.				- Vacation of 20 days per each
					12-month period
Eliyahu Cohen	January 1,	CTO of Witech	NIS 42,000 or	NIS 44,000 or	- Managers Insurance equal to 15.83%	$500,000-$1,000,000	$15,000
	2008-January 31,		$ 10,475	$ 11,000	of the Salary	$1,000,000-$1,500,000	$37,500
	2011.				- Education Fund equal to 7.5% of	$1,500,000-$2,000,000	$45,000
					the Salary	$2,000,000-$3,000,000	$50,000
	Automatically				- Cellular Phone	$3,000,000-$5,000,000	$100,000
	renewed if not				Company car up to Category 5,	$5,000,000-$8,000,000	$100,000
	terminated earlier.				provided that the cost of such car	$8,000,000-$10,000,000	$200,000
					will not exceed NIS 4,200 per month	>$10,000,000	$250,000
	Termination Notice				- 4 months salary ("adjustment pay")
	period of at least				after February 1, 2011 in addition
	120 days.				to any statutory severance pay]
					- Vacation of 20 days per each
					12-month period

* If the total sales or profit for the previous year were less than 60% of the budget approved by the board of directors of Witech, with no obligation to pay the remaining value of the contract until the end of the initial term. Witech may terminate the employment agreement at its discretion at any time after February 1, 2008. Unless Witech exercises its right to terminate the contract under such condition, the contract shall automatically renew until terminated in accordance with the provisions of Section 7 of the employment agreement.

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** The agreement with the employee includes a Confidentiality and a 2-year Non-Competition and Non-Solicitation undertaking.

*** This will be the basic salary until February 1, 2009; provided that, until additional equity or convertible debt financing is raised, the basic salary shall be reduced by 25% (and will not be increased retroactively following such financing).

**** The salary from February 1, 2010 until January 31, 2011 will increase by 10% if the profit after tax in 2009 is at least $1,000,000.

        In addition, on January 2, 2008, we granted stock options to Charles Moss, David Elooz, Eliayu Cohen and Ronen Segal, to purchase 527,330 each of our Ordinary Shares at an exercise price equal to $0.44, which was the average trading price per share of the Exchange Shares during the twenty (20) trading days prior to the closing of the Exchange Agreement, vesting in eight (8) semi- annual installments as long as each such executive continues to be employed by us. These options were issued according to the capital gains route under Section 102 of the Israeli Income Ordinance or in accordance with Section 3(i) of the Israeli Income Ordinance, as applicable.

        Board Practices.

        In August 1993 our articles of association were amended to provide, among other matters, for a classified board of directors. These provisions were retained with minor amendments, in the new articles of associations of the Company approved on November 19, 2000 (the “Articles of Association”). Effective as of January 2, 2008, the “classified board’ provisions of our Articles of Association were repealed and currently all directors (except for “External Directors” elected in accordance with the Israeli Companies Law) are elected at a general or special meeting of shareholders and hold office until the end of the next annual meeting or until they cease to hold office pursuant to the provisions of the Articles of Association.

        During our voluntary liquidation proceedings, from July 2004 until April 2007, our board ceased to function and was replaced by the liquidators and all powers of the board of directors were exercised by the liquidators in accordance with Israeli law. In April 2007, Messrs. Hartman, Jacobowitz and Wulkan were elected as directors and, on January 2, 2008 Messrs. Moss, Elooz and Cohen were elected as additional directors. These directors will hold office until the later of the 2008 annual general meeting of shareholders or until their successors have been duly elected and qualified. Mrs. Weller-Weiss and Mr. Auman have been elected as external directors (as defined below) pursuant to the Israeli Companies Law. Under the Israeli Companies Law, the initial term of an external director is three years and may be extended for an additional three years.

        Officers serve at the discretion of the board of directors, subject to the terms of any agreement between them and the Company.

        There are no service contracts between the Company and any of its directors providing for benefits upon termination of engagement as directors.

External and Independent Directors

        Under the Israeli Companies Law, Israeli companies whose shares have been offered to the public in or outside of Israel are required to appoint two people to serve as external directors on the board of directors of a company.

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Under the Companies Law:

— An external director must either be professionally eligible or have relevant accounting and financial expertise, but at least one of the external directors must have relevant accounting and financial expertise.

— A director with accounting and financial expertise is a director who, due to his education, experience and skills, possesses capabilities relating to and understandings of, business and accounting matters and financial statements, which enable him to understand in depth the company’s financial statements and to initiate a debate regarding the manner in which the company’s financial information is presented.

— A director who meets certain professional qualifications is a director who satisfies one of the following requirements: (1) the director holds an academic degree in either economics, business administration, accounting, law or public administration, (2) the director either holds another academic degree or has obtained other high education in the company’s primary field of business or in an area that is relevant to his position, and (3) the director has at least five (5) years of experience serving in one of the following capacities or an aggregate of at least five (5) years of experience in two or more of the following capacities (a) a senior business management position of a company with a substantial scope of business, (b) a senior position in the primary field of business of the company or (c) a senior public administration position.

— The board of directors should determine the minimum number of directors having financial and accounting expertise, in addition to the external director, and in making the determination as to a director’s accounting and financial expertise, the board of directors is required to consider, among other things, the education, experience and knowledge of such person with respect to (1) accounting and internal control matters that are typical to the industry in which the company engages and to companies of similar size and complexity to those of the company, (2) the responsibilities of the company’s auditor and (3) the preparation and approval of financial statements under the Companies Law and the relevant Israeli securities law.

        The Companies Law provides that a person may not be appointed as an external director if the person or the person’s relative, partner, employer or any entity controlled by that person has at the date of appointment, or has had at any time during the two years preceding that date, any affiliation with the company, any entity controlling the company or any entity controlled by the company or by this controlling entity. The term “affiliation” includes:

— an employment relationship;

— business or professional relationship maintained on a regular basis;

— control; or

— service as an officer.

        No person can serve as an external director if the person’s position or other business creates, or may create, conflict of interests with the person’s responsibilities as an external director or if such position or other business may impair such director’s ability to serve a director. No person who is a director in one company can serve as an external director in another company, if at that time a director of the other company serves as an external director in the first company. The Companies Law further provides that if, at the time of appointment of an external director, all members of the board of directors of the company are of one gender, then the external director appointed shall be of the other gender. From April 2003 until termination of the voluntary liquidation proceedings in April 2007, we did not comply with these requirements due to the resignation of certain directors and our inability to attract additional directors. During our voluntary liquidation proceedings, from July 2004 until April 2007, our board ceased to function and was replaced by the liquidators and all powers of the board of directors were exercised by the liquidators in accordance with Israeli law.

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        External directors are appointed by a majority vote at a shareholders’ meeting, provided that either: (1) the majority of shares voted at the meeting, including at least one third of the shares of non-controlling shareholders voted at the meeting, vote in favor of appointment of the director or (2) the total number of shares of non-controlling shareholders voted against the election of the director does not exceed one percent of the aggregate voting rights in the company. The initial term of an external director will be three years and may be extended for an additional three-year period. Each committee of a company’s board of directors will be required to include at least one external director and all external directors must be members of the company’s audit committee.

        In addition, we are obligated under the Companies Law to establish an audit committee, at least a majority of whose members are independent of management. The audit committee should adopt a formal written audit committee charter to be reviewed annually.

        An external director is entitled to consideration and to the refund of expenses, as is provided in regulations adopted under the Companies Law only and is otherwise prohibited from receiving any other consideration, directly or indirectly, in connection with the services provided as an external director. Nevertheless, the grant of an exemption from liability for breach of fiduciary duty or duty of care, an undertaking to indemnify, indemnification or insurance under the provisions of the Companies Law shall not be deemed consideration. Under the Companies Law, an external director cannot be dismissed from the office unless:

— the board of directors determines that the external director no longer meets the requirements for holding such office, as set forth in the Companies Law or that the director is in breach of his or her fiduciary duties to the company and the shareholders of the company vote (by the same majority required for the appointment) to remove the external director after the external director has been given the opportunity to present his or her position;

— an Israeli court determines, upon a request of a director or a shareholder, that the director no longer meets the requirements for holding such office as set forth in the Companies Law or that the director is in breach of his or her fiduciary duties to the company; or

— the court determines, upon a request of the company or a director, shareholder or creditor of the company, that the external director is unable to fulfill his or her duty or has been convicted of certain crimes as specified in the Companies Law.

Audit Committee

        The Israeli Companies Law requires public companies to appoint an audit committee. The responsibilities of the audit committee include identifying irregularities in the management of the company’s business and approving related party transactions as required by law. An audit committee must consist of at least three directors, including every external director. The chairman of the board of directors, any director employed by or otherwise providing services to the company, and a controlling shareholder or any relative of a controlling shareholder, may not be a member of the audit committee. An audit committee may not approve an action or a transaction with a controlling shareholder, or with an office holder, unless at the time of approval two external directors are serving as members of the audit committee and at least one of the external directors was present at the meeting in which an approval was granted. Our audit committee consists of Aharon Jacobowitz, Alon Wulkan, Iris Weller-Weiss and Adrian Auman.

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        The audit committee provides assistance to the board in fulfilling its legal and fiduciary obligations with respect to matters involving the accounting, auditing, financial reporting and internal control functions of the Company. In carrying out these duties, the audit committee meets at least once every fiscal quarter with management at which time, among other things, it reviews, and either approves or disapproves, the financial statements of the Company for the immediately preceding fiscal quarter and conveys its conclusions in this regard to the board. The audit committee also monitors generally the services provided by the Company’s external auditors to ensure their independence, and reviews, and either approves or disapproves, all audit and non-audit services provided by them. The Company’s external and internal auditors also report regularly to the audit committee at its meetings, and the audit committee discusses with the Company’s external auditors the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the Company’s financial statements, as and when it deems it appropriate to do so.

        Under the provisions of the Sarbanes-Oxley Act of 2002, the audit committee will be responsible for the appointment, compensation, retention and oversight of the work of the Company’s external auditors. However, under Israeli law, the appointment of external auditors and their compensation require the approval of the shareholders of the Company. Pursuant to Israeli law, the shareholders may delegate the authority to determine the compensation of the external auditors to the board of directors. The compensation of the external auditors will be required to be approved by the audit committee and recommended to the shareholders or, if so authorized by the shareholders, recommended by the board and ratified by the shareholders or simply ratified by the board, as the case may be. The Company does not have a separate compensation committee.

Internal Auditor

        Pursuant to the Israeli Companies Law, the board of directors must appoint an internal auditor, nominated by the audit committee. The role of the internal auditor is to examine, among other matters, whether the company’s actions comply with the law and orderly business procedure. Under the Israeli Companies Law, the internal auditor may be an employee of the company but not an office holder, or an affiliate, or a relative of an office holder or affiliate, and he or she may not be the company’s independent accountant or its representative. Our internal auditor was appointed during May 2007 and is expected to submit an audit report by the end of January 2008.

C. Employees.

        As of December 31, 2007, Witech had 31 permanent employees and 8 temporary employees. During the height of the 2007 season, Witech had a total of 145 employees. Most of these were hired for 3-4 months to work in the U.S. parks. None of Witech’s employees are represented by a labor union and Witech considers its relations with its employees to be good. Witech’s U.S. subsidiary, CDRide had 1 permanent employee and 20 temporary employees.

        IIS employs one person on a part-time basis, in general management and administration and Robi Hartman, the CEO is engaged on the basis of a consulting agreement.

        For a description of the agreement with our CEO and Witech’s material employment agreements, see “Item 6. Directors, Senior Management and Employees – B. Compensation”.

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D. Share Ownership.

        The following chart sets forth director and senior management share ownership in the Company as of January 2, 2008. Each shareholder listed below enjoys the same voting rights with respect to each share.

Name	Title of Class		Number of Shares Beneficially Owned (1)			Percentage of Shares Beneficially Owned (%)(2)			Options			Warrants
Robi Hartman		Ordinary Shares		2,748,901			11.89	%		15,000	(4)		1,092,291	(7)
Aharon Jacobowitz		Ordinary Shares		0			0			15,000	(4)		0
Alon Wulkan		Ordinary Shares		0			0			15,000	(4)		0
Charles Moss		Ordinary Shares		1,012,141	(3)		4.38	%		527,330	(5)		795	(7)
David Elooz		Ordinary Shares		1,094,097			4.73	%		527,330			0
Eliyahu Cohen		Ordinary Shares		1,010,521			4.37	%		527,330			0
Iris Weller-Weiss		Ordinary Shares		0			0			45,000	(6)		0
Adrian Auman		Ordinary Shares		0			0			45,000	(6)		0
Ronen Segal		Ordinary Shares		1,010,521			4.37	%		527,330	(5)		0

* Owns less than one percent of the Ordinary Shares outstanding.

(1) Beneficial ownership by a person assumes the exercise of all options and warrants held by such person 527,330(5) that are currently exercisable or are exercisable within 60 days of such date.

(2) Percentage ownership is based on 23,128,768 shares outstanding as of January 2, 2008.

(3) Includes 151,958 Shares of Opcom Ltd., a company owned and controlled by Mr. Moss

(4) All these options were granted in December 2007. Each of these directors will receive additional options to purchase 15,000 shares for each year in which they serve as a director of the Company, commencing April 17, 2007 and vesting of such options will occur at the end of each such year. The exercise price of all the above options is $0.44 which is the average closing price of the Company's shares in the 20 trading days preceding the approval of these options by the general meeting of the shareholders of the Company.

(5) All these options were issued on January 2, 2008 at an exercise price equal to $0.44 which was the average trading price per share of the Exchange Shares during the 20 trading days prior to the closing of the Witech Exchange Agreement, vesting in eight (8) semi- annual installments as long as each such executive continues to be employed by us or Witech.

(6) All these options were granted in December 2007 and vest in three equal annual installments commencing in April 17, 2008 with respect to Mrs. Weller-Weiss and December 20, 2007 with respect to Mr. Auman. The exercise price of all the above options is $0.44 which is the average closing price of the Company's shares in the 20 trading days preceding the approval of the options granted to Mr. Auman by the general meeting of the Shareholders of the Company.

(7) Part of the 4,600,000 warrants to be issued following compliance with applicable Israeli and United States securities laws and regulations, we intend to issue, for no additional consideration, to all our shareholders at the record date determined for the purpose of the extraordinary general meeting held on December 20, 2007 (November 9, 2007), to the percentage holding of each such shareholder in our issued and outstanding share capital on such date. The exercise price of these warrants will be $0.44.

Stock Option Plans

        In August 1993, the Company’s employee share incentive plan (the “1993 Plan”) was approved by the board of directors and later adopted by the Company’s shareholders. The 1993 Plan permitted the grant of options to purchase Ordinary Shares to officers, directors and key employees of, and consultants to, the Company or any subsidiary of the Company. The 1993 Plan and all outstanding options issued under the 1993 Plan expired in 2003 except that the options held by Mr. Robi Hartman and Mr. Aharon Jacobowitz expired in 2006.

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        On November 5, 2007, our board of directors approved the Company’s 2007 Israeli Share Option Plan (the “Plan”) and resolved to reserve 3,300,000 Ordinary Shares for issuance pursuant to the Plan. The Plan was also approved by our general meeting of shareholders on December 20, 2007.

        The purpose of the Plan is to enable us to attract and retain qualified persons as employees, officers, directors, consultants, advisors and service providers and to motivate such persons by providing them with an equity participation in the Company. The Plan will expire 10 years after its adoption, unless terminated earlier by the Board of Directors.

        The Plan is administered by our board of directors or a committee of our board of directors which has broad discretion, subject to certain limitations, to determine the persons entitled to receive options.

        Under the Plan, the terms and conditions under which options are granted and the number of shares subject thereto shall be determined by our board of directors or a committee of our board of directors. The board of directors or such committee also has discretion to determine the nature of the consideration to be paid upon the exercise of an option under the Plan. Such consideration generally may consist of cash, but may at the discretion of our board of directors include cash and a recourse promissory note.

        The Ordinary Shares acquired upon exercise of an option are subject to certain restrictions on transfer, sale or hypothecation. Options are exercisable and restrictions on disposition of shares lapse pursuant to the terms of the individual agreements under which the options were granted or the shares were issued.

        Options granted under the Plan to our employees and to certain of directors may be designated as 102 Options that afford qualified optionees certain tax benefits under the Israel Income Tax Ordinance (“102 Options”). We have elected that the benefits available under the “capital gains” alternative will apply to 102 Options. Pursuant to the election made by the Company, capital gains derived by optionees arising from the sale of shares derived from the exercise of options granted to them under Section 102, will be subject to a flat capital gains tax rate of 25% (instead of the gains being taxed as salary income at the employee’s marginal tax rate). However, as a result of this election, the Company will no longer be allowed to claim as an expense for tax purposes the amounts credited to such employees as a benefit when the related capital gains tax is payable by them, as the Company was previously entitled to do. The Company may change its election from time to time, as permitted by the Tax Ordinance. There are various conditions that must be met in order to qualify for these benefits, including registration of the options in the name of a trustee (the “Trustee”) for each of the employees who is granted options. Each option, and any ordinary shares acquired upon the exercise of the option, must be held by the Trustee for a period commencing on the date of grant and ending no earlier than 24 months after the date of grant.

        In December 2007 the Company issued stock options to purchase 2,435,000 of its Ordinary Shares at an exercise price of $0.44.

Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders.

        During the period from January 1, 2004 through December 31, 2006, Mr. Hartman purchased an aggregate of 1,377,757 Ordinary Shares of the Company in open-market transactions.

        Pursuant to the Exchange Agreement, on January 2, 2008, we issued 11,552,229 of our Ordinary Shares to the shareholders of Witech.

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        The following table sets forth, as of January 2, 2008, the number of Ordinary Shares of the Company owned by all persons known to the Company to beneficially own 5% or more of the Company’s Ordinary Shares. The Company’s major shareholders do not have different voting rights.

Name and Address	Number of Ordinary Shares Beneficially Owned			Percentage of Ordinary Shares Beneficially Owned(1)
Nimrod Fund Ltd.
Sir Francis Drake Drive C725
Roadtown, Tortola,
British Virgin Islands		1,595,559	(2)		6.9	%
CDC Holdings Ltd.
c/o Fiduciaire Equity Trust A.G.
Address: 22 rue de Villereuse, P.O. Box
6135, 1211 Geneva 6, Switzerland		1,258,225	(3)		5.44	%
Robi Hartman
c/o I.I.S Intelligent Information Systems
Limited
33 Jabotinsky Street
Ramat Gan, Israel		2,748,901	(4)		11.89	%

(1) Percentage ownership is based on 23,128,768 shares outstanding as of January 2, 2008.

(2) Issued on January 2, 2008, at the closing of the Exchange Agreement in consideration for the transfer of shares in Witech to the Company.

(3) As reported on Schedule 13G filed with the Securities & Exchange Commission, dated January 14, 2002.

(4) As reported on Schedule 13D filed with the Securities & Exchange Commission, dated January 24, 2007.

        As of December 31, 2007, approximately 90% of the outstanding Ordinary Shares of the Company were held of record by approximately 50 holders registered on the books of the Company’s United States transfer agent with addresses in the United States. The Company believes that a majority of its Ordinary Shares are beneficially owned by non-United States persons. To the extent known to the Company, the Company is not directly or indirectly owned or controlled by another corporation, by any foreign government or by any other natural or legal person.

B. Related Party Transactions.

        In February 2001, a portion of our office space located in Ramat Gan, Israel was leased from West End, a company that is owned by Robi Hartman, the Company’s Chief Executive Officer and Chairman. As of April 1, 2003, this lease was assumed by Enargis which sublet 35% of the premises to us at an annual cost of approximately $12,000 which was reduced by 50% to $6,000 per annum with effect from August 2004, following our entry into voluntary liquidation proceedings in July 2004. The other 50%, $6,000, was deferred until receipts of the proceeds from the sale of either StoreAge or Enargis. These deferred amounts were paid in May 2007 following termination of our voluntary liquidation proceedings. As of November 2005, we became a direct tenant of West End. Following termination of the Company’s voluntary liquidation proceedings in April 2007, the amount of office space used increased from 35% to 50% of the premises and the annual cost also increased to $1,450 per month due to the larger space (the cost per square meter remained the same according to the original agreement).

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        Effective as of January 2006, Mr. Hartman received additional options to purchase 91,539 non-voting ordinary shares of StoreAge at an exercise price of $0.25 per share bringing the amount of his options in StoreAge to a total of 401,359 shares, constituting approximately 0.69% of the outstanding shares of StoreAge on a fully diluted basis. See: “Item 6. Directors, Senior Management and Employees. B. Compensation”. These options vested and were exercised at the time of the sale of StoreAge to LSI. For compensation due to the liquidators in the voluntary liquidation and our officers and directors, see “Item 6 – Directors, Senior Management and Employees”.

        On May 23, 2007, considering the bleak business prospects of Enargis and the costs involved in maintaining our shareholding in Enargis (particularly audit costs), we, together with all the other shareholders of Enargis, transferred all our shares in Enargis to West End Technology Investments Ltd. for no consideration other than the assumption by West End of all Enargis’ liabilities.

On June 17, 2007, our Audit Committee and Board of Directors approved and on December 20, 2007, at a general meeting, our shareholders approved that (i) we will pay Mr. Aharon Jacobowitz a cash bonus according to the following: $25,000 (plus VAT, if applicable) if the PPS (as defined below) is above $0.50 per share, $50,000 (plus VAT, if applicable) if the PPS is above $1.00 per share and $75,000 (plus VAT, if applicable) if the PPS is above $1.30 per share, and (ii) we will pay Robi Hartman a cash bonus of $100,000 (plus VAT, if applicable) if the PPS is above $1.30 per share. For the purposes of this resolution “PPS” shall mean the average closing price of our shares on the “Pink Sheets” (as quoted by Yahoo Financial or other similar service) during the twenty (20) trading days following the approval of the resolution by our general meeting of shareholders (which was given on December 20, 2007).

        For a description of the agreements with our directors and our CEO see "Item 6. Directors, Senior Management and Employees - B. Compensation".

        Out of the initial $1,500,000 loan provided by us to Witech, $200,000 was used to repay a loan provided in February 2007 by a company whose beneficial shareholders are affiliated with the beneficial shareholders of CDC Holdings Ltd., which holds 5.44% of our issued and outstanding share capital.

        Our Board of Directors decided in May 2007 in a resolution that was amended and supplemented in November 2007 that, subject to and following compliance with applicable Israeli and United States securities laws and regulations, we intend to issue, for no additional consideration, to all our shareholders at the record date determined for the purpose of the extraordinary general meeting held on December 20, 2007 (November 9, 2007), warrants to purchase an aggregate of 4,600,000 of our Ordinary Shares, on a pro-rata basis according to the percentage holding of each such shareholder in our issued and outstanding share capital on such record date. The exercise price of each warrant shall be $0.44 (the average trading price per share of our Ordinary Shares during the twenty trading days prior to the closing of the Witech Exchange Agreement). The warrants will be exercisable for cash or on a cash-less exercise basis. These warrants will be exercisable until the earlier of (i) five years from the date of issuance, and (ii) the closing of a Transaction. A “Transaction” shall mean either (i) the merger of our Company into another company in which our Company is not the surviving entity, or (ii) the purchase of all or substantially all of the shares of our Company. These warrants will be non-transferable and non-exercisable until all applicable Israeli and United States securities laws and regulations have been complied with in connection with the warrants and the underlying shares, including without limitation, that a registration statement covering the issuance of the underlying shares is declared effective by the SEC.

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        At an extraordinary general meeting of shareholders on December 20, 2007, the shareholders authorized the procurement of directors and officers liability coverage of up to $10 million per event and up to $10 million per annum, with an annual premium not to exceed $100,000. We procured an insurance policy, effective until December 2008 with the above coverage for an annual premium of $68,000.

        At an extraordinary general meeting of shareholders on December 20, 2007, the shareholders approved indemnification and exculpation agreements with our directors and office holders in a total amount for all directors and office holders (in excess of the insurance proceeds received) that shall not exceed to US$2,500,000, or such greater sum as shall, from time to time, be approved by our shareholders.

Item 8. FINANCIAL INFORMATION

A. Statements and Other Financial Information.

        See pages F-1 – F-75 of the Company’s financial statements.

Legal Proceedings

        The Company is not a party to any litigation that would, individually or in the aggregate, have a material adverse effect on the Company or its business, and is not aware that any such litigation is threatened.

Dividends

        The Company has not declared or paid dividends on its Ordinary Shares since 1989, and does not intend to declare or pay any dividends to its shareholders in the foreseeable future.

B. Significant Changes.

With the exception of the Exchange Agreement pursuant to which we acquired all the issued and outstanding shares of Witech, in consideration for the issuance of 11,552,229 of our ordinary shares on January 2, 2007 (see Item 4. INFORMATION ON THE COMPANY – A. Share Exchange Agreement with Witech), there have been no material changes in our business or Witech’s business since September 30, 2007.

Item 9. THE OFFER AND THE LISTING

        The Ordinary Shares of the Company have been traded in the over-the-counter market in the United States since the Company’s initial public offering on November 8, 1984. The Ordinary Shares originally traded under the symbol IISLF and now trade under the symbol IISLF.PK. From January 22, 1985 to March 17, 1999, the Ordinary Shares traded on the Nasdaq National Market (“Nasdaq”). From March 18, 1999 until January 22, 2003, the Ordinary Shares traded on the Nasdaq SmallCap Market. From January 23, 2003 until August 23, 2004, the Company’s Ordinary Shares traded on the OTC Bulletin Board. Since August 24, 2004, the Company’s Ordinary Shares have traded on the Pink Sheets Electronic Quotation Service (“Pink Sheets”).

        The following table sets forth, for the periods indicated, the annual high and low closing sales price quotes of the Ordinary Shares as reported by Nasdaq, by the OTC Bulletin Board or by the Pink Sheets since January 23, 2003, for the five most recent full financial years and the quarterly high and low closing sales price quotes for the three most recent full financial years. The table also sets forth the high and low closing sales price quotes of the Ordinary Shares as reported by the Pink Sheet s for the most recent six months.

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	High		Low
Year ended December 31, 2003	$	0.92	$	0.31
Year ended December 31, 2004	$	0.73	$	0.09
Year ended December 31, 2005	$	0.15	$	0.09
Year ended December 31, 2006	$	0.36	$	0.09
Year ended December 31, 2007	$	0.85	$	0.30
2005
First Quarter	$	0.15	$	0.09
Second Quarter	$	0.12	$	0.09
Third Quarter	$	0.14	$	0.10
Fourth Quarter	$	0.13	$	0.10
2006
First Quarter	$	0.22	$	0.10
Second Quarter	$	0.12	$	0.9
Third Quarter	$	0.11	$	0.9
Fourth Quarter	$	0.36	$	0.10
Most Recent Six Months
July 2007	$	0.55	$	0.42
August 2007	$	0.51	$	0.32
September 2007	$	0.4	$	0.3
October 2007	$	0.44	$	0.32
November 2007	$	0.64	$	0.35
December 2007	$	0.50	$	0.32

        The foregoing prices reflect inter-dealer quotations without retail mark-ups, mark-downs or commissions and may not represent actual transactions.

Item 10. ADDITIONAL INFORMATION

A. Share Capital.

        At our shareholders meeting held on December 20, 2007 our registered share capital was increased to 50,000,000 Ordinary Shares of NIS 0.003 par value each.

        On January 2, 2008, with the closing of the acquisition of all the issued and outstanding shares of Witech, we issued 11,552,229 of our Ordinary Shares to the shareholders of Witech. See “Item 4.INFORMATION ON THE COMPANY. – A. Share Exchange Agreement”.

        For the issuance of share options, see “Item 10 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES – E. Stock Option Plans”.

        In November 2007, we issued notes convertible into Ordinary Shares and warrants to purchase 331,000 of our Ordinary Shares. See C. Material Contracts – Convertible Note Financing” below in this section.

        Other than the above, we have not issued any other shares or options or other convertible securities in the last three fiscal years.

B. Memorandum and Articles of Association.

Objects and Purposes in the Company’s Articles of Association

        The Company’s objects and purposes are specified in its Memorandum of Association filed as Exhibit 3.2 to Registration Statement No. 33-62862 dated August 10, 1993 (the “Memorandum”).

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Provisions Regarding Directors

        Pursuant to article 54(b) of our Articles of Association, a transaction entered into by the Company in which a director of the Company has a personal interest, directly or indirectly, will be valid in respect of the Company and the given director only if approved by the Company’s board of directors and, if such transactions are “irregular transactions” as defined in the Israeli Companies Law, approved in accordance with the requirements of the Israeli Companies Law.

        An “irregular transaction” pursuant to the Israeli Companies Law is defined as a transaction which is not in the ordinary course of business, a transaction which is not under ordinary market conditions or any transaction which might substantially affect the profitability of the Company, its assets and liabilities.

        The Israeli Companies Law provides that a director who has a personal interest in a given transaction of the Company, brought for approval of the board of directors, shall not be present and/or vote at that meeting. Article 55 of the Company’s Articles of Association, provides that a director who has a personal interest in a matter which is brought for discussion before the board of directors may participate in said discussion, provided that he shall neither vote in nor attend discussions concerning the approval of the activities or the arrangements. If said director did vote or attend as aforesaid, the approval given to the aforesaid activity or arrangements shall be invalid.

        Pursuant to article 72 of the Company’s Articles of Association, at any meeting of the board of directors at which a quorum is present, the board will have the authority to exercise all or part of the authorities, power of attorney and discretion invested at such time in the directors or regularly exercised by them. With respect to legal quorum at our board meetings, the Israeli Companies Law provides that, unless determined otherwise by the Company, a legal quorum at the board meetings shall consist of the majority of the board members. We have not decided otherwise and therefore, the legal quorum at our board meeting will consist of the majority of the board members.

        Any transaction concerning compensation to a director requires the approval by the board of directors, the audit committee and the shareholders of the Company.

        The board of directors may from time to time, in its discretion, cause the Company to borrow or secure the payment of any sum or sums of money for the purpose of the Company. Additionally, the Company may secure or provide for the repayment of such sum or sums in such manner, at such times and upon such terms and conditions in all respects as it sees fit including but not limited to, by the issuance of bonds, perpetual or redeemable debentures, debenture stock, or any mortgages, charges or other securities on the undertaking, or the whole or any part of the property of the Company, both present and future, including units uncalled or called but unpaid capital for the time being.

        There is no mandatory retirement age for the directors under our Articles of Association or the Companies Law.

        There is no requirement concerning the number of shares one individual must hold in order to qualify him or her as a director under our Articles of Association or the Israeli Companies law.

Dividends

        Subject to any preferential, deferred, qualified or other rights, privileges or conditions attached to any special class of shares with regard to dividends, the profits of the Company available for dividend and resolved to be distributed shall be applied in payment of dividends upon the shares of the Company in proportion to the amount paid up or credited as paid up per the nominal value thereon respectively. Unless not otherwise specified in the conditions of issuance of the shares, all dividends with respect to shares which were not fully paid up within a certain period, for which dividends were paid, shall be paid proportionally to the amounts paid or credited as paid on the nominal value of the shares during any portion of the above-mentioned period.

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        The board of directors may declare a dividend to be paid to the shareholders according to their rights and interests in the profits, and may fix the record date for eligibility and the time for payment.

        The board of directors may from time to time pay to the shareholders on account of the next forthcoming dividend such interim dividends as, in their judgment, the position of the Company justifies.

        A transfer of shares shall not pass the right to any dividend declared thereon after such transfer and before the registration of the transfer.

        There is no time limit after which dividend entitlement lapses according to our Articles of Association or the Companies Law.

        The board of directors may determine that, a dividend may be paid, wholly or partially, by the distribution of specific assets of the Company or by distribution of paid up shares, debentures or debenture stock or any other securities of the Company or of any other companies or in any one or more of such ways in the manner and to the extent permitted by the Companies Law.

Terms of Directors

        Effective as of January 2, 2008, the “classified board” provisions of our Articles of Association were cancelled and currently all directors (except for “External Directors” elected in accordance with the Israeli Companies Law) are elected at a general or special meeting of shareholders and hold office until the end of the next annual meeting or until they cease to hold office pursuant to the provisions of the Articles. For a detailed description of the provisions relating to External Directors see “Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES – Board Practices”.

Votes of Shareholders

        Our shareholders have one vote for each share held on all matters submitted to a vote of shareholders. Except as otherwise provided in our Articles of Association, any resolution at a general meeting shall be deemed adopted if approved by the holders of a majority of the voting rights in the Company represented at the meeting in person or by proxy and voting thereon. In the case of an equality of votes, either on a show of hands or a poll, the chairman of the meeting shall not be entitled to a further or casting vote.

        At all general meetings, a resolution put to a vote at the meeting shall be decided on a show of hands unless, before or upon the declaration of the result of the show of hands, a poll in writing be demanded by the chairman (being a person entitled to vote), or by at least two shareholders present, in person or by proxy, holding at least 5% of the issued share capital of the Company and, unless a poll be so demanded, a declaration by the chairman of the meeting that a resolution has been carried, or has been carried unanimously or by a particular vote, or lost, or not carried by a particular vote, shall be conclusive, and an entry to that effect in the minute book of the Company shall be conclusive evidence thereof, without proof of the number or proportion of the votes recorded in favor of or against such resolution.

        If a poll be demanded in manner aforesaid, it shall be taken forthwith, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded.

        Any shareholder which is not a natural person may, by resolution of its directors or other governing body, authorize such person as it thinks fit to act as its representative at a general meeting, and the person so authorized to the satisfaction of the Company shall be entitled to exercise the same powers on behalf of such entity, which he represents as the entity could exercise if it were an individual shareholder.

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        Subject to any rights or restrictions for the time being attached to any class or classes of shares, every shareholder shall have one vote for each share of which he is the holder, whether on a show of hands or on a poll. Our Articles of Association do not permit cumulative voting and it is not mandated by Israeli law. Votes may be given either personally or by proxy. A proxy need not be a shareholder of the Company. If any shareholder is a lunatic, idiot, or non compos mentis, he may vote by his committee, receiver, curator bonis or other legal curator, and such last mentioned persons may give their votes either personally or by proxy. If two or more persons are jointly entitled to a share then, in voting upon any question, the vote of the senior person who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other registered holders of the share and, for this purpose seniority shall be determined by the order in which the names stand in the shareholder register.

        The instrument appointing a proxy shall be in writing in the usual common form, or such form as may be approved by the board of directors, and shall be signed by the appointor or by his attorney duly authorized in writing or, if the appointor is a corporation, the corporation shall vote by its representative, appointed by an instrument duly signed by the corporation. The instrument appointing a proxy shall be deemed to include authorization to demand a poll or to vote on a poll on behalf of the appointor.

        A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the principal, or revocation of the proxy, or transfer of the share in respect of which the vote is given, unless an intimation in writing of the death, revocation or transfer shall have been received at the office before the commencement of the meeting or adjourned meetings at which the proxy is used.

        The instrument appointing a proxy shall be deposited at the registered office of the Company or at such other place or places, whether in Israel or elsewhere, as the board of directors may from time to time, either generally or in a particular case or class of cases prescribe, at least forty eight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in such instrument proposes to vote. Otherwise, the person so named shall not be entitled to vote in respect thereof, but no instrument appointing a proxy shall be valid after the expiration of twelve months from the date of its execution.

        Subject to the provisions of the Companies Law, a resolution in writing (approved by letter, telex, facsimile or otherwise) by all the shareholders, in person or by proxy, for the time being entitled to vote at a general meeting of the Company, shall be as valid and as effectual as a resolution adopted by a general meeting duly convened, held and constituted for the purpose of passing such resolution.

        A shareholder will be entitled to vote at the meetings of the Company by several proxies appointed by him, provided that each proxy shall be appointed with respect to different shares held by the appointing shareholder. Every proxy so appointed on behalf of the same shareholder shall be entitled to vote as he sees fit.

Further Rights and Preferences of the Ordinary Shares

        In the event of sale or the undertaking of the Company, the board or the liquidator on a winding up, as the case may be, subject to the authorization by a majority vote at a meeting of shareholders, may distribute to our shareholders all assets remaining after payment of the Company’s liabilities.

        Our Articles of Association permit, subject to the Israeli Companies Law, the issue of redeemable shares and to redeem the same according to terms and conditions determined by the Company. Our Articles of Association do not include provisions related to sinking funds.

        According to our Articles of Association no person shall be entitled to vote at any general meeting (or be counted as a part of the quorum thereof) unless all calls then payable by him in respect of his shares in the Company shall have been paid. The Israeli Companies Law provides that a company is entitled to determine within its articles a provision allowing the board to place a call on the shares, in the event that the consideration for such shares, in full or in part, have not been paid on time and in accordance with the agreeable terms set out in the given agreement or the articles of association of the company.

        According to our Articles of Association, there are no discriminating provisions against any existing or prospective holders of shares of the Company as a result of a shareholder holding a substantial number of shares.

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Modification of Class Rights

        If, at any time, the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issuance of the shares of that class) may be varied with the consent in writing of the holders of all the issued shares of that class, or with the sanction of a majority vote at a meeting of the shareholders passed at a separate meeting of the holders of the shares of the class. The provisions of our Articles of Association relating to general meetings shall apply, mutatis mutandis, to every such separate general meeting. Any holder of shares of the class present in person or by proxy may demand a secret poll.

        Unless otherwise provided by the conditions of issuance, the enlargement of an existing class of shares, or the issuance of additional shares thereof, shall not be deemed to modify or abrogate the rights attached to the previously issued shares of such class or of any other class. These conditions provide for the minimum shareholder approvals permitted by the Israeli Companies Law.

General Meetings

        General meetings shall be held at least once in every calendar year at such time, not being more than fifteen months after the holding of the last preceding general meeting, and at such time and place as may be determined by the board of directors.

        The board of directors may, whenever it deems necessary, and shall upon such requisition in writing as is provided by Section 63(b) of the Companies Law, convene a general meeting. Any such request must state the purposes for which the meeting is to be called, be signed by the requesting shareholders, and must be deposited at the registered office of the Company. Such request may consist of several documents in like form, each signed by one or more requesting shareholder(s).

        Unless a longer period for notice is prescribed by the Companies Law, at least ten (10) days and not more than sixty (60) days notice of any general meeting shall be given, specifying the place, the day and the hour of the meeting and, in the case of special business, the nature of such business, shall be given in the manner hereinafter mentioned, to such shareholders as are under the provisions of the Company’s Articles of Association, entitled to receive notices from the Company. Notices shall be given by mail or by personal delivery to every registered shareholder of the Company, to his address as described in the shareholders register of the Company or such other address as designated by him in writing for this purpose. The accidental omission to give such notice to, or the non receipt of such notice by, any such shareholder shall not invalidate any resolution passed or proceeding held at any such meeting and, with the unanimous consent of the shareholders entitled to receive notice of meetings, a meeting may be convened upon a shorter notice or without notice, and generally in such manner as such shareholders may approve. Such consent may be given at the meeting or retroactively after the meeting. If a shareholder has not provided the Company with an address for the delivery of notices, the shareholder shall be deemed to have waived his right to receive such notices.

        Only shareholders of record as reflected on the Company’s share register at the close of business on the date fixed by the board of directors as the record date determining the then shareholders who will be entitled to vote, shall be entitled to notice of, and to vote, in person or by proxy, at a general meeting and any postponement or adjournment thereof.

Quorum at General Meetings

        No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business. The quorum at any Meeting shall be two shareholders present in person or by proxy, holding or representing at least twenty five percent (25%) of the total voting rights in the Company. A company being a shareholder shall be deemed to be personally present for the purpose of the Company’s Articles of Association if represented by its representative duly authorized in accordance with Article 42 of the Company’s Articles of Association.

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        If, within half an hour from the time appointed for the holding of a general meeting, a quorum is not present, the meeting shall stand adjourned to the same day in the next week at the same time and place, or any time and hour as the board of directors shall designate and state in a notice to the shareholders entitled to vote at the original meeting, and if, at such adjourned meeting, a quorum is not present within half an hour from the time appointed for holding the meeting any two shareholders present in person or by proxy shall constitute a quorum. Notwithstanding the aforesaid, if a general meeting was convened at the demand of shareholders as permitted by Section 63(b) of the Companies Law, then a quorum at such adjourned meeting shall be present only if one or more shareholders are present who hold in the aggregate at least 5% of the issued share capital of the Company and at least 1% of the voting rights in the Company or one or more shareholders who hold in the aggregate at least 5% of the voting rights in the Company.

Restrictions on Shareholders Rights to Own Securities

        The Memorandum and Articles of Association of the Company do not restrict in any way the ownership of Ordinary Shares by residents or nonresidents, except with respect to subjects of countries which are in a state of war with Israel, and neither the Memorandum and Articles of Association nor Israeli law restricts the voting rights of residents or nonresidents.

Potential Issues that Could Delay a Merger

        A merger of the Company requires the approval of the board of directors and the general meeting of shareholders, in accordance with the provisions of the Israeli Companies Law. See also “Anti-Takeover Provisions; Merger and Acquisitions under Israeli Law”.

Requirement of Disclosure of Shareholder Ownership

        There are no provisions of our Memorandum or Articles of Association governing the ownership threshold above which shareholder ownership must be disclosed.

Approval of Related Party Transactions Under Israeli Law

        The Companies Law codifies the fiduciary duties that “office holders,” including directors and executive officers, owe to a company. An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act at a level of care that a reasonable office holder in the same position would employ under the same circumstances. The duty of loyalty includes avoiding any conflict of interest between the office holder’s position in the company and his personal affairs, avoiding any competition with the company, avoiding exploiting any business opportunity of the company in order to receive personal gain for the office holder or others, and disclosing to the company any information or documents relating to the company’s affairs which the office holder has received due to his position as an office holder. Each person listed as a director or executive officer in the table under “Directors, Senior Management and Employees–Directors and Senior Management” above is an office holder. Under the Companies Law, all arrangements as to compensation of office holders who are not directors require approval of our board of directors, and the compensation of office holders who are directors must be approved by our audit committee, board of directors and shareholders.

        The Companies Law requires that an office holder promptly disclose any personal interest that he or she may have and all related material information known to him or her, in connection with any existing or proposed transaction by us. In addition, if the transaction is an extraordinary transaction, that is, a transaction other than in the ordinary course of business, other than on market terms, or likely to have a material impact on the company’s profitability, assets or liabilities, the office holder must also disclose any personal interest held by the office holder’s spouse, siblings, parents, grandparents, descendants, spouse’s descendants and the spouses of any of the foregoing, or by any corporation in which the office holder or a relative is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager. Some transactions, actions and arrangements involving an office holder (or a third party in which an office holder has an interest) must be approved by the board of directors or as otherwise provided for in a company’s articles of association, as not being adverse to the company’s interest. In some cases, such a transaction must be approved by the audit committee and by the board of directors itself (with further shareholder approval required in the case of extraordinary transactions). An office holder who has a personal interest in a matter, which is considered at a meeting of the board of directors or the audit committee, may not be present during the board of directors or audit committee discussions and may not vote on this matter, unless the majority of the members of the board or the audit committee have a personal interest, as the case may be.

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        The Companies Law also provides that some transactions between a public company and a controlling shareholder, or transactions in which a controlling shareholder of the company has a personal interest but which are between a public company and another entity, require the approval of the board of directors and of the shareholders.

        Once the officer or controlling shareholder complies with these disclosure requirements, the company may approve the transaction in accordance with the provisions of the Companies Law and its articles of association. Generally, the approval of the majority of the disinterested members of the audit committee and the board of directors is required. If audit committee approval is required for a transaction with an interested party, an officer or a controlling shareholder, such approval may not be given unless, at the time the approval was granted two members of the audit committee were external directors and at least one of them was present at the meeting at which the audit committee decided to grant the approval. Shareholder approval may also be required if the transaction is an exceptional transaction. An exceptional transaction is a transaction other than in the ordinary course of business, otherwise than on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities. In such event, the principal terms of such transaction must be disclosed in a notice to the shareholders which will include all substantive documents relating to the transaction.

        Moreover, the audit committee, the board of directors and shareholders must approve an extraordinary transaction with a controlling shareholder or the terms of compensation of a controlling shareholder. The shareholder approval for an extraordinary transaction must include at least one-third of the shareholders who have no personal interest in the transaction and are present at the meeting. Shareholders without this one-third approval can approve the transaction, if the total shareholdings of those shareholders who have no personal interest and voted against the transaction do not represent more than one percent of the voting rights in the company.

        If the transaction is with an officer or with a third party in which the officer or the controlling shareholder has a personal interest, the approval must confirm that the transaction is not adverse to the company’s interest. Shareholders must also approve all compensation paid to directors in whatever capacity, company’s undertaking to indemnify a director or indemnification under a permit to indemnify and any transaction in which a majority of the board members have a personal interest. An officer with a personal interest in any matter may not be present at any committee or board of directors meeting where such matter is being approved, and may not vote thereon, unless the majority of the members of the committee or of the board of directors have a personal interest in such approval.

        However, under the Companies Regulations (Relief From Related Party Transactions), 5760-2000, promulgated under the Companies Law and amended in January 2002, certain transactions between a company and its controlling shareholder(s) do not require shareholder approval. In addition, pursuant to the recent amendment to these regulations, certain directors’ compensation and employment arrangements do not require the approval of the shareholders if both the audit committee and the board of directors approve that such arrangements are for the benefit of the company.

        If the director or the office holder is a controlling shareholder of the company then the employment and compensation arrangement of such director or office holder does not require the approval of the shareholders if it meets certain criteria.

        The above relief shall not apply if one or more shareholders, holding at least 1% of the issued and outstanding share capital of the company or of the company’s voting rights objects to the grant of such relief, providing that such objection is submitted to the company in writing not later than seven (7) days from the date of the filing of a report regarding the adoption of such resolution by the company pursuant to the requirements of the Israeli Securities Law. If such objection is duly and timely submitted then the compensation arrangement of the directors will require shareholders’ approval as detailed above.

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Indemnification of Directors and Officers

        The Companies Law provides that an Israeli company cannot exculpate an office holder from liability with respect to a breach of his duty of loyalty, but may exculpate in advance an office holder from his liability to the company, in whole or in part, with respect to a breach of his duty of care. Our articles of association provide that, subject to any restrictions imposed by corporate law, we may enter into a contract for the insurance of the liability of any of our office holders with respect to:

— a breach of his duty of care to us or to another person;

— breach of his duty of loyalty to us, provided that the office holder acted in good faith and had reasonable cause to assume that his act would not prejudice our interests; or

— a financial liability imposed upon him in favor of another person in respect of an act performed by him in his capacity as an office holder.

In addition, we may indemnify an office holder against:

— a financial liability imposed on him in favor of another person by any judgment, including a settlement or an arbitrator’s award approved by a court in respect of an act performed in his capacity as an office holder; and

— reasonable litigation expenses, including attorneys’ fees, expended by such office holder or charged to him by a court, in proceedings we institute against him or instituted on our behalf or by another person, or in a criminal charge from which he was acquitted, all in respect of an act performed in his capacity as an office holder.

        These provisions are specifically limited in their scope by the Companies Law, which provides that a company may not indemnify an office holder, nor enter into an insurance contract which would provide coverage for any monetary liability incurred as a result of certain improper actions.

        Pursuant to the Companies Law, indemnification of, and procurement of insurance coverage for, our office holders must be approved by our audit committee and our board of directors and, in specified circumstances, by our shareholders.

        At an extraordinary general meeting of shareholders in December 2007, the shareholders authorized the procurement of directors and officers liability coverage of up to $10 million per event and up to $10 million per annum, with an annual premium not to exceed $100,000. We procured an insurance policy, effective until December 2008 with the above coverage for an annual premium of $68,000.

        At an extraordinary general meeting of shareholders in December 2007, the shareholders approved indemnification and exculpation agreements with our directors and office holders in a total amount for all directors and office holders (in excess of the insurance proceeds received) that shall not exceed US$2,500,000, or such greater sum as shall, from time to time, be approved by our shareholders.

Anti-Takeover Provisions; Mergers and Acquisitions under Israeli Law

        Pursuant to the Companies Law, if following any acquisition of shares of a public company or of a class of shares of a public company the acquiror will hold 90% or more of the company’s shares or 90% of any class of the company’s shares, respectively, then the acquiror must make a tender offer for all of the remaining shares or the particular class of shares of the company. In the event that 5% or more of the shareholders have not responded favorably to a tender offer, the offeror may not purchase more than 90% of that class of shares. Furthermore, the Companies Law provides that as long as a shareholder in a public company holds more than 90% of the company’s shares or of a class of shares, such shareholder shall be precluded from purchasing any additional shares of that type.

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        The Companies Law further provides that if following the tender offer such acquiring shareholder holds more than 95% of the outstanding shares of any class, the holders of all the remaining shares will be obligated to transfer such shares to the acquiror at the tender offer price. This entails the possibility of additional delay and the imposition of further approval requirements at the court’s discretion. The Companies Law requires that each company that is party to a merger approve the transaction by a vote of the board of directors and by a vote of the majority of its outstanding shares, generally excluding shares voted by the other party to the merger or any person holding at least 25% of the other party to the merger, at a shareholders’ meeting called for this purpose. In addition, in certain cases court approval of a merger may be required. Upon the request of a creditor to either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger. In addition, a merger may not be completed unless at least 50 days have passed from the time that a proposal for approval of the merger has been filed with the Israeli Registrar of Companies, certain notification and information have been provided to debtors and at least 30 days have passed from the shareholders approval of the merging companies.

        The Companies Law also provides that an open market acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 25% of the voting rights in the company. This rule does not apply if there already is another holder of 25% of the voting rights in the company. Similarly, the Companies Law provides that an open market acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become the holder of 45% of the voting rights in the company. This rule does not apply if another party already holds more than 45% of the voting rights in the company. Regulations promulgated under the Companies Law provide that these tender offer requirements do not apply to companies whose shares are listed for trading on a stock exchange outside of Israel only if, according to the laws in the country in which its shares are traded there is either a limitation on the acquisition of a specified percentage of control in the Company or the acquisition of a specified percentage of control requires the purchaser to also make a tender offer to the public.

        The Companies Law extends the disclosure requirements applicable to an officer of the Company to a shareholder that holds 25% or more of the voting rights in a public company, including an Israeli company that is publicly traded outside of Israel such as on the OTC Bulletin Board. Certain transactions between a public company and a 25% shareholder, or transactions in which a 25% shareholder of the company has a personal interest but which are between a public company and another entity, require the approval of the board of directors and of the shareholders. Moreover, an extraordinary transaction with a 25% shareholder or the terms of compensation of a 25% shareholder must be approved by the audit committee, the board of directors and shareholders. The shareholder approval for an extraordinary transaction must include at least one third of the shareholders who have no personal interest in the transaction and are present at the meeting; the transaction can be approved by shareholders without this one third approval, if the total share holdings of those who vote against the transaction do not represent more than 1% of the voting rights in the company.

        The Israeli Companies Ordinance requires that certain transactions, actions and arrangements be approved as provided for in the Company’s Articles of Association, by the Company’s board of directors, by the audit committee and/or by the Company’s shareholders. The vote required by the audit committee and the board for approval of such matters, in each case, is a majority of the disinterested directors participating in a duly convened meeting.

Changes in Capital

        The Company’s Memorandum and Articles of Association do not impose any conditions governing changes in capital that are more stringent than required by the Israeli Companies Law.

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C. Material Contracts.

        Sale of shares in StoreAge

        In October 2006 all shareholders of StoreAge, including us, signed a share purchase agreement (the “SPA”) with LSI for the sale of all issued and outstanding shares of StoreAge to LSI. In November 2006, the sale was closed and LSI paid us gross proceeds of $5,416,692 ($0.862 per share) for all our shares, out of which 13%, $703,793 or $0.112 per share is held in escrow to satisfy certain possible future claims for a period of 18 months following the closing (see below in this Item). At the time of this closing, we held 12.68% of the issued and outstanding share capital of StoreAge (10.89% on a fully diluted basis). This additional dilution resulted from the issuance of warrants to the Israeli venture lending fund that provided a $4,000,000 loan to StoreAge in March 2006 (that was repaid by LSI) and the increase of shares reserved for options pursuant to StoreAge’s incentive share option plans. See “Item 4C. Business Overview – Sale of StoreAge”.

        In the framework of the SPA, we did not make any representations and warranties regarding StoreAge and its subsidiaries, these representation and warranties were made only by StoreAge. We were required to make certain representations and warranties regarding ourselves and the ownership of our shares. The representations and warranties of StoreAge and the sellers, including ourselves, contained in the SPA shall survive the closing for 18 months until May 21, 2008; provided, however, that (i) the representations and warranties made with respect to capitalization and ownership of shares shall survive indefinitely, and (ii) the representations and warranties with respect to tax liabilities shall survive until the expiration of the applicable statute of limitations.

        In the event of any breach of any representation, warranty or covenant by StoreAge or a seller, including ourselves, the liability of the sellers is limited to their pro-rata share of the funds in escrow; with the exception of representations and warranties regarding capitalization, taxation and due ownership of the shares in which case the total liability of each seller will not exceed the aggregate consideration received by such seller for such seller’s shares sold pursuant to the SPA.

        The SPA provides that the Seller will have no liability for breaches of representations and warranties (until the aggregate amount of all losses to the purchaser as a result of such breaches equals or exceeds $500,000 (the “Threshold”), whereupon LSI shall be entitled to indemnification with respect to all such losses including the amount of the Threshold; except that (i) the Threshold shall not apply with respect to losses arising or resulting from breaches of the representations and warranties regarding due ownership of the shares, and (ii) the threshold for tax liabilities is $50,000.

        To date to the best of our knowledge no claim has been made against the funds in escrow.

        Transfer of Shares in Enargis

        On May 23, 2007, considering the bleak business prospects of Enargis and the costs involved in maintaining our shareholding in Enargis, we, together with all the other shareholders of Enargis, transferred all our shares in Enargis to West End Technology Investments Ltd. for no consideration other than the assumption by West End of all Enargis’ liabilities (see Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions).

        Intention to issue warrants

        On November 5, 2007 our Board of Directors approved, subject to and following compliance with applicable Israeli and United States securities laws and regulations, its intention to issue, for no additional consideration, to all our shareholders at the record date determined for the purpose of the shareholders meeting convened to approved the Exchange Agreement (November 9, 2007), warrants to purchase an aggregate of 4,600,000 of our Ordinary Shares, on a pro-rata basis according to the percentage holding of each such shareholder in our issued and outstanding share capital on such record date. This includes the warrants to purchase 2,300,000 Ordinary Shares that we decided to issue in May 2007. The exercise price of each warrant shall be $0.44 (the average trading price per share of our Ordinary Shares during the twenty trading days prior to the closing of the Exchange Agreement). The warrants will be exercisable for cash or on a cash-less exercise basis. These warrants will be exercisable until the earlier of (i) five years from the date of issuance, and (ii) the closing of a Transaction. A “Transaction” shall mean either (i) the merger of the Company into another company in which the Company is not the surviving entity, or (ii) the purchase of all or substantially all of our shares. These warrants will be non-transferable and non-exercisable until all applicable Israeli and United States securities laws and regulations have been complied with in connection with the warrants and the underlying shares, including without limitation, that a registration statement covering the issuance of the underlying shares is declared effective by the SEC.

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        Witech Exchange Agreement

        For a description of the Witech Exchange Agreement that was signed on November 5, 2007 and closed on January 2, 2008, see “Item 4. Information on the Company – A. Share Exchange Agreement”.

        Agreements with Directors and Officers

        For a description of the agreements with directors and officers of the Company see "Item 6. Directors, Senior Management and Employees - B. Compensation".

        Convertible Note Financing

        In November 2007, we entered into definitive agreements with private investors for the issuance of convertible notes in the principal amount of $1,655,000, out of which $827,500 was invested in November 2007 and the remaining $827,500 was invested in January 2007 following the closing of the Witech Exchange Agreement. The principal amount of the notes will accrue interest at the rate of 8% compounded annually and principal and interest will be repaid in 12 equal quarterly installments commencing 36 months from issuance. Unpaid principal and interest may at the option of the purchasers be converted into our Ordinary Shares at a price of $0.65 per share, subject to a broad-based weighted average ratchet anti-dilution adjustment in the event of issuance of equity-related securities at a lower price, subject to certain exceptions. We shall have the right to redeem the principal amount and interest of the notes that have not been converted into shares, in whole or in part, between December 31 and January 31 of each year commencing December 31, 2008 or at the closing of a Transaction at a 20% premium per year, or a pro-rata portion of a year if redeemed in the event of a Transaction. The notes are secured by a floating charge on our assets, subordinated only to bank financing in an amount not to exceed $500,000.

        We also issued to the purchasers of the notes warrants exercisable for 331,000 Ordinary Shares at the price per share of $0.44 (equal to the average trading price per share of the shares of IIS during the 20 trading days prior to the closing of the Exchange Agreement), until the earlier of: (i) five years from issuance, and (ii) the closing of a merger of the Company into another company in which the Company is not the surviving entity or the purchase of all or substantially all of the shares of the Company. The warrants will be exercisable for cash or on a cash-less exercise basis. In the event that within 6 months from the date of issuance of the notes, the Company raises financing from the issuance of convertible loans or notes or similar securities with terms more favorable to the purchasers thereof than those granted to the purchasers, the notes and warrants will be automatically amended to provide for such favorable terms.

D. Exchange Controls.

        The Memorandum and Articles of Association of the Company do not restrict in any way the ownership of Ordinary Shares by nonresidents, except with respect to subjects of countries which are in a state of war with Israel, and neither the Memorandum and Articles of Association nor Israeli law restricts the voting rights of nonresidents. The Israeli Currency Control Law, 1978 imposes certain limitations concerning foreign currency transactions and transactions between Israeli and non-Israeli residents, which limitations may be regulated or waived by the Controller of Foreign Exchange at the Bank of Israel, through “general” and “special” permits. In May 1998, a new “general permit” was issued pursuant to which substantially all transactions in foreign currency are permitted. Any dividends or other distributions paid in respect of Ordinary Shares and any amounts payable upon the dissolution, liquidation or winding up of the affairs of a company, as well as the proceeds of any sale in Israel of the company’s securities to an Israeli resident are freely repatriable into non-Israeli currencies (including U.S. dollars) at the rate of exchange prevailing at the time of conversion, provided that any Israeli income tax owing has been paid on (or withheld from) such payments. Because exchange rates between the NIS and most foreign currencies fluctuate continuously, non-Israeli shareholders will be subject to any such currency fluctuation during the period from when such dividend is declared through the date payment is made in U.S. dollars.

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E. Taxation.

        The following is a summary of the current tax structure applicable to companies in Israel which may be relevant to our shareholders and us. To the extent that the summary is based on new tax legislation yet to be judicially or administratively interpreted, we cannot be sure that the views expressed will accord with any future interpretation by the Israeli tax authorities or courts.

        The discussion is not intended, and should not be taken, as legal or professional tax advice and is not exhaustive of all possible tax considerations. Accordingly, you should consult your tax advisor as to the particular tax consequences of an investment in our Ordinary Shares.

General Corporate Tax Structure

        On July 24, 2002, the Israeli Knesset enacted income tax reform legislation, commonly referred to as the “2003 Tax Reform”. The 2003 Tax Reform has introduced fundamental and comprehensive changes into Israeli tax laws. Most of the legislative changes took effect on January 1, 2003. The 2003 Tax Reform has introduced a transition from a primarily territorial-based tax system to a personal-based system of taxation with respect to Israeli residents. The 2003 Tax Reform has also resulted in significant amendments to the international taxation provisions, and new provisions concerning the taxation of capital markets. Under the 2003 Tax Reform legislation the Ordinary Shares are no longer regarded and defined as “foreign traded securities” and thus certain associated Israeli tax aspects will accordingly be subject to change as discussed below.

        A relatively short time after the 2003 Tax Reform, the Knesset approved on July 25, 2005, the second and third readings of the Income Tax Ordinance Amendment (No. 147 and Ad Hoc Provision) Law, 2005 (hereafter – the 2005 Amendment). The 2005 amendment was an additional update of corporate tax rates that were previously determined in the 2003 Tax Reform, and determines that the rate of corporate tax will be reduced from January 1, 2006. Consequently income not eligible for “Approved Enterprise” benefits was taxed in 2006 at the regular corporate rate of 31% and in 2007 is taxed at a regular corporate tax rate of 29%. The tax rate will be reduced in subsequent tax years as follows: in 2008 27%, in 2009 26% and in 2010 and thereafter 25%.

        However, the effective tax rate payable by a company that derives income from an “Approved Enterprise” may be considerably less. We currently have no facilities which have received Approved Enterprise status.

        The tax reform also substantially changed the system of taxation of capital gains. Capital gains tax is reduced to 25%, except with respect to capital gains from marketable securities, with transitional provisions for assets acquired prior to January 1, 2003. For further discussion see below “Capital Gains Tax”.

Tax Benefits Under the Law for the Encouragement of Industry (Taxes), 1969

        Pursuant to the Law for the Encouragement of Industry (Taxes), 1969, also known as the Industry Encouragement Law, an Industrial Company is a company resident in Israel, if at least 90% of the income of which, in a given tax year, determined in Israeli currency (exclusive of income from some government loans, capital gains, interest and dividends), is derived from an Industrial Enterprise owned by it. An “Industrial Enterprise” is defined as an enterprise whose major activity in a given tax year is industrial production activity.

        Under the Industry Encouragement Law, Industrial Companies are entitled to the following preferential corporate tax benefits:

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— amortization of purchases of know-how and patents over an eight-year period for tax purposes;

— the right to elect to file under specified conditions a consolidated tax return with additional related Israeli Industrial Companies; and

— accelerated depreciation rates on equipment and buildings.

        Eligibility for benefits under the Industry Encouragement Law is not subject to receipt of prior approval from any governmental authority. We no longer qualify as an Industrial Company.

Taxation Under Inflationary Conditions

        The Income Tax Law (Inflationary Adjustments), 1985, generally referred to as the Inflationary Adjustments Law, represents an attempt to overcome the problems presented to a traditional tax system by an economy undergoing rapid inflation. The Inflationary Adjustments Law is highly complex. Its features which may be material to us can be summarized as follows:

— There is a special tax adjustment for the preservation of equity whereby corporate assets are classified broadly into fixed assets and non-fixed assets. Where a company’s equity, as defined in such law, exceeds the depreciated cost of fixed assets, a deduction from taxable income that takes into account the effect of the applicable annual rate of inflation on such excess is allowed up to a ceiling of 70% of taxable income in any single tax year, with the unused portion permitted to be carried forward on a linked basis. If the depreciated cost of fixed assets exceeds a company’s equity, then such excess multiplied by the applicable annual rate of inflation is added to taxable income.

— Subject to specific limitations, depreciation deductions on fixed assets and losses carried forward are adjusted for inflation based on the increase in the consumer price index (“CPI”).

Capital Gains Tax

        Capital gains tax is imposed on the disposal of capital assets by an Israeli resident, and on the disposal of such assets by a non- Israel resident if those assets are: (i) located in Israel; (ii) are shares or a right to a share in an Israeli resident corporation; or (iii) rights in a foreign corporation, the majority of whose assets is directly or indirectly, rights to assets located in Israel (with respect to the applicable portion of the capital gain). The Israeli Tax Ordinance distinguishes between “Real Gain” and the “Inflationary Surplus”. Real Gain is the excess of the total capital gain over Inflationary Surplus computed generally on the basis of the increase in the Israeli CPI between the date of purchase and the date of disposal.

        The capital gain accrued by individuals on the sale of an asset purchased on or after January 1, 2003 will be taxed at the rate of up to 20%. However, if the individual shareholder is a “Controlling Shareholder” (i.e., a person who holds, directly or indirectly, alone or together with others, 10% or more of one of the Israeli resident company’s means of control at the time of sale or at any time during the preceding 12-month period) such gain will be taxed at the rate of 25%. In addition, capital gain derived by an individual claiming deduction of financing expenses in respect of such gain will be taxed at the rate of up to 25%. The real capital gain derived by corporation will be generally subject to tax at the rate of 25%. However, the real capital gain derived from the sale of securities, as defined in Section 6 of the Inflationary Adjustment Law, by a corporation, which was subject upon December 31, 2005 to the provisions of Section 6 of the Inflationary Adjustment Law, will be taxed at the corporate tax rate (29% in 2007).

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        The capital gains accrued at the sale of an asset purchased prior to January 1, 2003 will be subject to tax at a blended rate. The marginal tax rate for individuals (up to 48% in 2007) and the regular corporate tax rate for corporations (29% in 2007) will be applied to the gain amount which bears the same ratio to the total gain realized as the ratio which the holding period commencing at the acquisition date and terminating on January 1, 2003 bears to the total holding period. The remainder of the gain realized will be subject to capital gains tax at the rates applicable to an asset purchased after January 1, 2003 (see aforementioned). With respect to traded securities detailed rules apply. Individual and corporate shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income (in 2007 – 29% tax rate for a corporation and a marginal tax rate of up to 48% for an individual).

        Notwithstanding the foregoing, if the shareholder is a non-Israeli resident, then such taxation is subject to the provisions of any applicable double tax treaty. Moreover, capital gains derived from the sale of the Ordinary Shares by a non-Israeli shareholder may be exempt under the Israeli income tax ordinance from Israeli taxation provided the following cumulative conditions are met: (i) the Shares were purchased upon or after the registration of the Ordinary Shares at the stock exchange, (ii) the seller does not have a permanent establishment in Israel to which the derived capital gain is attributed, and (iii) if the seller is a corporation, less than 25% of its means of control are held by Israeli resident shareholders. In addition, the sale of the Shares may be exempt from Israeli capital gains tax under an applicable tax treaty. Thus, the U.S.-Israel Double Tax Treaty (“the US Treaty”) exempts U.S. resident from Israeli capital gain tax in connection with such sale, provided that: (i) the U.S. resident controlled, either directly or indirectly, less than 10% of an Israeli resident company’s voting power at any time within the 12–month period preceding such sale; (ii) the seller, if being an individual, is present in Israel for a period or periods of less than 183 days during the taxable year; and (iii) the capital gain from the sale was not derived through a permanent establishment of the U.S. resident in Israel.

        Either the seller, the Israeli stockbrokers or financial institution through which the sold securities are held is obliged, subject to the above mentioned exemptions, to withhold tax upon the sale of securities from the real capital gain at the rate of 25% in respect of a corporation and 20% in respect of an individual

        Generally, a detailed return, including a computation of the tax due, should be submitted to the Israeli Tax Authority, within 30 days of the completion of a transaction and advanced payment amounting to the tax liability arising from the capital gain is due. At the sale of traded securities, detailed rules apply, by which, inter alia, the aforementioned detailed return, upon fulfillment of certain conditions, may not be submitted and the advanced payment should not be paid if all tax due was withheld at the source according to applicable provisions of the Israeli income tax ordinance and regulations promulgated thereunder. Capital gains are also reportable on the annual income tax return.

Dividends

        The following Israeli tax consequences shall apply in the event of actual payment of any dividends on ordinary shares.

        Income from dividends in 2007 and thereafter, other than bonus shares (stock dividends), to Israeli residents who purchased our Shares will generally be subject to an income tax rate of 20% for individuals, or 25% if the dividends recipient is a Controlling Shareholder (as defined above) and will be exempt from income tax for Israeli corporations (as long as the corporation did not generate income from an approved enterprise).

        Non-residents of Israel (both individuals and corporations) are subject to income tax on income accrued or derived from sources in Israel, including dividends from Israeli corporations. The distribution of dividends, other than bonus shares (stock dividends), sourced from non-Approved Enterprise income, to non-residents of Israel will generally be subject to income tax at a rate of 20% (or 25% for a shareholder that is considered a Controlling Shareholder (as described above) by way of a tax withholding, unless a lower rate is stipulated by a treaty between Israel and the shareholder’s country of residence.

        Generally, under the US Treaty the maximum rate of withholding tax on dividends paid to a shareholder who is a resident of the United States (as defined in the US Treaty) will be 25%. Due to the fact that a tax rate of 25% is higher than the maximum Israeli tax rate on dividends pursuant to the 2005 Amendment, the maximum tax rate should be 20%. However, when a U.S. tax resident corporation is the recipient of the dividend, the rate on a dividend out of regular (sourced from non-Approved Enterprise income) profits may be reduced to 12.5% under the treaty, where the following conditions are met:

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(a) the recipient corporation owns at least 10% of the outstanding voting rights of the Company for all of the period preceding the dividend during the Company’s current and prior tax year; and

(b) generally not more than 25% of the gross income of the paying corporation for its prior tax year consists of certain interest and dividend income components.

        Otherwise, the usual rates as described above would apply.

        In addition, if an Individual shareholder is considered a Controlling Shareholder (as defined above) at any time during the 12-month period preceding such sale, the tax rate on the dividend (not source from Approved Enterprise income) will be 25%. The withholding tax by the Company on such dividend would remain 20%.

United States Federal Income Tax Consequences

        TO ENSURE COMPLIANCE WITH THE REQUIREMENTS IMPOSED BY THE INTERNAL REVENUE SERVICE, WE INFORM YOU THAT ANY TAX STATEMENT HEREIN IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY TAX-RELATED PENALTIES UNDER THE UNITED STATES INTERNAL REVENUE CODE. ANY TAX STATEMENT HEREIN WAS WRITTEN IN CONNECTION WITH THE MARKETING OR PROMOTION OF THE TRANSACTIONS OR MATTERS TO WHICH THE STATEMENT RELATES. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

        The following is a summary of selected material U.S. Federal income tax consequences that apply to U.S. Holders (as defined below) who hold Ordinary Shares as capital assets. This summary is based on the United States Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder, judicial and administrative interpretations thereof, and the U.S.-Israel Tax Treaty, all as in effect on the date hereof and all of which are subject to change either prospectively or retroactively. This summary does not address all tax considerations that may be relevant with respect to an investment in Ordinary Shares. This summary does not account for the specific circumstances of any particular investor, such as:

— broker dealers,

— financial institutions,

— certain insurance companies,

— investors liable for alternative minimum tax,

— tax exempt organizations,

— non-resident aliens of the U.S. or taxpayers whose functional currency is not the U.S. dollar,

— persons who hold the Ordinary Shares through partnerships or other pass-through entities,

— investors that actually or constructively own 10 percent or more of our voting shares,

— investors holding Ordinary Shares as part of a straddle, hedge, conversion transaction, or other integrated investment; and

— regulated investment companies.

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        This summary does not address the effect of any U.S. Federal taxation other than U.S. Federal income taxation. In addition, this summary does not include any discussion of state, local or foreign taxation.

        Shareholders are urged to consult their tax advisors regarding the foreign and United States Federal, state and local tax considerations of an investment in Ordinary Shares.

        For purposes of this summary, a “U.S. Holder” is a shareholder which is:

— an individual who is a citizen or, for U.S. Federal income tax purposes, a resident of the United States;

— a corporation (including any entity treated as a corporation for U.S. Federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof;

— an estate whose income is subject to U.S. Federal income tax regardless of its source; or

— a trust if:

(a) a court within the United States is able to exercise primary supervision over administration of the trust;

(b) one or more United States persons have the authority to control all substantial decisions of the trust; or

(c) it has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person.

Taxation of Dividends

        The gross amount of any distributions received with respect to Ordinary Shares, including the amount of any Israeli taxes withheld therefrom, will constitute dividends under U.S. Federal income tax purposes, to the extent of our current and accumulated earnings and profits as determined for U.S. Federal income tax principles. Shareholders will be required to include this amount of dividends in gross income as ordinary income. Subject to the discussion below under the heading “Passive Foreign Investment Companies”, distributions in excess of our earnings and profits will be treated as a non taxable return of capital to the extent of a shareholder’s tax basis in the Ordinary Shares and any amount in excess of such shareholder’s tax basis, will be treated as gain from the sale of Ordinary Shares. See “Disposition of Ordinary Shares” below for the discussion on the taxation of capital gains. Dividends will not qualify for the dividends received deduction generally available to corporations under Section 243 of the Code.

        Dividends that we pay in NIS, including the amount of any Israeli taxes withheld therefrom, will be included in a shareholder’s income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day such dividends are received. A U.S. Holder who receives payment in NIS and converts NIS into U.S. dollars at an exchange rate other than the rate in effect on such day may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss. U.S. Holders should consult their own tax advisors concerning the U.S. tax consequences of acquiring, holding and disposing of NIS.

66

        Any Israeli withholding tax imposed on such dividends will be a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability, subject to certain limitations set out in the Code (or, alternatively, for deduction against income in determining such tax liability). The limitations set out in the Code include computational rules under which foreign tax credits allowable with respect to specific classes of income cannot exceed the U.S. federal income taxes otherwise payable with respect to each such class of income. Dividends generally will be treated as foreign source passive income or financial services income for United States foreign tax credit purposes. Foreign income taxes exceeding the credit limitation for the year of payment or accrual may be carried back for two taxable years and forward for five taxable years in order to reduce U.S. federal income taxes, subject to the credit limitation applicable in each of such years. Other restrictions on the foreign tax credit include a prohibition on the use of the credit to reduce liability for the U.S. individual and corporation alternative minimum taxes by more than 90%. A U.S. Holder will be denied a foreign tax credit with respect to Israeli income tax withheld from dividends received on the Ordinary Shares to the extent such U.S. Holder has not held the Ordinary Shares for at least 16 days of the 30-day period beginning on the date which is 15 days before the ex dividend date or to the extent such U.S. Holder is under an obligation to make related payments with respect to substantially similar or related property. Any days during which a U.S. Holder has substantially diminished its risk of loss on the Ordinary Shares are not counted toward meeting the 16-day holding period required by the statute. The rules relating to the determination of the foreign tax credit are complex, and shareholders should consult with their personal tax advisors to determine whether and to what extent they would be entitled to this credit.

        Dividends received by an individual shareholder from U.S. corporations and certain qualified foreign corporations are taxed at the same rate applicable to net capital gain income. As such, the maximum rate applicable to dividend income received by an individual shareholder from a U.S. corporation and certain qualified foreign corporations has generally been reduced to 15%. However, an individual shareholder will not qualify for this lower rate if such shareholder does not hold a share of stock for more than 60 days during the 120 day period beginning 60 days before the ex-dividend date. Additionally, the reduced rate is not available for dividends to the extent that the individual shareholder is obligated to make related payments (whether pursuant to a short sale or otherwise) with respect to positions in substantially similar or related property. Special rules will apply in determining an individual shareholder’s foreign tax credit limitation in the case of dividends which qualify for the lower rate.

        A foreign corporation is a “qualified foreign corporation” if it is not a foreign personal holding company, a foreign investment company or a passive foreign investment company for the taxable year of the corporation in which the dividend is paid, or the preceding taxable year and either (i) is eligible for the benefits of a comprehensive income tax treaty with the United States which the United States Treasury Department determines is satisfactory for purposes of the new provision and which includes an exchange of information program, or (ii) the stock of the foreign corporation is readily tradable on an established securities market in the United States.

        The reduced rate applicable to dividend distributions shall not apply to taxable years beginning after December 31, 2008.

Dispositions of Ordinary Shares

        If a shareholder sells or otherwise disposes of Ordinary Shares, such shareholder will recognize gain or loss for U.S. Federal income tax purposes in an amount equal to the difference between the amount realized on the sale or other disposition and the adjusted tax basis of such Ordinary Shares. Subject to the discussion below under the heading “Passive Foreign Investment Companies,” such gain or loss generally will be capital gain or loss and will be long term capital gain or loss if a shareholder has held the Ordinary Shares for more than one year at the time of the sale or other disposition. In general, any gain that a shareholder recognizes on the sale or other disposition of Ordinary Shares will be U.S. source for purposes of the foreign tax credit limitation; losses, will generally be allocated against U.S. source income. Under the U.S.-Israel Treaty, gain on the disposition of Ordinary Shares may be treated as Israeli source, if the shareholder has held 10% or more of the voting power of the company at any time during the 12 months preceding the date of disposition. Deduction of capital losses is subject to certain limitations under the Code.

        In the case of a cash basis U.S. Holder who receives NIS in connection with the sale or disposition of Ordinary Shares, the amount realized will be based on the U.S. dollar value of the NIS received with respect to the Ordinary Shares as determined on the settlement date of such exchange. A U.S. Holder who receives payment in NIS and converts NIS into United States dollars at a conversion rate other than the rate in effect on the settlement date may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss.

67

        An accrual basis U.S. Holder may elect the same treatment required of cash basis taxpayers with respect to a sale or disposition of Ordinary Shares, provided that the election is applied consistently from year to year. Such election may not be changed without the consent of the Internal Revenue Service (the “IRS”). In the event that an accrual basis U.S. Holder does not elect to be treated as a cash basis taxpayer (pursuant to the Treasury regulations applicable to foreign currency transactions), such U.S. Holder may have a foreign currency gain or loss for U.S. federal income tax purposes because of differences between the U.S. dollar value of the currency received prevailing on the trade date and the settlement date. Any such currency gain or loss would be treated as ordinary income or loss and would be in addition to gain or loss, if any, recognized by such U.S. Holder on the sale or disposition of such Ordinary Shares.

Passive Foreign Investment Companies

        For U.S. Federal income tax purposes, we will be considered a passive foreign investment company (“PFIC”) for any taxable year in which either (i) 75% or more of our gross income is passive income, or (ii) at least 50% of the average value of all of our assets for the taxable year produce or are held for the production of passive income. For this purpose, passive income includes dividends, interest, royalties, rents, annuities and the excess of gains over losses from the disposition of assets which produce passive income. If we were determined to be a PFIC for U.S. Federal income tax purposes, highly complex rules would apply to U.S. Holders owning Ordinary Shares. Accordingly, shareholders are urged to consult their tax advisors regarding the application of such rules.

        Based on our current and projected income, assets and activities, we believe that we may be considered a PFIC for periods prior to the acquisition of Witech.

        If we are treated as a PFIC for any taxable year, then, unless a shareholder elects either to treat such shareholder’s investment in Ordinary Shares as an investment in a “qualified electing fund” (a “QEF election”) or to “mark to market” such shareholder’s Ordinary Shares, as described below:

— the shareholder would be required to allocate income recognized upon receiving certain dividends or gain recognized upon the disposition of Ordinary Shares ratably over the holding period for such Ordinary Shares;

— the amount allocated to each year during which we are considered a PFIC other than the year of the dividend payment or disposition would be subject to tax at the highest individual or corporate tax rate, as the case may be, and an interest charge would be imposed with respect to the resulting tax liability allocated to each such year;

— gain recognized upon the disposition of Ordinary Shares would be taxable as ordinary income; and

— the shareholder would be required to make an annual return on IRS Form 8621 regarding distributions received with respect to ordinary shares and any gain realized on such shareholder’s Ordinary Shares.

        If a shareholder makes either a timely QEF election or a timely mark to market election in respect of such shareholder’s Ordinary Shares, the shareholder would not be subject to the rules described above. If a shareholder makes a timely QEF election, the shareholder would be required to include in such shareholder’s income for each taxable year such shareholder’s pro rata share of our ordinary earnings as ordinary income and such shareholder’s pro rata share of our net capital gain as long term capital gain, whether or not such amounts are actually distributed to the shareholder. A shareholder would not be eligible to make a QEF election unless we comply with certain applicable information reporting requirements.

68

        Alternatively, if a shareholder elects to “mark to market” such shareholder’s Ordinary Shares, the shareholder will generally include in income any excess of the fair market value of the Ordinary Shares at the close of each tax year over such shareholder’s adjusted basis in the Ordinary Shares. If the fair market value of the Ordinary Shares had depreciated below the shareholder’s adjusted basis at the close of the tax year, the shareholder may generally deduct the excess of the adjusted basis of the Ordinary Shares over its fair market value at that time. However, such deductions generally would be limited to the net mark to market gains, if any, that the shareholder included in income with respect to such Ordinary Shares in prior years. Income recognized and deductions allowed under the mark to market provisions, as well as any gain or loss on the disposition of Ordinary Shares with respect to which the mark to market election is made, is treated as ordinary income or loss. For these purposes, stock will be treated as “marketable stock” for which a “mark-to-market” election can be made if (i) it is a class of stock which trades on a national securities exchange that is registered with the Securities and Exchange Commission or on a national market system established pursuant to Section 11A of the Securities Exchange Act of 1934 and (ii) which is regularly traded on such exchanges or markets, other than in de minimis quantities, on at least 15 days during each calendar quarter. However, it is unclear under current law whether shares being traded in the over-the-counter market qualify as “marketable stock” for these purposes. Shareholders are urged to consult their own tax advisors concerning their ability to make a “mark-to-market” election.

Backup Withholding and Information Reporting

        Payments in respect of Ordinary Shares may be subject to information reporting to the IRS and U.S. backup withholding tax. Under the backup withholding rules, a shareholder may be subject to backup withholding at the rate of 28%. Backup withholding will not apply, however, if a shareholder (i) is a corporation or falls within certain exempt categories, and demonstrates the fact when so required, or (ii) furnishes a correct taxpayer identification number and makes any other required certification. Any amount withheld under these rules may be credited against a shareholder’s federal income tax liability.

        Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a U.S. holder’s U.S. tax liability, and a U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS.

        Any U.S. holder who holds 10% or more in vote or value of our Ordinary Shares will be subject to certain additional United States information reporting requirements.

U.S. Gift and Estate Tax

        An individual U.S. holder of Ordinary Shares will be subject to U.S. gift and estate taxes with respect to Ordinary Shares in the same manner and to the same extent as with respect to other types of personal property.

F. Dividends and Paying Agents.

        Not applicable.

G. Statements by Experts.

        Kesselman & Kesselman, an Israeli independent registered public accounting firm, a member of PricewaterhouseCoopers, have audited our consolidated financial statements for the years ended December 31, 2004, 2005 and 2006. We have included our financial statements in this Shell Company Report on Form 20-F in reliance on Kesselman & Kesselman’s report, given on their authority as experts in accounting and auditing.

H. Documents on Display.

        The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, accordingly, it files reports and other information with the Securities and Exchange Commission (the “SEC”). Individuals can inspect and copy those reports and other information at the public reference facilities maintained by the SEC at 100 F. Street, N.E., Room 1580, Washington, D.C. 20549 and at the SEC’s regional offices. For more information on its public reference facilities, you can call the SEC at 1-800-SEC-0330. You can obtain copies of such material at prescribed rates from the Public Reference Section of the SEC. Individuals can also obtain reports and other information from the Internet site maintained by the SEC at http://www.sec.gov.

69

        In addition, documents referred to in this Form 20-F filing are available, at no cost, upon request from Robi Hartman, Chief Executive Officer, I.I.S. Intelligent Information Systems Limited, 33 Jabotinsky Street, Ramat Gan, Israel (Tel. 972-3-751-0007).

I. Subsidiary Information.

        Not applicable.

Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        In the normal course of business, the financial position of the Company is routinely subjected to a variety of risks, including market risk associated with interest rate movements and currency rate movements on non-U.S. dollar denominated assets and liabilities. The Company regularly assesses these risks and has established policies and business practices to protect against the adverse effects of these and other potential exposures. As a result, the Company does not anticipate material losses in these areas.

        For purposes of specific risk analysis, the Company uses sensitivity analysis to determine the impacts that market risk exposures may have on the fair values of the Company’s financial instruments. The financial instruments included in the sensitivity analysis consist of all of the Company’s cash and cash equivalents.

        To perform sensitivity analysis, the Company assesses the risk of loss in fair values from the impact of hypothetical changes in interest rates and foreign currency exchange rates on market sensitive instruments. The market values for interest risk are computed based on the present value of future cash flows as impacted by the changes in rates attributable to the market risk being measured. The discount rates used for the present value computations were selected based on market interest rates in effect at December 31, 2006. The market values for foreign exchange risk are computed based on spot rates in effect at December 31, 2006. The market values that result from these computations are compared to the market values of these financial instruments at September 30, 2007. The differences in this comparison are the hypothetical gains or losses associated with each type of risk.

        The results of the sensitivity analysis are as follows:

        Interest Rate Risk: A 10% decrease or a 10% increase in the levels of interest rates with all other variables held constant would not materially affect the earnings, cash flow and fair value of the Company’s near-term financial condition or results of operations.

        Foreign Currency Exchange Rate Risk: A 10% movement in levels of foreign currency exchange rates against the U.S. dollar with all other variables held constant would not materially affect the earnings, cash flow and fair value of the Company’s near-term financial condition or results of operations.

Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

        Not applicable.

PART II

Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

        Not applicable.

70

Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

        Not applicable.

Item 15. CONTROLS AND PROCEDURES

        Not applicable.

Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT

        Not applicable.

Item 16B. CODE OF ETHICS

        Not applicable.

Item 16C. AUDIT FEES AND SERVICES

        Not applicable.

Item 16D. EXEMPTIONS FROM THE LISTING REQUIREMENTS AND STANDARDS FOR AUDIT COMMITTEE

        Not applicable.

Item 16E PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATES AND PURCHASERS

        Not applicable.

PART III

Item 17. FINANCIAL STATEMENTS

        Not applicable.

Item 18. FINANCIAL STATEMENTS

        Attached. See Item 19(a).

71

Item 19. FINANCIAL STATEMENTS AND EXHIBITS

(a)	Index to Financial Statements of the Company:	Page
	Report of Independent Auditors on
	Financial Statements of the Company	F-3
	Balance Sheets at December 31, 2006 and 2005	F-4
	Statements of Operations for the years ended
	December 31, 2006, 2005 and 2004	F-5
	Statements of Changes in Shareholders' Equity (capital deficiency)
	for the years ended December 31, 2006, 2005 and 2004	F-6
	Statements of Cash Flows for the years ended
	December 31, 2006, 2005 and 2004	F-7
	Notes to the Financial Statements	F-8 - F-20
(b)	Index to Condensed Financial Statements of the Company:
	Condensed balance sheets - September 30, 2007 and December 31, 2006	F-23
	Condensed statements of operations for the periods of nine months
	ended September 30, 2007 and 2006	F-24
	Condensed Statements of cash flows for the periods of nine months
	ended September 30, 2007 and 2006	F-25
	Notes to financial statements	F-26 - F-32
(c)	Index to Audited Financial Statements of Witech
	Report of Independent Registered Public Accounting Firm	F-35
	Balance sheets at December 31, 2006 and 2005	F-36
	Statements of operations for the years ended December 31, 2006 and 2005	F-37
	Statements of changes in shareholders' equity (capital deficiency) for the years
	ended December 31, 2006 and 2005	F-38
	Statements of cash flows for the years ended December 31, 2006 and 2005	F-39
(d)	Index to Condensed Consolidated Unaudited Financial Statements of Witech:	F-60
	Condensed balance sheets - September 30, 2007 and December 31, 2006	F-61
	Condensed statements of operations for nine month periods ended September 30, 2007
	and 2006	F-62
	Condensed statements of cash flows for the nine month periods ended September 30, 2007
	and 2006	F-63
	Notes to financial statements	F-64 - F-69

72

(e)	Unaudited Pro Forma Combined Condensed Statement Of Operations For the Nine Months Ended
	September 30, 2007	F-71
	Unaudited Pro Forma Combined Condensed Statement Of Operations For the Year Ended
	December 31, 2006	F-72
	Unaudited Pro Forma Combined Condensed Balance Sheet as of September 30, 2007	F-73
	Notes to Unaudited Condensed Combined Pro Forma Financial Statements	F-75

All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

73

SIGNATURES

        The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Shell Company Report on its behalf.

I.I.S. INTELLIGENT INFORMATION
SYSTEMS LIMITED
(Registrant)



By: /s/ Robi Hartman
——————————————
Robi Hartman, Chief Executive Officer and Acting Chief
Financial Officer (Principal Executive Officer and
Principal Financial and Accounting Officer)

Date: January 10, 2008

74

Index to Exhibits:

Exhibit No.:

1.1 Memorandum of Association of the Company.*

1.2 Articles of Association of the Company, Amended and Restated as of November 19, 2000. **

2.1 Securities Purchase Agreement between the Company and the Purchasers listed therein dated as of November 12, 2007.

4.1 Summary English Translation from the original Hebrew of a Lease Agreement entered into between the Company and West End Technology Investments Ltd., for office space located at 33 Jabotinsky Street, Ramat Gan, Israel, dated January 30, 2001. ***

4.2 Share Purchase Agreement between LSI Logic Corporation, StoreAge Networking Technologies Ltd. and the Purchasers listed therein dated as of October 25, 2006.

4.4 Share Exchange Agreement between the Company, Witech Communications Ltd., and the Shareholders of Witech Communications Ltd. dated November 5, 2007, and the amendment dated January 2, 2008.

4.5 Indemnification Agreement between the Company, Witech Communications Ltd., the Shareholders of Witech Communications Ltd. and Charles Moss as the Shareholder Representative dated November 5, 2007.

4.6 2007 Stock Option Plan

4.7 Form of Indemnification Agreement with directors and officers

8.1 List of significant subsidiaries of the Company.

99.1 Consent of Independent Auditors

* Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement No. 33-62862 dated August 10, 1993.

** Incorporated by reference to the corresponding exhibit to the Company’s Annual Report on Form 20-F for the year ended December 31, 2000.

*** Incorporated by reference to the corresponding exhibit to the Company’s Annual Report on Form 20-F for the year ended December 31, 2001.

75

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2006

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2006

TABLE OF CONTENTS

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-3
FINANCIAL STATEMENTS:
Balance sheets	F-4
Statements of operations	F-5
Statements of changes in shareholders' equity (capital deficiency)	F-6
Statements of cash flows	F-7
Notes to financial statements	F-8-F-20

The amounts are stated in U.S. dollars ($) in thousands.

F - 2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders of

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED

We have audited the balance sheets of I.I.S. Intelligent Information Systems Limited (the “Company”) as of December 31, 2006 and 2005 and the statements of operations, of changes in shareholders’ equity (capital deficiency) and of cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s Board of Directors and management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company’s Board of Directors and management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion the financial statements referred to above, present fairly, in all material respects, the financial position of the Company as of December 31, 2006 and 2005 and the results of its operations and cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

Tel-Aviv, Israel	Kesselman & Kesselman
August 29, 2007	Certified Public Accountant (Isr.)
	A member of PricewaterhouseCoopers
	International Limited

F - 3

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
BALANCE SHEETS
(U.S. dollars in thousands)

	December 31
	2006			2005
A s s e t s
Current assets:
Cash and cash equivalents	$	4,705		$	41
Accounts receivable - related parties		5
T o t a l  current assets		4,710			41
Funds in respect of employee rights upon retirement		3			2
T o t a l   assets	$	4,713		$	43
Liabilities and shareholders' equity
(net of capital deficiency)
Current liabilities -
accounts payable and accruals	$	261		$	232
Long-term liabilities -
liability for employee rights upon retirement		5			3
T o t a l  liabilities		266			235
Commitments and contingent liabilities, note 4
Shareholders' equity (capital deficiency):
Ordinary shares of NIS 0.003 par value at
December 31, 2006 and 2005:
Authorized - 16,666,667 shares;
Issued and outstanding - 11,576,539 shares		55			55
Additional paid-in capital		41,417			41,417
Accumulated deficit		(37,025	)		(41,664	)
T o t a l   shareholders' equity (capital deficiency)		4,447			(192	)
T o t a l   liabilities and shareholders' equity
(net of capital deficiency)	$	4,713		$	43

——————————————	——————————————
Robi Hartman	Aharon Jacobowitz
Chairman of the Board,	Director
Chief Executive Officer
and Chief Financial Officer

The accompanying notes are an integral part of the financial statements.

F - 4

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)

	Year ended December 31
	2006			2005			2004
General and administrative expenses	$	(91	)	$	(103	)	$	(200	)
Capital gain from disposal of investment		4,713
Financial income (expenses) - net		17			(3	)		(4	)
Net income (loss)	$	4,639		$	(106	)	$	(204	)
Net income (loss) per share of ordinary shares -
Basic and diluted	$	0.40		$	(0.01	)	$	(0.02	)
Weighted average number of ordinary shares used in
computing income (loss) per ordinary shares
(in thousands) -
Basic and diluted		11,577			11,577			11,577

The accompanying notes are an integral part of the financial statements.

F - 5

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
STATEMENTS OF SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY)
(U.S dollars in thousands, except share data)

	Ordinary shares
	Number of shares		Amount		Additional paid-in capital		Accumulated deficit			Total shareholders' equity (capital deficiency)
Balance as of January 1, 2004		11,576,539	$	55	$	41,417	$	(41,354	)	$	118
Change during 2004 -
Net loss								(204	)		(204	)
Balance as of December 31, 2004		11,576,539		55		41,417		(41,558	)		(86	)
Change during 2005 -
Net loss								(106	)		(106	)
Balance as of December 31, 2005		11,576,539		55		41,417		(41,664	)		(192	)
Change during 2006 -
Net income								4,639			4,639
Balance as of December 31, 2006		11,576,539	$	55	$	41,417	$	(37,025	)	$	4,447

The accompanying notes are an integral part of the financial statements.

F - 6

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
STATEMENTS OF CASH FLOWS
(U.S dollars in thousands)

	Year ended December 31
	2006			2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	4,639		$	(106	)	$	(204	)
Adjustments required to reconcile net income (loss) to net cash
used in operating activities:
Write-off of fixed assets								9
Changes in accrued liability for employee rights
upon retirement		2			1			(7	)
Loss (gain) on amounts funded in respect of employee
rights upon retirement		(1	)					3
Capital gain from disposal of investment		(4,713	)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		(5	)		10			130
Increase (decrease) in accounts payable and accruals		29			43			(19	)
Net cash used in operating activities		(49	)		(52	)		(88	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of investment		4,713
Proceeds from a restricted deposit								48
Net cash provided by investing activities		4,713			-,-			48
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		4,664			(52	)		(40	)
BALANCE OF CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR		41			93			133
BALANCE OF CASH AND CASH EQUIVALENTS
AT END OF YEAR	$	4,705		$	41		$	93

The accompanying notes are an integral part of the consolidated financial statements.

F - 7

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES:

a. General:

1) Operations

Through December 2002, I.I.S. Intelligent Information Systems Limited. (“the Company”) designed, developed and provided enterprise storage solutions for the Internet Small Computer Systems Interface (“iSCSI”). The Company’s products were customized software implementation projects for the development and integration of iSCSI interface into existing storage devices and a family of comprehensive IP storage testing tools, for iSCSI protocol analysis of SAN devices. Due to the slow down associated with the iSCSI revenues resulting from the delays in the adoption of the iSCSI protocol, the Company decided to cease its iSCSI operations in December 2002.

As of December 31, 2003, the Company is no longer engaged in any operational business activity other than managing its holdings in StoreAge Networking Technologies Ltd. (“StoreAge”) and Enargis Storage Solutions Ltd. (“Enargis”) (see below).

On July 29, 2004, the Company’s shareholders resolved to place the Company in a voluntary liquidation.

On April 17, 2007, the Company’s general meeting of shareholders duly approved the termination of the Company’s voluntary liquidation.

Since the voluntary liquidation was not considered imminent, these financial statements are presented on a going-concern basis.

2) Accounting principles

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

3) Functional currency

The currency of the primary economic environment in which the operations of the Company are conducted is the U.S. dollar (“dollar”; “$”). Most of the Company’s expenses are incurred in dollars. The Company’s deposits are mostly in dollars. Thus, the functional currency of the Company is the dollar.

Transactions and balances originally denominated in dollars are presented at their original amounts. Balances in non-dollar currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. Non-dollar transactions reflected in the statements of operations are translated into dollars using exchange rates at the transaction dates or average rates. Currency transaction gains or losses are carried to financial income or expenses, as appropriate.

F - 8

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED

(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):

4) Use of estimates in preparation of financial statements

The preparation of financial statements in conformity with generally accepted accounting policies (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

b. Cash equivalents

The Company considers all highly liquid investments, which are comprised of short-term bank deposits with an original maturity date of up to three months) that are not restricted as to withdrawal or use, to be cash equivalents.

c. Deferred income taxes

The Company accounts for income taxes in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. Deferred taxes are determined utilizing the asset and liability method, based on the estimated future tax effects of differences between the financial accounting and tax bases of assets and liabilities under the applicable tax laws. Deferred tax balances are computed using the tax rates expected to be in effect at time when these differences reverse.

Valuation allowances in respect of the deferred tax assets are provided when it is more likely than not that all or a portion of the deferred income tax assets will not be realized. The Company has provided a full valuation allowance with respect to its deferred tax assets.

d. Investments in associated companies

Investments in associated companies are investments in companies held to the extent of 20% or more which the Company can exercise significant influence over operating and financial policy.

As the Company has not guaranteed obligations and not otherwise committed to provide further financial support for any of the associated companies, the Company discontinued applying the equity method when the investment account was reduced to zero.

F - 9

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):

e. Net income (loss) per share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the year.

Diluted net income (loss) per share are computed by dividing net income (loss) by the weighted average number of shares outstanding during the year, taking into account the potential dilution that could occur upon the exercise of options granted under employee stock option plans, using the treasury stock method. In the years ended December 31, 2006, 2005 and 2004 all outstanding stock options have been excluded from the calculation of the diluted net income (loss) per share since their effect was anti-dilutive.

The diluted loss per share does not include options of the Company in the amount of 372,671, 406,550 and 406,550 for the years 2006, 2005 and 2004, respectively.

f. Accounting for stock based compensation

Prior to January 1, 2006, the Company accounted for employee share-based compensation under the intrinsic value model in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations. Under APB 25, compensation expense is based on the difference, if any, on the date of the grant of a stock option, between the fair value of the shares underlying the option and the exercise price of the option. The Company did not disclose pro forma data, as required by SFAS 123, “Accounting for Stock-Based Compensation”(“SFAS 123”), as amended by FAS 148, assuming it had accounted for employee share option grants using the fair value-based method defined in SFAS 123, since the effect on net loss and net loss per share assuming it had applied the fair value recognition provisions is immaterial.

The Company adopted SFAS No. 123 (Revised 2004), “Shared-Based Payment” (“SFAS 123R”) as of January 1, 2006, using the modified prospective application transition method, as permitted by SFAS 123R. Under such transition method, the Company’s financial statements for periods prior to the effective date of SFAS 123R have not been restated. The adoption of SFAS 123R, for the year ended December 31, 2006 had no effect on the financial statements of the Company.

g. Concentration of credit risks

Financial instruments that subject the Company to credit risk consist primarily of cash and cash equivalents, which are deposited in major financial institutions.

F - 10

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):

h. Newly issued and recently adopted accounting pronouncements:

In June 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes –an interpretation of FAS 109". This financial interpretation clarifies the accounting for uncertainty in income taxes, and prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on various related matters such as de-recognition, interest and penalties and disclosure. The provisions of FIN 48 are effective for fiscal years beginning January 1, 2007. The Company is currently evaluating the impact of adopting FIN 48 on its financial statements and results of operations.

In September 2006, the FASB issued FAS 157, “Fair Value Measurements”. This standard establishes a framework for measuring fair value and expands related disclosure requirements; however, it does not require any new fair value measurement. The provisions of SFAS 157 are effective for fiscal years beginning January 1, 2008. The Company is currently evaluating the impact of adopting of SFAS 157 on its financial statements and results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin (SAB) 108, which expresses the Staff’s views regarding the process of quantifying financial statement misstatements. The bulletin was effective as of the year beginning January 1, 2006. The implementation of this bulletin is not expected to have an impact on the Company’s financial statements.

In February 2007, the FASB issued FAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This standard permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The provisions of SFAS 159 are effective for fiscal years beginning January 1, 2008. The Company is currently evaluating the impact of adopting SFAS 159 on its financial position, cash flows and results of operations. The Company does not expect the impact to have a material effect on its financial position, cash flows and results of operations.

i. Impairment in value of long-lived assets

Under FAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”(“FAS 144”), the Company reviews long-lived assets, to be held and used, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Under FAS 144, if the sum of the expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the carrying amount of such assets, an impairment loss would be recognized, and the assets are written down to their estimated fair values.

During the fiscal year 2004, the Company abandoned some of its office furniture and equipment. Accordingly, the Company recorded an impairment charge in the amount of $9.

F - 11

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 2 – CERTAIN TRANSACTIONS AND INVESTMENTS

a. Investment in Enargis

On March 31, 2003, the Company transferred iSCSI activities to a newly formed company –Enargis. Following such transfer, the Company held 25% in Enargis. The carrying amount of the investment in Enargis following the transaction amounted to approximately $20,000, equaling the carrying amount of assets transferred, and was subsequently reduced to zero during the year ended December 31, 2003 due to the Company’s share in Enargis losses.

On May 15, 2007, the Company, together with all the other shareholders of Enargis, transferred all of its 25% holdings in Enargis to West End Technology Investments Ltd. a company controlled by the CEO and Chairman of the Board) for no consideration.

b. Investment in StoreAge

As of January 1, 2004 and through October 2005, the Company held 38.9% of StoreAge. StoreAge is an Israeli company, which is engaged in the development and marketing of products based on its SAN Virtualization technology.

In October 2005, all classes of preferred shares of StoreAge and outstanding bridge loans were converted into ordinary shares of StoreAge. Following this conversion the Company held 13% of the issued and ordinary shares of StoreAge.

The carrying amount of the investment in StoreAge was reduced to zero during the year ended December 31, 2002 due to the Company’s share in StoreAge’s losses.

In March 2006, the Company’s holdings in Storage were diluted to 12.68% due to share issuance by StoreAge to a third party.

In October 2006 all the shareholders of StoreAge, including the Company, signed a share purchase agreement with LSI Logic Corporation (“LSI”) for the sale of all issued and outstanding shares of StoreAge to LSI. The Company’s share of the proceeds received upon the closing of the transaction in November 2006, was $5,416,692.of which $703,793 is held in escrow to satisfy certain possible future claims for a period of 18 months following the closing.

The Company recognized the cash portion received in the amount of $4,712,899 as a gain on the sale.

F - 12

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 2 – CERTAIN TRANSACTIONS AND INVESTMENTS (continued):

c. Memorandum Of Agreement (“MOA”) with Witech Communications Ltd. (“Witech”)

On February 20, 2007, the Company signed a MOA with Witech with respect to a contemplated merger between the Company and Witech, under which the Company is to acquire full control and ownership of Witech, in consideration of 50% of the Company’s shares. In addition, the Company is to provide certain loans to Witech (see below). The closing of the merger with Witech is subject to numerous terms and conditions, among others: satisfaction, in the sole discretion of the Company, the Company’s due diligence requirements, including technical, financial and legal diligence, the signing of mutually acceptable Final Agreements containing additional provisions customary in transactions of this type, obtaining of a ruling from the Israeli Tax Authority confirming that the Merger will be tax-free subject to reasonable conditions set forth therein, the mutual execution of employment agreements between the Company and the senior management of Witech who will become the Company’s employees, the termination of the Company’s voluntary liquidation proceedings, the approval of the Company’s Board of Directors and general meeting of shareholders. In addition and without derogating from the aforesaid, the Company shall not be obligated to consummate the contemplated transaction if at any time before the consummation of the merger of Witech with and into the Company there is any effect, change, event, circumstance or condition which, when considered with all other effects, changes, events, circumstances or conditions, has or would reasonably be expected to have a material adverse effect on the business, assets (including intangible assets), prospects (including due to the loss or resignation, or notice of loss or resignation, of key employees of Witech and its subsidiary), results of operations or financial condition of Witech and its subsidiary taken together as a whole. If the Tax Ruling is subject to unreasonable conditions, the Company and Witech will negotiate in good faith an alternative structure for the transaction.

From April 2007 through August 2007, according to the MOA, the Company provided loans to Witech in the total amount of $3,200,000. The above mentioned loans bear an annual interest rate of LIBOR plus 5%, whilst in the event that the merger is not consummated, the interest on the loans will be increased to LIBOR plus 10% (or the maximum rate permitted by law, whichever is lower) retroactively to the date it was provided to Witech.

If the merger is not consummated, Witech may have difficulty in repaying the loans provided by the Company and, if Witech is in default, the Company may not be able to recoup its loans through exercise of the charge on Witech’s assets.

F - 13

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 3 – EMPLOYEE RIGHTS UPON RETIREMENT

Israeli law generally requires payment of severance pay and/or pensions upon dismissal of an employee or upon termination of employment in certain other circumstances. The severance pay liabilities are fully provided for in these financial statements, as if it was payable at each balance sheet date on an undiscounted basis, based upon the number of years of service and the most recent monthly salary of the Company’s employee.

NOTE 4 – COMMITMENTS AND CONTINGENT LIABILITIES:

a. Effective as of April 1, 2003, all of the directors of the Company agreed to suspend their compensation until the Company either received a settlement from an ongoing lawsuit which at that time was in mediation or received proceeds from the sale/exit of StoreAge or Enargis or the raising of additional financial resources. Following settlement of the lawsuit, the directors of the Company did not take this compensation and agreed that this compensation would be paid only from receipt of proceeds from the sale/exit of its holdings in StoreAge or Enargis or the raising of additional financial resources. The amount of compensation due but unpaid to the Company’s officers and directors as of December 31, 2006 according to this arrangement is approximately $172,000. This amount was accrued in the financial statements in “accounts payable and accruals” and was paid in May 2007.

b. At the Company’s general meeting of shareholders held in July 2004, Messrs. Hartman and Jacobowitz were appointed as joint liquidators and the shareholders approved a fee of $1,000 per month (plus VAT, if applicable), to each of them commencing from the appointment of the liquidation and until distribution of all proceeds of the liquidation to the Company’s shareholders. The amount of compensation due but unpaid to the Company’s liquidators as of December 31, 2006 according to this arrangement is approximately $58,000. This amount was accrued in the financial statement in “accounts payable and accruals” and was paid in May 2007.

c. In addition to (b) above, the Company’s shareholders approved that (i) Mr. Jacobowitz will receive an additional bonus as follows: $25,000 (plus VAT, if applicable) if the gross proceeds received by the Company’s shareholders as a result of the liquidation of the net assets of the Company (hereinafter – the “Gross Proceeds”) are above $0.50 per share, $50,000 (plus VAT, if applicable) if the Gross Proceeds are above $1.00 per share and $75,000 (plus VAT, if applicable) if the Gross Proceeds are above $1.30 per share, and (ii) Mr. Hartman will receive an additional bonus of $100,000 (plus VAT, if applicable) if the Gross Proceeds are above $1.30 per share.

Since the Company terminated its voluntary liquidation, the Company’s audit committee and board have approved on June 17, 2007, subject to shareholder approval, that these bonuses will be calculated and paid based on the share price of the Company’s shares in the twenty trading days following the approval of this resolution by the general meeting of the shareholders of the Company (if such approval is given).

The Company has not included any provision for the additional bonus to the liquidators in its financial statements.

F - 14

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 4 – COMMITMENTS AND CONTINGENT LIABILITIES (continued):

d. In February 2001, a portion of the Company’s office space located in Ramat Gan, Israel was leased from West End Technology Investments Ltd. (“West End”), a company that is owned by Robi Hartman, the Company’s Chief Executive Officer and Chairman of the Board. As of April 1, 2003, this lease was assumed by Enargis which sublet 35% of the premises to the Company at an annual cost of approximately $12,000. As of December 31, 2005, an amount of $14.5 thousands was postponed until receipts of proceeds from sale of StoreAge or Enargis, and was paid in May 2007, following the termination of the Company voluntary liquidation proceedings. The financial statements include provisions for the aforesaid postponed rent payments. As of November 2005, the sub-lease was transferred back to West End. Following termination of the voluntary liquidation proceedings in April 2007, the Company increased its sublease from 35% to 50% of the premises. The annual cost increased, proportionally, based on the original agreement, with a cap of $3,000 per month (on an average) and will be valid until the later of (1) the merger with Witech or (2) December 31, 2007.

e. A claim was filed against NetWiz Ltd. (a former subsidiary of the Company) in respect of a breach of a lease agreement. As part of the agreement for the sale of NetWiz, the Company agreed to assume the liabilities in respect of the above claim.

On June 8, 2004, the Company reached a settlement agreement with the plaintiff in terms of which the Company accepted to pay a final and conclusive payment of $39,000 to the plaintiff, in consideration for the mutual waiver of all claims between the parties. The Company recorded a provision in the amount of $39,000 in respect of this claim in the year ended December 31, 2003.

F - 15

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 5 – SHAREHOLDERS’ EQUITY:

a. Share capital:

The Company’s shares are traded on the OTC Bulletin Board in the United States.

The ordinary shares confer upon the holders the right to receive notices of, participate and vote in the general meetings of the Company, the right to receive dividends, if and when declared by the board of directors and the right to receive, upon liquidation, a pro rata share of any remaining assets.

b. Stock Option Plan:

Under the Company’s 1993 Stock Option Plan (“the Plan”), options may be granted to officers, directors, employees and consultants of the Company. Pursuant to the Plan, the Company reserved for issuance 1,192,929 ordinary shares. The exercise price of the options granted under the plan may not be less than 85% of the fair market value of the Company’s ordinary shares on the date of grant. The options vested primarily up to 3-4 years.

No options were exercised during the years ended December 31, 2006, 2005 and 2004. The Plan expired in 2003. The options of the liquidators of the Company expired during 2006; all other outstanding options issued under the Plan have either been expired or forfeited in previous years.

Following is a summary of the status of the Company’s stock option plan and related information:

	Year ended December 31
	2006					2005				2004
	Amount of options			Weighted average exercise price		Amount of options		Weighted average exercise price		Amount of options			Weighted average exercise price
Outstanding at the beginning of
the year		406,550		$	3.63		406,550	$	3.63		781,762		$	4.67
Forfeited and cancelled		(406,550	)	$	3.63						(375,212	)	$	5.81
Outstanding at the end of the year		-;-					406,550	$	3.63		406,550		$	3.63
Exercisable at the end of the year		-;-					406,550	$	3.63		406,550		$	3.63

All of the outstanding and exercisable options at December 31, 2005 and 2004 expired in November 2006.

The intrinsic value of the outstanding and exercisable options at December 31, 2005 and 2004 is zero.

F - 16

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 6 – TAXES:

a) Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments) Law, 1985 (the “inflationary adjustments law”)

Under the inflationary adjustments law, results for tax purposes are measured in real terms, having regard to the changes in the Israeli consumer price index (“CPI”). The Company is taxed under this law.

b) Tax rates

The income of the Company is taxed at the statutory rate. In July 2004, an amendment to the Income Tax Ordinance was enacted. One of the provisions of this amendment is that the corporate tax rate is to be gradually reduced from 36%to 30%, in the following manner: the rate for 2004 will be 35%, in 2005 – 34%, in 2006 – 32%, and in 2007 and thereafter – 30%. In August 2005, a further amendment (No. 147) was published, which makes a further revision to the corporate tax rates prescribed by Amendment No. 140. As a result of the aforementioned amendments, the corporate tax rates for 2004 and thereafter are as follows: 2004 – 35%, 2005 – 34%, 2006 – 31%, 2007 – 29%, 2008 – 27%, 2009 – 26% and for 2010 and thereafter – 25%.

Capital gains are taxed at a reduced rate of 25% of the capital gains derived after January 1, 2003 and at the regular corporate tax rate on the gains derived through the aforementioned date.

c) Deferred income taxes

The deferred income taxes are composed as follows:

	December 31
	2006			2005
Provided for:
Operating loss carryforward	$	10,308		$	9,397
Capital loss carryforward		9,390			8,628
In respect of investments		5			1,060
Total		19,703			19,085
Less - valuation allowance		(19,703	)		(19,085	)
		-;-			-;-

The deferred tax assets are computed at the tax rates of 25% as of December 31, 2006 and 2005.

F - 17

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 6 – TAXES (continued):

d) Taxes included in the statement of operations in year ended December 31, 2004 are in respect of previous years.

e) Tax loss carryforward

As of December 31, 2006, the Company has carryforward tax losses in the amount of approximately $41 million which may be carried forward and offset against taxable income in the future for an indefinite period (December 31, 2005 – $38 million).

In addition, as of December 31, 2006, the Company has accumulated carryforward capital losses in a total amount of approximately $38 million, which may be offset against future capital gain for tax purposes (December 31, 2005 – $35 million).

Under the inflationary adjustments law (see a. above), carryforward losses are linked to the Israeli CPI.

f) Tax assessments

Tax assessments for the Company are considered final through the year ended December 31, 2001.

g) Reconciliation of the theoretical tax expenses to actual tax expenses:

	Year ended December 31
	2006			2005			2004
	U.S. dollar in thousands
Income (loss) before taxes, as reported in the
statements of operations	$	4,639		$	(106	)	$	(211	)
Theoretical income on taxes (tax benefit) at the
statutory rate (31%, 34%, 35% for the years ended
December 31, 2006, 2005 and 2004, respectively)	$	1,438		$	(36	)	$	(74	)
Utilization of tax losses carryforward		(1,375	)		14			104
Difference between the basis of measurement of
loss reported for tax purposes and the basis of
measurement of loss for financial reporting
purposes		(66	)		23			21
Special allowance, net of non deductible expenses					(1	)		(50	)
Other		3						(1	)
		-;-			-;-			-,-

F - 18

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 7 – SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:

Balance sheets:

		December 31
		2006		2005
		U.S. dollar in thousands
a.	Accounts payable and accruals:
	Payroll and related expenses	$	1	$	1
	Accrued expenses		254		226
	Other		6		5
		$	261	$	232

Statement of operations:

		Year ended December 31
		2006			2005			2004
		U.S. dollar in thousands
b.	General and administrative expenses:
	Liquidators fees	$	24		$	24		$	10
	Directors fees								71
	Payroll and related expenses		12			12			32
	Rent and office maintenance		19			16			19
	Professional fees		7			23			42
	Capital loss from write-off of fixed assets								9
	Other		29			28			17
		$	91		$	103		$	200
c.	Financial income (expenses) - net:
	Interest income	$	19		$	1		$	3
	Other		(2	)		(4	)		(7	)
		$	17		$	(3	)	$	(4	)

F - 19

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli corporation)
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 8 – RELATED PARTIES – TRANSACTIONS AND BALANCES:

a. Transactions with related parties:

	Year ended December 31
	2006		2005		2004
	U.S. dollar in thousands
Rent and office maintenance (1)	$	19	$	16	$	19
Administrative expenses (2)		-,-	$	8	$	16

(1) See note 4d.

(2) To Storage, in respect of services received until April 2005.

b. Related party balances:

	December 31
	2006		2005
	U.S. dollar in thousands
Accounts receivable	$	5		-,-

c. Under the Company’s 1993 Stock Option Plan (see note 4b), the Company granted the CEO of the Company, on November 30, 2000, 356,550 options with exercise price of $3.63 as follows:

55,600 of the options had no vesting terms, the remaining options vested annually in four equal batches, from March 22, 2001 until March 21, 2004. All options expired on November 30, 2006.

F - 20

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2007
(Unaudited)

F - 21

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2007
(Unaudited)

TABLE OF CONTENTS

	Page
CONDENSED FINANCIAL STATEMENTS:
Condensed balance sheets - September 30, 2007 and December 31, 2006	F - 23
Condensed statements of operations for the periods of nine months ended September 30, 2007 and 2006	F - 24
Condensed Statements of cash flows for the periods of nine months ended September 30, 2007 and 2006	F - 25
Notes to condensed financial statements	F-26-F-32

The amounts are stated in U.S dollars, ($) in thousands.

F - 22

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
CONDENSED BALANCE SHEETS
(U.S dollars in thousands)

	September 30, 2007			December 31, 2006
	(Unaudited)			(Audited)
A  s  s  e  t  s
CURRENT ASSETS:
Cash and cash equivalents	$	881		$	4,705
Accounts receivable - other		71			5
T o t a l   current assets		952			4,710
FIXED ASSETS		1
LONG-TERM ASSETS:
Loans (see note 2)		3,566
Funds in respect of employee rights upon retirement		5			3
T o t a l   long-term assets		3,571			3
	$	4,524		$	4,713
Liabilities and shareholders' equity
CURRENT LIABILITIES -
accounts payable and accruals	$	267		$	261
LONG-TERM LIABILITIES:
Provision for uncertain tax position (see note 1d)		14
Liability for employee rights upon retirement		5			5
T o t a l   long-term liabilities		19			5
T o t a l   liabilities		286			266
CONTINGENT LIABILITY (note 3)
SHAREHOLDERS' EQUITY:
Ordinary shares of NIS 0.003 par value at
December 31, 2006 and September 30 2007:
authorized - 16,666,667 shares;
issued and outstanding - 11,576,539 shares		55			55
Additional paid in capital		41,417			41,417
Accumulated deficit		(37,234	)		(37,025	)
T o t a l   shareholders' equity		4,238			4,447
	$	4,524		$	4,713

The accompanying notes are an integral part of these condensed financial statements.

F - 23

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
CONDENSED STATEMENTS OF OPERATIONS
(U.S dollars in thousands, except share and per share data)

	Nine Months Ended September 30,
	2007			2006
	( U n a u d i t e d )
INCOME FROM MANAGEMENT FEE	$	33
GENERAL AND ADMINISTRATIVE EXPENSES		(479	)	$	(63	)
FINANCIAL INCOME - net		251			8
LOSS BEFORE TAX ON INCOME		(195	)		(55	)
TAX ON INCOME		10
NET LOSS FOR THE PERIOD	$	(205	)	$	(55	)
NET LOSS PER SHARE-
basic and diluted:	$	(0.02	)	$	(0.01	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
basic and diluted		11,576,539			11,576,539

The accompanying notes are an integral part of these condensed financial statements.

F - 24

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
CONDENSED STATEMENTS OF CASH FLOWS
(U.S dollars in thousands)

	Nine Months Ended September 30,
	2007			2006
	( U n a u d i t e d )
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period	$	(205	)	$	(55	)
Adjustments required to reconcile net loss to net cash used in
operating activities:
Accumulated financial income on loans		(166	)
Changes in accrued liability for employee rights upon retirement					1
Gain on amounts funded in respect of employee rights upon
Retirement		(2	)
Taxes on income		10
Changes in operating assets and liabilities:
Increase in accounts receivable		(66	)		(6	)
Increase in accounts payable and accruals		6			22
Net cash used in operating activities		(423	)		(38	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(1	)
Loans granted		(3,400	)
Net cash used in investing activities		(3,401	)
DECREASE IN CASH AND CASH EQUIVALENTS		(3,824	)		(38	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		4,705			41
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	881		$	3

The accompanying notes are an integral part of these condensed financial statements.

F - 25

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES:

a. Nature of operations:

Through December 2002, I.I.S. Intelligent Information Systems Limited. (“the Company”) designed, developed and provided enterprise storage solutions for the Internet Small Computer Systems Interface (“iSCSI”). Due to the slow down associated with the iSCSI revenues resulting from the delays in the adoption of the iSCSI protocol, the Company decided to cease its iSCSI operations in December 2002.

On July 29, 2004, the Company’s shareholders resolved to place the Company in a voluntary liquidation.

On February 20, 2007, the Company signed a memorandum of agreement (“MOA”) with Witech Communications Ltd. (“WTC”) with respect to a contemplated merger between the Company and WTC, under which the Company is to acquire full control and ownership of WTC, in consideration of 50% of the Company’s shares.

On April 17, 2007, the Company’s general meeting of shareholders duly approved the termination of the Company’s voluntary liquidation.

On November 5, 2007, the Company signed a Share Exchange Agreement (the “Exchange Agreement”) with WTC shareholders for the acquisition of all the outstanding shares of WTC in exchange for the issuance of Company shares, representing approximately 50% of the Company’s shares.

On December 20, 2007, the general shareholders meeting of IIS approved the Exchange Agreement. The closing of the transaction was on January 2, 2008. For additional information see note 5a.

As of September 30, 2007, the Company is no longer engaged in any operational business other than providing managing services to WTC for a fixed fee amounting to $6,000 per month.

b. Basis of presentations

The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and Article 10 of Regulation S-X under the Securities Exchange Act of 1934. These condensed financial statements and notes thereto are unaudited and should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2006, as filed with the Securities and Exchange Commission on August 31, 2007.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2007, are not necessarily indicative of the results that may be expected for the year ended December 31, 2007.

F - 26

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):

c. Loss per share

Basic and diluted loss per share was computed by dividing net loss by the weighted average number of shares outstanding during the period.

d. Accounting for uncertainty in income taxes:

Effective January 1, 2007, the Company adopted FIN 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FAS 109", which was issued in June 2006. FIN 48 clarifies the accounting for uncertainty in income taxes, and prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company’s accounting policy, pursuant to the adoption of FIN 48, is to classify interest and penalties recognized in the financial statements relating to uncertain tax positions, under provision for income taxes. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and consequently, affect the net loss of the Company.

As a result of the implementation of FIN 48, the Company recognized $4 thousands as a long-term liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007 balance of accumulated deficit. During the nine months ended September 30, 2007, the Company recorded an increase of its unrecognized tax benefits of $10 thousands. Both amounts would result in a reduction of the Company’s effective tax rate, if recognized.

As of the date of adoption, the tax years that remain subject to examination by tax authorities are between years 2002 and 2006.

e. Recently issued accounting pronouncements:

In September 2006, the FASB issued FAS 157, “Fair Value Measurements.” This standard establishes a framework for measuring fair value and expands related disclosure requirements; however, it does not require any new fair value measurement. As applicable to the Company, this standard will be effective as of the year beginning January 1, 2008. The Company is currently evaluating the impact that the adoption of FAS 157 would have on its financial statements.

In February 2007, the FASB issued FAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This standard permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. As applicable to the Company, this standard will be effective as of the year beginning January 1, 2008. The Company is currently evaluating the impact that the adoption of FAS 159 would have on its financial statements.

F - 27

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)

NOTE 2 – LOANS:

a. On April 23, 2007 and May 28, 2007, the Company signed loan agreements with WTC to grant an aggregate principal amount of $3,000,000 to WTC. The loans bear an annual interest rate of LIBOR plus 5%, whilst in the event that the Exchange Agreement with WTC is not consummated, the interest on the loan will be increased to LIBOR plus 10% retroactively to the date it was granted. The maturity date was determined as the earlier of (i) 90 days following the termination of the exchange agreement (ii) January 20, 2008.

In connection with these loans, WTC issued promissory notes to the Company. According to these promissory notes, the Company has the right at any time following an event of default, as defined in the agreement, or in the event that the exchange agreement is not consummated, to convert any unpaid amount into fully-paid up and duly issued shares of WTC at a pre-conversion fully-diluted valuation of $ 5,000,000.

The amount of interest included in financial income on behalf of these loans represents an interest of LIBOR plus 10%.

b. On August 8, 2007 and on September 9, 2007, the Company signed two loan agreements with WTC to grant principal amount of $200,000 each to WTC. The loans bear an interest rate of 1.5% per month. According to those agreements, the maturity date is December 16, 2007, whilst after the balance sheet date the maturity date was lengthened by additional three months. In addition, for every month or part thereof that the principal amount for each loan (including interest) or part thereof shall be outstanding, the Company will be entitled to newly issued ordinary shares of WTC equal to 0.0259% of the issued and outstanding share capital of WTC, on a fully diluted basis. According to the alternative settlement of the above mentioned shares as stipulated in the loan agreements, due to the fact that the exchange agreement was closed prior to issuance of the shares, the amount of shares of the Company that the shareholders of WTC received in such exchange agreement has been reduced by 3,000 shares for every month or part thereof that the principal amount (including interest) or part thereof has been outstanding.

The loans are secured by a pledge over the shares of WTC held by certain shareholders.

The fair value of WTC’s shares to which the Company is entitled has been included in these financial statements as financial income based on the price of the Company’s shares at September 30, 2007, according to the conversion rate ratio established in the exchange agreement.

NOTE 3 – CONTINGENT LIABILITY

At the Company’s general meeting of shareholders held in July 2004, Messrs. Hartman and Jacobowitz were appointed as joint liquidators and the shareholders approved a fee of $1,000 per month (plus VAT, if applicable), to each of them commencing from the appointment of the liquidation and until distribution of all proceeds of the liquidation to the Company’s shareholders. In addition, the Company’s shareholders approved that (i) Mr. Jacobowitz will receive an additional bonus as follows: $25,000 (plus VAT, if applicable) if the gross proceeds received by the Company’s shareholders as a result of the liquidation of the net assets of the Company (hereinafter – the “Gross Proceeds”) are above $0.50 per share, $50,000 (plus VAT, if applicable) if the Gross Proceeds are above $1.00 per share and $75,000 (plus VAT, if applicable) if the Gross Proceeds are above $1.30 per share, and (ii) Mr. Hartman will receive an additional bonus of $100,000 (plus VAT, if applicable) if the Gross Proceeds are above $1.30 per share.

F - 28

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)

NOTE 3 – CONTINGENT LIABILITY (continued):

Since the Company terminated its voluntary liquidation, the Company’s audit committee and board of directors have approved on June 17, 2007, subject to shareholder approval, that these bonuses will be calculated and paid based on the average closing share price of the Company’s shares in the twenty trading days following the approval of this resolution by the general meeting of the shareholders. On December 20, 2007 the general shareholders meeting approved the abovementioned bonuses.

The Company has not provided for the additional bonus to the liquidators in its financial statements as, at balance sheet date, it was contingent upon conditions as detailed above.

Based on the share price from December 20, 2007 until the date of issuance these condensed financial statements, no bonus would be paid.

NOTE 4 – RELATED PARTIES – TRANSACTIONS:

a. Sale of the investment in Enargis

On March 31, 2003, the Company transferred iSCSI activities to a newly formed company –Enargis. Following such transfer, the Company held 25% in Enargis with the remaining shares held by the Company’s Chief Executive Officer (“CEO”) and Chairman of the Board. On May 23, 2007, the Company transferred all of its 25% holdings in Enargis, together with all the other shareholders of Enargis, to West End Technology Investments Ltd. (“West End”), a company owned by the CEO and Chairman of the Board, for no consideration. The carrying amount of the investment in Enargis at the transaction date was zero.

b. Rent agreement between the Company and West End

In February 2001, a portion of the Company office space located in Ramat Gan, Israel was leased from West End. As of April 1, 2003, this lease was assumed by Enargis which sublet 35% of the premises to us at an annual cost of approximately $12,000 which was reduced by 50% to $6,000 per annum with effect from August 2004, following our entry into voluntary liquidation proceedings in July 2004. The other 50%, $6,000, was postponed to until receipts of proceeds from the sale of StoreAge or Enargis. These amounts were paid only in May 2007 following termination of our voluntary liquidation proceedings. As of November 2005, the Company became a direct tenant of West End. Following termination of the Company’s voluntary liquidation proceedings in April 2007, the rent increased from 35% to 50% of the premises and annual cost according to the original agreement, amounting to $1,450 per month.

c. As to Consulting Agreement with West End- refer to Note 5f.

NOTE 5 – SUBSEQUENT EVENTS:

a. Acquisition of WTC

On December 20, 2007, the Company’s general shareholders meeting approved an Exchange Agreement with WTC and its shareholders for the acquisition of all the outstanding shares of WTC in exchange for the issuance of 11,522,229 shares of the Company to the shareholders of WTC, representing approximately 50% of the issued and outstanding shares of the Company less those shares due to the Company by virtue of the loan agreement between the Company and WTC (see also note 2b). Following the transaction, WTC will become a wholly owned subsidiary of the Company. According to the agreement, the Company will grant stock options to the senior management and shareholders of WTC to purchase an aggregate of 2,300,000 shares of the Company at an exercise price equal to the average trading share price during the twenty (20) trading days prior to the Closing (0.44$), vesting in eight (8) semi- annual installments as long as each such executive continues to be employed by the Company. It is intended that these options will be issued according to the capital gain track, stipulated by Section 102 of the Israeli Income Tax Ordinance.

F - 29

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)

NOTE 5 – SUBSEQUENT EVENTS (continued):

Pursuant to terms thereof, the Company is not allowed to claim, as an expense for tax purposes, the amounts credited to employees as a benefit, including amounts recorded as salary benefits in the Company’s accounts, in respect of options granted to employees under the plan – with the exception of the work-income benefit component, if any, determined on the grant date.

In addition, according to the agreement , the Company will increase the shares reserved for issuance to directors, employees, consultants and service providers of the Company and its subsidiaries pursuant to its incentive stock option plans by an additional 1,000,000 shares so that the total amount of shares reserved for issuance pursuant to such plan will be 3,300,000. In addition, the Company will issue to all registered shareholders of the Company as of November 9, 2007 (the “record date”) warrants to purchase an aggregate of 4,600,000 Ordinary Shares of the Company, on a pro-rata basis according to the percentage holding of each such shareholder in the issued and outstanding share capital of the Company on such record date . These warrants will be exercisable until the earlier of (i) five years from the date of issuance, and (ii) the closing of a Transaction. A “Transaction” means each of (i) merger, acquisition or reorganization of IIS with one or more other entities in which IIS is not the surviving entity, or (ii) a sale of all or substantially all of the assets or shares of IIS. The exercise price of each warrant shall be the average trading price per share of the Company’s Ordinary Shares during the twenty trading days prior to the Closing (0.44$). These warrants will be non-transferable and non-exercisable until all applicable Israeli and United States securities laws and regulations have been complied with in connection with the warrants and the underlying shares, including without limitation, that a registration statement covering the underlying shares is declared effective by the United States Securities and Exchange Commission.

The closing of the Exchange Agreement was subject to the Company shareholders’ approval and certain additional customary closing conditions. The closing of the transaction was on January 2, 2008.

b. Directors’Compensation

On December 20, 2007, the Company’s general meeting of shareholders approved that the compensation of any director of the Company who is not anemployee, consultant or service provider to the Company or any of its subsidiaries, shall be $12,000 per annum. All directors will be granted options to purchase 15,000 ordinary shares of the Company, per annum as long as such person acts as a director of the Company. These compensations will be granted retroactively for the period from April 17, 2007.

The Company also granted to each of the two external directors of the Company options to purchase 45,000 ordinary shares of the Company. The options shall vest annually in equal shares over three years following the grant date.

F - 30

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)

NOTE 5 – SUBSEQUENT EVENTS (continued):

The exercise price of the above options shall be equal to the average closing price of the Company’s shares on the last 20 trading days prior to December 20, 2007 (0.44$).

The Company has included a provision for the cash compensation in these financial statements.

As to options granted to the CEO and Chairman of the Board, see f. below.

c. Issuance of convertible notes and warrants

On November 15, 2007, the Company announced that it has signed definitive agreements with private investors (the “purchasers”) for the issuance of convertible notes in the principal amount of $1,655,000, out of which $827,500 was invested in November 2007 and the remaining 50% was invested on January 7, 2008. The principal amount of the notes will accrue an annual interest rate of 8%. The principal amount and interest will be repaid in 12 equal quarterly installments commencing 36 months from issuance. Unpaid principal and interest may at the option of the purchasers be converted into ordinary shares at a price of $0.65 per share, subject to certain conditions. The Company shall have the right to redeem the principal amount and interest of the notes that have not been converted into shares, in whole or in part, between December 31 and January 31 of each year commencing December 31, 2008 or at the closing of a Transaction (which is defined as either the merger of the Company into another company or the purchase of all shares of the Company) at a 20% premium per year, or a pro-rata portion of a year if redeemed in the event of a Transaction. The notes are secured by a floating charge on the assets of the Company, subordinated only to bank financing in an amount not to exceed $500,000.

The Company also issued to the purchasers of the notes warrants exercisable for 331,000 ordinary shares at the price per share equal to the average trading share price of the Company during the 20 trading days prior to the closing of the Exchange Agreement (0.44$), until the earlier of: (i) five years from issuance, and (ii) the closing of a Transaction as defined above.

d. Loans

On October 7, 2007 and on November 5, 2007, the Company signed loan agreements with WTC to grant an aggregate amount of $1,200,000 to WTC, at the same terms as the loans referred in note 2b.

e. Increase of Registered Share Capital

On December 20, 2007, the Company’s general meeting of shareholders approved theincrease of the registered share capital of the Company by NIS 100,000 consisting of 33,333,334 Ordinary Shares of NIS 0.003 par value each, so that following such increase the registered share capital of the Company shall consist of NIS 150,000 divided into 50,000,000 Ordinary Shares of NIS 0.003 par value each.

f. Consulting Agreement with West End

On May 15, 2007 and November 5, 2007 the audit committee and the board of directors approved, subject to shareholders approval that was given on December 20, 2007 an agreement with West End. According to the agreement the CEO and Chairman of the board will provide to the Company consulting services for a monthly fee of NIS 60,000 (approximately $15,000). The effective date of the agreement is April 17, 2007.

F - 31

I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
(An Israeli Corporation)
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)

NOTE 5 – SUBSEQUENT EVENTS (continued):

Further approved on the same general meeting of shareholders to grant the CEO and Chairman of the board options to purchase 15,000 Ordinary Shares of the Company, per annum for each year in which he serves as a director of the Company, commencing April 17, 2007. The exercise price of such options shall be equal to the average closing share price on the last 20 trading days prior to December 20, 2007 (0.44$).

F - 32

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2006

F - 33

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2006

TABLE OF CONTENTS

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM		F-35
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets		F-36
Statements of operations		F-37
Statements of changes in shareholders' equity (capital deficiency)		F-38
Statements of cash flows		F-39
Notes to consolidated financial statements		F-40-F-58

The amounts are stated in U.S. dollars ($) in thousands.

F - 34

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders of

WITECH COMMUNICATIONS LTD

We have audited the consolidated balance sheets of Witech Communications Ltd (the “Company”) and its subsidiary as of December 31, 2006 and 2005 and the related consolidated statements of operations, of changes in shareholders’ equity (capital deficiency) and of cash flows for each of the two years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s Board of Directors and management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company’s Board of Directors and management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above, present fairly, in all material respects, the financial position of the Company and its subsidiary as of December 31, 2006 and 2005 and the consolidated results of their operations and cash flows for each of the two years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has net losses for the period from inception (February 1, 2004) through December 31, 2006 of $2,746 thousand, as well as negative cash flow from operating activities. Presently the Company does not have sufficient cash resources to meet its requirements in the twelve months following January 10, 2008. These reasons raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Tel-Aviv, Israel	Kesselman & Kesselman
January 10, 2008	Certified Public Accountant (Isr.)
	A member of PricewaterhouseCoopers
	International Limited

F - 35

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)

	December 31,
	2006			2005
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents	$	31		$	20
Restricted bank deposit		31
Accounts receivable		101			110
T o t a l  current assets		163			130
FUNDS IN RESPECT OF EMPLOYEE RIGHTS UPON RETIREMENT		43			15
FIXED ASSETS, net		757			143
T o t a l  assets	$	963		$	288
Liabilities and shareholders' equity
(net of capital deficiency)
CURRENT LIABILITIES:
Credit from banks and current maturities of long term loans	$	469		$	21
Accounts payable and accruals:
Trade payables		92			23
Other		475			56
T o t a l  current liabilities		1,036			100
LONG-TERM LIABILITIES:
Loans (net of current maturities):
Bank loans		137
Other loans and convertible loans		801			90
Warrants issued to a bank		131
Liability for employee rights upon retirement		67			28
T o t a l  long-term liabilities		1,136			118
T o t a l  liabilities		2,172			218
COMMITMENTS, see note 5
SHAREHOLDERS' EQUITY (CAPITAL
DEFICIENCY):
Ordinary shares of NIS 0.1 par value at
December 31, 2006 and 2005:
authorized - 500,000 shares;
issued and outstanding 25,000 shares and 2,000 shares,
respectively		1			*
Additional paid-in capital		1,536			800
Accumulated deficit		(2,746	)		(730	)
T o t a l   shareholders' equity (capital deficiency)	$	(1,209	)	$	70
T o t a l   liabilities and shareholders' equity
(net of capital deficiency)	$	963		$	288

——————————————
Charles Moss
Chairman of the Board
and Chief Executive Officer ——————————————
Yifat Zommer
Chief Financial Officer

* Represents an amount of less than $1,000.

The accompanying notes are an integral part of the financial statements.

F - 36

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)

	Year ended December 31,
	2006			2005
REVENUES	$	272		$	25
COST OF REVENUES		740			57
GROSS LOSS		(468	)		(32	)
RESEARCH AND DEVELOPMENT EXPENSES, net		407			200
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		820			208
OPERATING LOSS		(1,695	)		(440	)
FINANCIAL EXPENSES, net		316			14
LOSS BEFORE TAXES ON INCOME		(2,011	)		(454	)
TAXES ON INCOME		(5	)
NET LOSS	$	(2,016	)	$	(454	)
NET LOSS PER SHARE -
basic and diluted	$	(105.4	)	$	(29.4	)
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
USED IN COMPUTING LOSS PER
ORDINARY SHARES-
basic and diluted		19,125			15,421

The accompanying notes are an integral part of the financial statements.

F - 37

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY)
(U.S dollars in thousands, except share data)

	Ordinary shares				Additional paid-in capital			Accumulated deficit			Total shareholders' equity (capital deficiency)
	Number of shares**		Amount
Balance as of January 1, 2005		2,000		*	$	230		$	(276	)	$	(46	)
Changes during 2005:
Issuance of share capital				*		570						570
Net loss									(454	)		(454	)
Balance as of December 31, 2005		2,000		*		800			(730	)		70
Changes during 2006:
Stock based compensation						233						233
Stock split		18,000	$	1		(1	)
Shares issued to be held by the Company		5,000
Issuance of share capital				*		418						418
Conversion of a loan into shares						86						86
Net loss									(2,016	)		(2,016	)
Balance as of December 31, 2006		25,000	$	1	$	1,536		$	(2,746	)	$	(1,209	)

* Represents an amount of less than $1,000.

** Including shares issued to the Company, for no consideration, in the amount of 720 shares and 3,362 shares as of January 1, 2005 and December 31, 2006, respectively, see note 6.

The accompanying notes are an integral part of the financial statements.

F - 38

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S dollars in thousands)

	Year ended December 31,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,016	)	$	(454	)
Adjustments required to reconcile net loss to net cash used
in operating activities:
Depreciation		197			32
Changes in accrued liability for employee rights
upon retirement		39			27
Gain on amounts funded in respect of employee
rights upon retirement		(7	)		(2	)
Share based compensation		233
Accrued interest in respect of loans received		229			*
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		9			(99	)
Increase in accounts payable and accruals		497			31
Net cash used in operating activities		(819	)		(465	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(827	)		(156	)
Investment grants relating to fixed assets		16			24
Investment in a restricted bank deposit		(31	)
Amounts funded in respect of employee rights upon
Retirement		(21	)		(12	)
Net cash used in investing activities		(863	)		(144	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term credit from banks - net		43			(33	)
Long term loans received from a bank and warrants issued
to a bank		400
Long term convertible loans received from others		156			90
Long term loans received from others		685
Issuance of share capital		409			570
Net cash provided by financing activities		1,693			627
INCREASE IN CASH AND CASH
EQUIVALENTS		11			18
BALANCE OF CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR		20			2
BALANCE OF CASH AND CASH EQUIVALENTS
AT END OF YEAR	$	31		$	20
Supplementary information on financing
activities not involving cash flows:
Conversion of a loan into ordinary shares	$	86
Issuance of shares to an employee as a settlement of a
liability	$	9

* Represents an amount of less than $1,000.

The accompanying notes are an integral part of the consolidated financial statements.

F - 39

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES:

a. General:

1) Operations

Witech Communications Ltd. (the “Company”) was established in Israel in 2004. The Company operates in one operating segment – development and manufacture of wireless video technology, and provides wireless video solutions for diverse commercial applications system. The system, marketed currently captures dynamic videos, for installation on roller coasters and other thrill rides in amusement parks. The revenue of the Company is derived from the sale of CDs and other media products to roller coasters riders, which were filmed by the Company’s systems. The Company and its subsidiary (the “Group”) has signed contracts with amusement parks according to which it was granted the right to operate the systems in the said parks and it entitled to a percentage of revenue from the sale of CDs. The sales in the US, which represent the majority of the company’s sales, are done through a wholly owned subsidiary, CDRide Corp. (“CDRide”) which was established in June 2005 and registered in the state of Delaware

On February 20, 2007, the Company signed a Memorandum Of Agreement (“MOA”) with I.I.S Intelligent Information Systems Limited (“IIS”) with respect to a contemplated merger between the Company and IIS, under which IIS is to acquire full control and ownership of the Company, in consideration of approximately 50% of IIS’s shares.

On November 5, 2007, the Company signed a Share Exchange Agreement (the “Exchange Agreement”) with IIS shareholders for the acquisition of all the outstanding shares of the Company in exchange for the issuance of IIS’s shares. See also note 11b.

On December 20, 2007, IIS’s general shareholders meeting approved the Exchange Agreement with the Company and it’s shareholders for the acquisition of all the outstanding shares of the Company in exchange for the issuance of 11,552,226 shares of IIS to the shareholders of the Company, representing approximately 50% of the issued and outstanding shares of IIS less those shares due to IIS by virtue of the loan agreement between IIS and the Company.

The closing of the transaction was on January 2, 2008. For additional information see note 11b.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has accumulated net losses for the period from inception (February 1, 2004) through December 31, 2006 of $2,746 thousand, as well as negative cash flow from operating activities. Presently, the Company does not have sufficient cash resources to meet its requirements in the twelve months following January 10, 2008, the date of issuance of these consolidated financial statements. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is in the process of evaluating various financing alternatives as the Company will need to finance future operating expenses, research and development activities and general and administrative expenses through fund raising in the public or private equity markets. Among these alternatives the Company is relying on the additional financing from IIS, see also note 11. Although there is no assurance that the Company will be successful with those initiatives, management is confident that it will be able to secure the necessary financing as a result of ongoing financing discussions with third party investors and existing shareholders.

F - 40

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):

These financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability.

2) Accounting principles

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

3) Functional currency

The currency of the primary economic environment in which the operations of the Group are conducted is the U.S. dollar (“dollar”; “$”). Almost all of the Group’s income is incurred in dollars. Thus, the functional currency of the Group is the dollar.

Transactions and balances originally denominated in dollars are presented at their original amounts. Balances in non-dollar currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. Non-dollar transactions reflected in the statements of operations are translated into dollars using exchange rates at the transaction dates or average rates. Currency transaction gains or losses are carried to financial income or expenses, as appropriate.

4) Use of estimates in preparation of financial statements

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

b. Principles of consolidation

1) The consolidated financial statements include the accounts of the Company and its subsidiary.

2) Intercompany balances and transactions were eliminated in consolidation.

F - 41

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):

c. Cash equivalents

The Group considers all highly liquid investments, which are comprised of short-term bank deposits with an original maturity date of up to three months that are not restricted as to withdrawal or use, to be cash equivalents.

d. Fixed assets:

Fixed assets are stated at cost, net of accumulated depreciation and of related investment grants received from the Office of the Chief Scientist of the Ministry of Industry and Trade of Israel (the “OCS”) (see also note 5d) in the amount of $28,540 and $20,287 at December 31, 2006 and 2005, respectively. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets at the following annual rates:

	%
Computers and peripheral equipment		33
Office furniture and equipment		7
Installed systems		33

Direct labor and overhead costs related to the construction and installation of fixed assets that are required to bring the asset to its intended use, are capitalized to the extend that it is expected that they are to generate economic future benefits. The direct payroll and related costs of employees that are related to construction and installation activities are capitalized based on specific time devoted to these activities where identifiable.

Maintenance and repairs are charged to expenses as incurred and improvements are capitalized.

e. Deferred income taxes:

The Group accounts for income taxes in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. Deferred taxes are determined utilizing the asset and liability method, based on the estimated future tax effects of differences between the financial accounting and tax bases of assets and liabilities under the applicable tax laws. Deferred tax balances are computed using the tax rates expected to be in effect at time when these differences reverse.

Valuation allowances in respect of the deferred tax assets are provided when it is more likely than not that all or a portion of the deferred income tax assets will not be realized. The Group has provided a full valuation allowance with respect to its deferred tax assets as it expects that it is more likely than not that it will not have taxable income in the foreseeable future.

The Group does not provide for deferred taxes with respect to the difference between the book value and the tax basis of investments in its non – Israeli subsidiary, as the Company does not expect such temporary differences to be reversed in the foreseeable future.

F - 42

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):

Paragraph 9(f) of SFAS 109 “Accounting for Income Taxes”, prohibits the recognition of deferred tax liabilities or assets that arise from differences between the financial reporting and tax bases of assets and liabilities that are measured from local currency into dollars using historical exchange rates, and that result from changes in exchange rates or indexing for tax purposes. Consequently, the aforementioned differences were not reflected in the computation of deferred tax assets and liabilities.

f. Revenue recognition:

Revenues from sales of CDs and other media products to roller coaster riders, which were filmed by the Company’s systems, are recognized at the point of sale on a net basis pursuant to EITF 99-19 “Reporting Revenue Gross as a Principal versus Net as an Agent”, based on the percentage stated in the agreements with the amusement parks ( see also note 1 a (1)).

g. Research and development:

Research and development costs are expensed as incurred and consist primarily of personnel, facilities, equipment, and supplies for research and development activities. Grants received from the OCS are recognized when the grant becomes receivable, provided there is reasonable assurance that the Company will comply with the conditions attached to the grant and there is reasonable assurance the grant will be received. The grant is deducted from the related research and development expenses as the costs are incurred. See also note 5d.

h. Net loss per share:

Basic and diluted net loss per share is computed by dividing net loss attributed to ordinary shares for the period by the weighted average number of ordinary shares outstanding during the period after giving retroactive effect to the stock split effected on February 20, 2006, see note 6a(3). The calculation of diluted net loss per share excludes potential additional ordinary shares issuable upon the conversion of stock options, warrants and convertible loans as their effect was anti-dilutive.

i. Accounting for share – based compensation:

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-based Payment” (“FAS 123(R)”). FAS 123(R) supersedes APB 25 and related interpretations and amends Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows” (“FAS 95”). FAS 123(R) requires awards classified as equity awards be accounted for using the grant-date fair value method. The fair value of share-based payment transactions is recognized as an expense over the requisite service period, net of estimated forfeitures.

F - 43

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):

j. Fair value of financial instruments:

In view of their nature, the fair value of the financial instruments included in the working capital of the Company is usually identical or close to their carrying value. The carrying amounts of the Company’s long-term assets, long-term loan payable, and other long-term liabilities approximate their fair value.

k. Concentration of credit risks:

Financial instruments that subject the Group to credit risk consist primarily of cash and cash equivalents, which are deposited in major financial institutions in Israel and the U.S..

Accordingly, the Group’s cash and cash equivalents balances do not represent a substantial concentration of credit risks at December 31, 2006.

l. Impairment in value of long-lived assets:

Under FAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”(“FAS 144”), the Group reviews long-lived assets, to be held and used, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Under FAS 144, if the sum of the expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the carrying amount of such assets, an impairment loss would be recognized, and the assets are written down to their estimated fair values.

As of December 31, 2006 the Group has not recorded any impairment charges relating to its long lived assets.

m. Advertising costs:

Cost related to advertising and promotion of products, which amounted to $83 thousand and $337 thousand for the years ended December 31, 2005 and 2006, respectively, are charged to selling, general and administrative expenses as incurred.

n. Newly issued and recently adopted accounting pronouncements:

In June 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes –an interpretation of FAS 109". This financial interpretation clarifies the accounting for uncertainty in income taxes, and prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on various related matters such as de-recognition, interest and penalties and disclosure. The provisions of FIN 48 are effective for fiscal years beginning January 1, 2007. The adoption of this interpretation had the effect of increase in the accumulated deficit of $10 thousand.

F - 44

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):

In September 2006, the FASB issued FAS 157, “Fair Value Measurements”. This standard establishes a framework for measuring fair value and expands related disclosure requirements; however, it does not require any new fair value measurement. The provisions of SFAS 157 are effective for fiscal years beginning January 1, 2008. The Group is currently evaluating the impact of adopting of SFAS 157 on its consolidated financial statements and results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin (SAB) 108, which expresses the Staff’s views regarding the process of quantifying financial statement misstatements. The bulletin was effective as of the year beginning January 1, 2006. The implementation of this bulletin had no impact on the Group’s financial statements.

In February 2007, the FASB issued FAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This standard permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The provisions of SFAS 159 are effective for fiscal years beginning January 1, 2008. The Group is currently evaluating the impact of adopting SFAS 159 on its financial position, cash flows and results of operations.

NOTE 2 – FIXED ASSETS:

a. Composition of assets, grouped by major classifications, is as follows:

	December 31
	2006			2005
	U.S. dollars in thousands
Cost:
Computers and peripheral equipment	$	41		$	39
Office furniture and equipment		10			2
Installed systems		941			123
Systems under construction					17
		992			181
Less - accumulated depreciation		(235	)		(38	)
Net carrying amount	$	757		$	143

b. Depreciation expenses totaled $197 and $32 for the years ended December 31, 2006 and 2005, respectively.

c. As for pledges – see note 5a.

F - 45

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 3 – LOANS AND CONVERTIBLE LOANS:

a. Composed as follows:

	December 31
	2006			2005
	U.S. dollars in thousands
Loans from a bank (see d. below)	$	326
Loans from others* (see f. and h.. below)		293
Convertible loans from others (see e. and h. below)		724		$	90
		1,343			90
Less - current maturities (see note 8b)		(405	)
	$	938		$	90

* Including loan from Opcom Ltd (“Opcom”), a company controlled and owned by the CEO and shareholder of the Company in the amount of $61 thousand.

b. Classified by currency of repayment, linkage terms and interest rates, the total amount of the liabilities (before deduction of current maturities) is as follows:

	December 31
	2006				2005
Currency	Interest rates		Amount
	%		U.S. dollars in thousands
U.S. dollars		11.8%-42.5%**	$	923	$	90
U.S. dollars		Libor+5%		326
New Israeli Shekels		12%		94
			$	1,343	$	90

** Mainly 40.5%.

c. The loans (net of current maturities) mature in the following years after the balance sheet dates:

	December 31
	2006		2005
	U.S. dollars in thousands
Second year	$	693	$	90
Third year		187
Fourth year		58
	$	938	$	90

F - 46

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 3 – LOANS AND CONVERTIBLE LOANS (continued):

d. On June 21, 2006 and July 3, 2006, the Company was granted loans from Mizrahi-Tefahot bank (“the Bank”) in an aggregate amount of $400,000. The loans bear a stated effective annual interest rate of Libor+5%. The principal amount will be repaid in 12 monthly installments commencing 12 months from grant date. The interest of one of the loans will be repaid in 24 months, commencing one month from the grant date, and the other loan’s interest will be repaid with the principal installments.

On the dates the loans were received, the Company granted the Bank warrants to purchase 4% of the then outstanding Company’s share capital, on a fully diluted basis, for no consideration, exercisable any time for a period of 6 years commencing at grant date.

The bank has also received a PUT option to sell back to the Company those warrants for the amount of $400,000. The PUT option may be exercised, in whole or in part, at the end of 4 years after grant date and in accordance with the provisions stated in the agreements.

Based on APB 14 “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants” the allocation of the proceeds from the bank has been based on allocation of full fair value to the warrant and the residual proceeds to the loans. The warrant is classified as a liability under “Warrants issued to a bank” and measured subsequently at fair value with changes in fair value recognized in profit and loss.

As to the modification of the terms of the warrants subsequent to December 31, 2006, see note 11g.

e. 1) Loans from others

On January 10, 2006 and February 5, 2006, the Company was granted loans in the amount of $100,000 and $50,000, respectively from two lenders. These loans bear an effective annual interest rate of 40.5%. The principal amount and interest will be repaid in 4 annual installments commencing 12 months from grant date.

According to the terms of the loans, should the Company not be able to repay the first installment, the lenders will be entitled to choose to either convert the said installment into the Company’s shares or postpone the payment in consideration for an additional interest. In case that the Company will not be able to repay the loans, each installment will be converted into a certain percentage of the Company’s share capital, at the date of conversion.

When the final installment is due, the lender has the right to receive shares comprising a certain percentage of the Company’s issued shares, in lieu of $50,000 and $25,000, respectively, which will be deducted from the final payment.

The amount of the installments may be adjusted according to a formula detailed in the agreements based on certain operational indexes of the Company. In any case, the total amount of repayment will not be less than $150,000 and $75,000, respectively.

On January 20, 2007 an amount of approximately 71,000$ ($50,000 principal and $21,000 interest out of $100,000 loan) was converted into 311 shares of the Company. The conversion rights on the $50,000 loan and on the remaining $50,000 out of the $100,000 loan were cancelled on the date of the closing.

See h. below in respect of postponement of repayment date.

F - 47

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 3 – LOANS AND CONVERTIBLE LOANS (continued):

2) On November 30, 2005 the Company was granted a loan in the amount of $90,206 by a lender. The loan bears an effective annual interest rate of 11.8%. The principal amount and interest will be repaid 24 months after the grant date. According to the terms of the loan the lender may convert the loan into the Company’s shares at an increasing conversion ratio as a factor of time.

See h. below in respect of postponement of repayment date.

On January 2, 2008, the date of the closing, the conversion rights on the loans were cancelled.

3) On February 8, 2006 the Company was granted a loan by the CEO and a shareholder of the Company in an amount of approximately $28,000. The loan is denominated in NIS and linked to the dollar and bears effective annual interest rate of 12%. The principal amount and interest will be repaid not later than the end of 2008.

According to the terms of the loan the lender may convert the loan into the Company’s shares at a price of $136 per share.

On November 1, 2007 an amount of approximately 40,000$ was converted into 684 shares of the Company.

4) On May 16, 2006 the Company was granted loans in the total amount of $360,000 by a group of lenders. The loans bear an effective annual interest rate of 14.33%. The principal amount and interest will be repaid 18 months after the grant date. According to the terms of the loan the lender may convert the loan into the Company’s shares.

On December 30, 2007, the loans were converted into 1,838 shares of the Company. At time of the conversion, the conversion conditions were changed such that the conversion rate was changed from 4% to approximately 6%.

f. On December 15, 2006, a loan was received by the Company from a lender on March 23, 2006 in the amount of $59,957 and the accumulated interest on such loan and the accumulated interest on the loan described in e(2) above were converted into 365 shares of the Company. See also note 6a(6). The above amount of approximately $86,000 was classified as equity on the date of conversion.

g. As to pledges – see note 5a.

h. On November 5, 2007, the repayment date of loans in the total amount of $630,000 (including loans described in e(1) and e(2) above) have been postponed until IIS raises at least $6 million in equity or convertible debt financing ($1.655 million of this amount has already been raised).

NOTE 4 – EMPLOYEE RIGHTS UPON RETIREMENT

Israeli law generally requires payment of severance pay and/or pensions upon dismissal of an employee or upon termination of employment in certain other circumstances. The severance pay liabilities are fully provided for in these consolidated financial statements, as if it was payable at each balance sheet date on an undiscounted basis, based upon the number of years of service and the most recent monthly salary of the Company’s employee.

The amounts funded are presented as non-current assets. The severance pay expenses were $21 thousand and $12 thousand in the years ended December 31, 2006 and 2005, respectively.

F - 48

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 5 – COMMITMENTS:

a. The Company has on-going collateral including rights derived from, on all its assets, and fixed collateral on its share capital and goodwill. The collateral is to the benefit of the Bank.

b. The Company has fixed collateral on its share capital, goodwill and all its assets to other lenders.

c. In February 2007 the Company signed an agreement for the lease of its facilities for a period of one year ending on March 1, 2008. The monthly rental payments are in the amount of $6,600. In addition, the Company has agreed to pay a monthly amount of $900 in respect of management and maintenance fee. Lease expenses totaled to $55 thousand and $5 thousand for the years ended December 31, 2006 and 2005.

d. Royalties to the OCS:

The Company is committed to pay royalties to the Government of Israel at a rate of 3%-5% of the proceeds from sales of products in the research and development expenses of which the Government of Israel participated by way of grants. The commitment is determined on a product-by-product basis, in an amount not to exceed the total of the grants received (dollar linked) with an additional of an annual interest based on Libor.

As of December 31, 2006, the Company has outstanding contingent obligations to pay royalties in the amount of $133 thousands in respect of future sales of products derived from such research and development.

e. On January 23, 2007, the Company signed an agreement which settles the finder’s fee (subject to closing) in respect of the share exchange agreement with IIS. According to the agreement with the finder, the Company will pay in cash 2.25% of $4,900,000, which represents the estimated balance of cash in IIS at that date, and 4.7% of the ordinary shares of the Company which were converted into 545,270 IIS shares.

NOTE 6 – SHAREHOLDERS’ EQUITY:

a. Share capital:

1) Composed as follows:

	Number of shares
	Authorized		Issued and paid
	December 31, 2006 and 2005		December 31
			2006		2005
Ordinary shares of NIS 0.1 par value		500,000		25,000		2,000

2) During the year 2005, the Company issued 469 ordinary shares of NIS 0.1 par value that were held by the Company in consideration of $570 thousands.

3) On February 20, 2006, the Company executed a stock split by distributing, prorata, to its shareholders 18,000 ordinary shares of NIS 0.1 par value, for no consideration.

F - 49

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 6 – SHAREHOLDERS’ EQUITY (continued):

4) On September 1, 2006, the Company issued 5,000 ordinary shares of NIS 0.1 par value for no consideration to be held by the Company.

5) During the year 2006, the Company issued (including shares granted to an employee – see b(2) below) 3,477 ordinary shares of NIS 0.1 par value that were held by the Company in consideration of $418 thousands.

6) On December 15, 2006, a loan and accumulated interest in a total amount of $86 thousands was converted into 365 ordinary shares of NIS 0.1 par value of the Company, (see also note 3f.).

b. Employee compensation

1) As to the Company’s option plan – see note 11f.

2) On June 28, 2006, and August 31, 2006, 800 and 233 shares that were held by the Company, respectively, were granted to an employee at par value and $9,227, respectively. The fair value of the above shares on the grant dates, based on the Company’s estimates is $233,000.

c. As to convertible loans and warrants issued – see notes 3d and 3e.

NOTE 7 – TAXES:

a) Corporate taxation in Israel:

1) Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments) Law, 1985 (the “inflationary adjustments law”)

Under the inflationary adjustments law, results for tax purposes are measured in real terms, having regard to the changes in the Israeli consumer price index (“CPI”). The Company is taxed under this law.

2) Tax rates

The income of the Company is taxed at the statutory rate. The corporate tax rates for 2005 and thereafter, as amended in August 2005 are as follows: 2005 – 34%, 2006 – 31%, 2007 – 29%, 2008 – 27%, 2009 – 26% and for 2010 and thereafter – 25%.

b) Subsidiary outside Israel – CDRide

The subsidiary that is incorporated outside of Israel is assessed for tax under the tax laws in the U.S. The principal tax rate applicable to the subsidiary is 40%.

The taxes on income for the year ended December 31, 2006, is in respect of the Company’s subsidiary.

F - 50

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 7 – TAXES (continued):

c) Deferred income taxes

The deferred income taxes are composed as follows:

	December 31
	2006			2005
	U.S. dollar in thousand
Provided for:
Operating loss carryforward	$	550		$	125
Provisions for employee related obligations		20			8
Total		570			133
Less - valuation allowance		(570	)		(133	)
		-;-			-;-

The deferred tax assets are computed at the tax rates of 25% as of December 31, 2006 and 2005.

d) Carryforward tax losses

As of December 31, 2006, the Company has carryforward tax losses in the amount of approximately $2.22 million which may be carried forward and offset against taxable income in the future for an indefinite period (December 31, 2005 – $0.5 million).

Under the inflationary adjustments law (see a. above), carryforward losses are linked to the Israeli Consumer Price Index.

e) Tax assessments

The Company and its subsidiary have not yet been assessed for tax purposes since incorporation.

f) The components of profit (loss) before income taxes are as follows:

	Year ended December 31
	2006			2005
	U.S. dollar in thousand
United States	$	13		$	1
Israel		(2,024	)		(455	)
	$	(2,011	)	$	(454	)

F - 51

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 7 – TAXES (continued):

g) Reconciliation of the theoretical tax expenses to actual tax expenses :

	Year ended December 31
	2006			2005
	U.S. dollar in thousand
Loss before taxes, as reported in the
statements of operations	$	(2,011	)	$	(454	)
Theoretical tax benefit at the statutory rate
(31% and 34% for the years ended
December 31, 2006 and 2005, respectively)	$	(623	)	$	(154	)
Changes in taxes in respect of tax losses incurred
in the reported year for which deferred taxes
were not created		475			111
Difference between the basis of measurement of
loss reported for tax purposes and the basis of
measurement of loss for financial reporting
purposes		41			(2	)
Special allowance, net of non deductible expenses		107			45
Other		5
	$	5			-;-

F - 52

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 8 – SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:

Balance sheets:

		December 31
		2006		2005
		U.S. dollar in thousands
a.	Accounts receivable:
	Government authorities	$	26	$	9
	OCS		36		63
	Others		39		38
		$	101	$	110
b.	Credit from banks and current maturities of
	long term loans :
	Short-term credit from banks	$	64	$	21
	Current maturities of long-term loans:
	From a bank		189
	From others		216
		$	469	$	21
c.	Accounts payables and accruals:

1)	Trade payable:
	Open accounts	$	36	$	8
	Checks and notes payable		56		15
		$	92	$	23
2)	Other:
	Payroll and related expenses	$	250	$	41
	Accrued expenses		147		5
	Related party		66
	Other		12		10
		$	475	$	56

F - 53

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 9 – RELATED PARTIES – TRANSACTIONS AND BALANCES:

a. Transactions with related parties:

	Year ended December 31
	2006		2005
	U.S. dollar in thousands
Management fees (see c. below)	$	43	$	5
Financing expenses		-,-	$	3

b. Related party balances:

	December 31
	2006		2005
	U.S. dollar in thousands
Current liabilities - presented under "Credit
from banks and loans" - "Current
maturities of long term loans from others"	$	11	$	3
Current liabilities - presented under
"Accounts payable and accruals" - "Other
payable"	$	66	$	1
Long-term liabilities - presented under
"Loans" - "Other" (see also note 3a and
note 3e(3))	$	94		-,-

c. On December 31, 2006 and December 31, 2005 the Company signed an agreement with Opcom to receive management fees for management services granted to the Company and participation in the Company’s operational expenses in the amount of $43,000 in the year ended December 31, 2006 and $5,000 in the year ended December 31, 2005.

F - 54

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 10 – SEGMENT INFORMATION:

The Group operates in one reportable segment.

Disaggregated financial data is provided below as follows: (1) revenues by geographic area and tangible long-lived assets by geographic location; and (2) revenues from principal customers:

1) Geographic and by products information:

Revenues are attributed to geographic areas based on the location of the customer. The following is a summary of revenues by geographic area:

	Year ended December 31
	2006		2005
	U.S. dollar in thousands
USA and Canada	$	262	$	15
Israel		10		10
	$	272	$	25

Tangible long-lived assets by geographic location are as follows:

	December 31
	2006		2005
	U.S. dollar in thousands
USA and Canada	$	736	$	96
Israel		21		47
	$	757	$	143

2) Revenues from principal customers - revenues from single customers each of which exceeds 10% of total revenues in the relevant year:

	Year ended December 31
	2006			2005
Customer A		28	%		-;-
Customer B		22	%		-;-
Customer C		12	%		-;-
Customer D		12	%		60	%
Customer E		4	%		40	%

F - 55

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 11 – SUBSEQUENT EVENTS:

a. Asto MOA and the assignment of the Exchange Agreement see note 1a(1).

b. On December 20, 2007, the IIS’s general shareholders meeting approved the Exchange Agreement with the Company and all its shareholders of the Company for the acquisition of all the outstanding shares of the Company in exchange for the issuance of 11,552,226 shares of IIS to the shareholders of the Company, representing approximately 50% of the issued and outstanding shares of IIS less those shares due to IIS by virtue of the loan agreement between IIS and the Company. Following the transaction, the Company will become a wholly owned subsidiary of IIS. According to the agreement, IIS will grant stock options to the senior management and shareholders of the Company to purchase an aggregate of 2,300,000 shares of IIS at an exercise price equal to the average trading share price during the twenty (20) trading days prior to the Closing, vesting in eight (8) semi – annual installments as long as each such executive continues to be employed by IIS.

In addition, according to the agreement , IIS will increase the shares reserved for issuance to directors, employees, consultants and service providers of IIS and its subsidiaries pursuant to its incentive stock option plans by an additional 1,000,000 shares so that the total amount of shares reserved for issuance pursuant to such plan will be 3,300,000.

In addition, IIS will issue to all registered shareholders of IIS as of November 9, 2007 (the “record date”) warrants to purchase an aggregate of 4,600,000 Ordinary Shares of IIS nominal value NIS 0.003 per share, on a pro-rata basis according to the percentage holding of each such shareholder in the issued and outstanding share capital of IIS on such record date. These warrants will be exercisable until the earlier of (i) five years from the date of issuance, and (ii) the closing of a Transaction. A “Transaction” means each of (i) merger, acquisition or reorganization of IIS with one or more other entities in which IIS is not the surviving entity, or (ii) a sale of all or substantially all of the assets or shares of IIS. The exercise price of each warrant shall be the average trading price per share of IIS’s Ordinary Shares during the twenty trading days prior to the Closing. These warrants will be non-transferable and non-exercisable until all applicable Israeli and United States securities laws and regulations have been complied with in connection with the warrants and the underlying shares, including without limitation, that a registration statement covering the underlying shares is declared effective by the United States Securities and Exchange Commission.

c. On April 23, 2007 and May 28, 2007, IIS signed loan agreements with the Company to grant an aggregate principal amount of $3,000,000 to the Company. The loans bear an annual interest rate of LIBOR plus 5%, whilst in the event that the Exchange Agreement with IIS is not consummated, the interest on the loan will be increased to LIBOR plus 10% retroactively to the date it was granted. The maturity date was determined as the earlier of (i) 90 days following the termination of the exchange agreement (ii) January 20, 2008.

In connection with these loans, the Company issued promissory notes to IIS. According to these promissory notes, IIS has the right at any time following an event of default, as defined in the agreement, or in the event that the exchange agreement is not consummated, to convert any unpaid amount into fully-paid up and duly issued shares of the Company at a pre-conversion fully-diluted valuation of $5,000,000.

F - 56

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 11 – SUBSEQUENT EVENTS (continued):

d. On August 8, 2007 and on September 9, 2007, IIS signed two loan agreements with the Company to grant principal amounts of $200,000 each to the Company. The loans bear an interest rate of 1.5% per month. According to the original agreements, the maturity date is December 16, 2007, whilst in December 2007 the maturity date was lengthened by additional three months. In addition, for every month or part thereof that the principal amount for each loan (including interest) or part thereof shall be outstanding, IIS will be entitled to newly issued ordinary shares of the Company equal to 0.0259% of the issued and outstanding share capital of the Company, on a fully diluted basis. According to the alternative settlement of the above mentioned shares as stipulated in the loan agreements, due to the fact that the exchange agreement was closed prior to issuance of the shares, the amount of shares of IIS that the shareholders of the Company received in such exchange agreement has been reduced by 3,000 shares for every month or part thereof that the principal amount (including interest) or part thereof has been outstanding.

The loans are secured by a pledge over the shares of the Company held by certain shareholders.

On October 7, 2007 and on November 5, 2007, The Company signed loan agreements with IIS to receive an aggregate amount of $1,200,000 to the Company, at the same terms as the loan referred above.

e. Subsequent to December 31, 2006, loans in a total amount of $576 thousands were converted into 3,275 ordinary shares of NIS 0.1 par value of the Company, from which 1,434 ordinary shares were held by the Company. In addition the Company issued 1,434 ordinary shares of NIS 0.1 par value in respect of finder’s fee and additional 35 ordinary shares in respect of a short term loan received and repaid during the year 2007. In addition the Company issued 2,417 ordinary shares of NIS 0.1 par value that were held by the Company, in consideration of $484 thousands.

In January 2007, the Company issued 492 ordinary shares of NIS 0.1 par value for no consideration to be held by the Company.

f. In August 2007 the Company approved an employee share option plan (hereafter – the Plan), according to which employees and service providers of the Company will receive up to 1,000 options, which could be exercised into NIS 0.1 par value of Company’s ordinary shares. The ordinary shares that will be issued following the exercise of the options will be equal in rights to the Company’s ordinary shares immediately upon their allocation.

The share option plan is subject to the capital gain track stipulated by the section 102 of the Israeli Income Tax Ordinance. Pursuant to the terms thereof, the Company is not allowed to claim, as an expense for tax purposes, the amounts credited to employees as a benefit, including amounts recorded as salary benefits in the Company’s accounts, in respect of options granted to employees under the Plan – with the exception of the work-income benefit component, if any, determined on the grant date.

In September 2007, the Company granted, according to the Plan, 1,000 options to employees, at an exercise price of NIS 0.1 per share. All of the options vested immediately. All of the options were exercised until the approval of these financial statements. The Company estimated that the fair value of the options on the date of grant is approximately $122,000

The Company issued 1,000 ordinary shares of NIS 0.1 par value for the exercise of the above options.

F - 57

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 11 – SUBSEQUENT EVENTS (continued):

g. On December 31, 2007, the Company and the Bank signed a Notice And Agreement Of Exercise And Redemption (“the Notice”) in respect of the two loans received from the Bank in 2006 (see note 3d). According to the Notice, The Bank will receive 610 ordinary shares of the Company and will redeem and convert the rest of the warrants into a one-time payment of $200,000. Upon the fulfillments of these terms, the Bank will have no further rights under the warrants.

The Company allocated the above shares on December 31, 2007 and paid the amount of $200,000 on December 16, 2007.

On that day the Company received a new loan from the Bank in the amount of the payment, which bears an effective annual interest rate of Libor+5% and will be repaid in 12 monthly installments commencing July 2008.

F - 58

WITECH COMMUNICATIONS LTD
(An Israeli Corporation)
INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2007
(Unaudited)

F - 59

WITECH COMMUNICATIONS LTD
(An Israeli Corporation)
INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2007
(Unaudited)

TABLE OF CONTENTS

	Page
CONDENSED CONSOLIDATED FINACIAL STATEMENTS:
Condensed balance sheets - September 30, 2007 and December 31, 2006	F-61
Condensed statements of operations for nine month periods ended September 30, 2007
and 2006	F-62
Condensed statements of cash flows for the nine month periods ended September 30, 2007
and 2006	F-63
Notes to financial statements	F-64-F-69

The amounts are stated in U.S dollars, ($) in thousands.

F - 60

WITECH COMMUNICATIONS LTD
(An Israeli Corporation)
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S dollars in thousands)

	September 30, 2007			December 31, 2006
	(Unaudited)			(Audited)
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents	$	82		$	31
Restricted bank deposit		64			31
Accounts receivable - other		599			101
Inventory		35
Total current assets		780			163
FUNDS IN RESPECT OF EMPLOYEE RIGHTS UPON
RETIREMENT		92			43
FIXED ASSETS, net		2,305			757
	$	3,177		$	963
Liabilities net of capital deficiency
CURRENT LIABILITIES:
Credit from banks and loans including current maturities
of long term loans	$	4,033		$	469
Accounts payable and accruals:
Trade payable		435			92
Other		1,090			475
T o t a l  current liabilities		5,558			1,036
LONG TERM LIABILITIES:
Loans (net of current maturities):
Bank loans	$	47		$	137
Other loans		787			801
Warrants issued to a bank		167			131
Provision for uncertain tax position (see note 1c)		60
Liability for employee rights upon retirement		139			67
T o t a l  long-term liabilities		1,200			1,136
T o t a l  liabilities		6,758			2,172
CAPITAL DEFICIENCY:
Ordinary shares of NIS 0.1 par value at
September 30, 2007 and December 31, 2006:
authorized - 500,000 shares;
issued and outstanding - 26,492 shares and 25,000 shares,
respectively		1			1
Additional paid-in capital		2,318			1,536
Accumulated deficit		(5,900	)		(2,746	)
Total capital deficiency		(3,581	)		(1,209	)
T o t a l  liabilities net of capital deficiency	$	3,177		$	963

The accompanying notes are an integral part of these condensed financial statements.

F - 61

WITECH COMMUNICATIONS LTD
(An Israeli Corporation)
CONDENSED STATEMENTS OF OPERATIONS
(U.S dollars in thousands, except share and per share data)

	Nine months ended September 30,
	2007			2006
	(Unaudited)
REVENUES	$	1,369		$	183
COST OF REVENUES		1,573			452
GROSS LOSS		(204	)		(269	)
RESEARCH AND DEVELOPMENT EXPENSES, net		239			361
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		2,085			597
OPERATING LOSS		(2,528	)		(1,227	)
FINANCIAL EXPENSES, net		539			214
LOSS BEFORE TAXES ON INCOME		(3,067	)		(1,441	)
TAXES ON INCOME		77			4
NET LOSS FOR THE PERIOD	$	(3,144	)	$	(1,445	)
NET LOSS PER SHARE - basic and diluted	$	(127.6	)	$	(77.2	)
WEIGHTED AVERAGE NUMBER OF ORDINARY
SHARES USED IN COMPUTING LOSS PER SHARES
basic and diluted		24,641			18,707

The accompanying notes are an integral part of these condensed financial statements.

F - 62

WITECH COMMUNICATIONS LTD
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S dollars in thousands)

	Nine months ended September 30
	2007			2006
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period	$	(3,144	)	$	(1,445	)
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation		481			113
Changes in accrued liability for employee rights upon retirement		72			30
Gain on amounts funded in respect of employee rights upon retirement		(2	)		(6	)
Share based compensation		122			233
Changes in provision for uncertain tax position		50
Accrued interest in respect of loans received		370			116
Changes in operating assets and liabilities:
Increase in accounts receivable		(498	)		(50	)
Increase in accounts payable and accruals		827			416
Increase in inventory		(35	)		(5	)
Net cash used in operating activities		(1,757	)		(598	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment		(1,898	)		(755	)
Investment grants relating to fixed assets					16
Investment in a restricted bank deposit		(33	)		(30	)
Amounts funded in respect of employee rights upon retirement		(47	)		(15	)
Net cash used in investing activities		(1,978	)		(784	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Credit from banks - net		(64	)		(21	)
Long-term loans received from a bank and warrants issued to a bank		70			424
Short-term loans received from others		3,400			797
Issuance of share capital		484			204
Repayment of long-term loans		(104	)
Net cash provided by financing activities		3,786			1,404
INCREASE IN CASH AND CASH EQUIVALENTS		51			22
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		31			20
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	82		$	42
Supplementary information on financing activities not involving cash flows:
Long-term credit received for the purchase of fixed assets	$	131		$	69
Conversion of long term loans into ordinary shares	$	176
Payment of a liability to an employee in the form of shares				$	9

The accompanying notes are an integral part of these condensed financial statements.

F - 63

WITECH COMMUNICATIONS LTD
(An Israeli Corporation)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES:

a. Nature of operations

Witech Communications Ltd. (the “Company”) was established in Israel in 2004. The Company operates in one operating segment – development and manufacture of wireless video technology, and provides wireless video solutions for diverse commercial applications system. The system, marketed currently captures dynamic videos, for installation on roller coasters and other thrill rides in amusement parks. The revenues of the company derive from the sale of CDs and other media products to roller coasters riders, which were filmed by the Company’s systems. The Company and its subsidiary (the “Group”) has signed contracts with amusement parks according to which it was granted the right to operate the systems in the said parks and entitled to a percentage of revenue from the sale of CDs. The sales in the US, which represent the majority of the company’s sales, are done through a wholly owned subsidiary, CDRide Corp. (“CDRide”) which was established in June 2005 and registered in the state of Delaware

On February 20, 2007, the Company signed a Memorandum Of Agreement (“MOA”) with I.I.S Intelligent Information Systems Limited (“IIS”) with respect to a contemplated merger between the Company and IIS, under which IIS is to acquire full control and ownership of the Company, in consideration of 50% of IIS’s shares.

On November 5, 2007, the Company signed a Share Exchange Agreement (the “Exchange Agreement”) with IIS for the acquisition of all the outstanding shares of the Company in exchange for the issuance of IIS shares.

On December 20, 2007, the general shareholders meeting of IIS approved the Exchange Agreement. The closing of the transaction was on January 2, 2008. For additional information see note 4b.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has accumulated net losses for the period from inception (February 1, 2004) through September 30, 2007 of $5,900 thousand, as well as negative cash flow from operating activities. Presently, the Company does not have sufficient cash resources to meet its requirements in the twelve months following January 10, 2008, the date of issuance of these condensed consolidated financial statements. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is in the process of evaluating various financing alternatives as the Company will need to finance future operating expenses, research and development activities and general and administrative expenses through fund raising in the public or private equity markets. Among these alternatives the Company is relying on the additional financing from IIS, see also note 2. Although there is no assurance that the Company will be successful with those initiatives, management is confident that it will be able to secure the necessary financing as a result of ongoing financing discussions with third party investors and existing shareholders.

These condensed consolidated financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability.

F - 64

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):

b. Basis of presentations

The accompanying unaudited condensed consolidatedfinancial statements of the Company and its subsidiary (“the Group”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and Article 10 of Regulation S-X under the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. These condensed consolidated financial statements and notes thereto are unaudited and should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report for the year ended December 31, 2006, as filed with the Securities and Exchange Commission on January 10, 2008.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 2007, are not necessarily indicative of the results that may be expected for the year ended December 31, 2007.

c. Accounting for uncertainty in income taxes

Effective January 1, 2007, the Group adopted FIN 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FAS 109", which was issued in June 2006. FIN 48 clarifies the accounting for uncertainty in income taxes, and prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Group’s accounting policy, pursuant to the adoption of FIN 48, is to classify interest and penalties recognized in the financial statements relating to uncertain tax positions, under provision for income taxes. Changes in judgement as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and consequently, affect the net loss of the Group.

As of the date of adoption, the tax years that remain subject to examination by tax authorities are between years 2004 and 2006. As a result of the implementation of FIN 48, the Group recognized $10 thousands as a long-term liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007 balance of accumulated deficit. During the nine months ended September 30, 2007, the Company recorded an increase of its unrecognized tax benefits of $50 thousands. Both amounts would result a reduction of the Group’s effective tax rate, if recognized.

d. Recently issued accounting pronouncements:

In September 2006, the FASB issued FAS 157, “Fair Value Measurements.” This standard establishes a framework for measuring fair value and expands related disclosure requirements; however, it does not require any new fair value measurement. As applicable to the Group, this standard will be effective as of the year beginning January 1, 2008. The Company is currently evaluating the impact that the adoption of FAS 157 would have on its consolidated financial statements.

In February 2007, the FASB issued FAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This standard permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. As applicable to the Group, this standard will be effective as of the year beginning January 1, 2008. The Company is currently evaluating the impact that the adoption of FAS 159 would have on its consolidated financial statements.

F - 65

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 – LOANS:

a. On April 23, 2007 and May 28, 2007, the Company signed loan agreements with IIS to receive an aggregate principal amount of $3,000,000 from IIS. The loans bear an annual interest rate of LIBOR plus 5%, whilst in the event that the Exchange Agreement with IIS is not consummated, the interest on the loan will be increased to LIBOR plus 10% retroactively to the date it was granted. The maturity date was determined as the earlier of (i) 90 days following the termination of the exchange agreement (ii) January 20, 2008.

In connection with these loans, the Company issued promissory notes to IIS. According to these promissory notes, IIS has the right at any time following an event of default, as defined in the agreement, or in the event that the Exchange agreement is not consummated, to convert any unpaid amount into fully-paid up and duly issued shares of the Company at a pre-conversion fully-diluted valuation of $5,000,000.

The loan agreements include certain covenants. The Company satisfied the respective covenants as at December 31, 2006 and September 30, 2007.

The interest accrued in respect of these loans is calculated base on LIBOR plus 10%.

b. On August 8, 2007 and on September 9, 2007, the Company signed two loan agreements with IIS to receive principal amounts of $200,000 each from IIS. The loans bear an interest rate of 1.5% per month. According to those agreements, the maturity date is December 16, 2007, whilst after the balance sheet date the maturity date was lengthened by additional three months. In addition, for every month or part thereof that the principal amount (including interest) or part thereof shall be outstanding, IIS will be entitled to newly issued ordinary shares of the company equal to 0.0259% of the Company’s issued and outstanding share capital, on a fully diluted basis. According to the alternative settlement of the above mentioned shares as stipulated in the loan agreements, due to the fact that the exchange agreement was closed prior to issuance of the shares, the amount of shares of IIS that the shareholders of the Company received in such exchange agreement has been reduced by 3,000 shares for every month or part thereof that the principal amounts (including interest) or part thereof has been outstanding.

The loans are secured by a pledge over the shares of the Company held by certain shareholders. The fair value of the Company’s shares to which IIS is entitled has been included in these condensed consolidatedfinancial statements as a liability and as financial expenses, based on the price of IIS’s shares at September 30, 2007, according to the ratio established in the Exchange Agreement.

c. 1) On January 10, 2006 and February 5, 2006, the Company was granted loans in the amount of $100,000 and $50,000, respectively from two lenders. These loans bear an effective annual interest rate of 40.5%. The principal amount and interest will be repaid in 4 annual installments commencing 12 months from grant date.

According to the terms of the loans, should the Company not be able to repay the first installment, the lenders will be entitled to choose to either convert the said installment into the Company’s shares or postpone the payment in consideration for an additional interest. In case that the Company will not be able to repay the loans, each installment will be converted into a certain percentage of the Company’s share capital, at the date of conversion.

When the final installment is due, the lender has the right to receive shares comprising a certain percentage of the Company’s issued shares, in lieu of $50,000 and $25,000, respectively, which will be deducted from the final payment.

F - 66

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 – LOANS (continued):

The amount of the installments may be adjusted according to a formula detailed in the agreements based on certain operational indexes of the Company. In any case, the total amount of repayment will not be less than $150,000 and $75,000, respectively.

On January 20, 2007 an amount of approximately 71,000$ ($50,000 principal and $21,000 interest out of $100,000 loan) was converted into 311 shares of the Company. The conversion rights on the $50,000 loan and on the remaining $50,000 out of the $100,000 loan were cancelled on the date of the closing.

See d. below in respect of postponement of repayment date.

2) On November 30, 2005 the Company was granted a loan in the amount of $90,206 by a lender. The loan bears an effective annual interest rate of 11.8%. The principal amount and interest will be repaid 24 months after the grant date. According to the terms of the loan the lender may convert the loan into the Company’s shares at an increasing conversion ratio as a factor of time.

See d. below in respect of postponement of repayment date.

On January 2, 2008, the date of the closing, the conversion rights on the loans were cancelled.

3) On February 8, 2006 the Company was granted a loan by the CEO and shareholder of the Company in an amount of approximately $28,000. The loan is denominated in NIS and linked to the dollar and bears effective annual interest rate of 12%. The principal amount and interest will be repaid not later than the end of 2008.

According to the terms of the loan the lender may convert the loan into the Company’s shares at a price of $136 per share.

On November 1, 2007 an amount of approximately $40,000 was converted into 684 shares of the Company.

4) On May 16, 2006 the Company was granted loans in the total amount of $360,000 by a group of lenders. The loans bear an effective annual interest rate of 14.33%. The principal amount and interest will be repaid 18 months after the grant date. According to the terms of the loan the lender may convert the loan into the Company’s shares.

On December 30, 2007, the loans were converted into 1,838 shares of the Company. At time of the conversion, the conversion conditions were changed such that the conversion rate was changed from 4% to approximately 6%.

d. On November 5, 2007, the repayment date of loans in the total amount of $630,000 (including loans described in c(1) and c(2) above) have been postponed until IIS raises at least $6 million in equity or convertible debt financing ($1.655 million of this amount has already been raised).

NOTE 3 – SHAREHOLDERS’ EQUITY

a. Share capital:

In the nine months ended September 30, 2007, loans in a total amount of $176 thousands were converted into 753 ordinary shares of NIS 0.1 par value of the Company.

In addition, 2,417 ordinary shares of NIS 0.1 par value that were held by the Company were issued by the Company in consideration of $484 thousands.

F - 67

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 3 – SHAREHOLDERS’ EQUITY (continued):

b. Employee compensation:

In August 2007 the Company approved an employee share option plan (hereafter – the Plan), according to which employees and service providers of the Company will receive up to 1,000 options, which each one could be exercised into one NIS 0.1 par value of Company’s ordinary shares. The ordinary shares that will be issued following the exercise of the options will be equal in rights to the Company’s ordinary shares immediately upon their allocation.

The share option plan is subject to the capital gain track stipulated by the section 102 of the Israeli Income Tax Ordinance. Pursuant to the terms thereof, the Company is not allowed to claim, as an expense for tax purposes, the amounts credited to employees as a benefit, including amounts recorded as salary benefits in the Company’s accounts, in respect of options granted to employees under the Plan – with the exception of the work-income benefit component, if any, determined on the grant date.

In September 2007, the Company granted, according to the Plan, 1,000 options to employees, at an exercise price of NIS 0.1 per share. All of options vested immediately. All of the options were exercised until the approval of these financial statements. The Company estimated that the fair value of the options on the date of grant is approximately $122,000.

The Company issued 1,000 ordinary shares of NIS 0.1 par value each for the exercise of the above options.

NOTE 4 – SUBSEQUENT EVENTS:

a. As to MOA and the assignment of the Exchange Agreement see note 1a(1).

b. On December 20, 2007, the IIS’s general shareholders meeting approved the Exchange Agreement with the Company and all its shareholders for the acquisition of all the outstanding shares of the Company in exchange for the issuance of 11,552,229 shares of IIS to the shareholders of the Company, representing approximately 50% of the issued and outstanding shares of IIS less those shares due to IIS by virtue of the loan agreement between IIS and the Company. Following the transaction, the Company will become a wholly owned subsidiary of IIS. According to the agreement, IIS will grant stock options to the senior management and shareholders of the Company to purchase an aggregate of 2,300,000 shares of IIS at an exercise price equal to the average trading share price during the twenty (20) trading days prior to the Closing, vesting in eight (8) semi – annual installments as long as each such executive continues to be employed by IIS.

In addition, according to the agreement , IIS will increase the shares reserved for issuance to directors, employees, consultants and service providers of IIS and its subsidiaries pursuant to its incentive stock option plans by an additional 1,000,000 shares so that the total amount of shares reserved for issuance pursuant to such plan will be 3,300,000.

In addition, IIS will issue to all registered shareholders of IIS as of November 9, 2007 (the “record date”) warrants to purchase an aggregate of 4,600,000 Ordinary Shares of IIS nominal value NIS 0.003 per share, on a pro-rata basis according to the percentage holding of each such shareholder in the issued and outstanding share capital of IIS on such record date. These warrants will be exercisable until the earlier of (i) five years from the date of issuance, and (ii) the closing of a Transaction. A “Transaction” means each of (i) merger, acquisition or reorganization of IIS with one or more other entities in which IIS is not the surviving entity, or (ii) a sale of all or substantially all of the assets or shares of IIS. The exercise price of each warrant shall be the average trading price per share of IIS’s Ordinary Shares during the twenty trading days prior to the Closing.

F - 68

WITECH COMMUNICATIONS LTD
(An Israeli corporation)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4 – SUBSEQUENT EVENTS (continued):

These warrants will be non-transferable and non-exercisable until all applicable Israeli and United States securities laws and regulations have been complied with in connection with the warrants and the underlying shares, including without limitation, that a registration statement covering the underlying shares is declared effective by the United States Securities and Exchange Commission.

c. On October 7, 2007 and on November 5, 2007, IIS signed loan agreements with the Company to an aggregate amount of $1,200,000 to the Company, at the same terms as the loans referred to in note 2b.

d. Subsequent to September 30, 2007, loans in a total amount of $400 thousands were converted into 2,522 ordinary shares of NIS 0.1 par value of the Company, from which 684 ordinary shares were held by the Company. In addition the Company issued 1,434 ordinary shares of NIS 0.1 par value in respect of finder’s fee and additional 35 ordinary shares in respect of a short term loan received and repaid during the year 2007.

e. On December 31, 2007, the Company and Mizrahi-Tefahot bank(“the Bank”) signed a Notice And Agreement Of Exercise And Redemption (“the Notice”) in respect of the two loans received from the Bank in 2006. According to the Notice, The Bank will receive 610 ordinary shares of the Company and will redeem and convert the rest of the warrants into a one-time payment of $200,000. Upon the fulfillments of these terms, the Bank will have no further rights under the warrants.

The Company allocated the above shares on December 31, 2007 and paid the amount of $200,000 on December 16, 2007.

On that day the Company received a new loan from the Bank in the amount of the payment, which bears an effective annual interest rate of Libor+5% and will be repaid in 12 monthly installments commencing July 2008.

F - 69

UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS

The statements contained in this section may be deemed to be forward-looking statements within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act. Forward-looking statements are typically identified by the words “believe,” “expect,” “anticipate,” “intend,” “estimate” and similar expressions. These forward-looking statements are based largely on management’s expectations and are subject to a number of uncertainties. Actual results could differ materially from these forward-looking statements. Neither IIS nor Witech undertake any obligation to update publicly or revise any forward-looking statements.

The unaudited condensed combined pro forma statements of operations combine the consolidated statements of operations of Witech and IIS giving the effect to the Share Exchange Agreement (the “Exchange Agreement”) as if the Exchange Agreement occurred on January 1, 2006. The unaudited condensed combined pro forma balance sheet combines the consolidated balance sheets of Witech and IIS giving the effect to the Exchange Agreement as if the Exchange Agreement occurred on September 30, 2007.

The unaudited pro forma condensed combined financial statements were prepared using the purchase method of accounting. The allocation of the purchase price as reflected in these pro forma combined condensed financial statements has been based upon preliminary estimates of the fair value of assets acquired and liabilities assumed as of the date of the Exchange Agreement. Management, with the assistance of independent valuation specialists, is currently assessing the fair values of the tangible and intangible assets acquired and liabilities assumed. This preliminary allocation of the purchase price is dependent upon certain estimates and assumptions, which are preliminary and have been made solely for the purpose of developing such pro forma condensed combined financial statements.

A final determination of the fair values of Witech’s assets and liabilities, will be based on the actual net tangible and intangible assets of Witech that exist as of the date of completion of the Exchange Agreement and such valuations could change significantly upon the completion of further analyses and asset valuations from those used in the combined condensed pro forma financial statements presented below, and could result in a material change in amortization of acquired intangible assets.

The unaudited pro forma combined condensed financial statements are not necessarily and should not be assumed to be an indication of the results that would have been achieved had the transaction been completed as of the dates indicated or that may be achieved in the future. The unaudited pro forma combined condensed financial statements should be read in conjunction with the respective historical financial statements and the notes thereto of both IIS and Witech, which are incorporated by reference into this Registration Statement.

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PRO FORMA FINANCIAL DATA
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2007
(U.S. dollars in thousands, except share and share data)

	IIS			Witech			Adjustments			Note		Pro forma
Revenues		33			1,369			(33	)		(1)		1,369
Cost of revenues					1,573			305			(2)		1,878
Gross income (loss)		33			(204	)		(338	)				(509	)
Research and development expenses, net					239								239
Selling, general and administrative, expenses		479			2,085			257			(1),(2),(7)		2,821
Operating loss		(446	)		(2,528	)		(595	)				(3,569	)
Financial income (expenses), net		251			(538	)		(38	)		(3)		(325	)
Loss before taxes on income		(195	)		(3,066	)		(633	)				(3,894	)
Taxes on income (tax benefit)		10			77			(125	)		(4)		(38	)
Net loss for the period		(205	)		(3,143	)		(508	)				(3,856	)
Net loss per share of ordinary shares-     Basic and diluted		(0.02	)								(6)		(0.17	)
Weighted average number of ordinary
shares used in computing loss per
ordinary share-
basic and diluted		11,576									(6)		23,129

See accompanying notes to unaudited pro forma financial statements of the Combined Group.

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UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2006
(U.S. dollars in thousands, except share and share data)

	IIS			Witech			Adjustments			Note		Pro forma
Revenues					272								272
Cost of revenues					740			407			(2)		1,147
Gross loss					(468	)		(407	)				(875	)
Research and development expenses, net					407								407
Selling, general and administrative expenses		91			820			387			(2),(7)		1,298
Operating loss		(91	)		(1,695	)		(794	)				(2,580	)
Capital gain from disposal of investment		4,713											4,713
Financial income (expenses), net		17			(316	)		(101	)		(3)		(400	)
Income (loss) before taxes on income		4,639			(2,011	)		(895	)				1,733
Taxes on income (tax benefit)					5			(166	)		(4)		(161	)
Net income (loss) for the period		4,639			(2,016	)		(729	)				1,894
Net income per share of ordinary
shares- basic and diluted		0.40									(6)		0.08
Weighted average number of ordinary     shares used in computing income per     ordinary shares:
Basic		11,576									(6)		23,129
Diluted		11,576									(6)		25,675

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UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
As of September 30, 2007
(U.S. dollars in thousands)

	IIS		Witech		Adjustments			Note		Pro forma
Assets
Current assets:
Cash and cash equivalents		881		82		1,655			(f)		2,618
Restricted bank deposit				64							64
Accounts receivables - other		71		599		(35	)		(a)		635
Inventory				35							35
T o t a l current assets		952		780		1,620					3,352
Fixed assets, net		1		2,305							2,306
Long term assets:
Loans		3,566				(3,566	)		(a)
Funds in respect of employee rights
upon retirement		5		92							97
		3,571		92		(3,566	)				97
Intangible assets and goodwill:
Goodwill						4,176			(c)		4,176
Other intangible assets						6,135			(b)		6,135
						10,311					10,311
Total assets	$	4,524	$	3,177	$	8,365				$	16,066

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UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
As of September 30, 2007
(U.S. dollars in thousands)

	IIS			Witech			Adjustments			Note		Pro forma
Liabilities and shareholders' equity
(Net of capital deficiency)
Current liabilities:
Credit from banks and current
maturities of long term loans	$	469			4,033			(3,516	)		(a),(g)		517
Accounts payable and accruals:
Trade payables		92			435			(7	)		(a)		428
Other		267			1,090			82			(a),(h)		1,439
T o t a l current liabilities		267			5,558			(3,441	)				2,384
Long-term liabilities:
Loans (net of current maturities):
Bank loans		137			47			150			(g)		197
Other loans and convertible loans		801			787			1,655			(f)		2,442
Warrants issued to a bank		131			167			(167	)		(g)
Deferred income tax liability								1,534			(d)		1,534
Provision for uncertain tax position		14			60								74
Liability for employee rights upon
retirement		5			139								144
Total long-term liabilities		19			1,200			3,172					4,391
Total liabilities		286			6,758			(269	)				6,775
Shareholders' equity (capital Deficiency):
Ordinary shares		55			1			(1	)		(e)		55
Additional paid-in capital		41,417			2,317			3,269			(e)		47,003
Accumulated deficit		(37,234	)		(5,899	)		5,366			(e),(h),(g)		(37,767	)
Total shareholders' equity (capital
deficiency)		4,238			(3,581	)		8,634					9,291
Total liabilities and shareholders' equity
(net of capital deficiency)	$	4,524		$	3,177		$	8,365				$	16,066

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NOTES TO UNAUDITED CONDENSED COMBINED
PRO FORMA FINANCIAL STATEMENTS
(in thousands, share prices and per share amounts)

On February 20, 2007, the Company and Witech signed a Memorandum Of Agreement (“MOA”) with respect to a contemplated merger between the Company and Witech, under which the Company is to acquire full control and ownership of Witech, in consideration of 50% of the Company’s shares.

On November 5, 2007, the Company signed a Exchange Agreement with Witech for the acquisition of all the outstanding shares of Witech in exchange for the issuance of the Company’s shares.

According to the agreement, the Company will grant stock options to the senior management and shareholders of Witech to purchase an aggregate of 2,300,000 shares of the Company at an exercise price equal to the average trading share price during the twenty (20) trading days prior to the closing of the transaction, vesting in eight (8) semi – annual installments as long as each such executive continues to be employed by the Company.

In addition, the Company notified that, subject to and following compliance with applicable Israeli and United States securities laws and regulations, it intends to issue to all registered shareholders of the Company as of November 9, 2007 (the “record date”) warrants to purchase an aggregate of 4,600,000 Ordinary Shares of the Company, with a nominal value of NIS 0.003 per share, on a pro-rata basis according to the percentage holding of each such shareholder in the issued and outstanding share capital of the Company on such record date. These warrants will be exercisable until the earlier of (i) five years from the date of issuance, and (ii) the closing of a Transaction. A “Transaction” means each of (i) merger, acquisition or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, or (ii) a sale of all or substantially all of the assets or shares of the Company. The exercise price of each warrant shall be the average trading price per share of the Company’s Ordinary Shares during the twenty trading days prior to the Closing.

On December 20, 2007, the Company’s general shareholders meeting approved the Exchange Agreement with Witech and all its shareholders for the acquisition of all the outstanding shares of Witech in exchange for the issuance of 11,552,229 shares of the Company to the shareholders of Witech, representing approximately 50% of the issued and outstanding shares of the Company less those shares due to the Company by virtue of the loan agreement between the Company and Witech. Following the transaction, Witech will become a wholly owned subsidiary of the Company. The closing of the transaction was on January 2, 2008.

The measurement date for the purpose of determining the purchase price was November 5, 2007, the date of the Exchange Agreement, this due to the fact that there has been a substantive change in the consideration when compared with the original terms agreed upon in the MOA. The total consideration for the acquisition, calculated based upon the average of the closing prices per share for the period two days before through two days after the announcement of the Exchange Agreement, net of the estimated fair value of the warrants (see below), and estimated transaction costs, is $5.3 million.

These unaudited condensed combined pro forma financial statements reflect a preliminary allocation of the purchase price as if the transaction had been completed on January 1, 2006 with respect to the statements of operations, and on September 30, 2007, with respect to the balance sheet. The pro forma combined condensed statements of operations do not include any non-recurring charges directly attributable to the transaction. The pro forma adjustments are based on preliminary estimates, which may change as additional information is obtained.

Adjustments to unaudited combined condensed pro forma balance sheet as of September 30, 2007

(a) Elimination of inter-company loans and other balances which amounted to $3,601.

(b) Fair value of identifiable intangible assets acquired.

(c) The estimated purchase price of $5.3 million has been calculated and preliminarily assigned to the net tangible and intangible assets acquired as follows:

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	U.S. dollars in thousands
Number of IIS shares issued to Witech's shareholders		11,552,229
Multiplied by IIS's average stock price for the period two business days before and
through the two business days after the November 5, 2007 Exchange Agreement date, net of
the estimated fair value of the warrants	$	0.45
			$	5,198
Estimated transactions costs				130
Estimated purchase price			$	5,328
The preliminary allocation of the estimated purchase price based on the estimated fair
values of Witech's assets acquired and liabilities assumed in the acquisition is as
follows:
Net tangible assets (1)			$	(5,115	)
Identifiable intangible assets (3)				6,135
In-process research and development (2)				132
Goodwill (3)				4,176
Total purchase price			$	5,328

(1) Net tangible assets of Witech include, in addition to the carrying amount of net tangible assets as of September 30, 2007, deferred income taxes. No adjustments have been made to the carrying value of tangible assets of Witech. Such adjustments would change the allocation of the purchase consideration to goodwill.

(2) The amount allocated to in-process research and development represents an estimate of the fair value of purchased in-process research projects that, as of the closing date of the Exchange Agreement, will not have reached technological feasibility and have no alternative future use. The preliminary estimate of in-process research and development is $132,000. Because this expense is directly attributable to the acquisition and will not have a continuing impact, it is not reflected in the unaudited condensed combined pro forma statements of operations. However, this item will be recorded as a charge against income in the period in which the transaction occurs. The amount of in-process research and development is subject to change and will be finalized upon valuation.

For every incremental $100 thousands increase to the amount allocated to in-process research and development expense, there will be a $100 thousand decrease to net income in the period in which the transaction occurs. Additionally, goodwill will also each decrease by $100 thousands.

(3) The excess of the purchase price over the estimated fair value of identifiable net assets acquired, has been classified as goodwill. Amortization of intangible assets which comprises of developed technology, existing contracts and brand name, has been provided over an estimated useful life of 7-13 years using a straight-line method. The amount of intangible assets, estimated useful life and amortization methodology are subject to the completion of an evaluation. Assuming a tax rate of 25%, for every additional $1 million allocated to intangible assets, goodwill will decrease by $750 thousands and non-current deferred income tax liabilities will increase by $250 thousands.

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(d) Deferred income tax liabilities provided in respect of identifiable intangible assets acquired.

(e) Elimination of all components of Witech’s capital deficiency and the issuance of the shares as part of the consideration in the transaction.

(f) Convertible loan received in contemplation of the transaction.

(g) Redemption and conversion of warrants in the amount of $167 thousand, resulting in the increase of accumulated deficit in the amount of $117 thousand and a new loan received to finance such redemption, in the amount of $200 thousand, of which $50 thousand are classified as a current liability.

(h) Finders’ fees payable in connection with the closing of the transaction, in the amount of $284 thousand, of which $110 thousand is outstanding, and classified as other payables.

Adjustments to unaudited combined condensed pro forma statements of operations

(1) Elimination of inter-company management fee.

(2) Amortization of intangible assets established as part of the purchase price allocation in connection with the acquisition. Intangible assets are amortized on a straight-line basis over their estimated useful lives of 7-13 years. The amount of intangible assets, estimated useful life and amortization methodology are subject to the completion of an evaluation. Assuming a useful life of 7-13 years, straight-line amortization and a tax rate of 25%, for every additional $1 million allocated to intangible assets, net income will decrease by $81 thousands and $61 thousands in the year ended December 31, 2006 and the nine months ended September 30, 2007, respectively.

(3) Additional interest on convertible loan and loan received, amounting to $115 thousand and $132 thousand in the year ended December 31, 2006 and the nine months ended September 30, 2007, respectively, less add back of interest on loans converted, amounting to $77 thousand and $31 thousand in the year ended December 31, 2006 and the nine months ended September 30, 2007, respectively, in contemplation of the transaction,

(4) Reflecting the tax effect of the pro forma adjustments relating to the amortization of intangible assets, using the applicable tax rates.

(5) The unaudited pro forma condensed combined financial information gives effect to the issuance of 11.6 million IIS shares.

(6) The calculation of the weighted average number of ordinary shares for pro forma basic earnings per ordinary shares gives effect to the issuance of approximately 11.5 million IIS shares in the transaction, assuming these were issued on January 1, 2006. The calculation of the weighted average number of ordinary shares issued in pro forma diluted earnings per ordinary share gives effect to the issuance of approximately 11.6 million ordinary shares issued in the transaction and the dilutive effect of approximately $1.6 million convertible securities issued assuming these were issued on January 1, 2006.

(7) Stock based compensation regarding stock options granted to Witech’s senior management and shareholders. The fair market value of such IIS stock options issued was determined using the Black-Scholes option pricing model with the following assumptions: stock price of $0.32 (date of closing); dividend yield of 0%; expected volatility of 86%; risk-free interest rate of 3.88%; and an expected life of 6.1 years. Stock based compensation expenses amounted to $92 thousand and $129 thousand in the year ended December 31, 2006 and the nine months ended September 30, 2007, respectively.

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EX-2.1

Exhibit 2.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT, dated as of November 12, 2007, is entered into by and between IIS INTELLIGENT INFORMATION SYSTEMS LIMITED, an Israeli company, located at Twin Towers, 33 Jabotinsky Street, Ramat Gan, Israel (the “Company”), and the purchasers listed on Schedule 1 attached hereto (each, a “Purchaser,” and collectively, the “Purchasers”).

W I T N E S S E T H:

WHEREAS, the Purchasers wish to purchase, and the Company wishes to issue, upon the terms and subject to the conditions of this Agreement, convertible redeemable secured promissory notes in the aggregate principal amount of $1,655,000 (the “Notes”) and five-year non-redeemable warrants to acquire up to 331,000 Ordinary Shares, par value NIS .003 per share (the “Ordinary Shares”) of the Company (the “Warrants”). The Notes are convertible into the Company’s Ordinary Shares, on the terms set forth therein, and the Warrants may be exercised for the purchase of the Company’s Ordinary Shares, on the terms set forth therein (the “Warrants”); and

WHEREAS, the Company and the Purchasers are executing and delivering this Agreement in reliance upon the exemptions from registration provided by Regulation D (“Regulation D”) promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), and/or Section 4(2) of the Securities Act.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. AGREEMENT TO PURCHASE; PURCHASE PRICE

a. Purchase. Each of the Purchasers hereby agrees to purchase from the Company the number of Notes and Warrants set forth next to its name on Schedule 1 hereto for an aggregate purchase price set out on Schedule 1 hereto (the “Purchase Price”). The Notes shall be issued in substantially the form attached hereto as Exhibit A, and the Warrants shall be issued in substantially the form attached hereto as Exhibit B. The Notes will be secured by a floating charge on all the assets of the Company according to the Floating Charge Agreement in the form attached hereto as Exhibit C (the “Floating Charge Agreement”). It is agreed that fifty percent (50%) of the purchase Price will be paid at the Closing Date and the remainder will be paid within three (3) business days of the closing of the Share Exchange Agreement between the Company, Witech Communications Ltd. (“Witech”) and the shareholders of Witech dated November 5, 2007 (the “Exchange Agreement”). If the Exchange Agreement is not closed by March 31, 2008, the Purchasers will not have any obligation to transfer the second payment and the Company will be under no obligation to issue the Notes and Warrants for the second payment.

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b. Closing. The Notes and Warrants to be purchased by the Purchasers hereunder, in definitive form, shall be delivered by or on behalf of the Company for the account of each such Purchaser, in consideration of payment of the Purchase Price in the manner set out in Section 6.a below, at the offices of Amit, Pollak, Matalon & Co. , 17 Yitzhak Sadeh Street, Tel-Aviv at 9:30 a.m., Israeli time on November 15, 2007, or at such other time and date as the purchasers or their representative, if any, and the Company may agree upon in writing, such date being referred to herein as the “Closing Date”.

c. Use of Proceeds.The proceeds from the Notes will be used to fund the activities of Witech according to loans to be provided by the Company to Witech.

d. Most Favorable Terms. In the event that within six (6) months from the date of Closing the Company raises financing from the issuance of convertible loans or notes or similar securities with terms more favorable to the purchasers thereof than those granted to the Purchasers, the Notes and Warrants will be automatically amended to provide for such favorable terms.

2. PURCHASER REPRESENTATIONS AND WARRANTIES.

Each Purchaser represents and warrants to, and covenants and agrees with, the Company as follows:

a. The Purchaser is purchasing the Notes and Warrants and will be acquiring the Ordinary Shares issuable upon conversion of the Notes and exercise of the Warrants for its own account, for investment purposes only and not with a view towards the public sale or distribution thereof and not with a view to or for sale in connection with any distribution thereof;

b. The Purchaser is (i) an “accredited investor,” as that term is defined in Rule 501 of the General Rules and Regulations under the Securities Act, (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors, to protect its own interests in connection with the transactions described in this Agreement and the related documents, and (iv) able to afford the entire loss of its investment in the Notes and Warrants;

c. All subsequent offers and sales of the Ordinary Shares, the Notes or the Warrants and the Ordinary Shares issuable upon conversion or exercise of, the Ordinary Shares, or upon exercise of the Warrants shall be made pursuant to an effective registration statement under the Securities Act or pursuant to an applicable exemption from registration;

d. The Purchaser understands that the Notes and warrants are being offered and sold to it in reliance upon exemptions from the registration requirements of the United States federal and state securities laws, and that the Company is relying upon the truth and accuracy of the Purchaser’s representations and warranties, and the Purchaser’s compliance with its agreements, each as set forth herein, in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Notes and Warrants;

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e. The Purchaser and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Notes and Warrants which have been requested by such Purchaser. The Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the Company, and have received answers to any such inquiries to their satisfaction.

f. The Purchaser acknowledges that it has been furnished with or has acquired copies of the Company’s Annual Report on Form 20-F (the “2006 Annual Report”) filed with the Commission for year ended December 31, 2006, and each Form 6-K filed thereafter (the “Offering Materials”). The Purchaser is not relying upon any representations or other information (whether oral or written) other than as set forth in this Agreement, and the Offering Materials.

g. The Purchaser understands that no Israeli or United States federal or state agency has passed on or made any recommendation or endorsement of the Notes and Warrants.

h. Among the risks associated with an investment by the Purchaser in the Notes and Warrants are: (1) the Company’s limited access to additional capital, (2) risks associated with technology-based companies generally, including the risks of technological change and new products, and (3) the limited trading market of the Ordinary Shares, and the consequent lack of liquidity of an investment in the Ordinary Shares and the Warrants. The Purchasers acknowledge that the Company has not made any representations to the Purchasers as to the prospects of success of Witech and that no assurance can be given that the Exchange Agreement will be consummated.

i. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Purchaser and is a valid and binding agreement of the Purchaser, enforceable in accordance with its terms, except to the extent that enforcement of this Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and to general principles of equity.

j. Organization. The Purchaser (if a company) is a company duly organized, validly existing and in good standing under its respective jurisdiction of incorporation.

k. Legality. The Purchaser has the power and authority to enter into this Agreement to purchase the Ordinary Shares and the Warrants. This Agreement has been duly and validly executed and delivered by and on behalf of the Purchaser, and is a valid and binding agreement of the Purchaser, enforceable against it in accordance with its terms, except to the extent that enforcement of this Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and to general principles of equity.

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l. Non-contravention. The execution and delivery of this Agreement, and each of the other Primary Documents, and the consummation by the Purchaser of the other transactions contemplated by this Agreement and each of the other Primary Documents (as defined in section 3.g. below), does not and will not conflict with or result in a breach by the Purchaser of any of the terms or provisions of, or constitute a default under any indenture, mortgage, deed of trust or other material agreement or instrument to which the Purchaser is a party or by which it or any of its properties or assets are bound, or any material existing applicable law, rule, or regulation or any applicable decree, judgment or order of any court, in their respective jurisdictions, federal or state regulatory body, administrative agency, or any other governmental body having jurisdiction over the Purchaser, its subsidiaries, or any of its properties or assets, except such conflict, breach or default which would not have a material adverse effect on the transactions contemplated by this Agreement or by the other Primary Documents.

m. Approvals. No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, stock exchange or market or the shareholders of any of the Purchaser is required to be obtained by the Purchaser for the entry into or the performance of this Agreement and the other Primary Documents, except such authorizations, approvals and consents that have been obtained.

3. REPRESENTATIONS OF THE COMPANY

The Company represents and warrants to each Purchaser that:

a. Organization. The Company is a corporation duly organized and validly existing under the laws of the State of Israel. .

b. Capitalization. On the date hereof, the authorized capital of the Company consists of 16,666,666 Ordinary Shares, of which 11,576,539 are and outstanding. The Company intends to increase its requested share capital to 50,000,000 Ordinary Shares at its next shareholders’ meting scheduled for December 20, 2007. Exhibit D hereto sets forth a fully diluted cap table of the Company at the date hereof.

c. Concerning the Ordinary Shares. The Notes and Warrants purchased hereby and issuable upon exercise of the Warrants, when so issued, shall be duly and validly issued, fully paid and non-assessable, and will not subject the holder thereof to personal liability by reason of being such a holder. There are no preemptive rights of any stockholder of the Company, as such, to acquire the Ordinary Shares issuable to the Purchaser’s pursuant to the terms of the Notes or the Warrants.

d. Authorized Shares. The Company has legally available a sufficient number of authorized and unissued Ordinary Shares as may be reasonably necessary to effect the conversion of the Notes and the exercise of the Warrants.

e. Legality. The Company has the requisite corporate power and authority to enter into this Agreement and to issue and deliver the Notes and the Warrants and the Ordinary Shares issuable upon conversion of the Notes and Exercise of the Warrants. The issuance of the Ordinary Shares and the Warrants (and the Ordinary Shares issuable upon conversion and exercise of the Warrants) have been duly and validly authorized by all necessary corporate action by the Company, and this Agreement has been duly and validly executed and delivered by and on behalf of the Company, and is a valid and binding agreement of the Company, enforceable against it in accordance with its terms, except to the extent that enforcement of this Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and to general principles of equity.

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f. Transaction Agreements. This Agreement, the Registration Rights Agreement, the form of which is attached hereto as Exhibit E (the “Registration Rights Agreement” and together with this Agreement, the Notes the Warrants and the Floating Charge Agreement, the “Primary Documents”), and the transactions contemplated thereby, have been duly and validly authorized by the Company, this Agreement has been duly executed and delivered by the Company and this Agreement is, and the Primary Documents, when executed and delivered by the Company, will each be valid and binding agreements of the Company, enforceable in accordance with their respective terms, except to the extent that enforcement of each of the Primary Documents may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and to general principles of equity.

g. Non-contravention. The execution and delivery of this Agreement, and each of the other Primary Documents, and the consummation by the Company of the other transactions contemplated by this Agreement and each of the other Primary Documents, does not and will not conflict with or result in a breach by the Company of any of the terms or provisions of, or constitute a default under, the Memorandum of Association or the Articles of Association of the Company, or any indenture, mortgage, deed of trust or other material agreement or instrument to which the Company or any of its subsidiaries is a party or by which they or any of their properties or assets are bound, or any material existing applicable law, rule, or regulation or any applicable decree, judgment or order of any court, Israeli or United States federal or state regulatory body, administrative agency, or any other governmental body having jurisdiction over the Company, its subsidiaries, or any of their properties or assets, except such conflict, breach or default which would not have a material adverse effect on the transactions contemplated by this Agreement or by the other Primary Documents.

h. Approvals. No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, stock exchange or market or the Shareholders of the Company is required to be obtained by the Company for the entry into or the performance of this Agreement and the other Primary Documents, except such authorizations, approvals and consents that have been obtained.

i. SEC Filings. None of the reports or documents filed by the Company with the Commission since June 30, 2007 contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein, or necessary to make the statements made therein in light of the circumstances under which they were made, not misleading.

j. Absence of Certain Changes. Since December 31, 2006, except as disclosed in the Company’s reports on Form 6-K, there has been no material adverse change and no material adverse development in the business properties, operations, financial condition or results of operations of the Company.

5

k. Title to Properties; Liens and Encumbrances. The Company has good and marketable title to all of its properties and assets, both real and personal, and has good title to all its leasehold interests, in each case subject only liens, and conditional sale agreements created in the ordinary course of business. The Company’s assets are not subject to any pledge or charges, of any kind whatsoever.

l. Patents and Other Proprietary Rights. The Company has no patents, trademarks, service marks, trade names, copyrights, trade secrets, information, proprietary rights and processes.

m. Permits. The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now conducted, the lack of which would materially and adversely affect the business, or financial condition of the Company. The Company is not in default in any material respect under any of such franchises, permits, licenses or similar authority.

n. Absence of Litigation.Except as set forth in the Offering Material, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, in which an unfavorable decision, ruling or finding would have a material adverse effect on the properties, business, condition (financial or other), results of operations or prospects of the Company and its subsidiaries, taken as a whole, or the transactions contemplated by the Primary Documents, or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under the Primary Documents.

o. No Default.The Company is not in default in the performance or observance of any material obligation, covenant or condition contained in any material indenture, mortgage, deed of trust or other instrument or agreement to which it is a party or by which it or its property may be bound.

p. Taxes. All applicable tax returns required to be filed by the Company and its subsidiary have been filed, or if not yet filed have been granted extensions of the filing dates which extensions have not expired, and all taxes, assessments, fees and other governmental charges upon the Company, its subsidiary, or upon any of their respective properties, income or franchises, shown in such returns and on assessments received by the Company or its subsidiaries to be due and payable have been paid, or adequate reserves therefor have been set up if any of such taxes are being contested in good faith; or if any of such tax returns have not been filed or if any such taxes have not been paid or so reserved for, the failure to so file or to pay would not in the aggregate have a material adverse effect on the business or financial condition of the Company and its subsidiary, taken as a whole.

q. Agent Fees. The Company has not incurred any liability for any finder’s or brokerage fees or agent’s commissions in connection with the offer and sale of the Notes and Warrants hereunder.

6

r. Private Offering. Subject to the accuracy of the Purchaser’s representations and warranties set forth in Section 2 hereof, the offer, sale and issuance of the Notes and Warrants as contemplated by this Agreement are exempt from the registration requirements of the Securities Act. The Company agrees that neither the Company nor anyone acting on its behalf will offer any of the Ordinary Shares or the Warrants or any similar securities for issuance or sale, or solicit any offer to acquire any of the same from anyone so as to render the issuance and sale of the Notes and Warrants subject to the registration requirements of the Securities Act.

s. Full Disclosure. The representations and warranties of the Company set forth in this Agreement do not contain any untrue statement of a material fact or omit any material fact necessary to make the statements contained herein, in light of the circumstances under which they were made, not misleading.

4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

a. Transfer Restrictions. Each Purchaser acknowledges that (1) the Notes and Warrants, the Warrants and the Ordinary Shares issuable upon conversion of the Notes or exercise of the Warrants (collectively, the “Securities”) have been, and are not being registered under the Securities Act and, except as provided in the Registration Rights Agreement, such securities have not been and are not being registered under the Securities Act, and may not be transferred unless (A) subsequently registered thereunder or (B) the Purchaser shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form and substance to the Company, to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; (2) any sale of the Securities made in reliance upon Rule 144 under the Securities Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of the Securities under circumstances in which the seller, or the person through whom the sale is made, may be deemed to be an underwriter, as that term is used in the Securities Act, may require compliance with another exemption under the Securities Act and the rules and regulations of the Commission thereunder; and (3) neither the Company nor any other person is under any obligation to register the Securities (other than pursuant to the Registration Rights Agreement) under the Securities Act or to comply with the terms and conditions of any exemption thereunder. The provisions of Section 4(a) and 4(b) hereof shall be binding upon any subsequent transferee of the Securities.

b. Restrictive Legend. Each Purchaser acknowledges and agrees that the Notes and the Warrants, and, until such time as the Ordinary Shares issuable upon conversion of the Notes, or upon exercise of the Warrants shall have been registered under the Securities Act as contemplated by the Registration Rights Agreement and sold in accordance with such Registration Statement, such securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such Securities)Each Purchaser acknowledges and agrees that the Notes and the Warrants, and, until such time as the Ordinary Shares issuable upon conversion of the Notes, or upon exercise of the Warrants shall have been registered under the Securities Act as contemplated by the Registration Rights Agreement and sold in accordance with such Registration Statement, such securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such Securities).

7

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

c. Filings. The Company undertakes and agrees to make all necessary filings in connection with the sale of the Notes and Warrants to each Purchaser as required by Israeli and/or United States laws and regulations, or by any domestic securities exchange or trading market, including, if applicable, the filing of a notice on Form D (at such time and in such manner as required by the Rules and Regulations of the Commission), and to provide copies thereof to the Purchaser promptly after such filing or filings.

d. Reporting Status. So long as any of the Purchasers beneficially own any of the Securities, the Company shall file all reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, and, except in connection with an acquisition transaction in which at least 50% of the Company’s voting equity securities are acquired by another entity, the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination.

5. TRANSFER AGENT INSTRUCTIONS.

a. The Company warrants that no instruction other than the instructions referred to in this Section 5 and stop transfer instructions to give effect to Sections 4(a) and 4(b) hereof prior to the registration and sale of the Ordinary Shares and the Ordinary Shares issuable upon exercise of the Warrants under the Securities Act will be given by the Company to the transfer agent and that such Ordinary Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement, the Registration Rights Agreement, and applicable law. Nothing in this Section shall affect in any way the Purchaser’s obligations and agreement to comply with all applicable securities laws upon resale of the Securities. If a Purchaser provides the Company with an opinion of counsel reasonably satisfactory to the Company that registration of a resale by the Purchaser of any of the Securities in accordance with clause (1)(B) of Section 4(a) of this Agreement is not required under the Securities Act, the Company shall (except as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer of the Securities and, in the case of the Ordinary Shares, promptly instruct the Company’s transfer agent to issue one or more certificates for Ordinary Shares without legend in such names and in such denominations as specified by the Purchaser.

8

b. The Company will permit each Purchaser to exercise its right to or to exercise the Warrants by faxing an executed and completed Form of Election to Purchase, to the Company, and delivering within three (3) business days thereafter, the original or Form of Election to Purchase (and the related original Warrants) to the Company by express courier, duly endorsed. Each date on which a Notice of Conversion or Form of Election to Purchase is received by the Company in accordance with the provisions hereof shall be deemed a “Exercise Date”. The Company will transmit the certificates representing the Ordinary Shares issuable upon exercise of any Warrants (together with the Ordinary Shares not so converted, or the Warrants not so exercised) to such Purchaser via express courier or by electronic transfer, as soon as practicable thereafter (but in all events within ten (10) business days), after receipt by the Company of the original Form of Election to Purchase (and the related original Warrants) to be converted (the “DeliveryDate”). For purposes of this Agreement, such exercise of the Warrants shall be deemed to have been made immediately prior to the close of business on the Exercise Date.

c. In lieu of delivering physical certificates representing the Ordinary Shares issuable upon exercise of the Warrants, provided the Company’s transfer agent is participating in the Depositary Trust company (“DTC”) Fast Automated Securities Transfer program, on the written request of a Purchaser who shall have previously instructed such Purchaser’s prime broker to confirm such request to the Company’s transfer agent, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit such Ordinary Shares to the Purchaser by crediting the account of the Purchaser’s prime broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system no later than the applicable Delivery Date.

6. CONDITIONS TO THE COMPANY’S OBLIGATION TO ISSUE THE NOTES AND WARRANTS.

The Purchaser understands that the Company’s obligation to issue the Notes and Warrants on the Closing Date to the Purchasers pursuant to this Agreement is conditioned upon:

a. Receipt by the Company of fifty percent (50%) of the Purchase Price and the remaining fifty percent (50%) will be paid in accordance with Section 1 above.

b. The accuracy on the Closing Date of the representations and warranties of the applicable Purchaser contained in this Agreement as if made on such Closing Date and the performance by the Purchasers on or before such Closing Date of all covenants and agreements of the applicable Purchasers required to be performed on or before such Closing Date;

c. There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.

7. CONDITIONS TO THE PURCHASERS’ OBLIGATION TO PURCHASE THE NOTES AND WARRANTS.

The Company understands that each Purchaser’s obligation to purchase the Notes and Warrants on the Closing Date is conditioned upon:

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a. The accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained in this Agreement as if made on the Closing Date, and the performance in all material respects by the Company on or before the Closing Date of all covenants and agreements of the Company required to be performed on or before the Closing Date;

b. The Company shall have executed and delivered the Notes for the principal amount paid at the Closing, the Warrants for the principal amount paid at the Closing and a signed counterpart to the Registration Rights Agreement and the Floating Charge Agreement;

c. On or prior to the Closing Date, there shall not have occurred a general moratorium on commercial banking activities in New York or the State of Israel declared by the applicable banking authorities.

8. GOVERNING LAW; MISCELLANEOUS

This Agreement shall be governed by and interpreted in accordance with the laws of the State of Israel. Each of the parties consents to the exclusive jurisdiction of the Tel-Aviv courts, Israel in connection with any dispute arising under this Agreement or any of the Primary Documents or relating to the offer or sale of the Notes and Warrants, and Ordinary Shares, and hereby waives, to the maximum extent permitted by law, any objection, including any objections based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. The Purchasers are entering into this Agreement, each separately from the others, thus each Purchaser will not be responsible for any act or omission of the other Purchasers, including a breach by the latter of any of the provisions or representations contained herein. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of this Agreement. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or enforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction. This Agreement shall inure to the benefit of, and be binding upon the successors and assigns of each of the parties hereto, including any transferees of the Securities. This Agreement may be amended only by an instrument in writing signed by the Company and the holders of at least sixty-six percent (66%) of principal amount of the outstanding Notes issued under this Agreement. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.

9. NOTICES.

Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be effective upon personal delivery, via facsimile (upon receipt of confirmation or error-free transmission) or two business days following deposit of such notice with an internationally recognized courier service, with postage prepaid and addressed to each of the other parties thereunto entitled at the following addresses, or at such other addresses as a party may designate by ten days advance written notice to each of the other parties hereto.

10

COMPANY: IIS INTELLIGENT INFORMATION SYSTEMS LIMITED
Twin Towers, 33 Jabotinsky Street,
Ramat Gan, Israel
ATT: Chairman and CEO
TEL: 972-3-7516449
FAX: 972-3-5750595

with a copy (which shall not constitute notice) to:
Amit, Pollak, Matalon & Co..
Nitsba Tower, 19^th Floor
17 Yitzhak Sadeh Street
Tel-Aviv 67775
ATT: Ian Rostowsky, Adv.
TEL: 972-3-568 9000
FAX: 972-3-568 9001

PURCHASERS: At the addresses set forth on Schedule 1 of this Agreement, as such addresses may be updated in writing from time to time by each of the Purchasers.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Agreement has been duly executed by each of the undersigned.

“COMPANY”

I.I.S. INTELLIGENT INFORMATION SYSTEMS


By:
——————————————
Name: Robi Hartman
Title: Chairman and CEO

“PURCHASERS”

ARIEL SHOOB, ADV (AS TRUSTEE)


By:
——————————————
Name: Ariel Shoob, Adv. (As Trustee)

12

SCHEDULE 1	PURCHASERS
EXHIBIT A	FORM OF NOTES
EXHIBIT B	FORM OF WARRANT
EXHIBIT C	FORM OF FLOATING CHARGE AGREEMENT
EXHIBIT D	CAPITALIZATION TABLE
EXHIBIT E	REGISTRATION RIGHTS AGREEMENT
EXHIBIT F	ESCROW AGREEMENT

13

SCHEDULE 1 TO SECURITIES PURCHASE AGREEMENT

PURCHASERS

Purchaser Name and Address	Total Purchase Price			Total Principal Amount of Notes		Number of Warrants
Ariel Shoob, Adv.
(As Trustee)
7 Aba Hillel Street
Ramat Gan 52522
Israel
Fax: 972 - 3- 752 7079	$	1,655,000	*	$	1,655,000		331,000	**

*$50% will be paid at the Closing Date and the remainder upon closing of the Exchange Agreement

** 50% of the Warrants will be issued upon each payment of the Purchase Price to the Company.

14

EX-4.2

Exhibit 4.2

SHARE PURCHASE AGREEMENT

by and among

LSI LOGIC CORPORATION,

STOREAGE NETWORKING TECHNOLOGIES LTD.,

and

the shareholders of STOREAGE NETWORKING
TECHNOLOGIES LTD. specified on the signature pages hereto

Dated as of October 25, 2006

TABLE OF CONTENTS

	Page
ARTICLE I
DEFINITIONS
SECTION 1.01   Certain Defined Terms	1
SECTION 1.02   Definitions	6
SECTION 1.03   Interpretation and Rules of Construction	6
ARTICLE II
PURCHASE AND SALE
SECTION 2.01   Purchase and Sale of the Shares	7
SECTION 2.02   Purchase Price for the Shares	7
SECTION 2.03   Escrow Fund	8
SECTION 2.04   Treatment of Company Share Options	9
SECTION 2.05   Closing	9
SECTION 2.06   Closing Deliveries by each Seller	9
SECTION 2.07   Closing Deliveries by the Company	10
SECTION 2.08   Closing Deliveries by the Purchaser	10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01   Organization, Authority and Qualification of the Company	11
SECTION 3.02   Subsidiaries	11
SECTION 3.03   Capitalization	12
SECTION 3.04   Corporate Books and Records	14
SECTION 3.05   No Conflict	14
SECTION 3.06   Governmental Consents and Approvals	14
SECTION 3.07   Financial Information	14
SECTION 3.08   Absence of Undisclosed Liabilities	15
SECTION 3.09   Conduct in the Ordinary Course	15
SECTION 3.10   Litigation	17
SECTION 3.11   Compliance with Laws	17
SECTION 3.12   Material Contracts	18
SECTION 3.13   Intellectual Property	19
SECTION 3.14   Leased Real Property	21
SECTION 3.15   Environmental Matters	22
SECTION 3.16   Assets	22
SECTION 3.17   Employee Benefit Matters	22
SECTION 3.18   Labor Matters	24
SECTION 3.19   Certain Interests	25
SECTION 3.20   Taxes	26
SECTION 3.21   Customers	27
SECTION 3.22   Insurance	27
SECTION 3.23   CSO Funding	27
SECTION 3.24   Full Disclosure	27
SECTION 3.25   Brokers	28

(ii)

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
SECTION 4.01   Authority of such Seller	28
SECTION 4.02   No Conflict	28
SECTION 4.03   Governmental Consents and Approvals	28
SECTION 4.04   Ownership of Ordinary Shares	29
SECTION 4.05   Litigation	29
SECTION 4.06   Brokers	29
SECTION 4.07   Right of First Refusal	29
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 5.01   Organization and Authority of the Purchaser	29
SECTION 5.02   No Conflict	30
SECTION 5.03   Governmental Consents and Approvals	30
SECTION 5.04   Investment Purpose	30
SECTION 5.05   Brokers	30
SECTION 5.06   No Success	30
SECTION 5.07   CSO	30
SECTION 5.08   Financial Capability	31
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01   Conduct of Business Prior to the Closing	31
SECTION 6.02   Access to Information	31
SECTION 6.03   Confidentiality	32
SECTION 6.04   Required Consents	32
SECTION 6.05   Notice of Developments	33
SECTION 6.06   No Shop	33
SECTION 6.07   Use of Intellectual Property	33
SECTION 6.08   [Intentionally omitted]	33
SECTION 6.09   Currency	33
SECTION 6.10   Further Action	33
ARTICLE VII
TAX MATTERS
SECTION 7.01   Taxes on Sale	34
SECTION 7.02   Miscellaneous	34
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01   Conditions to Obligations of the Sellers	34
SECTION 8.02   Conditions to Obligations of the Purchaser	35

(iii)

ARTICLE IX
INDEMNIFICATION
SECTION 9.01   Survival of Representations and Warranties	37
SECTION 9.02   Indemnification by the Sellers	38
SECTION 9.03   Indemnification by the Purchaser	38
SECTION 9.04   Third Party Claims	39
SECTION 9.05   Distributions from Escrow Fund	40
SECTION 9.06   Limits of Indemnification; Loss Threshold; Exclusive Remedy	40
SECTION 9.07   Sellers' Representatives	42
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01   Termination	43
SECTION 10.02   Effect of Termination	43
SECTION 10.03   Amendment	43
SECTION 10.04   Waiver	43
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01   Expenses	44
SECTION 11.02   Notices	44
SECTION 11.03   Public Announcements	45
SECTION 11.04   Severability	45
SECTION 11.05   Entire Agreement	46
SECTION 11.06   Assignment	46
SECTION 11.07   No Third Party Beneficiaries	46
SECTION 11.08   Governing Law	46
SECTION 11.09   Headings	46
SECTION 11.10   Counterparts	46

(iv)

SHARE PURCHASE AGREEMENT

        SHARE PURCHASE AGREEMENT (this “Agreement”), dated as of October 25, 2006, by and among LSI LOGIC CORPORATION, a Delaware corporation (the “Purchaser”), STOREAGE NETWORKING TECHNOLOGIES LTD., a company organized and existing under the laws of Israel (the “Company”), and each of the shareholders of the Company specified on the signature pages hereto (each a “Seller” and collectively the “Sellers”).

        WHEREAS, each Seller owns the number of issued and outstanding ordinary shares, par value NIS 0.01 per share, of the Company (the “Ordinary Shares”) set forth opposite the name of such Seller on Exhibit A attached hereto;

        WHEREAS, the Company owns all the issued and outstanding shares of capital stock of STOREAGE NETWORKING TECHNOLOGIES, INC., a Delaware corporation (“StoreAge U.S.”);

        WHEREAS, the Company owns 40% of the outstanding capital stock of StoreAge (Beijing) Co., Ltd., a limited liability company organized and existing under the laws of The People’s Republic of China (“StoreAge China” and, together with StoreAge U.S., the “Subsidiaries”);

        WHEREAS, the Company and the Subsidiaries are engaged in the business of designing, developing, producing, marketing, selling and distributing enterprise SAN storage management systems and data protection solutions (the “Business”); and

        WHEREAS, the Sellers wish to sell to the Purchaser, and the Purchaser wishes to purchase from the Sellers, all of the Ordinary Shares owned by the Sellers, upon the terms and subject to the conditions set forth herein.

        NOW, THEREFORE, in consideration of the promises and the mutual agreements and covenants hereinafter set forth, the Purchaser, the Company and the Sellers hereby agree as follows:

ARTICLE I

     SECTION 1.01         Certain Defined Terms. For purposes of this Agreement:

        “Action” means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority.

        “Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the specified Person.

        “Business Day” means any day that is not a Friday, a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in The City of San Francisco, California or in Tel-Aviv, Israel.

        “Claims” means any and all administrative, regulatory or judicial actions, suits, petitions, appeals, demands, claims, notices of noncompliance or violation, investigations, proceedings, consent orders or consent agreements.

        “Code” means the Internal Revenue Code of 1986, as amended through the date hereof.

        “Company IP Agreements” means (a) licenses of Intellectual Property by the Company or any Subsidiary to any third party, (b) licenses of Intellectual Property by any third party to the Company or any Subsidiary, (c) agreements between the Company or any Subsidiary and any third party relating to the development or use of Intellectual Property, the development or transmission of data, or the use, modification, financing, linking, advertisement, or other practices with respect to Internet web sites, and (d) consents, settlements, decrees, orders, injunctions, judgments or rulings governing the use, validity or enforceability of Owned Intellectual Property.

        “Company Software” means all Software designed, developed, produced, marketed, sold, licensed or distributed by the Company or any Subsidiary.

        “control” (including the terms “controlled by” and “under common control with”) respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract, credit arrangement or otherwise.

        “Disclosure Schedule” means the Disclosure Schedule, dated as of the date hereof, delivered by the Company to the Purchaser in connection with this Agreement.

        “Encumbrance” means any security interest, pledge, mortgage, lien, charge, lease, license, encumbrance, easement, adverse claim, reversion, reverter, preferential arrangement, restrictive covenant, condition or restriction of any kind, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

        “Environmental Claims” means any Claims relating in any way to any Environmental Law or any Environmental Permit, including, without limitation, (a) any Claims by Governmental Authorities for enforcement, cleanup, remedial or other actions or damages pursuant to any applicable Environmental Law and (b) any Claims by any Person seeking damages, contribution, indemnification or injunctive relief arising from alleged injury or threat of injury to health, safety or the environment.

        “Environmental Laws” means all Laws, now or hereafter in effect and as amended, relating to the environment, health or safety.

        “Environmental Permits” means all permits, approvals, licenses and other authorizations required under or issued pursuant to any applicable Environmental Law.

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        “Escrow Fund” means the Escrow Amount deposited with the Escrow Agent as such sum may be increased or decreased as provided in the Escrow Agreement.

        “Foreign Corrupt Practices Act” means the U.S. Foreign Corrupt Practices Act, 15 U.S.C. 78 dd-1 et seq., as amended.

        “Foreign Official” means (a) an officer or employee of any non-United States Governmental Authority or any political subdivision, department, agency or instrumentality thereof; (b) a Person acting in an official capacity for or on behalf of any such Governmental Authority; (c) a member or official of any political party outside of the United States; and (d) any other meanings or interpretation given to the term under the Foreign Corrupt Practices Act as it applies to the Business.

        “Governmental Authority” means any United States or non-United States federal, national, supranational, state, local, or similar governing, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.

        “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

        “Hazardous Materials” means any chemicals, materials or substances defined as or included in the definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “toxic substances”, “contaminants” or “pollutants” or words of similar import under any applicable Environmental Law, and any other chemical, material or substance which is regulated by any Environmental Law.

        “Indebtedness” means, with respect to any Person, (a) all indebtedness of such Person, whether or not contingent, for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services, (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, (e) all obligations of such Person as lessee under leases that have been or should be, in accordance with U.S. GAAP, recorded as capital leases, (f) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock, (h) all Indebtedness of others referred to in clauses (a) through (g) above guaranteed directly or indirectly in any manner by such Person, and (i) all Indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise to be secured by) any Encumbrance on property owned by such Person.

        “Indemnified Party” means a Purchaser Indemnified Party or a Seller Indemnified Party, as the case may be.

        “Indemnifying Party” means the Sellers and the other Company Securityholders pursuant to Section 9.02 and the Purchaser pursuant to Section 9.03, as the case may be.

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        “Intellectual Property” means (a) patents, patent applications, and statutory invention registrations, (b) trademarks, service marks, domain names, trade dress, logos, trade names, corporate names, and other identifiers of source or goodwill, including registrations and applications for registration thereof, (c) mask works and copyrights, including copyrights in computer software, and registrations and applications for registration thereof, and (d) confidential and proprietary information, including trade secrets, know-how and invention rights.

        “IRS” means the Internal Revenue Service of the United States.

        “knowledge of the Company” or “the Company’s knowledge” means the actual knowledge of the following persons and such knowledge that could reasonably be attributed to such persons: Eli Shapira, Bruno Keren, Nelson Nahum, and Mark Spowart.

        “Laws” means any United States or non-United States federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including, without limitation, common law).

        “Liabilities” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including, without limitation, those arising under any Law, Action or Governmental Order and those arising under any contract, agreement, arrangement, commitment or undertaking.

        “Licensed Intellectual Property” means Intellectual Property licensed to the Company or any Subsidiary pursuant to the Company IP Agreements.

        “Loan Agreement” means the Loan Agreement, made as of March 26, 2006, by and among the Company and the Lenders party thereto.

        “Material Adverse Effect” means any circumstance, change in or effect on the Company or any Subsidiary that, individually or in the aggregate with all other circumstances, changes in or effects on the Company or any Subsidiary, is or is reasonably likely to be materially adverse to the business, prospects, results of operations or financial condition of the Company and the Subsidiaries, taken as a whole; provided, however, that “Material Adverse Effect” shall not include any event, circumstance, change or effect arising out of (A) events, circumstances, changes or effects that generally affect the industries in which the Company operates, (B) changes in general economic conditions (provided that such changes do not affect such entity disproportionately as compared to such entity’s competitors), or (C) an effect (including the loss of customers, loss of suppliers or management personnel attrition) resulting from the public announcement of the execution of this Agreement or the pendency of the transactions contemplated by this Agreement.

        “Owned Intellectual Property” means Intellectual Property owned by the Company or any Subsidiary.

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        “Permitted Encumbrances” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced and as to which neither the Company nor any Subsidiary is otherwise subject to civil or criminal liability due to its existence: (a) liens for Taxes, assessments and governmental charges or levies not yet due and payable; (b) Encumbrances imposed by Law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens arising in the ordinary course of business; and (c) minor survey exceptions, reciprocal easement agreements and other customary encumbrances on title to real property that do not, individually or in the aggregate, materially adversely affect the value of or the use of such property for its current and anticipated purposes.

        “Person” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3)o f the Securities Exchange Act of 1934, as amended.

        “Regulations” means the Treasury Regulations (including Temporary Regulations) promulgated by the United States Department of Treasury with respect to the Code or other federal tax statutes.

        “Software” means computer software, programs and databases in any form, including source code, object code, operating systems and specifications, data, databases, database management code, utilities, graphical user interfaces, menus, images, icons, forms, methods of processing, software engines, platforms, and data formats, all versions, updates, corrections, enhancements and modifications thereof, and all related documentation, developer notes, comments and annotation.

        “Tax” or “Taxes” means any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts posed with respect thereto) imposed by any Governmental Authority, including, without limitation, taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, national insurance, health, social security, workers’ compensation, unemployment compensation, or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes; license, registration and documentation fees; and customs’ duties, tariffs, and similar charges.

        “U.S. GAAP” means United States generally accepted accounting principles and practices in effect from time to time applied consistently throughout the periods involved.

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    SECTION 1.02         Definitions. The following terms have the meaning set forth in the Sections set forth below:

Definition	Location
"Agreement"	Preamble
"Allocation"	7.02(b)
"Business"	Recitals
"Closing"	2.05
"Closing Date"	2.05
"Company"	Preamble
"Company Employee Plans"	3.17(b)
"Company Securityholder"	2.02
"Company Share Options"	2.04
"Company Share Option Plans"	2.04
"Confidentiality Agreement"	6.03(b)
"CSO"	3.06
"Escrow Account"	2.03
"Escrow Agent"	2.03
"Escrow Agreement"	2.03
"Escrow Amount"	2.03
"Financial Statements"	3.07(a)
"Interim Financial Statements"	3.07(a)
"Investment Center"	3.06
"Latest Balance Sheet"	3.08
"Leased Real Property"	3.14(b)
"Loss"	9.02(a)
"Material Contracts"	3.12(a)
"Ordinary Shares"	Recitals
"Pay-Off Amount"	8.02(f)
"Per Share Escrow Amount"	2.02(a)
"Per Share Option Amount"	2.04
"Per Share Purchase Price"	2.02(a)
"Pro Rata Share"	2.03
"Purchaser"	Preamble
"Purchaser Indemnified Party"	9.02(a)
"StoreAge China"	Recitals
"StoreAge U.S."	Recitals
"Seller"	Preamble
"Seller Indemnified Party"	9.03(a)
"Sellers' Representative"	9.08
"Subsidiaries"	Recitals
"Third Party Claims"	9.05(b)

    SECTION 1.03        Interpretation and Rules of Construction. In this Agreement, except to the extent that the context otherwise requires:

    (a)        when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or a Schedule to, this Agreement unless otherwise indicated;

    (b)        the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

    (c)        whenever the words “include,” “includes” or “including” are in this Agreement, they are deemed to be followed by the words “without limitation”;

    (d)        the words “hereof,” “herein” and “hereunder” and words of similar import. when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement;

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    (e)        all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;

    (f)        the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

    (g)        any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law or statute as from time to time amended, modified or supplemented, including by succession of comparable successor Laws;

    (h)        references to a Person are also to its permitted successors and assigns; and

    (i)        the use of “or” is not intended to be exclusive unless expressly indicated otherwise.

ARTICLE II
PURCHASE AND SALE

    SECTION 2.01        Purchase and Sale of the Shares. Upon the terms and subject to the conditions of this Agreement, at the Closing, each Seller shall sell, on a several and not joint basis, assign, transfer, convey and deliver, or cause to be sold, assigned, transferred, conveyed and delivered, to the Purchaser or to an Affiliate of the Purchaser designated by the Purchaser, the number of Ordinary Shares set forth opposite the name of such Seller on Exhibit A attached hereto, and the Purchaser shall purchase or shall cause an Affiliate of the Purchaser to purchase such number of shares from such Seller.

    SECTION 2.02        Purchase Price for the Shares. (a) Subject to (i) the withholding of the Per Share Escrow Amount at the Closing in accordance with Section 2.03 and the Escrow Agreement and (ii) Section 2.02(b), the purchase price for each Ordinary Share shall be the amount in cash equal to the Per Share Purchase Price, with the aggregate of the Per Share Purchase Prices to be paid to each Seller and the aggregate of the Per Share Escrow Amounts to be deducted from each Seller to be rounded to the nearest whole cent. For purpose of this Agreement:

    “Per Share Purchase Price” means $0.862.

    “Per Share Escrow Amount” means $0.112.

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    (b)        The Purchaser shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any Seller or holder of Company Share Options (each a “Company Securityholder”) (including payments made by the Escrow Agent) such amounts as it is required to deduct and withhold under any provision of U.S. federal, state or local, or any foreign, tax law; provided, however, that the Purchaser shall not make such deductions or withholdings of U.S. taxes if such Company Securityholder provides duly completed and executed W-8 or W-9 forms, as applicable, and such deduction or withholding is not required under applicable law. In addition, the Purchaser shall make such payments only if such Company Securityholder provides an authorization from the Israeli Tax Authorities, to the Purchaser’s reasonable satisfaction, specifying the rate at which the Purchaser is to withhold Israeli tax in relation to the payment or exempting the Purchaser in the entirety from withholding such Israeli tax (and Purchaser shall withhold Israeli tax from any payment in accordance with the conditions of such authorization). In the event that any authorization or exemption is not provided for one or more Sellers, the Purchaser and the Sellers’ Representatives, on behalf of such Sellers, shall enter into an appropriate agreement to provide for (i) the payment to each such Seller of the amount equal to 70% of the net amount (i.e. the difference per Ordinary Share that results from the subtraction of the Per Share Escrow Amount from the Per Share Purchase Price) that such Seller is otherwise entitled to receive in respect such Seller’s Ordinary Shares, and (ii) the deposit of the remaining 30% of the net amount that such Seller is otherwise entitled to receive in respect of such Seller’s Ordinary Shares into an escrow account with an escrow agent to be agreed by the parties. The pro rata portion of such escrow account shall be released promptly to each Seller for whom an authorization or exemption from the Israeli Tax Authorities is provided prior to due date (including any extension to such due date approved by the Israeli Tax Authorities) for the remittance to the Israeli Tax Authorities of withholding in the absence of an appropriate authorization or exemption. If no authorization or exemption from the Israeli Tax Authorities is provided prior to such due date (including any extension to such due date approved by the Israeli Tax Authorities) with respect to the amount payable to any Seller, the escrow agent shall remit the amount deposited into such escrow with respect to such Seller to the Israeli Tax Authorities. To the extent that amounts are so withheld or paid over to or deposited with the relevant Governmental Authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Company Securityholder in respect of which such deduction and withholding was made by the Purchaser.

    SECTION 2.03        Escrow Fund. Prior to the Closing, the Sellers’ Representatives, on behalf of all of the Company Securityholders, and the Purchaser shall enter into an Escrow Agreement (the “Escrow Agreement”) with Citibank, N.A.(or if such Person declines, such other U.S. commercial bank based in New York, New York selected by the Purchaser and reasonably acceptable to the Sellers’ Representatives) (the “Escrow Agent”) substantially in the form of Exhibit 2.03 attached hereto. Pursuant to the terms of the Escrow Agreement, at the Closing the Purchaser shall deposit into the escrow account (the “Escrow Account”) to be held by the Escrow Agent in accordance with the terms of the Escrow Agreement the amount of cash equal to $6,464,427 (the “Escrow Amount”). The Escrow Amount shall be available to compensate the Purchaser and other Purchaser Indemnified Parties for Losses in accordance with the indemnification obligations of the Sellers under Article IX of this Agreement and in accordance with the terms of the Escrow Agreement. The Purchaser shall be entitled to deduct from any payments due to a Seller or a holder of Company Share Options at the Closing pursuant to this Agreement the Per Share Escrow Amount in respect of each Ordinary Share, with the aggregate amount to be deducted from each Seller or holder of Company Share Options to be rounded to nearest whole cent. The portion of the Escrow Amount contributed on behalf of each Company Securityholder shall be in proportion to the number of Ordinary Shares held by such Company Securityholder immediately prior to the Closing, assuming the exercise of all outstanding Company Share Options as of immediately prior to the Closing (such proportion being such Company Securityholder’s “Pro Rata Share”), and shall be deemed held in a separate escrow sub-account for the benefit of such Company Securityholder. The portion thereof held in any Company Securityholder’s individual sub-account shall only be available to compensate the Purchaser and the other Purchaser Indemnified Parties for Losses for which such Company Securityholder is obligated to indemnify the Purchaser Indemnified Parties hereunder, and not for any Losses indemnifiable by any other Company Securityholder. Distributions from the Escrow Account shall be governed by the terms and conditions of the Escrow Agreement.

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    SECTION 2.04        Treatment of Company Share Options. The Company shall take all necessary action, including using its best efforts to obtain the consent of the individual option holders required pursuant to Section 8.02(n), to (i) effective as of the Closing terminate The 1999 Israeli Share Option Plan, the 2003 Israeli Share Option Plan and the 2001 U.S. Stock Option Plan (the “Company Share Option Plans”), (ii) provide that each outstanding option to purchase Ordinary Shares granted under the Company Share Option Plans (each, a “Company Share Option”) that is outstanding and unexercised immediately prior to the Closing, whether or not exercisable, shall become fully vested and exercisable as of the Closing and (iii) cancel as of the Closing each Company Share Option that is outstanding and unexercised as of the Closing. With respect to each Company Share Option that is outstanding and unexercised as of the Closing and that has an exercise price per Ordinary Share that is less than the Per Share Purchase Price, in exchange for the cancellation of such Company Share Option, the Purchaser shall pay to the holder of such Company Share Option at the Closing (or to the trustee of the relevant Company Share Option Plan in the case of Company Share Options held by a trustee) (subject to the provisions of Section 2.02(b), Section 2.03 and this Section 2.04, in each case mutatis mutandis), an amount in cash (the “Per Share Option Amount”) equal to (x) the excess of the Per Share Purchase Price over the per share exercise price of such Company Share Option, less (y) the Per Share Escrow Amount. The Per Share Escrow Amount withheld with respect to each Company Share Option shall be deposited in the Escrow Fund to secure the indemnification obligations of the Company Securityholders pursuant to Section 9.02.

    SECTION 2.05        Closing. Subject to the terms and conditions of this Agreement, the sale and purchase of the Ordinary Shares contemplated by this Agreement shall take place at a closing (the “Closing”) to be held at the offices of the Company at 10:00 A.M. Israel time on the fifth Business Day following the satisfaction or waiver of all conditions to the obligations of the parties set forth in Sections 8.01 and Sections 8.02 (other than conditions that are to be satisfied at the Closing, but subject to the satisfaction of such conditions at the Closing) or at such other place or at such other time or on such other date as the Sellers and the Purchaser may mutually agree upon in writing (the day on which the Closing takes place being the “Closing Date”).

    SECTION 2.06        Closing Deliveries by each Seller. At the Closing, each Seller shall deliver or cause to be delivered to the Purchaser:

    (a)        share certificates evidencing the Ordinary Shares owned by such Seller, duly endorsed in blank or accompanied by share transfer deeds duly executed in blank, in form reasonably satisfactory to the Purchaser and with any required (if required) share transfer tax stamps affixed;

    (b)        a counterpart of the Escrow Agreement executed by such Seller or on behalf of such Seller by the Sellers’ Representatives;

    (c)        the certificate of such Seller required by Section 8.02(d)(ii);

    (d)        [intentionally omitted]; and

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    (e)        an appropriate W-9 form for tax identification number certification or a W-8 form for non-resident alien certification, and an appropriate authorization from the Israeli tax authorities.

    SECTION 2.07        Closing Deliveries by the Company. At the Closing, the Company shall deliver or cause to be delivered to the Purchaser:

    (a)        (i) a true and complete copy, certified by the Secretary or an Assistant Secretary of the Company, of the resolutions duly and validly adopted by the Board of Directors of the Company evidencing its authorization of the execution and delivery of this Agreement, and (ii) a letter of counsel to the Company certifying the names and signatures of the officers of the Company authorized to sign this Agreement and the other documents to be delivered hereunder;

    (b)        a copy of (i) the Memorandum of Association, as amended (or similar organizational documents), of the Company and of each Subsidiary, certified by the Registrar of Companies or the Secretary of State of the jurisdiction in which each such entity is incorporated or organized, as of a date not earlier than five Business Days prior to the Closing Date and accompanied by a certificate of the Secretary or Assistant Secretary of each such entity, dated as of the Closing Date, stating that no amendments have been made to such Memorandum of Association (or similar organizational documents) since such date, and (ii) the Articles of Association (or similar organizational documents) of the Company and of each Subsidiary, certified by the Secretary or Assistant Secretary of each such entity:

    (c)        good standing certificates for StoreAge U.S. from the Secretary of State of the jurisdiction in which such entity is incorporated or organized and from the Secretary of State in each other jurisdiction in which the properties owned or leased by any of the Company or any Subsidiary, or the operation of its business in such jurisdiction, requires the Company or any Subsidiary to qualify to do business as a foreign corporation, in each case dated as of a date not earlier than five Business Days prior to the Closing Date;

    (d)        the certificate of a duly authorized officer of the Company required by Section 8.02(d)(i);

    (e)        the resignations, effective as of the Closing, of all of the directors and officers of the Company and StoreAge U.S. and the resignations, effective as of the Closing, of all of the directors and officers of StoreAge China appointed by the Company, except for such persons as shall have been designated in writing prior to the Closing by the Purchaser to the Company; and

    (f)        the other opinions, certificates and other documents required to be delivered pursuant to Section 8.02.

    SECTION 2.08        Closing Deliveries by the Purchaser. (a) At the Closing, the Purchaser shall deliver to each Seller:

    (i)        the aggregate Per Share Purchase Price less the aggregate Per Share Escrow Amount that such Seller is entitled to receive in respect of its Ordinary Shares pursuant to Section 2.01, by check or wire transfer of immediately available funds to a bank account designated in writing by such Seller at least two (2) Business Days prior to the Closing;

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    (ii)        a counterpart of the Escrow Agreement executed by the Purchaser;

    (iii)        the certificate of a duly authorized officer of the Purchaser required by Section 8.01(c); and

    (iv)        a receipt for the Ordinary Shares that the Purchaser is entitled to receive from the Sellers at the Closing.

    (b)        At the Closing, the Purchaser shall deliver to the Escrow Agent, in accordance with the Escrow Agreement, the Escrow Amount by wire transfer in immediately available funds to the accounts designated therefore in the Escrow Agreement.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

        As an inducement to the Purchaser to enter into this Agreement, the Company hereby represents and warrants to the Purchaser as follows, except as set forth in the section of the Disclosure Schedule corresponding to the related section number of the relevant representation or warranty below:

    SECTION 3.01        Organization, Authority and Qualification of the Company. The Company is a corporation duly organized and validly existing under the laws of Israel and has all necessary power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the Business as it has been and is currently conducted. The Company is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary or desirable, except to the extent that the failure to be so licensed or qualified and in good standing would not (x) adversely affect the ability of the Sellers to carry out their obligations under, and to consummate the transactions contemplated by, this Agreement and the Escrow Agreement, (y) adversely affect the ability of the Company and the Subsidiaries to conduct the Business or (z) otherwise have a Material Adverse Effect, and all such jurisdictions are set forth in Section 3.01 of the Disclosure Schedule. All corporate actions taken by the Company have been duly authorized, and the Company has not taken any action that in any respect conflicts with, constitutes a default under or results in a violation of any provision of its Memorandum or Articles of Association. True and correct copies of the Memorandum and Articles of Association of the Company, each as in effect on the date hereof, have been delivered by the Company to the Purchaser.

    SECTION 3.02        Subsidiaries. (a) Section 3.02(a) of the Disclosure Schedule sets forth a true and complete list of all Subsidiaries, listing for each Subsidiary its name, type of entity, the jurisdiction and date of its incorporation or organization, its authorized capital stock, partnership capital or equivalent, the number and type of its issued and outstanding shares of capital stock, partnership interests or similar ownership interests and the current ownership of such shares, partnership interests or similar ownership interests.

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    (b)        Other than the Subsidiaries, there are no other corporations, partnerships, joint ventures, associations or other entities in which the Company or any Subsidiary owns, of record or beneficially, any direct or indirect equity or other interest or any right (contingent or otherwise) to acquire the same. Other than the Subsidiaries, neither the Company nor any Subsidiary is a member of (nor is any part of the Business conducted through) any partnership nor is the Company or any Subsidiary a participant in any joint venture or similar arrangement.

    (c)        StoreAge U.S. and, to the knowledge of the Company, StoreAge China, (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (ii) has all necessary power and authority to own, operate or lease the properties and assets owned, operated or leased by such Subsidiary and to carry on its business as it has been and is currently conducted by such Subsidiary and (iii) is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary or desirable, except to the extent that the failure to be so licensed or qualified and in good standing would not (x) adversely affect the ability of the Sellers to carry out their obligations under, and to consummate the transactions contemplated by, this Agreement and the Escrow Agreement, (y) adversely affect the ability of the Company and the Subsidiaries to conduct the Business or (z) otherwise have a Material Adverse Effect.

    (d)        All corporate actions taken by StoreAge U.S. and, to the knowledge of the Company, all corporate actions taken by StoreAge China have been duly authorized and no Subsidiary has taken any action that in any respect conflicts with, constitutes a default under or results in a violation of any provision of its Certificate of Incorporation or By-laws (or similar organizational documents). True and complete copies of the certificate of incorporation and by-laws (or similar organizational documents), in each case as in effect on the date hereof, of each Subsidiary have been delivered by the Seller to the Purchaser.

    (e)        StoreAge China is a joint venture entity, in which the Company owns 40% of the outstanding capital stock, and the remaining 60% of the outstanding capital stock is owned by Beijing Deep Thought Software Company Ltd. In view of the aforementioned, any representations regarding StoreAge China are made to the knowledge of the Company.

    SECTION 3.03        Capitalization. (a) The authorized share capital of the Company is NIS 1,000,000 divided into 100,000,000 Ordinary Shares. As of the date hereof, (i) 49,836,898 Ordinary Shares are issued and outstanding, all of which are validly issued, fully paid and nonassessable, (ii) an aggregate of 11,938,347 Ordinary Shares are reserved for issuance pursuant to incentive stock options granted or to be granted pursuant to the Company Share Option Plans, of which an aggregate of 7,881,202 Ordinary Shares are issuable upon the exercise of Company Share Options outstanding on the date hereof. All of the outstanding Ordinary Shares and Company Share Options were issued in compliance with all applicable securities and corporate laws of Israel. None of the issued and outstanding Ordinary Shares was issued in violation of any preemptive rights. Except for Company Share Options granted pursuant to the Company Share Option Plans, there are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to Ordinary Shares or obligating either of the Sellers or the Company to issue or sell any Ordinary Shares, or any other interest in, the Company. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any Ordinary Shares or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person. The Ordinary Shares listed on Exhibit A attached hereto constitute all of the issued and outstanding share capital of the Company and, to the knowledge of the Company, are owned of record and beneficially by the Sellers as listed on Exhibit A attached hereto, free and clear of all Encumbrances. Upon consummation of the transactions contemplated by this Agreement and registration of the Ordinary Shares in the name of the Purchaser in the share register of the Company, the Purchaser, assuming it shall have purchased such shares for value in good faith and without notice of any adverse claim, will own all the issued and outstanding share capital and rights to acquire share capital of the Company free and clear of all Encumbrances. Upon consummation of the transactions contemplated by this Agreement, the Ordinary Shares to be sold to the Purchaser pursuant to this Agreement will be fully paid and nonassessable. To the knowledge of the Company, there are no voting trusts, shareholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the outstanding Ordinary Shares.

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    (b)        The share register of the Company accurately records: (i) the name and address of each Person owning Ordinary Shares and (ii) the certificate number of each certificate evidencing shares issued by the Company, the number of shares evidenced by each such certificate, the date of issuance thereof and, in the case of cancellation, the date of cancellation.

    (c)        Section 3.03(c) of the Disclosure Schedule sets forth the following information with respect to each Company Share Option outstanding as of the date of this Agreement: (i) the name of the option holder; (ii) the number of Ordinary Shares subject to such Company Share Option; (iii) the exercise price of such Company Share Option; (iv) the date on which such Company Share Option was granted; (v) the applicable vesting schedule; and (vi) the applicable Company Share Option Plan. The Company has made available to the Purchaser a complete and correct copy of the Company Share Option Plans and the form of all share option agreements evidencing Company Share Options in each case as in effect on the date of this Agreement. All Ordinary Shares subject to issuance as previously stated in this Section 3.03(c), upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable.

    (d)        All the outstanding shares of capital stock of StoreAge U.S. are validly issued, fully paid, nonassessable and free of preemptive rights and are owned by the Company, whether directly or indirectly, free and clear of all Encumbrances. There are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock of StoreAge U.S. or obligating any Seller, the Company or StoreAge U.S. to issue or sell any shares of capital stock of, or any other interest in StoreAge U.S. To the knowledge of the Company, there are no voting trusts, shareholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any shares of capital stock of or any other interests in StoreAge U.S. The stock register of StoreAge U.S. accurately records: (i) the name and address of each Person owning shares of capital stock of StoreAge U.S. and (ii) the certificate number of each certificate evidencing shares of capital stock issued by StoreAge U.S., the number of shares evidenced by each such certificate, the date of issuance thereof and, in the case of cancellation, the date of cancellation.

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    SECTION 3.04        Corporate Books and Records. The minute books of the Company and StoreAge U.S. and, to the knowledge of the Company, StoreAge China, contain accurate records of all meetings and accurately reflect all other actions taken by the shareholders, Boards of Directors and all committees of the Boards of Directors of such entity. The share register and the register of directors of the Company and StoreAge U.S. and, to the knowledge of the Company, such registers of StoreAge China, if applicable, completely and accurately set forth the information required to be included therein. Complete and accurate copies of all such minute books and of the share register of the Company and StoreAge U.S. have been provided by the Company to the Purchaser.

    SECTION 3.05        No Conflict. Assuming that all consents, approvals, authorizations and other actions described in Section 3.05 have been obtained, the execution, delivery and performance of this Agreement by the Company do not and will not (a) violate, conflict with or result in the breach of any provision of the Memorandum or Articles of Association (or similar organizational documents) of the Company or any Subsidiary, (b) conflict with or violate (or cause an event which could have a Material Adverse Effect as a result of) any Law or Governmental Order applicable to the Company, any Subsidiary or any of their respective assets, properties or businesses, or (c) except as set forth in Section 3.05(c) of the Disclosure Schedule, conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance on any of the outstanding Ordinary Shares or any of the assets of the Company or any Subsidiary pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Company or any Subsidiary is a party or by which any of the outstanding Ordinary Shares or any of such assets is bound or affected.

    SECTION 3.06        Governmental Consents and Approvals. The execution, delivery and performance of this Agreement by the Company do not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority, except (i) consent of the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor (“CSO”); and (ii) consent of the Investment Center of the Israeli Ministry of Industry, Trade and Labor (the “Investment Center”).

    SECTION 3.07        Financial Information. (a) True and complete copies of (i) the audited consolidated balance sheet of the Company for each of the two fiscal years ended as of December 31, 2004 and 2005, and the related audited consolidated statements of operations, statements of changes in shareholders’ equity and statements of cash flows of the Company, together with all related notes and schedules thereto, accompanied by the reports thereon of the Company’s independent auditors (collectively referred to herein as the “Financial Statements”) and (ii) the unaudited consolidated balance sheet of the Company as of June 30, 2006, and the related consolidated statements of operations, statements of changes in shareholders’ equity and statements of cash flows of the Company, together with all related notes and schedules thereto (collectively referred to herein as the “Interim Financial Statements”) have been delivered by the Seller to the Purchaser.

    (b)        The Financial Statements and the Interim Financial Statements (i) were prepared in accordance with the books of account and other financial records of the Company and StoreAge U.S., (ii) present fairly the consolidated financial condition and results of operations of the Company and StoreAge U.S. as of the dates thereof or for the periods covered thereby, (iii) have been prepared in accordance with U.S. GAAP applied on a basis consistent with the past practices of the Company and StoreAge U.S., (iv) include all adjustments (consisting only of normal recurring accruals) that are necessary for a fair presentation of the consolidated financial condition of the Company and StoreAge U.S. and the results of the operations of the Company and StoreAge U.S. as of the dates thereof or for the periods covered thereby, (v) the Interim Financial Statements are subject to year-end adjustments that may be required by the Company’s independent auditors, and (vi) the liabilities towards the CSO are not reflected on the Interim Financial Statements.

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    (c)        The books of account and other financial records of the Company and StoreAge U.S. (i) reflect all items of income and expense and all assets and Liabilities required to be reflected thereon in accordance with U.S. GAAP applied on a basis consistent with the past practices of the Company and StoreAge U.S., respectively, (ii) are in all material respects complete and correct, and do not contain or reflect any material inaccuracies or discrepancies, and (iii) have been maintained in accordance with good business and accounting and practices.

    SECTION 3.08        Absence of Undisclosed Liabilities. There are no Liabilities of the Company or StoreAge U.S. and, to knowledge of the Company, there are no Liabilities of StoreAge China, other than Liabilities (a) reflected or reserved against on the consolidated balance sheet of the Company as of June 30, 2006 (the “Latest Balance Sheet”), (b) described in Section 3.07(b)(vi) above, or (c) incurred since the date of the Latest Balance Sheet in the ordinary course of business, consistent with past practice, of the Company and the Subsidiaries and which individually and in the aggregate do not and could not reasonably be expected to have a Material Adverse Effect. Except as provided above, reserves are reflected on the Latest Balance Sheet against all Liabilities of the Company and StoreAge U.S. in amounts that have been established on a basis consistent with the past practices of the Company and StoreAge U.S. and in accordance with U.S. GAAP.

    SECTION 3.09        Conduct in the Ordinary Course. Since June 30, 2006, the Business has been conducted in the ordinary course and consistent with past practice. As amplification and not limitation of the foregoing, except as set forth in Section 3.09 of the Disclosure Schedule, since the above date, none of the Company nor StoreAge U.S. nor, to the knowledge of the Company, StoreAge China, has:

    (a)        amended or restated the Memorandum or Articles of Association (or other organizational documents) of the Company or any Subsidiary;

    (b)        issued or sold any share capital, notes, bonds or other securities, or any option, warrant or other right to acquire the same, of the Company or any Subsidiary;

    (c)        redeemed any of the share capital or declared, made or paid any dividends or distributions (whether in cash, securities or other property) to the holders of share capital of the Company or any Subsidiary or otherwise;

    (d)        merged with, entered into a consolidation with or acquired any interest of 5%or more in any Person or acquired a substantial portion of the assets or business of any Person or any division or line of business thereof, or otherwise acquired any material assets other than in the ordinary course of business consistent with past practice;

    (e)        made any capital expenditure or commitment for any capital expenditure in excess of $25,000 individually or $100,000 in the aggregate;

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    (f)        sold, leased, licensed or otherwise transferred any properties or assets, other than the sale of inventory or licenses in the ordinary course of business consistent with past practice;

    (g)        issued any sales orders or otherwise agreed to make any purchases involving exchanges in value in excess of $25,000individually or $100,000in the aggregate;

    (h)        incurred any Indebtedness in excess of $25,000 individually or $100,000 in the aggregate;

    (i)        made any loan to, guaranteed any Indebtedness of or otherwise incurred any Indebtedness on behalf of any Person;

    (j)        failed to pay any creditor any amount owed to such creditor when due;

    (k)        (i) granted any increase, or announced any increase, in the wages, salaries, compensation, bonuses, incentives, pension or other benefits payable by the Company or any Subsidiary to any of its employees, or (ii) established or increased or promised to increase any benefits under any Plan, in either case except as required by Law;

    (l)        entered into any agreement, arrangement or transaction with any of its directors, officers, employees or shareholders (or with any relative, beneficiary, spouse or Affiliate of such Persons);

    (m)        made any material changes in the customary methods of operations of the Company, any Subsidiary or the Business;

    (n)        permitted or allowed any of its assets to be subjected to any Encumbrance;

    (o)        revalued any of its assets other than in the ordinary course of business consistent with past practice and in accordance with U.S. GAAP;

    (p)        made any change in any method of accounting or accounting practice or policy used by the Company or any Subsidiary, other than such changes required by U.S. GAAP and set forth in Section 3.09 of the Disclosure Schedule;

    (q)        amended, terminated, cancelled or compromised any material claims of the Company or any Subsidiary or waived any other rights of substantial value to the Company or any Subsidiary;

    (r)        made any express or deemed election or settled or compromised any liability with respect to Taxes of the Company or any Subsidiary;

    (s)        disclosed any secret or confidential Intellectual Property (except by way of issuance of a patent and except in the ordinary course of business) or permitted to lapse or become abandoned any Intellectual Property (or any registration or grant thereof or any application relating thereto) to which, or under which, the Company or any Subsidiary has any right, title, interest or license;

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    (t)        amended, modified or consented to the termination of any Material Contract or the Company’s or any Subsidiary’s rights thereunder;

    (u)        (i) abandoned, sold, assigned, or granted any security interest in or to any item of the Owned Intellectual Property, Licensed Intellectual Property or Company IP Agreements, including, without limitation, failing to perform or cause to be performed all applicable filings, recordings and other acts, and pay or caused to be paid all required fees and taxes, to maintain and protect its interest in such Intellectual Property, (ii) granted to any third party any license with respect to any Owned Intellectual Property or Licensed Intellectual Property except in the ordinary course of business, (iii) developed, created or invented any Intellectual Property jointly with any third party (other than such joint development, creation or invention with a third party that is in progress prior to the date of the Latest Balance Sheet), or (iv) disclosed, or allow to be disclosed, any confidential Intellectual Property, unless such Intellectual Property is subject to a confidentiality or non-disclosure contract protecting against disclosure thereof;

    (v)        suffered any Material Adverse Effect; or

    (w)        agreed, whether in writing or otherwise, to take any of the actions specified in this Section 3.09 or granted any options to purchase, rights of first refusal, rights of first offer or any other similar rights or commitments with respect to any of the actions specified in this Section 3.09, except as expressly contemplated by this Agreement.

    SECTION 3.10        Litigation. There are no Actions by or against the Company or StoreAge U.S. and, to the Knowledge of the Company, there are no Actions by or against StoreAge China, or affecting any of the assets or businesses of the Company or StoreAge U.S. or, to the Knowledge of the Company, affecting any of the assets or businesses of StoreAge China, pending before any Governmental Authority (or, to the knowledge of the Company, threatened to be brought by or before any Governmental Authority). None of the Company, StoreAge U.S. or, to knowledge of the Company, StoreAge China or any of their respective assets or properties is subject to any Governmental Order (nor, to the knowledge of the Company, are there any such Governmental Orders threatened to be imposed by any Governmental Authority) which has or has had a Material Adverse Effect or could affect the legality, validity or enforceability of this Agreement, the Escrow Agreement or the consummation of the transactions contemplated by this Agreement.

    SECTION 3.11        Compliance with Laws. (a) The Company, StoreAge U.S. and, to the knowledge of the Company, StoreAge China have each conducted and continue to conduct the Business in accordance with all Laws and Governmental Orders applicable to the Company or any Subsidiary or any of their properties or assets, and none of the Company or StoreAge U.S. or, to the knowledge of the Company, StoreAge China, is in violation of any such Law or Governmental Order.

    (b)        There is no Governmental Order applicable specifically to the Company or any Subsidiary or any of their properties or assets, except extension orders (tzavei harchava) issued by the Minister of Labor relating to the software or electronics industry.

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    (c)        None of the Company, StoreAge U.S. or any officer, director, shareholder, employee, agent or representative of the Company or StoreAge U.S., or, to the knowledge of the Company, StoreAge China, or any of its officers, directors, shareholders, employees, agents or representatives (i) has taken any action which is or could be deemed to be a violation of the Foreign Corrupt Practices Act in respect of the Business; (ii) is aware of any action or conduct which could be deemed to be a violation of the Foreign Corrupt Practices Act in respect of the Business; or (iii) has offered, given, paid, authorized the payment of, or promised, directly or indirectly, any money, gift, promise or other thing of value to any Foreign Official (or to any Person while knowing it will be offered, given or promised to a Foreign Official) for any purpose including, by way of example, influencing any act or decision of such Person acting in their official capacity, inducing such Person to do or omit to do any action in violation of their lawful duty, inducing such Person to use their influence with any Governmental Authority to affect or influence any act or decision of such Governmental Authority, in order to assist the Company or any Subsidiary obtain or retain business for or with, or in directing business to, any Person.

    SECTION 3.12        Material Contracts. (a) Section 3.12(a) of the Disclosure Schedule lists each of the following contracts and agreements (including, without limitation, oral agreements) of the Company and the Subsidiaries (such contracts and agreements, together with all the leases relating to the Leased Real Property listed in Section 3.14(b) of the Disclosure Schedule and all Company IP Agreements listed or otherwise set forth in Section 3.13(a) of the Disclosure Schedule), being “Material Contracts”):

    (i)        all contracts and agreements under the terms of which the Company or any Subsidiary is likely to pay or receive consideration having a value of more than $100,000 in the aggregate over the remaining term of such contract or other arrangement;

    (ii)        all joint venture, partnership, strategic alliance or similar agreements (other than (x) any non-exclusive reseller or distribution agreements substantially in the form of the Company’s standard forms, or (y) confidentiality or non-disclosure agreements);

    (iii)        all shareholder agreements, investor rights’ agreements, registration rights agreements, right of first refusal agreements or similar agreements;

    (iv)        (A) all agreements pursuant to which the Company or any Subsidiary has sold or has agreed to sell any shares or material assets, and (B) all agreements pursuant to which the Company or any Subsidiary has sold or licensed or has agreed to sell or license any assets for aggregate consideration greater than $100,000 (other than any licensing of the Company’s products or services to end users in the ordinary course of business);

    (v)        all material agreements with resellers and distributors (other than (x) any non-exclusive reseller or distribution agreements substantially in the form of the Company’s standard forms, or (y) confidentiality or non-disclosure agreements);

    (vi)        all contracts and agreements relating to any Indebtedness of the Company or any Subsidiary in excess of $50,000 individually;

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    (vii)        all contracts and agreements with any Governmental Authority to which the Company or any Subsidiary is a party;

    (viii)        all contracts and agreements that limit or purport to limit the ability of the Company or any Subsidiary to compete in any line of business or with any Person or in any geographic area or during any period of time;

    (ix)        all contracts and agreements between or among the Company or any Subsidiary, on one hand, and a Seller or any Affiliate of a Seller (other than the Company or any Subsidiary), on the other hand;

    (x)        all material contracts and agreements providing for benefits under any Company Employee Plan; and

    (xii)        all other contracts agreements that the Company deems material to its business.

    (b)        Each Material Contract: (i) is valid and binding on the parties thereto and is in full force and effect; and (ii) upon consummation of the transactions contemplated by this Agreement and the Escrow Agreement, except to the extent that any consents set forth in Section 3.05(c) of the Disclosure Schedule are not obtained, shall continue in full force and effect without penalty or other adverse consequence. None of the Company nor any Subsidiary is in breach of, or default under, any Material Contract. To the knowledge of the Company, no other party to any Material Contract is in breach thereof or default thereunder and none of the Company or any Subsidiary has received any notice of termination, cancellation, breach or default under any Material Contract. The Company has made available to the Purchaser true and complete copies of all Material Contracts.

    SECTION 3.13        Intellectual Property. (a) Section 3.13(a) of the Disclosure Schedule sets forth a true and complete list of (i) all patents and patent applications, registered trademarks and trademark applications, registered copyrights and copyright applications, and domain names included in the Owned Intellectual Property, (ii) all Company IP Agreements, other than commercially available off-the-shelf computer software licensed pursuant to shrink-wrap or click-wrap licenses that is not material to the Business and (iii) other Owned Intellectual Property material to the Business.

    (b)        The operation of the Business as currently conducted and the use of the Owned Intellectual Property and Licensed Intellectual Property in connection therewith do not conflict with, infringe, misappropriate or otherwise violate the Intellectual Property or other proprietary rights, including rights of privacy, publicity and endorsement, of any third party, and no Actions or Claims are pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary alleging any of the foregoing.

    (c)        The Company or a Subsidiary owns or has the legal right to use all Intellectual Property used by the Company and the Subsidiaries in the Business. With respect to Owned Intellectual Property, the Company or a Subsidiary is the exclusive owner of the entire and unencumbered right, title and interest in and to such Owned Intellectual Property, and the Company or a Subsidiary has a valid right to use the Owned Intellectual Property in the ordinary course of the Business as presently conducted. With respect to Licensed Intellectual Property, the Company or a Subsidiary has a valid right to use such Licensed Intellectual Property in the ordinary course of the Business as presently conducted pursuant to valid and effective license agreements.

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    (d)        No Owned Intellectual Property, or to the knowledge of the Company, any Licensed Intellectual Property, is subject to any outstanding decree, order, injunction, judgment, ruling or agreement restricting the use of such Intellectual Property or that would impair the validity or enforceability of such Intellectual Property. The Owned Intellectual Property and, to the knowledge of the Company, the Licensed Intellectual Property, are subsisting, valid and enforceable, and have not been adjudged invalid or unenforceable in whole or part.

    (e)        No Actions or Claims have been asserted or are pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary (i) based upon or challenging or seeking to deny or restrict the use by the Company or any Subsidiary of any of the Owned Intellectual Property or Licensed Intellectual Property, (ii) alleging that any services provided by, processes used by, or products manufactured or sold by the Company or any Subsidiary infringe or misappropriate any Intellectual Property right of any third party or (iii) alleging that the Licensed Intellectual Property is being licensed or sublicensed in conflict with the terms of any license or other agreement.

    (f)        To the knowledge of the Company, no person is engaging in any activity that infringes the Owned Intellectual Property or Licensed Intellectual Property. Licensed Intellectual Property is not granted exclusively to the Company or any Subsidiary. Except in the ordinary course of business, neither the Company nor any Subsidiary has granted any license or other right to any third party with respect to the Owned Intellectual Property or Licensed Intellectual Property. The consummation of the transactions contemplated by this Agreement and the Escrow Agreement will not result in the termination or impairment of any of the Owned Intellectual Property or Licensed Intellectual Property.

    (g)        The Company Software is free of all viruses, worms, trojan horses and other material known contaminants and does not contain any bugs, errors, or problems of a material nature that would disrupt its operation or have an adverse impact on the operation of other software programs or operating systems. Except as set forth in Section 3.13(g) of the Disclosure Schedule, the Company Software does not incorporate any GNU or “open” source code or object code under which the Company Software is subject to the GNU general public license, GNU lesser general public license and other “copyleft” license. The Company’s business as currently conducted and as proposed to be conducted does not involve the use or development of, or engaging in, encryption technology, or other technology whose development, commercialization or export is restricted under Israeli or applicable foreign law, and the Company’s business as currently conducted and as proposed to be conducted does not require the Company to obtain a license from the Israeli Ministry of Defense or an authorized body thereof pursuant to the Control of Products and Services Declaration (Engagement in Encryption), 1974, as amended, or other applicable laws regulating the development, commercialization or export of technology. No rights in the Company Software have been transferred to any third party except to the customers of the Business to whom the Company or a Subsidiary has licensed such Company Software in the ordinary course of business. Section 3.13(g) of the Disclosure Schedule lists all agreements pursuant to which the Company or StoreAge U.S. has deposited source code or similar materials for the Company Software with or for the benefit of any Person. Each of the Company, StoreAge U.S. and, to the knowledge of the Company, StoreAge China, has the right to use all software development tools, library functions, compilers, and other third party software that are material to the Business or that are required to operate or modify the Company Software.

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    (h)        The Company and the Subsidiaries have taken reasonable steps in accordance with normal industry practice to maintain the confidentiality of the trade secrets and other confidential Intellectual Property used in connection with the Business. To the knowledge of the Company, (i) there has been no misappropriation of any material trade secrets or other material confidential Owned Intellectual Property used in connection with the Business by any person; (ii) no employee, independent contractor or agent of the Company or any Subsidiary has misappropriated any trade secrets of any other person in the course of performance as an employee, independent contractor or agent of the Business; and (iii) no employee, independent contractor or agent of the Company or any Subsidiary is in default or breach of any term of any employment agreement, nondisclosure agreement, assignment of invention agreement or similar agreement or contract relating in any way to the protection, ownership, development, use or transfer of Intellectual Property.

     SECTION 3.14        Leased Real Property. (a) None of the Company or any Subsidiary owns or has owned any real property.

    (b)        Section 3.14(b) of the Disclosure Schedule lists: (i) the block and lot number, and the street address, of each parcel of real property leased or subleased by the Company or any Subsidiary (the “Leased Real Property”), (ii) the identity of the lessor, lessee and current occupant (if different from lessee) of each such parcel of Leased Real Property, (iii) all applicable lease agreements for each parcel of Leased Real Property and a summary of the terms and rental payment amounts pertaining to each such parcel of Leased Real Property, and (iv) the current use of each such parcel of Leased Real Property.

    (c)        The Company has made available to the Purchaser true and complete copies of all lease agreements for each parcel of Leased Real Property, as listed in Section 3.14(b) of the Disclosure Schedule. With respect to each lease listed in Section 3.14(b) of the Disclosure Schedule, none of the Company nor any Subsidiary has exercised or given any notice of exercise of any option, right of first offer or right of first refusal contained in any such lease or sublease.

    (d)        To the knowledge of the Company, either the Company or a Subsidiary, as the case may be, is in peaceful and undisturbed possession of each parcel of Leased Real Property, and there are no contractual or legal restrictions that preclude or restrict the ability to use the Leased Real Property for the purposes for which it is currently being used. To the knowledge of the Company, there are no material latent defects or material adverse physical conditions affecting the Leased Real Property or any of the facilities, buildings, improvements, or fixtures attached to or located on any of the Leased Real Property. To the knowledge of the Company, neither the Company nor any Subsidiary has leased or subleased any parcel or any portion of any parcel of Leased Real Property to any other Person and no other Person has any rights to the use, occupancy or enjoyment thereof pursuant to any lease, sublease, license, occupancy or other agreement, nor has the Company or any Subsidiary assigned its interest under any lease or sublease listed in Section 3.14(b) of the Disclosure Schedule to any third party.

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    SECTION 3.15        Environmental Matters. Each of the Company, StoreAge U.S. and, to the knowledge of the Company, StoreAge China is in compliance with all applicable Environmental Laws and all Environmental Permits. There has been no release or discharge of any Hazardous Material on any of the Leased Real Property or, during the period of the Company’s or any Subsidiary’s ownership, lease, use or occupancy thereof, on any property formerly owned, leased, used or occupied by the Company or any Subsidiary. There are no Environmental Claims pending or threatened against the Company, any Subsidiary or the Leased Real Property, and to the Company’s knowledge there are no circumstances that can reasonably be expected to form the basis of any such Environmental Claim. Neither the Company, StoreAge U.S. or, to the knowledge of the Company, StoreAge China has any actual or alleged liability, whether fixed or contingent, under any Environmental Law. Neither the execution of this Agreement or the Escrow Agreement nor the consummation of the transactions contemplated by this Agreement or thereby will require any cleanup or other remedial action or notice to or consent of Governmental Authorities or third parties pursuant to any applicable Environmental Law or Environmental Permit.

    SECTION 3.16        Assets. The Company or a Subsidiary, as the case may be, owns, leases or has the legal right to use all the properties and assets used in the conduct of the Business or otherwise owned, leased or used by the Company or any Subsidiary, and, with respect to contract rights, is a party to and enjoys the right to the benefits of all contracts, agreements and other arrangements used by the Company or any Subsidiary or in or relating to the conduct of the Business. Except as set forth in Section 3.16 of the Disclosure Schedule, each of the Company or a Subsidiary, as the case may be, has good and marketable title to, or, in the case of leased or subleased assets, valid and subsisting leasehold interests in, all of its assets, free and clear of all Encumbrances.

    SECTION 3.17       Employment Matters. (a) Employees. Section 3.17(a) of the Disclosure Schedule lists the name, title, place of employment, date of hire, annual salary rate, annual bonus, and other compensation or benefits paid or payable (in cash or otherwise) in 2005 and 2006 of each current employee, officer, director, consultant or agent of the Company and StoreAge U.S. Except as described in Section 3.17(a) of the Disclosure Schedule, each employee is terminable “at will” subject to applicable notice periods as set forth by law or in the employment agreement, but in any event not more than 60 days, and there are no agreements or understandings between the Company or any Subsidiary and any of their employees that their employment will be for any particular period. The Company is not aware that any of officers or key employees of the Company or any Subsidiary intends to terminate his or her employment with the Company or any Subsidiary.

    (b)        Employee Benefit Plans. Section 3.17(b) of the Disclosure Schedule lists (i) all employment, termination, severance or other similar contracts or arrangements between the Company or any Subsidiary, on the one hand, and any employee of the Company or any Subsidiary, on the other hand, and (ii) all employee benefit plans and all bonus, stock option, share purchase, restricted share, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements to which the Company or any Subsidiary is a party, with respect to which the Company or any Subsidiary has any obligation or which are maintained, contributed to or sponsored by the Company or any Subsidiary for the benefit of any current or former employee, officer or director of the Company or any Subsidiary (collectively, the “Company Employee Plans”). Each Company Employee Plan is in writing and the Company has furnished to the Purchaser a complete and accurate copy of each Company Employee Plan and a complete and accurate copy of each material document prepared in connection with each such Company Employee Plan. There are no other employee benefit plans, programs, arrangements or agreements, whether formal or informal, whether in writing or not, to which the Company or any Subsidiary is a party, with respect to which the Company or any Subsidiary has any obligation or which are maintained, contributed to or sponsored by the Company or any Subsidiary for the benefit of any current or former employee, officer or director of the Company or any Subsidiary. Except as provided in individual employment agreements, labor laws and regulations and extension orders (tzavei harchava), neither the Company nor any Subsidiary has any express or implied commitment, whether legally enforceable or not, to (i) create, incur liability with respect to or cause to exist any other employee benefit plan, program or arrangement, (ii) to enter into any contract or agreement to provide compensation or benefits to any individual, or (iii) to modify, change or terminate any Company Employee Plan, other than with respect to a modification, change or termination required by applicable Law.

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    (c)        Absence of Retiree Benefit Plans. No Company Employee Plan or any agreement with any employee, officer or director of the Company or any Subsidiary provides, or reflects or represents any liability to provide post-termination medical, health, disability, insurance or other benefits to any person for any reason, and, to the knowledge of the Company, the Company has never represented, promised or contracted (whether in oral or written form) to any employee, officer or director (either individually or as a group) or any other person that such employee, officer or director or other person would be provided with post-termination life, health or other benefits, except for employee insurance plans and directors and officers insurance and indemnification agreements.

    (d)        Compliance with Applicable Law. Each Company Employee Plan is now and always has been operated in all respects in accordance with the requirements of all applicable Law. The Company and each Subsidiary has performed all obligations required to be performed by it under, is not in any respect in default under or in violation of, and has no knowledge of any default or violation by any party to, any Company Employee Plan. No legal action, suit or claim is pending or, to the knowledge of the Company, threatened with respect to any Company Employee Plan (other than claims for benefits in the ordinary course).

    (e)        Absence of Consequences. Subject to any applicable law, the execution of this Agreement and the consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Employee Plan, employment agreement, trust, loan or other agreement or arrangement that will or might result in any payment (whether of severance pay, “gross-up,” or indemnity or similar payment or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee, officer or director of the Company or any Subsidiary, except for any payment that is fully funded.

    (f)        No ERISA Plans. Except for StoreAge U.S. which has an Employee Plan (US 401K) which is subject to ERISA and secured by an ERISA Bond, none of the Company Employee Plans are subject to the U.S. Employee Retirement Income Security Act of 1974, as amended, or to any similar or corresponding statute of any jurisdiction outside of Israel.

    (g)        Plan Contributions and Funding. All contributions, premiums or payments required to be made with respect to any Company Employee Plan have been made on or before their due dates. No Company Employee Plan has, or as of the Closing will have, unfunded liabilities that, as of the Closing will not be fully funded or insured against. With respect to the Company Employee Plans, individually and in the aggregate, there are no funded benefit obligations for which contributions have not been made or properly accrued and there are no unfunded benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted, in accordance with GAAP on the Latest Balance Sheet, except for obligations incurred in the ordinary course of business consistent with past practice since the date of the Latest Balance Sheet.

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    (h)        Israel Employment Matters. The Company has complied with all legislative, regulatory and other binding provisions relating to employee of the Company in Israel and their terms and conditions of employment, and has made all deductions and payments to the Income Tax Authority and the National Insurance Institute required to be made by law or any other deductions or payments required by law. The severance pay due to the employees of the Company is fully insured against or funded. All other liabilities of the Company and the Subsidiaries to the employees of the Company and the Subsidiaries were properly accrued in the Latest Balance Sheet.

    (i)        Proprietary Invention Agreements. All directors, officers, management employees, and technical and professional employees of the Company and each Subsidiary are under written obligation to the Company or such Subsidiary to maintain in confidence all confidential or proprietary information acquired by them in the course of their employment and to assign to the Company or such Subsidiary all inventions made by them within the scope of their employment during such employment.

    SECTION 3.18        Labor Matters. (a) None of the Company or any Subsidiary is bound by or subject to collective bargaining agreement or any arrangement, written or oral, with any labor union and is required (under any legal requirement, under any contract or otherwise) to provide benefits or working conditions beyond the minimum benefits and working conditions required by law to be provided pursuant to rules and regulation of the Histadrut (General Federation of Labor), the Coordinating Bureau of Economic Organization and the Industrialists’ Association. Neither the Company nor any Subsidiary has recognized or received a demand for recognition from any collective bargaining representative with respect to any of its employees. Except to the extent applicable to employers and employees generally or in a certain field in Israel, neither the Company nor any Subsidiary has or is subject to, and no employee of Company or any Subsidiary benefits from, any extension order (tzavei harchava) or any contract or arrangement with respect to employment or termination thereof.

    (b)        There are no controversies, strikes, slowdowns or work stoppages pending or, to the knowledge of the Company, threatened between the Company or any Subsidiary and any of their respective employees, and neither the Company nor any Subsidiary has experienced any such controversy, strike, slowdown or work stoppage within the past three years.

    (c)        The Company and each Subsidiary are in compliance in all material respects with all applicable Laws respecting employment, employment practices, terms and conditions of employment, employee safety and wages and hours, including the Advance Notice for Dismissal and Resignation Law, 5761-2001, the Notification to an Employee (Terms of Employment) Law, 5762-2002, the Prevention of Sexual Harassment Law, 5758-1998, the Hours of Work and Rest Law, 5711-1951 and the Employment by Human Resources Contractors Law, 5756-1996. The Company has provided or made available to Purchaser all licenses or permits held by the Company and the Subsidiaries that enable them to employ foreign employees or employees from territories currently administered by Israel.

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    (d)        The obligations of the Company to provide statutory severance pay to its employees pursuant to the Severance Pay Law, 5723-1963 is fully insured against or funded. The Company uses the provisions of Section 14 of the Severance Pay Law, 5723-1963 with respect to such statutory severance pay.

    (e)        All amounts that the Company and the Subsidiaries are legally or contractually required either (x) to deduct from their employees’ salaries or to transfer to such employees’ pension or provident, life insurance, incapacity insurance, continuing education fund or other similar funds or (y) to withhold from their employees’ salaries and benefits and to pay to any Governmental Authority as required by the Ordinance and National Insurance Law [Consolidated Version], 5755-1995, the National Health Insurance Law, 5754-1994 or otherwise have, in each case, been duly deducted, transferred, withheld and paid in all material respects.

    (f)        None of the Company or any Subsidiary has engaged any employee whose employment would require special licenses or permits. None of the Company or any Subsidiary has engaged any consultants, sub-contractors or freelancers who, according to Israeli law, would be entitled to the rights of an employee vis-à-vis the Company or a Subsidiary, including rights to severance pay, vacation, recuperation pay (“dmei havra’a”) and other employee-related statutory benefits.

    (g)        There are no unwritten policies or customs concerning the payment of statutory severance pay when it is not legally required that, by extension, could entitle employees of the Company or any Subsidiary to severance benefits in addition to those to which they are entitled pursuant to the applicable Laws, other than those included in the Company Employee Plans.

    (h)        The Company and each Subsidiary has paid in full to all their respective employees or adequately accrued for in accordance with U.S. GAAP all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees. There is no claim with respect to payment of wages, salary or overtime pay that has been asserted or is now pending or threatened before any Governmental Authority with respect to any Persons currently or formerly employed by the Company or any Subsidiary.

    (i)        There are no unfair labor practice complaints pending against the Company or any Subsidiary before any Governmental Authority. Neither the Company nor any Subsidiary is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to employees or employment practices. There is no charge of discrimination in employment or employment practices, for any reason, including, without limitation, age, gender, race, religion or other legally protected category, which has been asserted or is now pending or threatened before any Governmental Authority in any jurisdiction in which the Company or any Subsidiary has employed or currently employs any Person.

    SECTION 3.19        Certain Interests. (a) To the knowledge of the Company, no shareholder, officer or director of the Company or any Subsidiary and no relative or spouse (or relative of such spouse) who resides with, or is, a dependent of, any such shareholder, officer or director:

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    (i)        owns, directly or indirectly, in whole or in part, or has any other interest in any tangible or intangible property which the Company or any Subsidiary uses in the conduct of the Business or otherwise; or

    (ii)        has outstanding any Indebtedness to the Company or any Subsidiary.

    (b)        Except as described in Section 3.19(b) of the Disclosure Schedule, neither the Company nor any Subsidiary has any Liability or any other obligation of any nature whatsoever to any officer, director or shareholder of the Company or any Subsidiary or to any relative or spouse (or relative of such spouse) who resides with, or is a dependent of, any such officer, director or shareholder.

    SECTION 3.20        Taxes. (a) The Company and the Subsidiaries have paid all Taxes (including advances required by law on Taxes) that were due prior to the date hereof. As of the Closing, the Company and the Subsidiaries (i) will have paid all Taxes that they are required to pay prior to the Closing, and (ii) will have withheld all Taxes required to be withheld. There are no liens for Taxes upon any property or assets of the Company or any Subsidiary except for liens for Taxes not yet due.

    (b)        The Company and the Subsidiaries have prepared and timely filed all Israeli, local and foreign returns, estimates, information statements and reports (“Returns”) required to be filed with any taxing authority at or prior to the Closing relating to any and all Taxes concerning or attributable to the Company or any Subsidiary or to their operations, and such Returns are true and correct in all material respects and have been completed in all material respects in accordance with applicable law. Section 3.20(b) of the Disclosure Schedule lists all Returns filed with respect to each of the Company and the Subsidiaries for taxable periods ended on or after December 31, 2003. The Company has made available to Purchaser copies of all Returns filed for all periods since its inception.

    (c)        There is no Tax deficiency outstanding, proposed or assessed against the Company or any Subsidiary that is not reflected as a liability on the Latest Balance Sheet nor has the Company or any Subsidiary executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax. The Company and the Subsidiaries do not have any liabilities for unpaid Israeli, local or foreign Taxes that have not been accrued for or reserved on the Latest Balance Sheet, whether asserted or unasserted, contingent or otherwise (other than Taxes that have accrued subsequent to the date of the Latest Balance Sheet in the ordinary course of business consistent with past practice).

    (d)        None of the Company nor any of the Subsidiaries is a party to any income tax-sharing agreement or similar arrangement with any other party, has assumed or agreed to pay any Tax obligations of, or with respect to any transaction relating to, any other person or agreed to indemnify any other person with respect to any Tax, or has any liability for the Taxes of any person, as a transferee or successor, by contract or otherwise.

    (e)        The Company has received final assessments of its tax returns (“shumot sofiot”) through and including the 2001 tax year. No Returns of the Company or any Subsidiary have been audited by a government or taxing authority during the three years preceding the date of this Agreement, nor is any such audit in process or pending, and neither the Company nor any Subsidiary has been notified of any request for such an audit or other examination.

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    (f)        None of the Company or any Subsidiary is a party to any joint venture, partnership or other agreement that the Company has reason to believe could be treated as a partnership for Tax purposes.

    (g)        None of the Company or any Subsidiary has received any notice from any taxing authority in a jurisdiction where the Company or any Subsidiary has not filed Returns that the Company or a Subsidiary may be subject to taxation in such jurisdiction.

    (h)        Neither the Company nor any Affiliate is a party to any agreement or arrangement that would result, separately or in the aggregate, in the actual or deemed payment by the Company or a Subsidiary of any “excess parachute payments” within the meaning of section 280G of the Code (without regard to Section 280G(b)(4) of the Code).

    (i)        None of the Company or Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code.

    SECTION 3.21        Customers. Section 3.21 of the Disclosure Schedule lists the names of the ten most significant customers (by revenue) of the Business for each of the year ended December 31, 2005 and the nine-month period ended September 30, 2006, and the amount that each such customer was invoiced during each such period. None of the Company or any Subsidiary has received any notice or has any reason to believe that any significant customer of the Business has ceased, or will cease, to use the products or services of the Company or any Subsidiary or has substantially reduced, or will substantially reduce, the use of such products or services at any time.

    SECTION 3.22        Insurance. All material assets, properties and risks of the Company and each Subsidiary are, and for the past five years have been, covered by valid and, except for insurance policies that have expired under their terms in the ordinary course, currently effective insurance policies or binders of insurance (including, without limitation, general liability insurance, property insurance and workers’ compensation insurance) issued in favor of the Company or a Subsidiary, as the case may be, in each case with responsible insurance companies, in such types and amounts and covering such risks as are consistent with customary practices and standards of companies engaged in businesses and operations similar to those of the Company or such Subsidiary, as the case may be. Section 3.22 of the Disclosure Schedule lists all insurance policies currently maintained by the Company and the Subsidiaries.

    SECTION 3.23        CSO Funding. Section 3.23 of the Disclosure Schedule (i) describes all approvals received by the Company from the Investment Center and all funds provided by the CSO to the Company or any Subsidiary and all amounts repaid by the Company or any Subsidiary to the CSO and (ii) lists all agreements and other material documents and correspondence with the Investment Center and the CSO regarding such approvals and funding.

    SECTION 3.24        Full Disclosure. (a) The Company is not aware of any facts pertaining to the Company, any Subsidiary or the Business which could reasonably be expected to materially adversely affect the Company, any Subsidiary or the Business and which have not been disclosed in this Agreement or otherwise disclosed to the Purchaser by the Company or any Seller except for risks inherent in high-tech company in a competitive market, including any promise or guarantee as to financial or commercial success of the Company.

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    (b)        To the knowledge of the Company, no representation or warranty of the Company in this Agreement, nor any statement or certificate furnished or to be furnished to the Purchaser pursuant to this Agreement, or in connection with the transactions contemplated by this Agreement, contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained herein or therein not misleading.

    SECTION 3.25        Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the Escrow Agreement based upon arrangements made by or on behalf of the Company.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS

        As an inducement to the Purchaser to enter into this Agreement, each Seller hereby represents and warrants to the Purchaser, with respect to such Seller only, as follows:

    SECTION 4.01        Authority of such Seller. The execution and delivery of this Agreement and the Escrow Agreement by such Seller, the performance by such Seller of its obligations hereunder and thereunder and the consummation by such Seller of the transactions contemplated by this Agreement and thereby have been duly authorized by all requisite action on the part of such Seller. This Agreement has been, and upon their execution the Escrow Agreement shall have been, duly executed and delivered by such Seller, and (assuming due authorization, execution and delivery by the Purchaser) this Agreement constitutes, and upon its execution the Escrow Agreement shall constitute, legal, valid and binding obligations of such Seller, enforceable against such Seller in accordance with their respective terms.

    SECTION 4.02        No Conflict. Assuming that all consents, approvals, authorizations and other actions described in Section 3.06 have been obtained, the execution, delivery and performance of this Agreement and the Escrow Agreement by such Seller do not and will not (a) violate, conflict with or result in the breach of any provision of the certificate of incorporation or by-laws (or similar organizational documents) of such Seller, (b) conflict with or violate any Law or Governmental Order applicable to such Seller, or (c) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of any contract to which such Seller is a party or by which any of the properties of such Seller may be bound, except for violations, breaches or defaults which, individually and in the aggregate, could not reasonably be expected to have a Material Adverse Effect on such Seller, or result in the creation of any Encumbrance on any of the outstanding Ordinary Shares owned by such Seller.

    SECTION 4.03        Governmental Consents and Approvals. The execution, delivery and performance of this Agreement and the Escrow Agreement by such Seller does not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority, except as described in Section 3.06 of this Agreement.

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    SECTION 4.04        Ownership of Ordinary Shares. Such Seller owns of record and beneficially, free and clear of all Encumbrances (other than Encumbrances under securities laws and any Encumbrances that will be discharged and released at or prior to the Closing) the number of Ordinary Shares set forth opposite the name of such Seller on Exhibit A attached hereto and does not own, beneficially or otherwise, any other securities of the Company or any of its Subsidiaries. At the Closing, the Purchaser will acquire from such Seller such Ordinary Shares free and clear of all Encumbrances other than Encumbrances under securities laws or Encumbrances created by or on account of the Purchaser. Upon the transfer of such Seller’s shares to the Purchaser, in accordance to the terms herein, the Purchaser will own all such Seller’s shares of the Company free and clear of all Encumbrances and will be fully paid and nonassessable. Such Seller is not a party to any voting trusts, shareholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the outstanding Ordinary Shares of such Seller.

    SECTION 4.05        Litigation. No Action by or against such Seller is pending or, to the knowledge of such Seller, threatened, which could reasonably be expected to affect in any material respect the legality, validity or enforceability of this Agreement or the Escrow Agreement or the consummation of the transactions contemplated hereby or thereby.

    SECTION 4.06        Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of such Seller.

    SECTION 4.07        Right of First Refusal. Such Seller irrevocably waives his right of first refusal with regard to the sale of shares by all other shareholders.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

        As an inducement to the Sellers to enter into this Agreement, the Purchaser hereby represents and warrants to the Sellers as follows:

    SECTION 5.01        Organization and Authority of the Purchaser. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all necessary corporate power and authority to enter into this Agreement and the Escrow Agreement, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated by this Agreement and thereby. The execution and delivery by the Purchaser of this Agreement and the Escrow Agreement, the performance by the Purchaser of its obligations hereunder and thereunder and the consummation by the Purchaser of the transactions contemplated by this Agreement and thereby have been duly authorized by all requisite corporate action on the part of the Purchaser. This Agreement has been, and upon its execution the Escrow Agreement shall have been, duly executed and delivered by the Purchaser, and (assuming due authorization, execution and delivery by the Seller) this Agreement constitutes, and upon its execution the Escrow Agreement shall constitute, legal, valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with their respective terms.

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    SECTION 5.02        No Conflict. Assuming the making and obtaining of all filings, notifications, consents, approvals, authorizations and other actions referenced to in Section 5.03, except as may result from any facts or circumstances relating solely to the Company or the Sellers, the execution, delivery and performance by the Purchaser of this Agreement and the Escrow Agreement do not and will not (a) violate, conflict with or result in the breach of any provision of the Certificate of Incorporation or By-laws of the Purchaser, (b) conflict with or violate any Law or Governmental Order applicable to the Purchaser or (c) conflict with, or result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Purchaser is a party, which would adversely affect the ability of the Purchaser to carry out its obligations under and to consummate the transactions contemplated by, this Agreement or by the Escrow Agreement.

    SECTION 5.03        Governmental Consents and Approvals. The execution, delivery and performance by the Purchaser of this Agreement and the Escrow Agreement do not and will not require any consent, approval, authorization or other order of, action by, filing with, or notification to any Governmental Authority, except as described in Section 3.06 of this Agreement.

    SECTION 5.04        Investment Purpose. The Purchaser is acquiring the Ordinary Shares solely for the purpose of investment and not with a view to, or for offer or sale in connection with, any distribution thereof.

    SECTION 5.05        Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Purchaser.

    SECTION 5.06        No Success. The Purchaser is an experienced investor with such business and investment expertise as to be able to evaluate the risks involved in an investment in a high-tech company in a competitive market. Without derogating from the express representations and warranties made by the Company and the Sellers in this Agreement, the Purchaser is aware that (i) there is no promise or guarantee as to the financial or commercial success of the Company and (ii) there is no assurance or guarantee that forward-looking plans or projections, or planned products, will materialize or achieve the projected or expected results.

    SECTION 5.07        CSO. The Purchaser is aware that the transaction contemplated by this Agreement is subject to the approval of the CSO in accordance with the Encouragement of Research and Development in Industry Act of 1984 and any regulations promulgated thereunder (the “ERDI Law”) and the Purchaser is aware that: (i) the Company is subject to the payment of royalties to the CSO from sale of products supported by the CSO up to a sum equal to the grant amount, and (ii) the ERDI Law places strict constraints on the transfer of specified know-how and/or production rights, making such transfers subject to the absolute discretion of the CSO, acting in accordance with the aims of the ERDI Law, and requiring that any such transfer receive the prior written approval of the CSO. The Purchaser agrees to use its reasonable best efforts to obtain the consent of the CSO required to complete the transactions contemplated by this Agreement; provided, however, that the Purchaser shall not be required to pay any consideration or to agree to any restrictions or undertakings in connection with seeking such consent, except for the execution of an undertaking to the CSO substantially in the form of Exhibit 5.07.

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    SECTION 5.08        Financial Capability. The Purchaser has sufficient funds to fulfill its obligations pursuant to this Agreement.

ARTICLE VI
ADDITIONAL AGREEMENTS

    SECTION 6.01        Conduct of Business Prior to the Closing. (a) The Company covenants and agrees that, except as described in Section 6.01(a) of the Disclosure Schedule, between the date hereof and the time of the Closing, neither the Company nor any Subsidiary shall conduct its business other than in the ordinary course and consistent with the Company’s and such Subsidiary’s prior practice. Without limiting the generality of the foregoing, except as described in Section 6.01(a) of the Disclosure Schedule, the Company shall, and shall cause each Subsidiary to (i) use their reasonable best efforts to (A) preserve intact their business organizations and the business organization of the Business, (B) keep available to the Purchaser the services of the employees of the Company and each Subsidiary, and (C) preserve their current relationships with their customers, suppliers and other persons with which they have had significant business relationships; (ii) not issue or grant any shares or options or any rights to acquire shares or options; and (iii) not engage in any practice, take any action, fail to take any action or enter into any transactions which could cause any representation or warranty of the Company to be untrue or result in a breach of any covenant made by the Company in this Agreement.

    (b)        Except as described in Section 6.01(b) of the Disclosure Schedule, the Company covenants and agrees that, between the date hereof and the time of the Closing, without the prior written consent of the Purchaser, neither the Company nor any Subsidiary will do any of the things enumerated in the second sentence of Section 3.09 (including, without limitation, clauses (a) through (w) thereof).

    SECTION 6.02        Access to Information. From the date hereof until the Closing, upon reasonable notice, the Company shall cause its officers, directors, employees, agents, representatives, accountants and counsel and shall cause the Subsidiaries and each of the Subsidiaries’ officers, directors, employees, agents, representatives, accountants and counsel to: (i) afford the officers, employees, agents, accountants, counsel and representatives of the Purchaser reasonable access, during normal business hours, to the offices, properties, plants, other facilities, books and records of the Company and each Subsidiary and to those officers, directors, employees, agents, accountants and counsel of the Company and of each Subsidiary who have any knowledge relating to the Company, any Subsidiary or the Business and (ii) furnish to the officers, employees, agents, accountants, counsel and representatives of the Purchaser such additional financial and operating data and other information regarding the assets, properties, liabilities and goodwill of the Company, the Subsidiaries and the Business (or legible copies thereof) as the Purchaser may from time to time reasonably request.

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    SECTION 6.03        Confidentiality. (a) Each Seller agrees to, and shall cause its agents, representatives, Affiliates, employees, officers and directors to: (a) treat and hold as confidential (and not disclose or provide access to any Person to) all information relating to the Company’s and each Subsidiary’s trade secrets, processes, patent and trademark applications, product development, price, customer and supplier lists, pricing and marketing plans, policies and strategies, details of client and consultant contracts, operations methods, product development techniques, business acquisition plans, new personnel acquisition plans and all other confidential or proprietary information with respect to the Business, the Company and each Subsidiary (the “Company Information”), (b) in the event that such Seller or any such agent, representative, Affiliate, employee, officer or director becomes legally compelled to disclose any such information, provide the Purchaser with prompt written notice of such requirement so that the Purchaser, the Company or any Subsidiary may seek a protective order or other remedy or waive compliance with this Section 6.03, and (c) in the event that such protective order or other remedy is not obtained, or the Purchaser waives compliance with this Section 6.03, furnish only that portion of such confidential information which is legally required to be provided and exercise its reasonable best efforts to obtain assurances that confidential treatment will be accorded such information; provided, however, that this section shall not apply to any information that (i)  is or becomes subsequently available publicly and was not disclosed in breach of this Agreement by such Seller, its agents, representatives, Affiliates, employees, officers or directors, (ii) corresponds in substance to information that was received in good faith by such Seller from a third party having a right to disclose such information; or (iii) was independently developed by or on behalf of such Seller subsequent to the receipt of such disclosure without resort to the information disclosed by the Company or any Subsidiary. The Seller agrees and acknowledges that remedies at law for any breach of its obligations under this Section 6.03 are inadequate and that in addition thereto the Purchaser shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach.

    (b)        The Purchaser and the Company agree that if this Agreement is terminated in accordance with its terms without Closing, the Purchaser and the Company will continue to be bound by the terms of the Mutual Nondisclosure Agreement, dated as of August 17, 2006, by and between the Purchaser and the Company (the “Confidentiality Agreement”).

    SECTION 6.04        Required Consents. (a) The Company shall use its reasonable best efforts to obtain (or cause the Subsidiaries to obtain) all authorizations, consents, orders and approvals of all Governmental Authorities that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement and the Escrow Agreement and will cooperate fully with the Purchaser in promptly seeking to obtain all such authorizations, consents, orders and approvals.

    (b)        The Company and the Subsidiaries shall give promptly such notices to third parties and use their reasonable best efforts to obtain such third party consents and estoppel certificates as the Purchaser may in its sole discretion deem necessary or desirable in connection with the transactions contemplated by this Agreement.

    (c)        The Purchaser shall cooperate and use all reasonable efforts to assist the Company in giving such notices and obtaining such consents and estoppel certificates; provided, however, that the Purchaser shall have no obligation to give any guarantee or other consideration of any nature in connection with any such notice, consent or estoppel certificate or to consent to any change inthe terms of any agreement or arrangement which the Purchaser in its sole discretion may deem adverse to the interests of the Purchaser, the Company, any Subsidiary or the Business.

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    (d)        The Company knows of no reason why all the consents, approvals and authorizations necessary for the consummation of the transactions contemplated by this Agreement will not be received.

    SECTION 6.05        Notice of Developments. Prior to the Closing, the Company shall promptly notify the Purchaser in writing of (a) all events, circumstances, facts and occurrences arising subsequent to the date of this Agreement which could result in any breach of a representation or warranty or covenant of the Company or the Sellers in this Agreement or which could have the effect of making any representation or warranty of the Company or the Sellers in this Agreement untrue or incorrect in any respect and (b) all other material developments affecting the assets, liabilities, business, financial condition, operations, results of operations, customer or supplier relations, employee relations, projections or prospects of the Company, any Subsidiary or the Business.

    SECTION 6.06         No Shop. Each Seller and the Company agrees that between the date of this Agreement and the earlier of (a) the Closing and (b) the termination of this Agreement, none of such Seller, the Company or any of their respective officers, directors, representatives or agents will (i) solicit, initiate, knowingly encourage or accept any other proposals or offers from any Person relating to any acquisition of any Ordinary Shares or assets of the Company or any Subsidiary (other than products or services to be sold or licensed in the ordinary course of business consistent with past practice) or (ii) participate in any discussions or negotiations with any Person (other than the Purchaser) regarding, or furnish to any Person (other than the Purchaser) any information with respect to, any of the foregoing. Each of the Company and each Seller immediately shall cease any existing discussions or negotiations conducted by such person with respect to any of the foregoing.

    SECTION 6.07        Use of Intellectual Property. From and after the Closing, none of the Sellers nor any of their Affiliates shall use any of the Owned Intellectual Property except pursuant to commercial arrangements between the Sellers (or their Affiliates) and the Company or as permitted pursuant to Section 6.03.

    SECTION 6.08        [Intentionally omitted].

    SECTION 6.09        Currency. Unless otherwise specified in this Agreement, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) dollars and all payments hereunder shall be made in United States dollars.

    SECTION 6.10        Further Action. Each of the parties hereto shall use all reasonable efforts to take, or cause to be taken, all appropriate action, do or cause to be done all things necessary, proper or advisable under applicable Law, and to execute and deliver such documents and other papers, as may be required to carry out the provisions of this Agreement and consummate and make effective the transactions contemplated by this Agreement.

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ARTICLE VII
CERTAIN TAX MATTERS

    SECTION 7.01        Taxes on Sale. Each Seller shall be liable for and shall hold the Purchaser harmless against any capital gains, ordinary income, company, National Insurance, health tax or any other Taxes applicable to such Seller which become payable in connection with the sale of shares hereunder by such Seller.

    SECTION 7.02        Miscellaneous. The Sellers and the Purchaser agree to treat all payments made by either of them to or for the benefit of the other (including any payments to the Company or any Subsidiary) under any indemnity provisions of this Agreement and for any misrepresentations or breaches of warranties or covenants as adjustments to the purchase price or as capital contributions for tax purposes and that such treatment shall govern for purposes hereof except to the extent that the laws of a particular jurisdiction provide otherwise.

ARTICLE VIII
CONDITIONS TO CLOSING

    SECTION 8.01        Conditions to Obligations of the Sellers. The obligations of each Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

    (a)        Accuracy of Representations and Warranties. The representations and warranties of the Purchaser contained in this Agreement that are qualified by materiality or Material Adverse Effect shall have been true and correct, and the representations and warranties that are not so qualified shall have been true and correct in all material respects, when made and as of the Closing, as though made on and as of the Closing, except to the extent such representations and warranties are expressly made as of earlier date, in which case, as of such earlier date;

    (b)        Compliance with Agreements. The Purchaser shall have performed or complied with in all material respects all covenants and agreements required by this Agreement to be performed or complied with by the Purchaser on or prior to the Closing;

    (c)        Officer Certificate. The Purchaser shall have delivered to the Seller or a representative of the Sellers a certificate, dated the date of the Closing, signed by a duly authorized officer of the Purchaser, certifying as to the satisfaction of the conditions specified in Sections 8.01(a) and 8.01(b);

    (d)        No Proceeding or Litigation. No Action shall have been commenced by or before any Governmental Authority against such Seller, any other Seller or the Purchaser, seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonable, good faith determination of such Seller, is likely to render it impossible or unlawful to consummate such transactions; provided, however, that the provisions of this Section 8.01(d) shall not apply if such Seller has directly or indirectly solicited or encouraged any such Action; and

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    (e)        Escrow Agreement. The Purchaser shall have executed and delivered to the Sellers or a representative of the Sellers the Escrow Agreement.

    SECTION 8.02        Conditions to Obligations of the Purchaser. The obligations of the Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

    (a)        Representations and Warranties of the Company. The representations and warranties of the Company contained in this Agreement that are qualified by “materiality” or “Material Adverse Effect” shall have been true and correct, and the representations and warranties that are not so qualified shall have been true and correct in all material respects, when made and as of the Closing as though made on and as of the Closing, except to the extent that any such representations and warranties are expressly made as of an earlier date, in which case, such representations and warranties shall be true and correct as of such earlier date;

    (b)        Representations and Warranties of the Sellers. The representations and warranties of the Sellers contained in this Agreement that are qualified by “materiality” or “Material Adverse Effect” shall have been true and correct, and the representations and warranties that are not so qualified shall have been true and correct in all material respects, when made and as of the Closing as though made on and as of the Closing, except to the extent that any such representations and warranties are expressly made as of an earlier date, in which case, such representations and warranties shall be true and correct as of such earlier date;

    (c)        Compliance with Agreement. (i) The Company shall have performed or complied with in all material respects all covenants and agreements required by this Agreement to be performed or complied with by the Company on or prior to the Closing; and (ii) each Seller shall have performed or complied with in all material respects all covenants and agreements required by this Agreement to be performed or complied with by such Seller on or prior to the Closing;

    (d)        Officer Certificate. (i) The Company shall have delivered to the Purchaser a certificate, dated the date of the Closing, signed by a duly authorized officer of the Company, certifying as to the satisfaction of the conditions specified in Sections 8.02(a) and 8.02(c)(i); and (ii) each Seller shall have delivered to the Purchaser a certificate, dated the date of the Closing, signed by a duly authorized officer of the Seller, certifying as to the satisfaction of the conditions specified in Sections 8.02(b) and 8.02(c)(ii);

    (e)        No Proceeding or Litigation. No Action shall have been commenced or threatened by or before any Governmental Authority against any Seller or the Purchaser, seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonable, good faith determination of the Purchaser, is likely to render it impossible or unlawful to consummate such transactions or which could have a Material Adverse Effect;

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    (f)        Loan Agreement. (i) The Lenders under the Loan Agreement shall have delivered to the Purchaser a “pay-off” letter duly executed by the Lenders, in form and substance reasonably acceptable to the Purchaser, certifying as to the aggregate amount owed by the Company and the Subsidiaries under the Loan Agreement as of immediately prior to the Closing (which amount shall not be greater than $4,000,000 plus the amount of interest accrued and unpaid since October 1, 2006) (the “Pay-off Amount”) and agreeing that, among other things, upon the payment of such Pay-Off Amount to the Lenders at the Closing in accordance with the “pay-off” letter, (A) all obligations under the Loan Agreement will be satisfied in full and neither the Company nor any of the Subsidiaries will have any outstanding liabilities or obligations whatsoever to any of the Lenders under, in connection with or pursuant to the Loan Agreement or other Transaction Documents (as defined in the Loan Agreement) and (B) all Encumbrances granted in favor of the Lenders under the Loan Agreement and other Transaction Documents (as defined in the Loan Agreement) shall be released; and (ii) the Lenders shall have delivered to the Company for filing, or authorized the filing by the Company of, UCC 3 Termination Statements and such other documents and forms as the Purchaser deems reasonably necessary to validly terminate or release all Encumbrances granted by the Company or any of its Subsidiaries in favor of the Lenders upon recordation thereof, in each case, in form and substance reasonably satisfactory to the Purchaser. It is agreed that the Purchaser shall, at the Closing, pay the Pay-off Amount to or as directed by the Lenders in accordance with a “pay-off” letter delivered to the Purchaser complying with the requirements of this Section 8.02(f), and this will not reduce the Per Share Purchase Price.

    (g)        Required Consents and Approvals. The Purchaser and the Company shall have received, each in form and substance reasonably satisfactory to the Purchaser, the authorizations, consents, orders and approvals of Governmental Authorities and third parties set forth on Exhibit 8.02(g) attached hereto, which shall not require any payments or impose any restrictions except such as the Purchaser shall approve in its sole discretion;

    (h)        Acceptance of Employment Offers. (i) All of the employees listed as Tier I Employees on Exhibit 8.02(h) shall remain employed with the Company or a Subsidiary as of the Closing and shall have accepted an offer of continuing employment made by the Purchaser or an Affiliate of the Purchaser; and (ii) at least 80% of all other employees of the Company and StoreAge U.S. shall remain employed with the Company or StoreAge U.S. as of the Closing and shall have accepted an offer of continuing employment made by the Purchaser or an Affiliate of the Purchaser;

    (i)        [Intentionally omitted];

    (j)        Resignations. All of the directors and officers of the Company and StoreAge U.S. and all of the directors and officers of StoreAge China appointed by the Company shall have executed and delivered to the Purchaser written resignations effective as of the Closing, except for such persons as shall have designated in writing by the Purchaser to the Company prior to the Closing;

    (k)        Escrow Agreement. Each of the Sellers and the Escrow Agent shall have delivered to the Purchaser an executed counterpart of the Escrow Agreement;

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    (l)        Legal Opinion. The Purchaser shall have received from Primes, Shiloh, Givon, Meir Law Firm, counsel to the Company, a legal opinion, addressed to the Purchaser and dated the Closing Date, addressing the matters set forth in Exhibit 8.02(l);

    (m)        No Material Adverse Effect. No event or events shall have occurred which, individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect;

    (n)        Company Share Option Plans. (i) The Company shall have taken all action necessary to terminate the Company Share Option Plans as of the Closing and (ii) all holders of Company Share Options shall have agreed, in writing in form and substance reasonably satisfactory to the Purchaser, to the treatment of cancellation of the Company Share Options in accordance with Section 2.04, to the other terms of this Agreement applicable to holders of Company Share Options (including the indemnification provisions of Article IX), and to the appointment of the Sellers’ Representatives to act on behalf of such holders for certain purposes pursuant to and in accordance with Section 9.07;

    (o)        No Other Shareholders. The Company shall not have issued any Ordinary Shares, Company Share Options or any other equity interests or rights to acquire equity interests in the Company and no other Person other than the Sellers shall have acquired or shall own, of record or beneficially, any shares of the Company or any Subsidiary, whether by exercise of Company Share Options or otherwise, and the Purchaser shall acquire at the Closing all of the outstanding Ordinary Shares;

    (p)        Termination of 401(k) Plan. The Board of Directors of the Company shall have taken all action necessary, in form and substance reasonably satisfactory to the Purchaser, to terminate the Company’s 401(k) plan as of immediately prior to the Closing; and

    (q)        Delivery of September 30 2006 Interim Financial Statements. The Company shall have delivered to the Purchaser interim financial statements as of and for the nine month period ended September 30, 2006 in substantially the same form as the Interim Financial Statements.

ARTICLE IX
INDEMNIFICATION

    SECTION 9.01        Survival of Representations and Warranties. (a) The representations and warranties of the Company and the Sellers contained in this Agreement shall survive the Closing until the date that is 18 months after the date of this Agreement; provided, however, that (i) the representations and warranties made pursuant to Sections 3.03 and 4.04 shall survive indefinitely, and (ii) the representations and warranties made pursuant to Section 3.20 shall survive until the expiration of the applicable statute of limitations with respect to the liabilities in question. Neither the period of survival nor the liability of the Sellers with respect to the representations and warranties of the Company and the Sellers shall be reduced by any investigation made at any time by or on behalf of the Purchaser. If written notice of a claim describing the basis for such claim in reasonable detail has been given prior to the expiration of the applicable representations and warranties by the Purchaser to the Sellers’Representative, then the indemnification obligation with respect to such item as to which a claim has been given shall survive, until such claim has been finally resolved.

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    (b)        The representations and warranties of the Purchaser contained in this Agreement and the Escrow Agreement shall survive the Closing until the date that is 18 months after the date of this Agreement; provided, however, that the representations and warranties made pursuant to Section 5.05 shall survive indefinitely. Neither the period of survival nor the liability of the Purchaser with respect to the Purchaser’s representations and warranties shall be reduced by any investigation made at any time by or on behalf of the Sellers. If written notice of a claim describing the basis for such claim in reasonable detail has been given prior to the expiration of the applicable representations and warranties by the Sellers’ Representative to the Purchaser, then the indemnification obligation with respect to such item as to which a claim has been given shall survive as to such claim, until such claim has been finally resolved.

    SECTION 9.02        Indemnification by the Sellers. The Purchaser and its Affiliates, officers, directors, employees, agents, successors and assigns (each a “Purchaser Indemnified Party”) shall be indemnified and held harmless by the Sellers and the other Company Securityholders, severally and not jointly, for and against any and all Liabilities, losses, diminution in value, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, reasonable attorneys’fees and expenses) actually suffered or incurred by them (hereinafter a “‘Loss”), arising out of or resulting from:

    (a)        the breach of any representation or warranty made by (i) the Company or (ii) such Seller in this Agreement as of the date of this Agreement or as if such representation and warranty was made on and as of the Closing (it being understood that such representations and warranties shall be interpreted without giving effect to any limitations or qualifications as to “materiality” (including the word “material”) or “Material Adverse Effect” set forth therein); or

    (b)        the breach of any covenant or agreement made by (i) the Company or (ii) such Seller in this Agreement.

The indemnification obligations of a Seller pursuant to Section 9.02(a)(ii) and Section 9.02(b)(ii) shall relate solely to any such breach of a representation, warranty, claim or agreement made by such Seller in this Agreement.

The indemnification obligations of the Sellers set forth in this Section 9.02 are subject to the limitations and provisions of Section 9.06 below.

    SECTION 9.03        Indemnification by the Purchaser. Each Seller and its Affiliates, officers, directors, employees, agents, successors and assigns (each a “Seller Indemnified Party”) shall be indemnified and held harmless by the Purchaser for and against any and all Losses, arising out of or resulting from:

    (a)        the breach of any representation or warranty made by the Purchaser contained in this Agreement as of the date of this Agreement or as if such representation and warranty was made on and as of the Closing (it being understood that such representations and warranties shall be interpreted without giving effect to any limitations or qualifications as to “materiality” (including the word “material”) or “material adverse effect” set forth therein); or

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    (b)        ;the breach of any covenant or agreement by the Purchaser contained in this Agreement.

    SECTION 9.04        Third Party Claims. (a) An Indemnified Party shall give the Indemnifying Party notice of any matter that an Indemnified Party has determined has given or could give rise to a right of indemnification under this Agreement, within 60 days of such determination, stating the amount of the Loss, if known, and method of computation thereof, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises.

    (b)        The obligations and Liabilities of an Indemnifying Party under this Article IX with respect to Losses arising from claims of any third party which are subject to the indemnification provided for in this Article IX (“Third Party Claims”) shall be governed by and be contingent upon the following additional terms and conditions: if an Indemnified Party shall receive notice of any Third Party Claim, the Indemnified Party shall give the Indemnifying Party written notice of such Third Party Claim promptly after receipt by the Indemnified Party of such notice; provided, however, that any failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article IX except to the extent that the Indemnifying Party is materially prejudiced by such failure and shall not relieve the Indemnifying Party from any other obligation or Liability that it may have to any Indemnified Party otherwise than under this Article IX except to the extent that the Indemnifying Party is materially prejudiced by such failure. If the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party hereunder against any Losses that may result from such Third Party Claim, then the Indemnifying Party shall be entitled to assume and control the defense of such Third Party Claim at its expense and through counsel of its choice if it gives notice of its intention to do so to the Indemnified Party within ten business days of the receipt of such notice from the Indemnified Party; provided that such counsel is not reasonably objected to by the Indemnified Party; and provided, further, that if there is reasonably likely to exist a conflict of interest that would make it inappropriate in the judgment of the Indemnified Party in its reasonable discretion for the same counsel to represent both the Indemnified Party and the Indemnifying Party, then the Indemnified Party shall be entitled to retain its own counsel in each jurisdiction for which the Indemnified Party reasonably determines counsel is required, at the expense of the Indemnifying Party. In the event that the Indemnifying Party exercises the right to undertake any such defense against any such Third Party Claim as provided above, the Indemnified Party shall agree to any judgment, settlement, compromise or discharge of such Third-Party Claim that the Indemnifying Party may recommend that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third-Party Claim (or the full amount will be paid from the Escrow Fund), which releases the Indemnified Party completely in connection with such Third-Party Claim and that would not otherwise materially adversely affect the Indemnified Party. In the event that the Indemnifying Party exercises the right to undertake any such defense against any such Third Party Claim as provided above, the Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party, at the Indemnifying Party’s expense, all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party. Similarly, in the event that the Indemnified Party is, directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party, at the Indemnifying Party’s expense, all such witnesses, records, materials and information in the Indemnifying Party’s possession or under the Indemnifying Party’s control relating thereto as is reasonably required by the Indemnified Party. No such Third Party Claim may be settled by the Indemnified Party without the prior written consent of the Indemnifying Party (not to be unreasonably withheld).

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    SECTION 9.05        Distributions from Escrow Fund. In the event that (a) the Sellers’Representatives shall not have objected to the amount claimed by the Purchaser for indemnification with respect to any Loss in accordance with the procedures set forth in the Escrow Agreement or (b) the Sellers’ Representatives shall have delivered notice of their disagreement as to the amount of any indemnification requested by the Purchaser and either (i) the Sellers’ Representatives and the Purchaser shall have, subsequent to the giving of such notice, mutually agreed that the Sellers are obligated to indemnify the Purchaser for a specified amount and shall have so jointly notified the Escrow Agent or (ii) a final nonappealable judgment shall have been rendered by the court having jurisdiction over the matters relating to such claim by the Purchaser for indemnification from the Sellers and the Escrow Agent shall have received, in the case of clause (i) above, written instructions from the Sellers’ Representatives and the Purchaser, or, in the case of clause (ii) above, a copy of the final nonappealable judgment of the court, the Escrow Agent shall deliver to the Purchaser from the Escrow Fund any amount (subject to the other terms of this Agreement and the Escrow Agreement) determined to be owed to the Purchaser under this Article IX in accordance with the Escrow Agreement.

    SECTION 9.06        Limits of Indemnification; Loss Threshold and Exclusive Remedy. (a) The maximum aggregate amount of indemnifiable Losses that may be recovered from any Seller under this Agreement shall be equal to such Seller’s Pro Rata Share of the Escrow Fund; provided, however, that the maximum aggregate amount of indemnifiable Losses (together with any amount of Losses indemnified under this Agreement) that may be recovered from any Seller in the case of fraud or breaches of representations and warranties in Sections 3.03, 3.20 or 4.04 shall be equal to the aggregate consideration actually received by such Seller for such Seller’s Ordinary Shares pursuant to this Agreement.

    (b)        In calculating the amount of any Losses claimed by the Purchaser (or its Affiliates, officers, directors, employees, agents, successors and assigns) under this Article IX, there shall be deducted: (i) the amount of any reserve or provision included in the Financial Statements for Losses to which such claim relates, and (ii) the amount of any indemnification or other recoveries (including insurance proceeds) actually received by the Purchaser or the Company (or its Affiliates, officers, directors, employees, agents, successors and assigns) from any third party with respect to such Losses (it being agreed that the Purchaser or its Affiliates, officers, directors, employees, agents, successors and assigns shall be entitled to claim, but shall not be entitled to recover for, Losses with respect to an amount whose collection by the Purchaser or the Company from a third party is reasonably certain, but which has not actually been received; provided, however, that (A) if such amount is not actually received by the Purchaser or its Affiliates, officers, directors, employees, agents, successors and assigns within 90 days of the making of the claim, despite good faith efforts to collect such amount, they shall be entitled to be indemnified for such claim, and (B) the indemnification obligation with respect to such claim shall continue until 120 days following the making of the claim); further provided, however, that if the Purchaser is indemnified pursuant to the foregoing proviso because an amount is not collected within 90 days of the making of the claim, and the Purchaser subsequently collects such amount from the third party, the Purchaser shall promptly refund the amount of the indemnification to the Escrow Agent.

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    (c)        Notwithstanding anything contained herein to the contrary, the Purchaser Indemnified Parties shall not be entitled to indemnification pursuant to Section 9.02(a), and the Sellers shall not have any obligation to indemnify the Purchaser Indemnified Parties pursuant to Section 9.02(a), from and against any Losses in respect of claims under Section 9.02(a) until the aggregate amount of all Losses for which Purchaser Indemnified Parties are seeking indemnification equals or exceeds $500,000 (the “Threshold”), whereupon the Purchaser Indemnified Parties shall be entitled to indemnification with respect to all such Losses including the amount of the Threshold; provided, however, that (i) the threshold with respect to Losses arising from or resulting from breaches of the representations and warranties set forth in Section 3.20 shall be $50,000, with any such Losses to be aggregated for the purpose of calculating the Threshold, and (ii) the Threshold shall not apply with respect to Losses arising from or resulting from breaches of the representations and warranties set forth in Section 4.04.

    (d)        Sellers and the Company shall have no liability to the Purchaser for Losses which arise as a direct result of: (i) any act or omission of the Purchaser (and its Affiliates, officers, directors, employees, agents, successors and assigns) having as its purpose the precipitation of a claim for indemnification hereunder, (ii) any changes in accounting methods or policies after the Closing, (iii) the granting of any extensions or waivers with respect to any statute of limitations applicable to claims which might be made against the Purchaser (and its Affiliates, officers, directors, employees, agents, successors and assigns), unless the Purchaser has consulted with the Sellers’ Representative with respect to such extension or waiver, or (iv) the passing of, or any change in, after the Closing, any law or administrative practice of any governmental authority in any such case not actually in force at the date of the Closing (even if retroactive in effect), including, but not limited, to any increase in the tax rates in effect on the date of the Closing or imposition of any tax not in effect on the date of the Closing.

    (e)        Except in the case of fraud and except with respect to claims for non-cash equitable remedies, the indemnification provisions set forth in this Article IX and the Escrow Agreement shall be the sole and exclusive remedy of the Indemnified Party for any cause of action, right, demand, charge or claim such Indemnified Party may have resulting from, arising out of, based upon or relating to any Losses and any inaccuracy in, or breach of, any representation, warranty, claim or agreement of the Company or the Sellers.

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    SECTION 9.07        Sellers’ Representatives. Each Company Securityholder hereby appoints, authorizes and empowers Robi Hartman and Genesis Partners II LDC, acting together (such persons and any successor or successors to such persons in such capacity being the “Sellers’ Representatives”), to act as representatives and as the exclusive agents and attorneys in fact of such Company Securityholder, and the Sellers’ Representatives are hereby authorized and empowered to act on behalf of such Company Securityholder, to execute the Escrow Agreement on behalf of such Company Securityholder and to take any and all actions required or permitted to be taken by the Sellers’ Representatives under this Agreement or the Escrow Agreement, with respect to any claims made by the Purchaser or the Sellers for indemnification pursuant to this Article IX of this Agreement and with respect to any actions to be taken by the Sellers’ Representatives pursuant to the terms of the Escrow Agreement, including, without limitation, to: (i) execute the Escrow Agreement on behalf of such Company Securityholder; (ii) execute any agreement or instrument required to be executed and delivered by the Sellers’ Representative under this Agreement or the Escrow Agreement, (iii) authorize delivery to any Purchaser Indemnified Parties of the Indemnity Escrow Fund, or any portion thereof, in satisfaction of indemnification claims under this Article IX, (iv) agree to, negotiate, enter into settlements and compromises of and comply with orders of courts and awards of arbitrators with respect to such indemnification claims, (v) resolve any indemnification claims under this Article IX, and (vi) take all actions necessary in the sole discretion of the Sellers’ Representative for the accomplishment of the foregoing and all of the other terms, conditions and limitations of this Agreement or the Escrow Agreement. The Sellers’ Representatives shall at all times act in their capacity as Sellers’Representatives in a manner that the Sellers’ Representatives believe in good faith to be in the best interests of the Company Securityholders. Neither the Sellers’Representatives nor any of their directors, officers, employees or agents shall be liable to any Person for any error of judgment, or any action taken, suffered or omitted to be taken, under this Agreement or the Escrow Agreement, except in the case of its gross negligence, bad faith or willful misconduct. The Sellers’ Representatives may in their discretion consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts or failure to seek advice. The Sellers’ Representatives shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the Escrow Agreement. As to any matters not expressly provided for in this Agreement or the Escrow Agreement, the Sellers’ Representatives shall not be required to exercise any discretion or take any action. The Sellers shall, severally and not jointly, on a pro rata basis based on their Pro Rata Share, indemnify, defend and hold the Sellers’ Representatives harmless against any liabilities, losses, damages, claims, costs or expenses that may be incurred as such liabilities, losses, damages, claims, costs or expenses are incurred by the Sellers’Representatives and arising out of or in connection with the acceptance or administration of the Sellers’ Representatives’ duties hereunder, including, but not limited, the legal costs and expenses of defending such Sellers’ Representatives against any claim or liability (and all actions, claims, proceedings and investigations in respect thereof), in connection with, caused by or arising out of, directly or indirectly, the performance of the Sellers’ Representatives’ duties (except for bad faith or willful misconduct). The Sellers shall be responsible for and shall reimburse the Sellers’ Representatives on a pro rata basis upon demand for all reasonable expenses, disbursements and advances incurred or made by the Sellers’ Representatives in accordance with any of the provisions of this Agreement, the Escrow Agreement or any other documents executed in connection herewith or therewith, including, without limitation, the costs and expenses of receiving advice of counsel according to this Agreement and the Escrow Agreement. The indemnification and reimbursement of costs and expenses obligations of the Sellers vis-à-vis the Sellers’ Representatives pursuant to this Section 9.08 shall remain in full force and effect following the appointment of a new Sellers’ Representative or termination of this Agreement for any reason. Notwithstanding anything to contrary herein or in the Escrow agreement, (a) the Sellers’ Representatives are not authorized to, and shall not, accept on behalf of any Seller any purchase price consideration to which such Seller is entitled under this Agreement and (b) the Sellers’ Representatives shall not in any manner exercise, or seek to exercise, any voting power whatsoever with respect to shares of the Company now or hereafter owned of record or beneficially by a Seller unless the Sellers’Representatives are expressly authorized to do so in a writing signed by such Seller. At any time during the term of the Escrow Agreement, holders of a majority in interest of the Escrow Fund can appoint a new Sellers’ Representative by a written consent signed by such holders, a copy of which shall be provided to the Purchaser and the Escrow Agent. The Purchaser shall be entitled to rely exclusively on all statements, representatives and decisions of the Sellers’ Representatives as statements, representations and decisions of the Sellers.

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ARTICLE X
TERMINATION, AMENDMENT AND WAIVER

     SECTION 10.01        Termination. This Agreement may be terminated at any time prior to the Closing:

    (a)        by the Purchaser if, between the date hereof and the Closing, (i) an event or condition occurs that has resulted in a Material Adverse Effect, (ii) the Company or the Sellers shall not have complied in all material respects with the covenants or agreements contained in this Agreement to be complied with by it or (iii) any Seller, the Company or any Subsidiary makes a general assignment for the benefit of creditors, or any proceeding shall be instituted by or against any Seller, the Company or any Subsidiary seeking to adjudicate any of them a bankrupt or insolvent, or seeking liquidation, winding up or reorganization, arrangement, adjustment, protection, relief or composition of its debts under any Law relating to bankruptcy, insolvency or reorganization;

    (b)        by either the Sellers’ Representative or the Purchaser if the Closing shall not have occurred by January 31, 2007; provided, however, that the right to terminate this Agreement under this Section 10.01 (b) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date;

    (c)        by either the Purchaser or the Sellers’ Representative in the event that any Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; or

    (d)        by the mutual written consent of the Sellers’ Representative and the Purchaser.

    SECTION 10.02        Effect of Termination. In the event of termination of this Agreement as provided in Section 10.01, this Agreement shall forthwith become void and there shall be no liability on the part of either party hereto except (a) as set forth in Sections 6.03(b) and 11.01 and (b) that nothing herein shall relieve any party from liability for any breach of this Agreement.

    SECTION 10.03        Amendment. This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, the Sellers and the Purchaser or (b) by a waiver in accordance with Section 10.04.

    SECTION 10.04        Waiver. Any party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained herein or in any document delivered by the other parties pursuant hereto or (c) waive compliance with any of the agreements of the other parties or conditions to such party’s obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any of such rights. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

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ARTICLE XI
GENERAL PROVISIONS

    SECTION 11.01        Expenses. Except as otherwise specified in this Agreement, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.

    SECTION 11.02        Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by telecopy or registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11.02):

(a) if to the Company:

StoreAge Networking Technologies Ltd.
63 Bar Yehuda Road
Nesher 36651, Israel
Fax Number: +(972-4) 820-3748

with a copy to:

Yesha Primes
Primes, Shiloh, Givon, Meir Law Firm
16 Derech Hayam St., Haifa 34741, Israel
Fax Number: +(972-4) 838-1401

(b) if to the Purchaser:

LSI Logic Corporation
1621 Barber Lane
Milpitas, CA 95035
Attention: General Counsel
Fax Number: +(1-408) 433-6896

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with a copy to:

Aaron M. Lampert
Naschitz, Brandes & Co.
5 Tuval Street
Tel-Aviv 67897, Israel
Fax Number: +(972-3) 623-5051

(c) if to a Seller, to the address for such Seller set forth below the signature block for such Seller on the signature pages hereto

with a copy to:

L.R (Robi) Hartman
c/o West End Technology Investments Ltd.
Twin Towers Building One
33 Jabotinsky Street
Ramat Gan 52511, Israel
Fax Number: (+972-3) 612-3994

Genesis Partners II L.D.C.
11 HaMenofim Street
Ackerstein Towers, Building B
4th Floor
Herzliya Pituach, Israel
Attention: Eddy Shalev
Fax Number: (+972-9) 972-9001

with a copy to:
Ian Rostowsky
Efrati Galili Lahat & Co.
6 Wissotsky Street
Tel-Aviv 62338
Fax Number: (+972-3) 604-0111

    SECTION 11.03        Public Announcements. No party to this Agreement shall make, or cause to be made, any press release or public announcement in respect of this Agreement or the transactions contemplated by this Agreement or otherwise communicate with any news media without the prior written consent of the other party, and the parties shall cooperate as to the timing and contents of any such press release or public announcement.

    SECTION 11.04        Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible.

45

    SECTION 11.05        Entire Agreement. This Agreement, the Escrow Agreement, the Confidentiality Agreement and the other agreements contemplated hereby constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between the Sellers and the Purchaser with respect to the subject matter hereof and thereof.

    SECTION 11.06        Assignment. This Agreement may not be assigned by operation of law or otherwise without the express written consent of the Sellers and the Purchaser (which consent may be granted or withheld in the sole discretion of the Sellers or the Purchaser); provided, however, that the Purchaser may assign this Agreement or any of its rights and obligations hereunder to one or more Affiliates of the Purchaser without the consent of the Seller; provided, however, that no such assignment shall release the Purchaser from any of its obligations under this Agreement to pay consideration to the Sellers or the holders of Company Share Options at the Closing.

    SECTION 11.07        No Third Party Beneficiaries. Except for the provisions of Article IX relating to indemnified parties, this Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their permitted assigns and nothing herein, express or implied is intended to or shall confer upon any other Person, including, without limitation, any union or any employee or former employee of the Company or any Subsidiary, any legal or equitable right, benefit or remedy of any nature whatsoever, including, without limitation, any rights of employment for any specified period, under or by reason of this Agreement.

    SECTION 11.08        Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any U.S. federal or state court sitting in the city of New York. The parties hereto hereby (a) submit to the exclusive jurisdiction of any court sitting in the city of New York for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto, and (b) irrevocably waive, and agree not to assert by way of notion, defense, or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement or the transactions contemplated by this Agreement may not be enforced in or by any of the above-named courts.

    SECTION 11.09        Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

    SECTION 11.10        Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

[Intentionally left blank – next page the first signature page]

46

        IN WITNESS WHEREOF, the Purchaser, the Company and each of the Sellers have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

LSI LOGIC CORPORATION


By:
——————————————
Name:
Title:

STOREAGE NETWORKING TECHNOLOGIES LTD.


By:
——————————————
Name: Mr. Eli Shapira
Title: CEO

IIS INTELLIGENT INFORMATION SYSTEMS LTD.


By:
——————————————
Name:
Title:
Address:
Fax Number:

47

GENESIS PARTNERS II L.D.C.


By:
——————————————
Name:
Title:
Address:
Fax Number:

GENESIS PARTNERS II (ISRAEL) L.P.


By:
——————————————
Name:
Title:
Address:
Fax Number:

48

OPHIRTECH LTD.


By:
——————————————
Name:
Title:
Address:
Fax Number:

KOONRAS TECHNOLOGIES LTD.


By:
——————————————
Name:
Title:
Address:
Fax Number:

CISCO SYSTEMS INTERNATIONAL B.V.


By:
——————————————
Name:
Title:
Address:
Fax Number:

49

MORGAN KEEGAN OPPORTUNITY FUND, L.P.


By:
——————————————
Name:
Title:
Address:
Fax Number:

MORGAN KEEGAN EMPLOYEE INVESTMENT FUND, L.P.


By:
——————————————
Name:
Title:
Address:
Fax Number:

CDC HOLDINGS LIMITED


By:
——————————————
Name:
Title:
Address:
Fax Number:

50

THE CHALLENGE FUND - ETGAR II LP


By:
——————————————
Name:
Title:
Address:
Fax Number:

AMNON EVRON & CO. TRUST COMPANY LTD.


By:
——————————————
Name:
Title:
Address:
Fax Number:

FAR EAST FINANCE LIMITED


By:
——————————————
Name:
Title:
Address:
Fax Number:

DAVID GOL


By:
——————————————
Name:
Title:
Address:
Fax Number:

51

ARIEL SHOOB, ADV.


By:
——————————————
Name:
Title:
Address:
Fax Number:

INDUSTRIAL SYSTEMS AND EQUIPMENT CO.


By:
——————————————
Name:
Title:
Address:
Fax Number:

52

PLENUS TECHNOLOGIES LTD.


By:
——————————————
Name:
Title:
Address:
Fax Number:

GOLDEN GATE BRIDGE FUND LP


By:
——————————————
Name:
Title:
Address:
Fax Number:

PLENUS II LP


By:
——————————————
Name:
Title:
Address:
Fax Number:

PLENUS II (D.C.M.), LP


By:
——————————————
Name:
Title:
Address:
Fax Number:

53

SAREL ALTSHULER


By:
——————————————
Name:
Title:
Address:
Fax Number:

MARCEL KATZ


By:
——————————————
Name:
Title:
Address:
Fax Number:

DANA COHEN


By:
——————————————
Name:
Title:
Address:
Fax Number:

MICHAEL PENN


By:
——————————————
Name:
Title:
Address:
Fax Number:

GREGORY DARDYK


By:
——————————————
Name:
Title:
Address:
Fax Number:

54

LINDA RITCHIE


By:
——————————————
Name:
Title:
Address:
Fax Number:

55

EXHIBIT A

OWNERSHIP OF ORDINARY SHARES

List of Sellers	Number of Ordinary Shares		Percentage of Ordinary Shares outstanding on the date of this Agreement			Percentage of fully diluted shares (assuming exercise of all outstanding options) - Pro Rata Share
IIS Intelligent Information Systems Ltd		6,283,866		12.61	%		10.89	%
Ophir Tech Ltd		4,035,804		8.10	%		6.99	%
Koonras Technologies Ltd		4,276,668		8.58	%		7.41	%
Genesis Partners II LDC		10,100,216		20.27	%		17.50	%
Genesis Partners II (Israel) LP		1,493,356		3.0	%		2.59	%
Cisco Systems International BV		5,175,894		10.39	%		8.97	%
Morgan Keegan Opportunity Fund LP		3,211,516		6.44	%		5.56	%
Morgan Keegan Employee Investment Fund LP		1,070,506		2.15	%		1.85	%
The Challenge Fund - Etgar II LP		3,040,234		6.10	%		5.27	%
Far East Finance Limited		272,978		0.55	%		0.47	%
David Gol		16,058		0.03	%		0.03	%
Amnon Evron & Co.		10,706		0.02	%		0.02	%
CDC Holdings Limited		1,541,528		3.09	%		2.67	%
Ariel Shoob, Adv		7,364,482		14.77	%		12.76	%
Industrial Systems And Equipment Co., Inc		241,458		0.48	%		0.42	%
Plenus Technologies Ltd		215,337		0.43	%		0.37	%
Golden Gate Bridge Fund LP		25,586		0.05	%		0.04	%
Plenus II LP		1,241,961		2.49	%		2.15	%
Plenus II (D.C.M), LP		123,272		0.24	%		0.21	%
Yuli Yardeni (Trustee for former employees)		84,784		0.17	%		0.15	%
Linda Ritchie		10,688		0.02	%		0.02	%
Ordinary Shares subject to outstanding Company
Share Options granted but not exercised (NOT A
SELLER)		7,881,202					13.65	%
		57,718,100		100	%		100	%

56

EXHIBIT 2.03

FORM OF ESCROW AGREEMENT

57

EXHIBIT 5.07

FORM OF CSO UNDERTAKING

To: The Research Committee
The Office of the Chief Scientist
Jerusalem

Relating to projects that have been financed by or are currently being financed by the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor (the “OCS”) (All considered as belong to Plan Number 17229) and to projects of the Company (as this term is defined below) that may be financed by the OCS in the future (the “Projects”).

1. Undertaking

We, the undersigned, of _________________________________ [Foreign investor’s name] a company incorporated, organized and existing under the laws of _______________ and whose registered office is at _________________ (“______”), having, by an agreement dated _____________, committed to invest in _____________________ Ltd. (the “Company”), in exchange for [number and type of shares] ________ shares of the Company;

Recognizing that the Company’s research and development Projects are currently, have been or will be financially supported by the Government of the State of Israel, through the OCS under and subject to the provisions of The Encouragement of Research and Development in Industry Law 5744-1984 (the “R&D Law”) and the regulations, rules and procedures promulgated there under;

Recognizing that the R&D Law places strict constraints on the transfer of know-how and/or production rights, making all such transfers subject to the absolute discretion of the OCS’ research committee (the “Research Committee”), acting in accordance with the aims of the R&D Law and requiring that any such transfer receive the prior written approval of the Research Committee;

Hereby declare and undertake:

1. To observe strictly all the requirements of the R&D Law and the regulations, rules and procedures promulgated there under, as applied to the Company and as directed by the Research Committee, in particular those requirements stipulated under Sections 19, 19A and 19B of the R&D Law relating to the prohibitions on the transfer of know-how and/or production rights.

2. As a shareholder of the Company, to make all reasonable efforts that the Company shall observe strictly all the requirements of the R&D Law and the regulations, rules and procedures promulgated there under, as applied to the Company and as directed by the Research Committee, in particular those requirements stipulated under Sections 19, 19A and 19B of the R&D Law relating to the prohibitions on the transfer of know-how and/or production rights.

——————————
Date ————————————————————————
Name (block letters) and signature of Authorized Company Representative and Company Seal

58

EXHIBIT 8.02(g)

REQUIRED CONSENTS AND APPROVALS

Consent of the OCS

Consent of the Investment Center of the Israeli Ministry of Industry

Consent of the Lessor pursuant to the lease agreement between the Company and P. Furman Properties Ltd. (the “Lessor”) in connection with the lease of the premises at 63 Bar Yehuda Rd., Nesher, Israel.

Microsoft Licensing, GP – OEM Customer License Agreement, updated August 30, 2006

WebMethods UK Ltd. – Distribution Platform Alliance Agreement, dated September 28, 2006

59

EXHIBIT 8.02(h)

REQUIRED EMPLOYEES

Tier I Employees

Eli Shapira
Nelson Nahum
Mark Spowart
Dani Naor
Kevin Liebel
Doug Jury
Mosche Melnikov
Yair Hershko
Eitan Maggeni
Gabi CohenZamir
Michael Gralnik

60

EXHIBIT 8.02(l)

MATTERS TO BE ADDRESSED IN OPINION OF THE COMPANY'S COUNSEL

1. Due organization and valid existence of the Company

2. Company’s power and authority to conduct its business in Israel

3. Due authorization, execution and delivery of this Agreement by the Company

4. Company’s capitalization and outstanding share capital, qualified by knowledge

5. Governmental approvals and consents of third parties under material contracts of the Company known to such counsel required in connection with the transactions contemplated by this Agreement

61

EX-4.4

Exhibit 4.4

SHARE EXCHANGE AGREEMENT

        THIS SHARE EXCHANGE AGREEMENT (“Agreement”), dated as November 5, 2007, by and among I.I.S Intelligent Information Systems Ltd., an Israeli company (“IIS”), Witech Communications Ltd., an Israeli company (“Witech”) and the shareholders of Witech listed on Schedule 1.1 hereto (the “Witech Shareholders”).

W I T N E S S E T H:

        WHEREAS, IIS and the Witech Shareholders intend to effect an exchange of Shares of Witech for shares of IIS in accordance with Section 103K of the Israeli Income Tax Ordinance [New Version] (the “Exchange”) in accordance with this Agreement pursuant to which all the issued and outstanding shares of Witech will be exchanged for shares of IIS to be issued to the Witech Shareholders and Witech will become a wholly-owned subsidiary of IIS;

        WHEREAS, the respective boards of directors of IIS, and Witech deem the Exchange desirable and in the best interests of their respective corporations and their respective stockholders, and have proposed, declared advisable, and approved the Exchange pursuant to this Agreement;

        WHEREAS, in order to induce each party to enter into this Agreement and to consummate the Exchange, the Witech Shareholders are delivering certain undertakings to IIS and IIS is delivering certain undertakings to Witech and the Witech Shareholders;

        NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, and in order to set forth the terms and conditions of the Exchange, the mode of carrying the same into effect, the manner and basis of converting the rights of the current holders of the presently issued outstanding ordinary shares, par value NIS 0.1 per share (the “Witech Shares”), of Witech into the right to receive the Exchange Shares (as defined herein), and such other details and provisions as are deemed necessary or proper, the parties hereto agree as follows:

ARTICLE I

EXCHANGE

    1.1.       The Exchange. Subject to and in accordance with the terms and conditions of this Agreement, at the Closing (as hereinafter defined) (a) the Witech Shareholders shall severally and not jointly transfer, assign and deliver to IIS, all of the Witech Shares (each of the Witech Shareholders shall transfer its/his respective number of Witech Shares as specified in Schedule 1.1 hereto) free and clear of any mortgage, pledge, lien, charge, security interest, option, right of first refusal, preferential purchase right, defect, encumbrance or other right or, interest of any other person (collectively, “Encumbrances”) and (b) IIS shall issue and deliver to the Witech Shareholders (or the trustee on their behalf) Ordinary Shares NIS 0.003 nominal value each of IIS (the “Exchange Shares”) in such number set out next to each Witech Shareholders name in Exhibit A hereto. No fractional shares shall be issued and all numbers will be rounded up or down to the nearest whole number; provided that, the number of Exchange Shares shall not exceed 11,576,539. Immediately after the Closing, the Exchange Shares shall constitute fifty percent (50%) of the issued and outstanding share capital of IIS (less any shares due to IIS by virtue of loan agreements between IIS and Witech). All of the Exchange Shares will be deemed “restricted stock” as that term is defined in the regulations of the Securities and Exchange Commission, promulgated under the Securities Act of 1933, as amended, and IIS undertakes to file a registration statement with respect to such Exchange Shares in accordance with Section 7.1 hereof.

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    1.2.       Closing Date. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Amit, Pollak, Matalon, Law Offices in Tel-Aviv Israel, on a date to be designated by IIS and Witech (the “Closing Date”), which shall be no later than the second business day after the satisfaction or waiver of the conditions set forth in Article V, which in any event shall be no later than December 31, 2007 unless agreed in writing by IIS, Witech and the Shareholders Representative (as defined in Section 5.1.9 below).

    1.3.       Material Adverse Effect. “Material Adverse Effect” or “Material Adverse Change” means any effect, change, event, circumstance or condition which when considered with all other effects, changes, events, circumstances or conditions could reasonably be expected to materially adversely affect the business, results of operations or financial condition of IIS or Witech, in each case including its respective subsidiaries together with it taken as a whole, as the case may be. In no event shall any of the following constitute a Material Adverse Effect or a Material Adverse Change: (i) a change in the trading prices of either of IIS equity securities between the date hereof and the Closing Date, in and of itself; (ii) any effects, changes, events, circumstances or conditions resulting from any change in law or generally accepted accounting principles, which affect generally entities such as IIS and Witech; or (ii) any effect resulting from compliance by IIS or Witech with the terms of this Agreement.

    1.4.       Witech’s Transfer Books Closed. Upon the Closing Date, the share transfer books of Witech shall be deemed closed, and no transfer of any certificates theretofore representing the Witech Shares shall thereafter be made or consummated; and no further transfer of any such Witech Shares shall be made on such share transfer books after the Closing Date.

    1.5.       Further Action. Witech and each of the Witech Shareholders shall take all such reasonable and lawful action as may be necessary or appropriate in order to effectuate the Exchange as promptly as possible. If, at any time after the Closing Date, any further action is determined by IIS to be necessary or desirable to carry out the purposes of this Agreement or to vest IIS with full right, title and possession of and to all rights to the Witech Shares the officers and directors of IIS shall be fully authorized (in the name of the Witech Shareholders) to take such action.

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    1.6.       Treatment of Stock Options. On or prior to the Closing Date, each of the then outstanding options, warrants and other rights to purchase Witech Shares or other non-cash compensation to the Witech Shareholders or the employees of Witech, (as defined herein) (collectively, the “Witech Options”)(which includes all outstanding options granted under Witech’s stock option plans (the “Witech Option Plans”) and Witech’s stock option agreements (the “Witech Option Agreements”)) will be terminated immediately prior to the Closing Date without any liability or obligation on the part of Witech or IIS.

    1.7.       Limitation of Assumed Liabilities. At the date of the Closing and except as agreed in writing by IIS, the aggregate total liabilities (of any kind or nature whatsoever) of Witech (on a consolidated basis) to any of the Shareholders or any of their affiliates and to any financial institutions, or other lenders or any third party, on a consolidated basis (including interest calculated up to the scheduled repayment date) shall not exceed $ $2,357,813 as set out in Schedule 1.7 hereto. It is agreed that out of the abovementioned, liabilities in the aggregate amount of approximately $660,571 will only be paid after the Company has raised at least $6,000,000 in equity or convertible debt financing following the date of this Agreement. At Closing, all shareholders and all holders of any other rights to shares of Witech will sign a customary waiver and release in favor of Witech and IIS, except with respect to the liabilities set out in Schedule 1.7 (the “Witech Shareholder Waiver”) hereto, which shall be liabilities only of Witech except as specifically assumed by IIS pursuant to Schedule 1.7 above.

ARTICLE II

REPRESENTATIONS AND WARRANTIES
OF WITECH AND CERTAIN WITECH SHAREHOLDERS

        Witech and Charles Moss, David Elooz, Eliyahu Cohen, Ronen Segal and Dan Ben Dror represent and warrant to IIS, as follows:

        Reference to any one matter in the Witech Disclosure Schedule (as defined below) is deemed sufficient for any other reference in such Witech Disclosure Schedule.

    2.1.       Organization and Standing. Witech is a company duly organized and validly existing under the laws of the State of Israel, has all requisite power and authority to carry on its business as it is currently conducted and to own and operate the properties currently owned and operated by it, and is duly qualified or licensed to do business and is in good standing as a foreign corporation authorized to do business in all jurisdictions in which the character of the properties owned or the nature of the business conducted by it would make such qualification or licensing necessary, except where the failure to be so qualified or licensed could not reasonably be expected to have a Material Adverse Effect on Witech. Witech has delivered to IIS accurate and complete copies of its memorandum of association and articles of association and other charter documents, including all amendments thereto.

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    2.2.       Agreement Authorized and its Effect on Other Obligations.

    2.2.1        Authorization and Enforceability. Witech has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to the receipt of all requisite Witech Third Party Consents (as hereinafter defined), to consummate the transactions contemplated hereby and thereby. The execution and delivery by Witech of this Agreement and the performance by Witech of its obligations hereunder have been duly and validly authorized by all necessary corporate action on the part of Witech. This Agreement has been duly executed and delivered by Witech and (assuming due authorization, execution and delivery hereof by the other parties hereto) constitutes a legal, valid and binding obligation of Witech, enforceable (subject to normal equity principles) against Witech in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, debtor relief or similar laws affecting the rights of creditors generally.

    2.2.2.        Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality (“Governmental Entity”) or any third party, is required by or with respect to Witech or any of its subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except the approval of Mizrahi Tfahot Bank (the “Bank Approval”).

    2.2.3.        No Violation. Assuming the receipt of all consents, approvals, orders or authorizations of, and the registration, declaration or filing with, any Governmental Entity or other third party contemplated by Section 2.2.2, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) conflict with or result in a violation or breach of any term or provision of, nor constitute a default under, the Articles of Association of Witech; (ii) contravene, conflict with or result in a violation or breach of, or result in a default under, any obligations, indenture, mortgage, deed of trust, lease, contract or other agreement to which Witech or any of its subsidiaries is a party or, by which any of them or their properties are bound, (iii) contravene, conflict with or result in a violation of, or give any Governmental Entity or other Person the right to challenge the Exchange or to exercise any remedy or obtain any relief under, any legal requirement or any order, writ, injunction, judgment or decree to which Witech, or any of the assets owned or used by Witech, is subject, (iv) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Entity the right to revoke, withdraw, suspend, cancel, terminate, modify or exercise any right or remedy or require any refund or recapture with respect to, any Grant (as hereinafter defined) given by any Governmental Entity (or any benefit provided or available thereunder) or other permit, license, consent, authorization, grant, benefit, right that is held by Witech or, that otherwise relates to the business or assets of Witech, (v) result in the imposition, creation or crystallization of any Encumbrance (as hereinafter defined) upon or with respect to any asset owned or used by Witech, or (vi) with the passage of time or the giving of notice, have any of the effects set forth in clauses (i) through (v) of this Section; in each case (other than clause (i) hereof) other than such violations, breaches or defaults as could not reasonably be expected to have a Material Adverse Effect on Witech. Section 2.2 of the Witech Disclosure Schedule lists all holders of any material indebtedness of Witech, the lessors of any material property leased by Witech and the other parties to any material agreements to which Witech is a party in each case whose consent to the Exchange is required (“Witech Third Party Consents”).

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    2.3.        Capitalization. The authorized share capital of Witech consists of NIS 50,000 divided into 500,000 ordinary shares, par value NIS 0.1 per share, of which as of the date hereof 40.473 shares are issued and outstanding, and no Witech Options are issued and outstanding as of the date hereof. All of such outstanding shares are validly issued, fully paid and non-assessable, and were not issued in violation of any preemptive rights of any shareholder. Section 2.3 of the Witech Disclosure Schedule delivered by Witech to IIS dated the date hereof (the “Witech Disclosure Schedule”) sets forth a complete list as of the date of this Agreement of all outstanding options, warrants or obligations of any kind to issue any shares of Witech, the owners thereof and the amounts owed. Other than as set forth in Section 2.3 of the Witech Disclosure Schedule, Witech has no outstanding options, warrants or obligations of any kind to issue any of its shares. Except as set forth in Section 2.3 of the Witech Disclosure Schedule: (i) none of the outstanding Witech Shares, or Witech Options and no holder of any Witech Shares, or Witech Options is entitled or subject to any preemptive right, right of participation, right of maintenance or similar right; (ii) none of the outstanding Witech Shares, or Witech Options and no holder of Witech Shares, or Witech Options is subject to any right of first refusal; and (iii) there are no contracts, undertakings or agreements relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to), any Witech Shares, or Witech Options or Witech Loans. Other than the Witech Loans, Witech is not under any obligation, or bound by any contract pursuant to which it may become obligated, to repurchase, redeem or otherwise acquire any Witech Shares, Witech Options or Witech Loans. The treatment of the Witech Options in accordance with Section 1.7 of this Agreement will not violate or conflict with the terms of the Witech Option Plans, Witech Option Agreements, or the applicable warrant agreements governing the terms of the Witech Loans or to Witech’s knowledge, any other agreement or plan governing the terms of the Witech Options or the Witech Loans.

    2.4.        Subsidiaries. Except for CDRide, Inc. a Delaware Corporation (the “Subsidiary”) the Company has no other direct or indirect subsidiary corporations and no interest in any partnership or other legal entity. All outstanding shares of capital stock of the Subsidiary are owned by Witech, are validly issued, fully paid, and non-assessable, and Witech has good and valid title thereto free and clear of any Encumbrances. The Subsidiary is a corporation duly organized, validly existing, and in good standing under the laws of Delaware and has full requisite corporate power and authority to own its property and carry on its business as presently conducted by it and is duly qualified or licensed to do business and is in good standing as a foreign corporation authorized to do business in all jurisdictions in which the character of the properties owned or the nature of the business conducted makes such qualification or licensing necessary, except where the failure to be so qualified or licensed could not reasonably be expected to have a Material Adverse Effect on Witech. As used in this Article II, the term “Witech” also includes the Subsidiary, except where the context indicates to the contrary.

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    2.5.        Financial Statements. Witech has previously furnished to IIS true and complete copies of its consolidated audited financial statements for the years ended December 31, 2004, December 31, 2005 and December 31, 2006 and unaudited internal consolidated financial statements for the period ended September 30, 2007 (collectively, the “Financial Statements”). The Financial Statements were prepared in accordance with the published regulations of the Commission and in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved and fairly present, or will present, the consolidated financial position for Witech and its subsidiaries as of the dates thereof and the consolidated results of their operations and changes in financial position for the periods then ended (except with respect to interim period financial statements, for normal year end adjustments which are, individually or in the aggregate, not material in amount).

    2.6.        Liabilities. Witech does not have any liabilities or obligations, either accrued, absolute, contingent, or otherwise, or have any knowledge of any potential liabilities or obligations, which could reasonably be expected to have a Material Adverse Effect on Witech, other than those (i) disclosed in the Financial Statements, or (ii) set forth in Section 2.6 of the Witech Disclosure Schedule.

    2.7.        Additional Witech Information. Set forth in Section 2.7 of the Witech Disclosure Schedule are true, complete and correct lists of the following items, and Witech agrees that upon the request of IIS, it will furnish to IIS true, complete and correct copies of any documents referred to in such lists:

    2.7.1.        Employee Compensation Plans. All bonus, incentive compensation, stock option, deferred compensation, profit-sharing, retirement, pension, welfare, severance pay, supplemental income, group insurance, death benefit, or other fringe benefit plans, arrangements or trust agreements covering active, former or retired employees of Witech (collectively, “Witech Plans”), together with copies of the related summary plan descriptions, if any, the most recent reports, if any, with respect to such plans, arrangements, or trust agreements filed with any governmental agency and all Internal Revenue Service determination letters that have been received with respect to such plans;

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    2.7.2.        Compensation. The names and salary rates of all present directors, officers and employees of Witech together with any bonuses and other compensation paid or payable to such persons and, to the extent existing on the date of this Agreement, all arrangements with respect to any bonuses to be paid to them from and after the date of this Agreement (including compensation payable pursuant to bonus, deferred compensation or commission arrangements or in connection with any manager’s insurance, education fund and health fund), and such employee’s employer, date of employment and position;

    2.7.3.        Employee Agreements. Any collective bargaining agreements of Witech with any labor union or other representative of employees, including amendments, supplements, and understandings, and all employment and consulting agreements of Witech in effect on the date hereof;

    2.7.4.        Guaranties. All third party indebtedness, liabilities and commitments of others as to which Witech is a guarantor, endorser, co-maker, surety, or accommodation maker, or is contingently liable therefor (excluding liabilities as an endorser of checks and the like in the ordinary course of business) and all letters of credit, whether stand-by or documentary, issued by any third party; and

    2.8.        No Undisclosed Contracts or Defaults. Except as set forth on Schedule 2.8 (Contracts) to the Witech Disclosure Schedule, Witech is not a party to, or bound by, any material contract or arrangement of any kind to be performed after the Closing Date, nor is Witech in default in any material obligation or covenant on its part to be performed under any material obligation, lease, contract, order, plan or other arrangement.

    2.9.        Absence of Certain Changes and Events. Except as set forth in the Financial Statements or in Section 2.9 of the Witech Disclosure Schedule, since December 31, 2006, there has not been:

    2.9.1.        Financial Change. On or prior to the date hereof, any adverse change in the financial condition, operations, assets, liabilities or business of Witech which could reasonably be expected to have a Material Adverse Effect on Witech;

    2.9.2.        Property Damage. Any damage, destruction, or loss to the business or properties of Witech (whether or not covered by insurance) that could reasonably be expected to have a Material Adverse Effect on Witech;

    2.9.3.        Dividends. Any declaration, setting aside, or payment of any dividend or other distribution in respect of the Witech Shares, or any direct or indirect redemption, purchase or any other acquisition by Witech of any such stock;

    2.9.4.        Labor Disputes. Any labor dispute (other than routine grievances);

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    2.9.5.        Employment Arrangements. Any increase in compensation, bonus, deferred compensation, stock options or other consideration of any employee or director other than in the ordinary course of business consistent with past practice;

    2.9.6.        Securities. Any sale, issue or grant of (i) any share or other security (except for Witech Shares issued upon the valid exercise of outstanding options in accordance with the terms of Witech Plans or the Witech Option Agreements), (ii) any option, warrant or right to acquire any share or any other security, or (iii) any instrument convertible into or exchangeable for any share or other security; or

    2.9.7.        Amendments to Charter Documents. Any amendment to the articles of association or other charter or organizational documents of Witech; the consummation of any Exchange, consolidation, amalgamation, arrangement, share exchange, business combination, recapitalization, reclassification of shares, stock split, division or subdivision of shares, stock dividend, issuance of bonus shares, reverse stock split, consolidation of shares or similar transaction involving Witech.

    2.10.        Taxes.

    2.10.1.        Tax Returns Filed; Taxes Paid. Except as set forth in Section 2.10.1 of the Witech Disclosure Schedule, (i) all returns, declarations, claims for refund, information returns and reports (“Tax Returns”) of or with respect to any and all taxes, charges, fees, levies, assessments, duties or other amounts payable to any federal, state, local, foreign or other taxing authority or agency, including, without limitation, (x) income, franchise, profits, gross receipts, minimum, alternative minimum, estimated, ad valorem, value added, sales, use, service, real or personal (tangible and intangible) property, environmental, capital stock, leasing, lease, user, license, registration, payroll, withholding, disability, employment, social security (or similar), workers compensation, unemployment compensation, utility, severance, excise, stamp, windfall profits, transfer and gains taxes, (y) customs, duties, imposts, charges, levies or other similar assessments of any kind, and (z) interest, penalties and additions to tax imposed with respect thereto (“Tax” or “Taxes”) which are required to be filed on or before the Closing by or with respect to Witech have been or will be duly and timely filed, (ii) all items of income, gain, loss, deduction and credit or other items required to be included in each such Tax Return have been or will be so included and all such information and any other information provided in each such Tax Return is true, correct and complete, (iii) all Taxes owed by Witech which have become or will become due have been or will be timely paid in full, (iv) all Tax withholding and deposit requirements imposed on or with respect to Witech have been or will be satisfied in full in all respects, (v) no penalty, interest or other charge is or will become due with respect to the late filing of any such Tax Return or late payment of any such Tax, and (vi) there are no Encumbrances, other than statutory liens for Taxes not yet due, on any of the assets of Witech that arose in connection with any failure (or alleged failure) to pay any Tax.

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    2.10.2.        Extensions Disclosed. Except as set forth in Section 2.10.2 of the Witech Disclosure Schedule, there is not in force any extension of time with respect to the due date for the filing of any Tax Return of or with respect to Witech or any waiver or agreement for any extension of time for the assessment or payment of any Tax of or with respect to Witech.

    2.10.3.        Claims Disclosed. There is no outstanding written claim from any governmental taxing authority against Witech for any Taxes, and no assessment, deficiency or adjustment has been asserted, proposed or threatened in writing by any governmental taxing authority with respect to any Tax Return of or with respect to Witech with respect to any period for which the statute of limitations on the assessment of tax deficiencies has not expired other than those disclosed (and to which are attached true and complete copies of all audit or similar reports) in Section 2.10.3 of the Witech Disclosure Schedule. To Witech’s knowledge, no written claim has ever been made by a governmental taxing authority in a jurisdiction where Witech does not file Tax Returns that it is or may be subject to taxation in that jurisdiction.

    2.10.4.        Scheduled Tax Liabilities Sufficient. The total reserve amounts for liabilities for current and deferred Taxes in the financial statements referred to in Section 2.4 of this Agreement are sufficient to cover in all material respects the payment of all Taxes, whether or not assessed or disputed, which are or to have been, due by or with respect to Witech up to and through the periods covered thereby.

    2.10.5.        No Tax Liens. Except for statutory liens for current Taxes not yet due, no material liens for Taxes exist upon the assets of Witech.

    2.10.6.        Change of Accounting Method. Witech will not be required to include any amount in income for any taxable period beginning after the Closing Date as a result of a change in accounting method for any taxable period ending on or before the Closing Date or pursuant to any agreement with any Tax authority with respect to any such taxable period.

    2.10.7.        Activity Limitations. Except for the Tax Ruling (as defined in Section 5.2.15), Witech has not entered into any agreement or arrangement with any taxing authority that requires it to take any action or to refrain from taking any action.

    2.10.8.        Intentionally Left Blank.

    2.10.9.        Intentionally Left Blank.

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    2.11.        Intellectual Property.

    2.11.1.        Ownership. Section 2.11.1 of the Witech Disclosure Schedule accurately identifies all software programs currently being marketed by Witech and all software products or programs under development by Witech but not currently marketed (collectively, the “Software Programs”). Except as set forth on Schedule 2.11.1 to the Witech Disclosure Schedule, Witech owns full and unencumbered right and good and valid title to the Software Programs listed in Section 2.11.1 of the Witech Disclosure Schedule, all patents, trademarks, service marks, trade names, domain names and copyrights (including registrations and applications pertaining thereto and extensions, continuations, renewals or divisions of any such registrations or applications) and all other intellectual property rights, trade secrets, processes, formulas, know-how and other confidential or proprietary information, processes and formulae used in its businesses or otherwise necessary for the conduct of its businesses (the “Intellectual Property”), free and clear of all mortgages, pledges, liens, security interests, conditional sales agreements, encumbrances or charges of any kind. Section 2.11.1 of the Witech Disclosure Schedule contains a complete list of all registered trademarks and service marks, all reserved trade names, all registered copyrights and all filed patent applications and issued patents used in, or otherwise necessary for the conduct of, the business of Witech as heretofore conducted.

    2.11.2.        Notices. Section 2.11.2 of the Witech Disclosure Schedule sets forth the form and placement of the proprietary legends and copyright notices displayed in or on the Software Programs. In no instance has the eligibility of the Software Programs for protection under applicable copyright law been forfeited to the public domain by omission of any required notice or any other action.

    2.11.3.        Protection. Witech has in force the trade secret protection program set forth in Section 2.11.3 of the Witech Disclosure Schedule. To Witech’s best knowledge, there has been no violation of such program by any person or entity. Except with respect to the distribution of source code of the Software Programs that can only be distributed in source code (such Software Programs being listed by name in Section 2.11.3 of the Witech Disclosure Schedule) pursuant to license agreements listed in Section 2.13.1 of the Witech Disclosure Schedule, the source code and related technical system documentation for the Software Programs (i) have at all times been maintained in strict confidence by Witech, and to Witech’s best knowledge, by third parties and (ii) have been disclosed by Witech only to employees and contractors who have had a “need to know” the contents thereof in connection with the performance of their duties to Witech and who have executed written agreements requiring the recipient to keep the information in strict confidence.

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    2.11.4.        Personnel. All key personnel who now, or have been employees, agents, consultants and contractors of Witech and who have contributed to or participated in the conception and development of the Software Programs, technical documentations, or Intellectual Property on behalf of Witech have executed nondisclosure agreements in form provided by Witech to IIS and either (1) have been a party to a “work-for-hire” arrangement or agreements with Witech in accordance with applicable law that has accorded Witech full, exclusive and original ownership of all tangible and intangible property thereby arising, or (2) have executed appropriate instruments of assignment in favor of Witech as assignee that have conveyed to Witech, effective, and exclusive ownership of all tangible and intangible property thereby arising.

    2.11.5.        Infringement.

    2.11.5.1.        No Infringement. Neither the existence nor the sale, license, lease, transfer, use, reproduction, distribution, modification or other exploitation by Witech of any Software Program or Intellectual Property, as such Software Program or Intellectual Property, as the case may be, is or was, or is currently contemplated to be, sold, licensed, leased, transferred, or used to Witech’s knowledge: (i) infringes on any patent, trademark, copyright or other right of any person, (ii) constitutes a misuse or misappropriation of any trade secret, know-how, process, proprietary information or other right of any other person, or (iii) entitles any other person to any interest therein, or right to compensation from Witech, its successors or assigns.

    2.11.5.2.        Witech has not received any notice of any lawsuit, claim, demand, proceeding, threat or allegation or otherwise has notice of any lawsuit, claim, demand, proceeding or investigation involving matters of the type contemplated by the immediately preceding sentence or is aware of any facts or circumstances that could reasonably be expected to give rise to any valid lawsuit, claim, demand, proceeding or investigation. There are no restrictions on Witech’ ability to sell, license, lease, transfer, use, reproduce, distribute, modify or otherwise exploit any Software Products or Intellectual Property.

    2.11.5.3.        Witech is not aware of any infringement, misappropriation or other violation of any Software Product or Intellectual Property, and no lawsuit, claim, demand, proceeding or investigation brought by Witech with respect to the Software Programs and Intellectual Property is pending against any third party.

    2.11.6.        Integrity. No portion of the Software Programs contains or will contain any “back door,” “time bomb,” “Trojan horse,” “worm,” “drop dead device,” “virus” or other software routines or hardware components designed to permit unauthorized access; to disable or erase software, hardware, or data; or to perform any other such actions.

    2.11.7.        Contract Performance. Witech has observed all material provisions of, and performed all of its material obligations under, the Licenses (as defined below), including, but not limited to, the performance of its product maintenance obligations. Witech has not taken any action that could cause, or to its knowledge, failed to take any action, the failure of which could cause, (i) any material source code, trade secret or other Intellectual Property relating to the Software Programs to be released from an escrow or otherwise made available to any person or entity other than those persons described in Section 2.11.4, dedicated to the public or otherwise placed in the public domain or (ii) any other Material Adverse Effect to the protection of the Software Programs under trade secret, copyright, patent or other intellectual property laws.

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    2.12.        Adequacy of Technical Documentation. The technical documentation of the Software Programs (the “Technical Documentation”) includes the source code (with comments) for all Software Programs, as well as any pertinent comments by or explanation that may be necessary to render such materials understandable and usable. The Technical Documentation also includes any programs (including compilers), “workbenches,” tools and higher level (or “proprietary”) languages necessary for the development, maintenance and implementation of the Software Programs.

    2.13.        Software Contracts.

    2.13.1.        End-User Agreements. Section 2.13.1 of the Witech Disclosure Schedule sets forth a complete list of all material licenses and sublicenses of the Software Programs in effect on the date hereof and of all current customer trial agreements for the Software Programs granted by Witech to other parties (the “Licenses”). All contracts identified in Section 2.13.1 of the Witech Disclosure Schedule constitute only end-user agreements, each of which grants the end user thereunder principally the nonexclusive right and license to use an identified Software Program and related user documentation, for internal purposes only and only in the form of software object code. Section 2.13.1. sets forth the general product licensing and pricing policies of Witech by categories of Software Programs. Section 2.13.1 of the Witech Disclosure Schedule accurately identifies each customer which generated 10% or more of Witech’ revenues during the preceding four fiscal quarters.

    2.13.2.        Marketing Agreements. Section 2.13.2 of the Witech Disclosure Schedule sets forth a complete list of all contracts, agreements, licenses, or other commitments or arrangements in effect to which Witech is a direct party as of the date hereof with respect to the marketing, remarketing, distribution, licensing or promotion of (i) the Software Programs or any other Technical Documentation or the Intellectual Property by any independent salesperson, distributor, sublicensor or other remarketer or sales organization or (ii) any third party’s software products by Witech (collectively the “Marketing Agreements”). Witech has observed all material provisions of, and performed all its material obligations under, the Marketing Agreements. Section 2.13.2 of the Witech Disclosure Schedule accurately identifies each marketing arrangement which generated 5% or more of Witech’ revenues during the preceding four fiscal quarters.

    2.14.        Third Party Rights.

    2.14.1.        In General. Other than the Licenses and the Marketing Agreements, to Witech’s knowledge, no person other than Witech has any right or interest of any kind or nature in or with respect to the Software Programs, the Technical Documentation or Intellectual Property.

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    2.14.2.        No Royalties. The sale, license, lease, transfer, use, reproduction, distribution, modification or other exploitation by Witech or any of its successors or assigns of any version or release of any computer program included in the Software Programs does not obligate Witech or its successors or assigns to pay any royalty, fee or other compensation to any other person.

    2.14.3.        Third-Party Components in Software Programs. The Software Programs and Technical Documentation contain no programming or materials in which any third party may claim superior, joint or common ownership, including any right or license. The Software Programs and Technical Documentation do not contain derivative works of any programming or materials not owned in their entirety by Witech.

    2.14.4.        Third-Party Tools. Witech has a valid license to use each of the material software libraries, compilers and other third-party software used in the development of the Software Programs.

    2.15.        Other Agreements.

    2.15.1        Material Contracts. Except as set forth in Section 2.15. of the Witech Disclosure Schedule, Witech does not have any contracts, agreements, leases, commitments, understandings, instruments or proposed transactions, written or oral, absolute or contingent, other than: (i) contracts for the purchase of supplies and services that were entered into in the ordinary course of business and that do not involve more than $10,000, and do not extend for more than six (6) months beyond the date hereof; and (ii) contracts terminable at will by the Company on no more than thirty (30) days notice without cost or liability to the Company and are not material to the conduct of Witech’s business. Section 2.15 of the Witech Disclosure Schedule also includes details on all bank accounts of Witech and the Subsidiary, including all material terms of engagement with such banks, including with respect to loans and lines of credit.

    2.15.2        Validity; Enforceability Etc. Witech has delivered to IIS, a correct and complete copy of each written agreement listed in Section 2.15 of the Witech Disclosure Schedule and a written summary setting forth the terms and conditions of each oral agreement referred to in the said Section. With respect to all such agreements, assuming due execution, delivery and performance of such agreements by any third parties: (i) the agreement is legal, valid, binding, enforceable, and in full force and effect with respect to Witech; (ii) the agreement will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby (and consummation of such transactions, without notice to or consent or approval of any party, will not constitute a default under or a breach of any provision of the agreement); (iii) neither Witech nor the Subsidiary is, and to their knowledge, no other party to any such agreement is, in breach or default of any such agreement, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under the agreement (and Witech has not received any notice of a default, offset or counterclaim under the agreement, or any other communication calling upon Witech or the Subsidiary to comply with any provision the agreement or ascertaining noncompliance); and (iv) to Witech’s best knowledge, no party has repudiated any provision of the agreement and neither the Company nor the Subsidiary has received or given notice of an intention to cancel or terminate the agreement or to exercise or not exercise options or rights under the agreement; (v) it is not aware of any security interest of any kind in the agreement.

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    2.16       Title to Properties. Except for merchandise and other property sold, used or otherwise disposed of in the ordinary course of business for fair value, Witech has good and valid title to all its properties and assets, real and personal, reflected in the most recent balance sheet of Witech included in the Financial Statements, free and clear of any Encumbrance of any nature whatsoever, except (i) liens and Encumbrances reflected in the most recent balance sheet of Witech included in the Financial Statements, (ii) liens for current Taxes not yet due and payable, and (iii) such imperfections of title, easements and Encumbrances, if any, as are not substantial in character, amount, or extent and do not and will not materially detract from the value, or interfere with the present use, of the property subject thereto or affected thereby, or otherwise would have a Material Adverse Effect on the business operations of Witech. All leases pursuant to which Witech leases (whether as lessee or lessor) any material real or personal property are, assuming the due execution and delivery and performance by such lease agreements by any third parties thereto, in valid and in effect; and there is not, under any such leases, any existing or prospective default or event of default or event which with notice or lapse of time, or both, would constitute a default by Witech and in respect to which Witech has not taken adequate steps to prevent a default from occurring. The buildings and premises of Witech that are used in its business are in good and sufficient operating condition and repair for the continued conduct of Witech’s business on a basis consistent with past practice, subject to ordinary wear and tear. All major items of equipment of Witech are in good and sufficient operating condition and in a state of reasonable maintenance and repair for the continued conduct of Witech’s business on a basis consistent with past practice, ordinary wear and tear excepted, and are free from any known defects except as may be repaired by routine maintenance and such minor defects as do not substantially interfere with the continued use thereof in the conduct of normal operations.

    2.17.        Litigation. There is no suit, action, claim, or legal, administrative, arbitration, or other proceeding or governmental investigation pending, or to the knowledge of Witech, threatened, against or effecting Witech at law or in equity, or before any federal, state, foreign, municipal or other governmental department, commission, board, bureau, agency or instrumentality, which would involve a liability in excess of $50,000 in the aggregate or could reasonably be expected to prevent, interfere with or delay consummation of the transactions contemplated hereby.

    2.18.        Environmental Compliance. There are no environmental conditions or circumstances, such as the presence or release of any hazardous substance, on any real property owned by Witech as a result of the actions of Witech or, to its knowledge, of any third party or otherwise, that could reasonably be expected to have a Material Adverse Effect on Witech.

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    2.19.        Compliance with Other Laws. Except as set forth in the Financial Statements or in Section 2.19 of the Witech Disclosure Schedule, Witech is not in violation of or in default with respect to, or in alleged violation of or alleged default with respect to, any applicable law or any applicable rule, regulation, or any writ or decree of any court or any governmental commission, board, bureau, agency, or instrumentality, or delinquent with respect to any report required to be filed with any governmental commission, board, bureau, agency or instrumentality, except for violations which, either singly or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on Witech.

    2.20.        Finder’s Fee. Except as set forth in the Financial Statements or in Section 2.20 of the Witech Disclosure Schedule, all negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by Witech and its counsel directly with IIS and its counsel, without the intervention of any other person as the result of any act of Witech, and so far as is known to Witech, without the intervention of any other person in such manner as to give rise to any valid claim against any of the parties hereto for a brokerage commission, finder’s fee or any similar payments.

    2.21.        Employment Matters. Witech is not a party to any collective bargaining contract, collective labor agreement or other contract or arrangement with a labor union, trade union or other organization or body involving any of its employees, or is otherwise required (under any legal requirement, under any contract or otherwise) to provide benefits or working conditions beyond the minimum benefits and working conditions required by law to be provided pursuant to rules and regulations of the Histadrut (General Federation of Labor), the Coordinating Bureau of Economic Organization and the Industrialists’ Association. Witech has not recognized or received a demand for recognition from any collective bargaining representative with respect to any of its employees. Except as set forth in Section 2.21 of the Witech Disclosure Schedule, Witech does not have and is not subject to, and no employee of Witech benefits from, any extension order (tzavei harchava) or any contract or arrangement with respect to employment or termination thereof. All of the employees of Witech are “at will” employees subject to the termination notice provisions included in employment agreements or applicable law. Except as set forth in Section 2.21 of the Witech Disclosure Schedule, all employees employed by Witech in the United States are employed and compensated on an hourly basis.

    2.21.1.        Except for the employment agreements described in Section 2.21.1 of the Witech Disclosure Schedule, there is no contract between Witech and any of its employees or directors that cannot be terminated by Witech upon less than three months’ notice without giving rise to a claim for damages or compensation (except for statutory severance pay).

    2.21.2.        Except as set forth in Section 2.21.2 of the Witech Disclosure Schedule, there is no claim or complaint that is pending or, to the knowledge of Witech, has been threatened against Witech by any person who is or has been an employee or director of Witech. Without limiting the generality of the foregoing, there are no unfair labor practice claims or charges that are pending, or to the knowledge of Witech, have been threatened against Witech.

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    2.21.3.        (i) there has been no labor strike, slowdown or stoppage pending (or, to the best knowledge of Witech, threatened) against or affecting Witech, (ii) there has been no dispute between Witech and any group of its employees, and (iii) no event has occurred and no circumstance or condition exists that could reasonably be expected to give rise to any such labor strike, slowdown, stoppage or dispute.

    2.21.4.        Witech’s obligations to provide severance pay to its employees are fully funded or have been properly provided for in the Financial Statements in accordance with US GAAP. All other liabilities of Witech relating to its employees (excluding liabilities for illness pay) were properly accrued in the Financial Statements in accordance with US GAAP. Except as set forth in Section 2.21.4 of the Witech Disclosure Schedule, Witech is not aware of any circumstance that could give rise to any valid claim by a current or former employee of Witech for compensation on termination of employment (beyond the statutory severance pay to which employees are entitled).

    2.21.5.        Except as set forth in Section 2.21.5 of the Witech Disclosure Schedule, all amounts that Witech is legally or contractually required either (i) to deduct from its employees’ salaries or to transfer to such employees’ pension or provident, life insurance, incapacity insurance, continuing education fund or other similar fund or (ii) to withhold from their employees’ salaries and pay to any Governmental Entity as required by the Israeli Tax Ordinance or the United States Tax Code have, in each case, been duly deducted, transferred, withheld and paid, and Witech does not have any outstanding obligation to make any such deduction, transfer, withholding or payment.

    2.21.6.        Witech is in compliance in all material respects with all applicable legal requirements and contracts relating to employment, employment practices, wages, bonuses and other compensation matters and terms and conditions of employment. All obligations of Witech with respect to statutorily required severance payments have been fully satisfied or have been funded by contributions to appropriate insurance funds.

    2.21.7.        Witech has good labor relations, and Witech has no knowledge of any facts indicating that (i) the consummation of the Exchange or any of the other transactions contemplated by this Agreement will have a Material Adverse Effect on the labor relations of Witech, or (ii) any of the employees of Witech intends to terminate his or her employment with Witech.

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    2.21.8.        (i) Each Witech Plan has been maintained and administered in material compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations, and is, to the extent required by applicable law or contract, fully funded without having any deficit or unfunded actuarial liability; (ii) all required contributions under any such plans have been made and the applicable funds have been funded in accordance with the terms thereof and no past service funding liabilities exist thereunder; (iii) each Witech Plan that is required or intended to be qualified under applicable law or registered or approved by a governmental agency or authority has been so qualified, registered or approved by the appropriate governmental agency or authority, and, to the knowledge of Witech, nothing has occurred since the date of the last qualification, registration or approval to materially and adversely affect, or cause, the appropriate governmental agency or authority to revoke such qualification, registration or approval; (iv) there are no pending or, to the knowledge of Witech, anticipated material claims against or otherwise involving any of the Witech Plans and no suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of Witech Plan activities) has been brought against or with respect to any Witech Plan; (v) all material contributions, reserves or premium payments, required to be made as of the date hereof to the Witech Plans have been made or provided for; or (vi) Witech has substantially performed all obligations, whether arising by law or by contract, required to be performed by it in connection with the Witech Plans. Witech does not have, and is not required to maintain, any plans under the United States Employee Retirement Income Security Act of 1974, as amended.

    2.22.        Product Warranty. There are no existing liabilities or, to the knowledge of Witech, potential liabilities, arising from claims regarding the performance or design of the products and services sold by Witech either in the past or at present for which adequate reserves have not been established on the most recent balance sheet in the Financial Statements that in the aggregate could reasonably be expected to have a Material Adverse Effect on Witech.

    2.23.        Information for Proxy Statement and the Combined 20-F. None of the information and data (including Financial Statements) concerning Witech and its shareholders which will be included in a proxy statement to be sent to the shareholders of Witech in connection with the IIS General Meeting to be held to obtain the IIS Shareholder Vote in accordance with applicable Israeli law (the “Proxy Statement”) and in the Combined 20-F to be filed with the United States Securities and Exchange Commission (the “Combined 20-F”) will, at the time the Proxy Statement is mailed to the shareholders of IIS, at the time of the IIS General Meeting, or at the time of filing, as applicable, and with respect to Witech and its Shareholders contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading and the Proxy Statement will comply with applicable Israeli law and the Combined 20-F will apply with the disclosure required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

    2.24.        Intentionally Left Blank.

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    2.25.        Customers and Suppliers. Since December 31, 2006 through the date hereof, no material licensor, vendor, supplier, licensee or customer of Witech or any of its subsidiaries has canceled or otherwise modified (in a manner materially adverse to Witech and its subsidiaries taken as a whole) its relationship with Witech or its subsidiaries and, to Witech’s knowledge, no such person has notified Witech of its intention to do so. Section 2.25 of the Witech Disclosure Schedule accurately identifies each customer of Witech which accounted for 5% or more of Witech’s revenues during the preceding four fiscal quarters.

    2.26.        Relationships with Related Persons. Except as identified in Section 2.26 of the Witech Disclosure Schedule and except for this Agreement and the transactions contemplated hereby, there are no undischarged contracts or agreements or other material transactions between Witech or any of its subsidiaries, on the one hand, and any director or executive officer of Witech or any of their respective Related Persons (as defined below), on the other hand, and no director or executive officer of Witech or any of their respective Related Persons have any interest in any of the assets of Witech or any of its subsidiaries. No executive officer, director of Witech or any of their respective Related Persons has any claim, charge, action or cause of action against Witech or any of its subsidiaries, except for claims for accrued vacation pay, accrued benefits under Witech’s benefit plans, claims for compensation, expense reimbursement and similar obligations and similar matters and agreements, which have been disclosed in the Witech Disclosure Schedule. For purposed hereof, the term “Related Persons” shall mean: (a) each other member of such individual’s Family; and (b) any person or entity that is directly or indirectly controlled by any one or more members of such individual’s Family. For purposes of this definition, the “Family” of an individual includes (i) such individual, (ii) the individual’s spouse, siblings, or ancestors (iii) any lineal descendent of such individual, or their siblings or (iv) a trust for the benefit of any of the foregoing.

    2.27.        Restrictions on Business Activities. There is no agreement, judgment, injunction, order or decree binding upon Witech or its subsidiaries or, their properties (including, without limitation, their Intellectual Property) which has or could reasonably be expected to have the effect of prohibiting or materially impairing any material acquisition of property by Witech or any of its subsidiaries or the conduct of the business by Witech or any of its subsidiaries including any exclusive distribution or licensing agreements which cannot be terminated on less than 30 days notice without any cost or expense to Witech or its subsidiaries.

    2.28.        Grants, Incentives and Subsidies. Section 2.28 of the Witech Disclosure Schedule provides a complete list of all pending and outstanding grants, incentives and subsidies (collectively, “Grants”) from the Government of the State of Israel or any agency thereof, or from any foreign governmental or administrative agency, granted to Witech, including, without limitation, (i) Approved Enterprise Status from the Investment Center and (ii) grants from the Office of the Chief Scientist of Israel (“OCS”). Witech has made available to IIS, prior to the date hereof, correct copies of all documents evidencing Grants submitted by Witech and of all letters of approval, and supplements thereto, granted to Witech. Section 2.28 of the Witech Disclosure Schedule details all material undertakings of Witech given in connection with the Grants. Without limiting the generality of the above, Section 2.28 of the Witech Disclosure Schedule includes the aggregate amounts of each Grant, and the aggregate outstanding obligations thereunder of Witech with respect to royalties, or the outstanding amounts to be paid by the OCS to Witech and the composition of such obligations or amount by the product or product family to which it relates. Witech is in compliance, in all material respects, with the terms and conditions of their respective Grants and, except as disclosed in Section 2.28 of the Witech Disclosure Schedule hereto, has duly fulfilled, in all material respects, all the undertakings relating thereto. Witech is not aware of any event or other set of circumstances which might lead to the revocation or material modification of any of the Grants.

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    2.29        Minutes. The minutes of Witech listed in Section 2.29 of the Witech Disclosure Schedule, contain accurate and complete copies of: (i) the minutes of every meeting of Witech ‘s shareholders and Board of Directors (and any committee thereof) which may be material to Witech; and (ii) minutes of every meeting of the each of Witech ‘s Board of Directors (and any committee thereof). No material resolutions have been passed, enacted, consented to or adopted by the directors (or any committee thereof) or shareholders of Witech, except for those contained in such minutes.

    2.30.       No ownership of IIS Stock. Witech does not own, beneficially or of record, any shares of common stock of IIS.

    2.31        Disclosure. Witech has not failed to disclose to IIS in writing any facts material to Witech or to the Subsidiary including, without limitation, its business, prospects and financial condition. This Agreement and all other documents delivered to IIS in connection with the Exchange and the other transactions contemplated herewith do not contain any material untrue statement and do not omit to state a material fact necessary in order to make the statements contained therein or herein not misleading.

2.A. REPRESENTATIONS AND WARRANTIES OF THE WITECH SHAREHOLDERS.

Each of the Witech Shareholders severally and not jointly represents and warrants to IIS and the other Witech Shareholders, the following, such representations and warranties to be true and correct upon the signing hereof and upon the Closing:

    2A.1        It has good and marketable title to those of the Witech Shares listed next to its name in Schedule 1.1 hereto, free and clear of all Encumberances, free and clear of all rights of first refusal, co-sale rights, options to purchase, proxies, voting trusts and any other voting agreements, calls or commitments of every kind.

    2A.2        If the Witech Shareholder is a corporation, it is duly organized and validly existing in the jurisdiction of its organization and has full power and authority to enter into this Agreement. All actions on its part necessary for the authorization, execution, delivery and performance by it of this Agreement have been duly taken (or shall be duly taken prior to the Closing) to authorize the execution and delivery by it, and this Agreement constitutes its valid and legally binding obligation, enforceable in accordance with its terms except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’rights, and (b) general principles of equity that restrict the availability of equitable remedies.

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    2A.3        It understands that any transfer agent of IIS will issue stop-transfer instructions with respect to the Exchange Shares unless any transfer thereof is subsequently registered under the Exchange Act and applicable state and other securities laws or unless an exemption from such registration is available.

    2A.4        The Witech Shareholder’s present intention is to acquire the Exchange Shares, for its own account and the Exchange Shares are being acquired by it for the purpose of investment and not with a view to distribution or resale thereof. The acquisition by the Witech Shareholder of the Exchange Shares acquired by it shall constitute a confirmation of this representation by such Witech Shareholder.

    2A.5        The Witech Shareholder acknowledges that it, during the course of this transaction and prior to the acquisition of the Exchange Shares has had the opportunity to ask questions of and receive answers from representatives of the Company concerning the terms and conditions of the Exchange. By reason of the Witech Shareholder’s knowledge and experience in business and financial matters, the Witech Shareholder is capable of evaluating the merits and risks of its investment in the Exchange Shares hereunder (this will not derogate from the representations and warranties of IIS in this Agreement).

    2A.6        The Witech Shareholder (i) is an “accredited investor”, as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act, and/or (ii) is not a “U.S. Person”, as defined by Rule 902 of Regulation S promulgated under the Securities Act, was not formed by a “U.S. Person” as defined by Rule 902 of Regulation S, was not organized under the laws of any United States jurisdiction, is not holding the Stock (or, where relevant, the Conversion Shares) for the benefit of any US Person, and was not formed for the purpose of investing in securities not registered under the Securities Act. At the time the buy order for this transaction was originated, the Witech Shareholder was outside the United States.

    2A.7        The Shares, as specified next to its/his name on Schedule 1.1, constitute all of the shares, warrants, and securities in Witech owned by it or to which it has any rights and it/he has no preemptive rights or other rights to subscribe for, purchase or acquire from Witech any share of capital stock or securities of Witech.

    2A.8        Immediately following the Closing, it shall own no shares or securities in Witech, it shall have no rights as a shareholder of Witech and no claims against Witech in connection with the issuance and/or non-issuance of securities in Witech.

    2A.9        It acknowledges that the Shareholders, and not IIS and/or Witech, is liable for any taxes levied on the transfer of the Witech Shares to IIS and/or the issuance of the Exchnage Shares by IIS to the Witech Shareholders.

    2A.10        The execution of this Agreement by each Witech Shareholder and the performance of such Witech Shareholder’s obligations hereunder do not require the consent or agreement of any person, authority or entity.

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    2A.11        The Witech Shareholder is familiar with the terms of the Tax Ruling and it shall abide by such terms, to the extent they apply to it.

    2A.12        The Witech Shareholder has disclosed to IIS in writing any shareholding of such Witech Shareholder or any of its Affiliates in IIS. An “Affiliate” shall refer, with respect to any Witech Shareholder, to (i) such shareholder’s spouse, lineal descendant or antecedent, brother or sister, or a trust for the benefit of any of the foregoing, (ii) any entity directly or indirectly controlling, controlled by or under common control with such Witech Shareholder or any other Affiliate of such Witech Shareholder.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF IIS

        IIS represents and warrants as follows:

        Reference to any one matter in the IIS Disclosure Schedule (as defined below) is deemed sufficient for any other reference in such IIS Disclosure Schedule.

    3.1.        Organization and Standing. IIS is a corporation duly organized and validly existing under the laws of the State of Israel has all requisite power and authority to carry on its business as it is currently conducted and to own and operate the properties currently owned and operated by it. IIS has delivered to Witech and the Witech Shareholders accurate and complete copies of its memorandum of association and articles of association including all amendments thereto. The voluntary liquidation proceedings of IIS have been terminated.

    3.2.        Agreement Authorized and its Effect on Other Obligations.

    3.2.1.        Authorization and Enforceability. Subject to the approval by the shareholders of IIS, IIS has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by IIS of this Agreement and the performance by IIS of its obligations hereunder have been duly and validly authorized by all necessary corporate action on the part of IIS. This Agreement has been duly executed and delivered by IIS and (assuming due authorization, execution and delivery hereof by the other parties hereto) this Agreement constitutes the legal, valid and binding obligation of IIS enforceable (subject to normal equity principles) against IIS in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, debtor relief or similar laws affecting the rights of creditors generally.

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    3.2.2.        Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to IIS or any of its subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby or thereby, except (a) any filings required to be made under Section 13 of the Exchange Act, as amended, (b) consent of and approval of the Israeli Commissioner of Restrictive Trade Practices, if necessary and (c) such other consents, approvals, orders, authorizations, registrations, declarations and filings, the failure of which to be obtained or made would not have, individually or in the aggregate, a Material Adverse Effect on IIS and which are set forth on Schedule 3.2.2 of the disclosure schedule delivered by IIS to Witech dated the date hereof (the “IIS Disclosure Schedule”), and all such consents have been or will have been obtained at or immediately prior to the Closing.

    3.2.3.        No Violation. Assuming the receipt of all consents, approvals, orders or authorizations of, and the registration, declaration or filing with, any Governmental Entity contemplated by Section 3.2.2, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) conflict with or result in a violation or breach of any term or provision of, nor constitute a default under, the organizational documents of IIS; (ii) contravene, conflict with or result in a violation or breach of, or result in a default under, any obligations, indenture, mortgage, deed of trust, lease, contract or other agreement to which IIS or any of its subsidiaries is a party or by which any of them or their properties are bound; (iii) contravene, conflict with or result in a violation of, or give any Governmental Entity or other Person the right to challenge the Exchange or to exercise any remedy or obtain any relief under, any legal requirement or any order, writ, injunction, judgment or decree to which IIS, or any of the assets owned or used by IIS, is subject. (iv) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Entity the right to revoke, withdraw, suspend, cancel, terminate or modify any permit, license, consent, authorization, grant, benefit, right that is held by IIS or to the knowledge of IIS, that otherwise relates to the business or assets of IIS, (v) result in the imposition, creation or crystallization of any Encumbrance upon or with respect to any asset owned or used by IIS or (vi) with the passage of time, the giving of notice, or the taking of any action by a third person, have any of the effects set forth in clauses (i) through and (v) of this Section, in each case other than such violations, breaches or defaults as could not reasonably be expected to have a Material Adverse Effect on IIS.

    3.4        Capitalization. The authorized share capital of IIS is NIS 50,000 divided into 16,666,666 ordinary shares, par value NIS 0.003 per share, of which as of the date hereof, 11,576,539 shares are issued and outstanding. All of such outstanding shares are validly issued, fully paid and non-assessable, and were not issued in violation of any preemptive rights of any shareholder. Schedule 3.4 of the IIS Disclosure Schedule sets forth, on a fully diluted basis, a complete list as of the date of this Agreement of all outstanding options, warrants or obligations of any kind to issue any shares of IIS, and sets forth the capitalization table of IIS on a fully diluted basis immediately prior to and immediately after the Closing. Other than as set forth in Schedule 3.4 of the IIS Disclosure Schedule, IIS has no outstanding options, warrants or obligations of any kind to issue any of its shares. Except as set forth in Schedule 3.4 of the IIS Disclosure Schedule: (i) there are no preemptive rights, rights of participation, rights of maintenance or similar rights with respect to any IIS securities (including convertible securities); (ii) none of the IIS shares, options or other equity interests of IIS (including any convertible securities) is subject to any right of first refusal; and (iii) there are no contracts, undertakings or agreements relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to), any IIS securities (including convertible securities). IIS is not under any obligation, or bound by any contract pursuant to which it may become obligated, to repurchase, redeem or otherwise acquire any IIS securities (including convertible securities). Without limiting the foregoing, all shares to be issued in connection with the Registration Rights Agreement dated January 2001, by and among the Company, CDC Holdings Ltd., Armour Investments Ltd., Industrial Systems and Equipment Co., Meir Noga & Nachum Ezra, have been duly and validly issued, and are fully paid and nonassessable, and there are no warrants or similar rights outstanding thereunder for the benefit of any Person. No Person has any rights in any IIS securities (including convertible securities) other than the IIS shares and options currently issued and outstanding as reflected in IIS’ Form 20-F for the year ended December 31, 2006 (the “2006 20-F”), which shares and options are set forth in the pre-closing and post-closing capitalization tables set forth on Schedule 3.4. of the IIS Disclosure Schedule.

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        The Exchange Shares, upon their issuance to the Witech, shall be duly authorized, validly issued, and free of preemptive rights or anti dilution or similar rights and shall be fully paid and non-assessable. The Exchange Shares when issued and allotted will have the rights and privileges and will be subject to the obligations set forth in the Articles of Association of IIS, as amended hereunder, and such Exchange Shares upon issuance thereof and payment therefor will be free and clear of any Encumbrances.

    3.5        Liabilities. IIS does not have any liabilities or obligations, including with respect to Taxes, either accrued, absolute, contingent or otherwise, or have any knowledge of any potential liabilities or obligations, which could reasonably be expected to have a Material Adverse Effect on IIS other than those set forth in Schedule 3.5 of the IIS Disclosure Schedule or in the 2006 20F. There are currently no claims pending, or to IIS’ knowledge, threatened, for which the LSI Escrow Funds deposited in escrow pursuant to the transactions entered into by StoreAge Networking Technologies Ltd., including IIS, as a shareholder thereof, and LSI Logic Corporation would be transferred to a third party.

    3.6.        Intentionally Left Blank.

    3.7        Intellectual Property.

    3.7.1        Intellectual Property of IIS. IIS is not a party to any license, royalty, research, Grants, or development or similar agreements or any other agreements relating to technology, inventions or intellectual property rights of IIS or any third party. IIS does not own or have any rights in any material intellectual property.

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    3.8        Legal Proceedings. There are no pending, or to IIS’ knowledge and except as set forth on Schedule 3.8, threatened suits, actions, claims or legal, administrative, arbitration or other proceedings or governmental investigations against or affecting IIS at law or in equity or before any federal, state, foreign, municipal, or other governmental department, commission, board, bureau, court, agency, or instrumentality, including with respect to any Taxes. Without derogating from the foregoing, no third party has asserted any claim against IIS with respect to the lack of a financial expert on the Audit Committee as required by the Sarbanes-Oxley Act 2002.

    3.9        Changes to Operations of IIS. There have been no material changes to IIS, including in the financial status, business operations of IIS, equity holdings in IIS, or any other material changes with respect to or affecting IIS since the 2003 20-F, other than the Bankruptcy Proceedings. The 2006 20-F accurately and truthfully sets forth a description , in all respects, of IIS as of the date thereof.

    3.10        Compliance with Laws. Except as set forth on Schedule 3.10 of the IIS Disclosure Schedule, IIS is not in violation or in default with respect to, or in alleged violation of or alleged default with respect to, any applicable laws or any applicable rules, regulations or any writ or decree of any court or any governmental commission, board, bureau, agency, or instrumentality, or delinquent with respect to any report required to be filed with any governmental commission, board, bureau, agency or instrumentality, except for violations which, either singly or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on IIS.

    3.11        Material Contracts.

    3.11.1        Except as set forth on Schedule 3.11 of the IIS Disclosure Schedule, IIS does not have any material contracts, agreements, leases, commitments, understandings, instruments or proposed transactions, written or oral, absolute or contingent.

    3.11.2        Validity; Enforceability Etc. IIS has delivered to Witech and the Witech Shareholders a correct and complete copy of each written agreement listed in Schedule 3.11 of the IIS Disclosure Schedule and a written summary setting forth the terms and conditions of each oral agreement referred to in such Schedule. With respect to all such agreements, assuming due execution, delivery and performance of such agreements by any third parties: (i) the agreement is legal, valid, binding, enforceable, and in full force and effect with respect to IIS; (ii) the agreement will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby (and consummation of such transactions, without notice to or consent or approval of any party, will not constitute a default under or a breach of any provision of the agreement); (iii) neither IIS nor, to its knowledge, is any other party to any such agreement, in breach or default of any such agreement, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under the agreement (and IIS has not received any notice of a default, offset or counterclaim under the agreement, or any other communication calling upon IIS to comply with any provision the agreement or ascertaining noncompliance); and (iv) to IIS’ knowledge, no party has repudiated any provision of the agreement and IIS has not received or given notice of an intention to cancel or terminate the agreement or to exercise or not exercise options or rights under the agreement; and (v) IIS is not aware of any security interest of any kind in the agreement.

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    3.11.3        IIS has no agreements with any Related Persons or any third party suppliers, contractors, service-providers, distributors, or any other third parties relating to the products, business operations, or securities of IIS.

    3.12        Assets; Loans and Encumbrances. A list of all material assets of IIS, including whether leased or owned, is set forth on Schedule 3.12 of the IIS Disclosure Schedule, and with respect to any leases, a description of the material terms of such leases. IIS has good and marketable title to all such assets or has the right to lease them, and all such assets free and clear of Encumbrances or any other third party rights. All leases pursuant to which IIS leases (whether as lessee or lessor) any substantial amount of real or personal property are in good standing, valid and effective; and there is not, under any such leases any existing or prospective default or event of default or event which with notice or lapse of time, or both, would constitute a default by IIS and in respect to which IIS has not taken adequate steps to prevent a default from occurring. The buildings and premises of IIS that are used in its business are in good and sufficient operating condition and repair for continued conduct of IIS’ business on a basis consistent with past practice, subject to ordinary wear and tear.

    3.13        Employment Matters. Except as set forth on Schedule 3.13 of the IIS Disclosure Schedule, IIS employs no employees and has not engaged, as of the date hereof, any consultant or independent contractor, and there are no employment, consulting or independent contractor agreements outstanding between IIS and any employee, consultant, or independent contractor. All employment, consulting and other independent contractor agreements with all past employees, consultants and independent contractors of IIS have been lawfully terminated, and no past employee of IIS or consultant or independent contractor of IIS has any rights or claims against IIS, including claims pertaining to severance payments or other social rights or benefits, or the right to exercise any options, warrants, or similar rights for any IIS securities including pursuant to any agreement or option plan of IIS. There are no, and never have been any, oral agreements or understandings between IIS and any third party relating to employment or consulting services. Except as set forth on Schedule 3.13 of the IIS Disclosure Schedule, IIS does not operate or maintain any pension, bonus, profit-sharing, share option, deferred compensation or similar plans or collective agreements in effect as of the date hereof, and no third party has any claim against IIS with respect to any such prior plans or agreements of IIS, to the extent any previously existed.

    3.14        Restrictions on Business Activities. There is no agreement, judgment, injunction, order or decree binding upon IIS or its properties which has or could reasonably be expected to have the effect of prohibiting or materially impairing any material acquisition of property by IIS or the conduct of the business by IIS including any exclusive distribution or licensing agreements which cannot be terminated on less than 30 days notice without any cost or expense to IIS.

    3.15        Subsidiaries. Schedule 3.15 of the IIS Disclosure Schedule sets forth a list of all subsidiaries of IIS as of the date hereof and sets forth as to each, the percentage of total outstanding shares thereof which is owned by IIS. All outstanding shares of capital stock of the subsidiary corporations owned by IIS are validly issued, fully paid, and non-assessable, and IIS has good and valid title thereto free and clear of any Encumbrance.

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    3.16        Finder’s Fee. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by IIS and its counsel directly with Witech and its counsel, without the intervention of any other person as the result of any act of IIS, and so far as is known to IIS, without the intervention of any other person in such manner as to give rise to any valid claim against any of the parties hereto for a brokerage commission, finder’s fee or any similar payments.

    3.17        Tax Returns Filed; Taxes Paid.

    3.17.1        Except as set forth in Schedule 3.17 of the IIS Disclosure Schedule, (i) all returns, declarations, claims for refund, information returns and reports (“IIS Tax Returns”) of or with respect to any and all taxes, charges, fees, levies, assessments, duties or other amounts payable to any federal, state, local, foreign or other taxing authority or agency, including, without limitation, (x) income, franchise, profits, gross receipts, minimum, alternative minimum, estimated, ad valorem, value added, sales, use, service, real or personal (tangible and intangible) property, environmental, capital stock, leasing, lease, user, license, registration, payroll, withholding, disability, employment, social security (or similar), workers compensation, unemployment compensation, utility, severance, excise, stamp, windfall profits, transfer and gains taxes, (y) customs, duties, imposts, charges, levies or other similar assessments of any kind, and (z) interest, penalties and additions to tax imposed with respect thereto (“IIS Tax” or “IIS Taxes”) which are required to be filed on or before the Closing by or with respect to IIS have been or will be duly and timely filed, (ii) all items of income, gain, loss, deduction and credit or other items required to be included in each such IIS Tax Return have been or will be so included and all such information and any other information provided in each such IIS Tax Return is true, correct and complete, (iii) all IIS Taxes owed by IIS which have become or will become due have been or will be timely paid in full, (iv) all IIS Tax withholding and deposit requirements imposed on or with respect to IIS have been or will be satisfied in full in all respects, (v) no penalty, interest or other charge is or will become due with respect to the late filing of any such IIS Tax Return or late payment of any such IIS Tax, and (vi) there are no Encumbrances on any of the assets of IIS that arose in connection with any failure (or alleged failure) to pay any IIS Tax.

    3.17.2        Extensions Disclosed. Except as set forth in Schedule 3.17.2 of the IIS Disclosure Schedule, there is not in force any extension of time with respect to the due date for the filing of any IIS Tax Return of or with respect to IIS or any waiver or agreement for any extension of time for the assessment or payment of any IIS Tax of or with respect to IIS.

    3.17.3.        Claims Disclosed. There is no outstanding written claim from any governmental taxing authority against IIS for any IIS Taxes, and no assessment, deficiency or adjustment has been asserted, proposed or threatened in writing by any governmental taxing authority with respect to any IIS Tax Return of or with respect to IIS with respect to any period for which the statute of limitations on the assessment of tax deficiencies has not expired other than those disclosed (and to which are attached true and complete copies of all audit or similar reports) in Schedule 3.17.3 of the IIS Disclosure Schedule. To IIS’ knowledge, no written claim has ever been made by a governmental taxing authority in a jurisdiction where IIS does not file IIS Tax Returns that it is or may be subject to taxation in that jurisdiction.

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    3.17.4.        Scheduled Tax Liabilities Sufficient. The total reserve amounts for liabilities for current and deferred IIS Taxes are sufficient to cover in all material respects the payment of all IIS Taxes, whether or not assessed or disputed, which are or to have been, due by or with respect to IIS up to and through the periods covered thereby.

    3.17.5.        No Tax Liens. No material liens for IIS Taxes exist upon the assets of IIS.

    3.17.6.        Change of Accounting Method. IIS will not be required to include any amount in income for any taxable period beginning after the Closing Date as a result of a change in accounting method for any taxable period ending on or before the Closing Date or pursuant to any agreement with any Tax authority with respect to any such taxable period.

    3.17.7.        Activity Limitations. IIS has not entered into any agreement or arrangement with any Taxing authority that requires it to take any action or to refrain from taking any action.

    3.18        Disclosure. IIS has not failed to disclose to Witech in writing any facts material to IIS, including, without limitation, its business and financial condition. This Agreement and all other documents delivered to Witech in connection with the Exchange and the other transactions contemplated herewith do not contain any material untrue statement and do not omit to state a material fact necessary in order to make the statements contained therein or herein not misleading.

ARTICLE IV

OBLIGATIONS PENDING CLOSING DATE

    4.1.        Agreements of Witech and IIS. Each of Witech and IIS undertakes to the other party that from the date hereof to the Closing Date, it will:

    4.1.1.        Maintenance of Present Business. Operate its business only in the usual, regular, and ordinary manner so as to maintain the goodwill it now enjoys and, to the extent consistent with such operation, use all reasonable efforts to preserve intact its present business organization, keep available the services of its present officers and employees, and preserve its relationships with customers, suppliers, licensors, licensees, contractors, distributors, and others having business dealings with it, and in connection therewith it shall not substantially deviate from its licensing and pricing practices;

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    4.1.2.        Maintenance of Properties. At its expense, maintain all of its property and assets in customary repair, order, and condition, reasonable wear and use and damage by fire or unavoidable casualty excepted;

    4.1.3.        Maintenance of Books and Records. Maintain its books of accounts and records in the usual, regular, and ordinary manner, in accordance with US GAAP applied on a consistent basis;

    4.1.4.        Compliance with Law. Duly comply with all laws applicable to it and to the conduct of its business; except where the failure to comply with such laws would not have a Material Adverse Effect on such party;

    4.1.5.        Compliance with Agreement. At its expense, take all commercially reasonable actions as may be necessary (i) to insure that the representations and warranties made by it herein are true and correct at the Closing Date, (ii) to fully perform all covenants made by it herein and (iii) to satisfy timely all other obligations imposed upon it by this Agreement;

    4.1.6.        Inspection. Permit the other party and its officers and authorized representatives, during normal business hours, and subject to standard confidentiality undertakings, to inspect upon reasonable prior notice its records and to consult with its officers, employees, attorneys, and agents for the purpose of determining the accuracy of the representations and warranties hereinabove made and the compliance with covenants contained in this Agreement; and

    4.1.7.        Maintenance of Intellectual Property. Not take any action that would, or fail to take any action the failure of which would, cause directly or indirectly any of its Intellectual Property to enter the public domain or that could otherwise adversely affect its Intellectual Property.

    4.2.        Agreements of IIS and Witech. IIS and Witech agree to take the following actions after the date hereof:

    4.2.1        IIS Regulatory and Other Filings. IIS shall timely comply with all U.S. federal, state (including “Blue Sky laws”), and Israeli regulatory requirements arising from the transactions contemplated hereby including the prompt filing with any regulatory agencies, stock exchanges, and any other U.S. or Israeli Governmental Entities with which IIS is so obligated to provide reporting information or make any filings. Witech will promptly provide all information and documents necessary for this purpose as and when requested by IIS.

    4.2.2.        Proxy Statement.

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    4.2.2.1        As promptly as reasonably practicable after the date of this Agreement, IIS and Witech shall cooperate in the preparation of the Proxy Statement, at IIS’ expense, that complies with all requirements of Israeli law.

    4.2.2.2        IIS shall cause the Proxy Statement to be mailed to IIS’ shareholders as promptly as reasonably practicable after the date of this Agreement. If any event relating to either party occurs, or if IIS or Witech becomes aware of any information, that should be disclosed in an amendment or supplement to the Proxy Statement, then IIS or Witech, as the case may be, shall promptly inform the other party thereof.

    4.2.3.        Governmental Approvals.

    4.2.3.1        Each party to this Agreement shall use all reasonable efforts to deliver and file, as promptly as practicable after the date of this Agreement, each notice, report or other document required to be delivered by such party to or filed by such party with any Israeli, and with respect to IIS, additionally any U.S. Governmental Entity with respect to the Exchange. Without limiting the generality of the foregoing:

    (a)        IIS and Witech shall respond as promptly as practicable to any inquiries or requests received from the Israeli Restrictive Trade Practices Commissioner for additional information or documentation; and

    (b)        Witech shall use all reasonable efforts to obtain, as promptly as practicable after the date of this Agreement any consents that may be required in connection with the Exchange;

    (c)        Within the relevant time periods therefor of the Closing, IIS will make all filings it is required to make (including past filings) pursuant to the Securities Act of 1933, as amended, and the Exchange Act, including all filings required to be filed with the US Securities and Exchange Commission (the “SEC”) and any relevant stock exchanges on which IIS’ securities are traded. In addition, IIS shall timely file all filings pertaining to the Exchange which are required to be filed with the SEC and any stock exchanges on which IIS’ securities are traded.

    4.2.3.2        Each party to this Agreement shall (i) give the other parties prompt notice of the commencement of any legal proceeding by or before any Israeli or U.S. Governmental Entity with respect to the Exchange, (ii) keep the other parties informed as to the status of any such legal proceeding and (iii) promptly inform the other parties of any communication to or from the SEC, any U.S. relevant stock exchanges, the OCS, the Companies Registrar or any other Israeli Governmental Entity regarding the Exchange or any of the other transactions contemplated by this Agreement. The parties to this Agreement will consult and cooperate with one another, and will consider in good faith the views of one another, in connection with any analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted in connection with any Israeli legal proceeding relating to the Exchange. In addition, except as may be prohibited by any Israeli Governmental Entity or by any Israeli legal requirement, in connection with any such legal proceeding under or relating to the Israeli Restrictive Trade Practices Law or any other Israeli antitrust or fair trade law, each party hereto will permit authorized representatives of the other party to be present at each meeting or conference relating to any such legal proceeding and to have access to and be consulted in connection with any document, opinion or proposal made or submitted to any Israeli Governmental Entity in connection with any such legal proceeding.

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    4.2.4.        Further Action. IIS and Witech shall use all reasonable efforts to cooperate with each other in the taking of such action reasonably necessary to consummate the Exchange and make effective the other transactions contemplated by this Agreement.

    4.2.5.        Notice of Material Development. Each of IIS and Witech will promptly notify the other party in writing of (i) any event occurring subsequent to the date of this Agreement which would render any representation or warranty of such party contained in this Agreement untrue or inaccurate in any material respect, (ii) any Material Adverse Effect on such party and (iii) breach by such party of any covenant or agreement contained in this Agreement.

    4.2.6.        Resignation of Directors. Witech shall use all reasonable efforts to obtain and deliver to IIS prior to the Closing Date the resignation of each director of Witech and of the Subsidiary, effective as of the Closing Date.

    4.3.        Additional Agreements of Witech. Witech agrees that from the date hereof to the Closing Date, it will:

    4.3.1.        Prohibition of Certain Employment Contracts. Not enter into any contracts of employment other than in the ordinary course of business consistent with past practice which (i) cannot be terminated on notice of 14 days or less for United States employees, and 30 days for Israeli employees, without the payment of additional compensation or (ii) provide for any increase in compensation including, without limitation, any modification of any stock option agreements, outside the ordinary course of business consistent with past practice, severance payments or benefits covering a period beyond the termination date except as contemplated by this Agreement or as may be required by law;

    4.3.2.        Prohibition of Certain Loans. Not incur any borrowings except (i) the prepayment by customers of amounts due or to become due for goods sold or services rendered or to be rendered in the future, (ii) trade payables incurred in the ordinary course of business, (iii) other borrowings incurred in the ordinary course of business to finance normal operations or (iv) as is otherwise agreed to in writing by IIS, with respect to borrowings involving a liability of more than US$10,000 per borrowing or more than US$50,000 in the aggregate;

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    4.3.3.        Prohibition of Certain Commitments. Not enter into commitments of a capital expenditure nature or incur any contingent liability which would exceed $25,000 in the aggregate, other than the bridge loans provided by IIS in the amount of US$3,550,000 to Witech between April 2007 (and additional loans from IIS) and the date hereof, a true and correct copy of which is attached hereto as Schedule 4.3. , except (i) as may be necessary for the maintenance of existing facilities and equipment in good operating condition and repair in the ordinary course of business, (ii) as may be required by law, or (iii) as is otherwise agreed to in writing by IIS;

    4.3.4.        Disposal of Assets. Not sell, dispose of, or encumber, any property or assets, except (i) in the ordinary course of business or (ii) as is otherwise agreed to in writing by IIS;

    4.3.5.        Maintenance of Insurance. Maintain insurance (or self insurance reserves) upon all its properties and with respect to the conduct of its business of such kinds and in such amounts as is customary in the type of business in which it is engaged, but not less than that presently carried by it, which insurance (or self insurance reserves) may be added to from time to time in its discretion;

    4.3.6.        No Solicitation. Not directly or indirectly authorize or permit any of its respective agents to: (i) solicit, initiate, encourage (including by way of furnishing information) or take any other action to facilitate, any inquiry or the making of any proposal which constitutes, or may reasonably be expected to lead to, any acquisition or purchase of a substantial amount of assets of, or any equity interest in, Witech or any Exchange, consolidation, business combination, sale of substantially all assets, sale of securities, recapitalization, liquidation, dissolution or similar transaction involving Witech (other than the transactions contemplated by this Agreement) or any other material corporate transactions the consummation of which would, or could reasonably be expected to, impede, interfere with, prevent or materially delay the Exchange (collectively, “Witech Transaction Proposals”) or agree to or endorse any Witech Transaction Proposal or (ii) propose, enter into or participate in any discussions or negotiations regarding any of the foregoing, or furnish to another person any information with respect to its business, properties or assets or any of the foregoing, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, an effort or attempt by any other person to do or seek any of the foregoing;

    4.3.7.        No Amendment to Articles of Association, etc. Without the consent of IIS, not amend its Articles of Association or other organizational documents or merge or consolidate with or into any other corporation or change in any manner the rights of its capital stock or the character of its business;

    4.3.8.        No Issuance, Sale, or Purchase of Securities. Except for issuances of shares to the Witech Shareholders as set forth on Schedule 4.3.8 to the Witech Disclosure Schedule, without the consent of IIS, not issue or sell, or issue options or rights to subscribe to, or enter into any contract or commitment to issue or sell (upon conversion or otherwise), any shares of its capital stock or subdivide or in any way reclassify any shares of its capital stock, or acquire, or agree to acquire, any shares of its capital stock; provided, that nothing in this Section 4.3.8 shall restrict or prohibit the issuance by Witech of Witech Shares upon exercise of options previously granted under existing benefit plans or warrants existing on the date hereof;

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    4.3.9.        Prohibition on Dividends. Without the consent of IIS, not declare or pay any dividend on shares of its capital stock or make any other distribution of assets to the holders thereof;

    4.3.10.        Notice of Material Developments. Promptly furnish to IIS copies of all communications from Witech to its stockholders. Witech shall give prompt notice to IIS of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would cause any Witech representation or warranty contained in this Agreement to be untrue or inaccurate at or prior to the Closing Date and (ii) any material failure of Witech to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 4.3.10 shall not limit or otherwise affect the remedies available hereunder to IIS;

    4.3.11.        Employment Agreements. Witech shall use its best efforts to obtain on or prior to the Closing Date, employment agreements with such employees of Witech as reasonably requested by IIS; and

    4.3.12.        Employee Plans and Contracts. Except as required by law, without the written consent of IIS, not directly or indirectly (i) enter into or modify any collective bargaining agreement with any labor union or other representative of employees, (ii) increase the compensation or benefits of any employee of Witech or any of its subsidiaries, (iii) amend or terminate any Witech Option Plan, or (iv) enter into or adopt any new employee benefit plan, policy or arrangement; and

    4.3.13.        Transaction Expenses. Except as set forth on Schedule 1.7 hereto, IIS and Witech will not pay any expenses of Witech in connection with the transactions contemplated by this Agreement to any legal, financial, investment banking, accounting or other professional advisor, including any agreement relating to the foregoing and payments to made by Witech shareholders, irrespective of whether disclosed to IIS, including pursuant to Section 2 above.

    4.3.14.        Licensing Practices. Observe all material provisions of, and perform all its material obligations under, any Marketing Agreements in a manner consistent with past practice.

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    4.4.        Additional Agreements of IIS. IIS agrees that from the date hereof to the Closing Date, it will:

    4.4.1.        Notice of Material Developments. Give prompt notice to Witech of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would cause any IIS representation or warranty contained in this Agreement to be untrue or inaccurate at or prior to the Closing Date; (ii) the occurrence of any event which could reasonably be anticipated to prohibit or restrain the consummation of the transactions contemplated hereby; and (iii) any material failure of IIS to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 4.4.1 shall not limit or otherwise affect the remedies available hereunder to Witech; and

    4.4.2        Compliance with Agreement. At its expense, take all commercially reasonable actions as may be necessary (i) to insure that the representations and warranties made by it herein are true and correct in all material respects at the Closing Date, (ii) to fully perform all covenants made by it herein and (iii) to satisfy timely all other obligations imposed upon it by this Agreement.

    4.4.3        No Shop. Until the Closing Date and except for a financing in Shares and/or convertible securities of IIS in the amount of up to $6,000,000 (and related warrants that may be issued in connection with such financing), none of IIS nor any of their officers, directors, representatives or agents will, directly or indirectly solicit, initiate, knowingly encourage or accept any other proposals or offers from any Person relating to any acquisition of any shares or assets of IIS (other than sale of already issued shares in the public market and the purchase of short term investments of publicly traded securities. IIS will immediately cease any existing discussions or negotiations conducted by such Person with respect to any of the foregoing prohibited activities. The foregoing shall not restrict IIS from responding to unsolicited proposals from any Person, nor shall it restrict its Board of Directors from taking any action if, in the opinion of IIS’outside counsel, such action is required in order to enable the Board of Directors of IIS to fulfill its fiduciary duties to IIS and its shareholders to the extent required under applicable Israeli law. “Person” means any natural person, corporation, limited liability company, general partnership, limited partnership proprietorship, other business organization, trust, union, association of any governmental or regulatory authority.

ARTICLE V

CONDITIONS PRECEDENT TO OBLIGATIONS

    5.1.        Conditions Precedent to Obligations of Witech. The obligations of Witech and the Witech Shareholders, severally, to consummate and effect the Exchange shall be subject to the satisfaction of the following conditions, or to the waiver thereof by Witech in the manner contemplated by Section 6.4 on the Closing Date :

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    5.1.1.        Representations and Warranties of IIS True at Closing Date. The representations and warranties of IIS herein contained shall be, in all material respects, true as of and at the Closing Date and again as of and at the Closing Date with the same effect as though made at such date, except for those representations and warranties that address matters only as of a particular date (which shall remain true and correct as of such particular date); IIS shall have performed and complied, in all material respects, with all covenants required by this Agreement to be performed or complied with by IIS before or at the Closing Date; and IIS shall have delivered to Witech a certificate, dated the Closing Date and signed by each of its chief executive officer and chief financial officer to both such effects.

    5.1.2.        No Order. No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Exchange shall have been issued by any court of competent jurisdiction and remain in effect, and there shall not be any legal requirement enacted or deemed applicable to the Exchange that makes consummation of the Exchange illegal.

    5.1.3        Increase in IIS’ registered share capital. IIS’ shareholders shall have duly authorized an increase in IIS’ share capital to 50,000,000 Ordinary Shares, par value NIS 0.003 per share.

    5.1.4        Amendment to Articles of Association. IIS’ shareholders shall have duly authorized an amendment to IIS’ Articles of Association to eliminate the casting vote of the Chairman of the Board of Directors according to Article 71(c) of such Articles and the staggered Board of directors according to Article 50 of the Articles of Association.

    5.1.5        No Orders or Judgments. As of the Closing Date, there shall not be any judgment or order of a court of competent jurisdiction or any ruling, regulation or order of any agency of the Israeli or U.S. federal, state, or local government which would prohibit or have the effect of preventing the consummation of the issuance of the Exchange Shares and the transactions hereunder shall not be prohibited or enjoined (temporarily or permanently) by any applicable law or governmental or other regulation.

    5.1.6        Opinion of IIS Counsel. Witech shall have received an opinion, dated as of the Closing Date from Amit, Pollak, Matalon & Co. counsel for IIS, in the form attached hereto as Schedule 5.1.6.

    5.1.7.        IIS Shareholder Approval. The Exchange and the transactions contemplated hereby shall have been duly approved by the shareholders of IIS, and IIS shall have provided Witech and the Witech Shareholders with a copy of the duly authorized resolutions of shareholders meeting of IIS approving the Exchange and the transactions contemplated hereby.

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    5.1.8.        Approvals. All material consents, permits and approvals of all Governmental Entities required to be obtained in connection with the Exchange and the other transactions contemplated by this Agreement shall have been obtained and shall be in full force and effect. IIS shall have provided Witech and the Witech Shareholders with a certified copy of the duly authorized board resolutions of IIS approving the Exchange and the transactions contemplated thereby and including a signatory rights approval with respect to the execution of the documents pertaining to the Exchange together with an incumbency certificate.

    5.1.9        Escrow Agreement. IIS, Charless Moss, as the Witech Shareholders representative (the “Shareholders Representative”) on behalf of the Witech Shareholders, and the Escrow Agent will have signed the Escrow Agreement substantially in the form attached hereto as Schedule 5.1.9 (the “Escrow Agreement”) placing in escrow the Exchange Shares and the IIS shares held by the other IIS shareholders holding 5% or more of the issued and outstanding shares of IIS immediately following the Closing, for a period of twenty-four months following the Closing in accordance with Israeli tax requirements and as applicable, the Indemnification Agreement.

    5.1.10        Tax Ruling. IIS and the Witech Shareholders shall have received a tax ruling from the Israeli Income Tax Authorities confirming that the Exchange will be tax-free subject to reasonable conditions as set forth therein (the “Tax Ruling”).

    5.1.11.        Execution of Employment Agreements with Designated Executives. IIS and each of Charles Moss, David Elooz, Eliyahu Cohen and Ronen Segal (collectively, the “Designated Executives”) shall have entered into employment agreements with IIS or Witech and in the form attached hereto as Schedules 5.1.11(i) – (iv), respectively (the “Designated Executives Employment Agreements”).

    5.1.12        No Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any Material Adverse Effect on IIS, and no event shall have occurred or circumstance shall exist that, in combination with any other events or circumstances, could reasonably be expected to have a Material Adverse Effect on IIS.

    5.1.13        Burdensome Condition. Other than the Tax Ruling, there shall not have been any action taken by any Governmental Entity, and there shall not have been any legal requirement or order enacted, entered, enforced or deemed applicable to the Exchange, that imposes or that seeks to impose any restriction, condition or obligation upon IIS or Witech that could reasonably be expected to adversely impact, in any material respect, any of the anticipated benefits to Witech or the Witech Shareholders of the Exchange.

    5.1.14        Share Transfer Deed. The Witech Shareholders shall have transferred the Exchange Shares, free and clear of any Encumbrances, to IIS, by signing and delivering to IIS a share transfer deed in appropriate form as reasonably determined by IIS.

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    5.2.        Conditions Precedent to Obligations of IIS. The obligations of IIS to consummate and effect the Exchange shall be subject to the satisfaction of the following conditions, or to the waiver in writing thereof by IIS in the manner contemplated by Section 6.4 on or before the Closing Date:

    5.2.1.        Representations and Warranties of Witech True at Closing Date. The representations and warranties of Witech herein contained shall be, in all material respects, true as of and at the Closing Date with the same effect as though made at such date, except for those representations and warranties that address matters only as of a particular date (which shall remain true and correct as of such particular date); Witech shall have performed and complied, in all material respects, with all covenants required by this Agreement to be performed or complied with by Witech on or before the Closing Date; and Witech shall have delivered to IIS a certificate, dated the Closing Date and signed by its chief executive officer and by its chief financial or accounting officer to both such effects.

    5.2.2.        Representations and Warranties of Witech Shareholders True at Closing Date. The representations and warranties of the Witech Shareholders herein contained shall be, in all respects, true as of and at the Closing Date with the same effect as though made at such date; and the Witech Shareholders shall have performed and complied with, in all material respects, with all covenants required to be performed or complied with by the Witech Shareholders on or before the Closing Date.

    5.2.3        No Order. No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Exchange shall have been issued by any court of competent jurisdiction and remain in effect, and there shall not be any legal requirement enacted or deemed applicable to the Exchange that makes consummation of the Exchange illegal.

    5.2.4.        Opinion of Witech’s Counsel. IIS shall have received an opinion, dated as of the Closing Date, from Fischer, Behar, Chen, Well, Orion & Co., counsel to Witech, in the form attached hereto as Schedule 5.2.4.

    5.2.5.        Approvals. All consents, permits and approvals of all Governmental Entities or any other third party required to be obtained in connection with the Exchange and the other transactions contemplated by this Agreement shall have been obtained and shall be in full force and effect.

    5.2.6.        Consent of Certain parties in Privity with Witech. The holders of any material indebtedness of Witech, the lessors of any property leased by Witech, and the other parties to any other agreements to which Witech is a party, whose consent to the Exchange is required as set forth in the Witech Disclosure Schedule, shall, when and to the extent necessary in the reasonable opinion of IIS, have consented to the Exchange.

    5.2.7.        Combined 20-F Ready for Filing. The Combined 20-F shall be ready for filing with the SEC as confirmed by the Board of Directors of IIS;

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    5.2.8.        Employees. The individuals identified on Section 5.2.8(a) of the Witech Disclosure Schedule shall not have ceased to be employed by Witech or shall not have expressed an intention to terminate his or her employment with Witech or, when relevant, shall have declined to accept employment with IIS provided that such employment with IIS shall be under their existing terms with Witech.

    5.2.9.        No Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any Material Adverse Effect on Witech, and no event shall have occurred or circumstance shall exist that, in combination with any other events or circumstances, could reasonably be expected to have a Material Adverse Effect on Witech; provided, however, for purposes of this Section 5.2.9 a Material Adverse Effect shall not include any loss of revenues or sales and support personnel during the period from the date hereof to the Closing Date other than losses of revenues or sales and support personnel attributable to an event the occurrence or existence of which would result in a representation or warranty made by Witech in this Agreement being untrue or would result in the breach of a covenant made by Witech in this Agreement.

    5.2.10.       Burdensome Condition. Other than the Tax Ruling, there shall not have been any action taken by any Governmental Entity, and there shall not have been any legal requirement or order enacted, entered, enforced or deemed applicable to the Exchange, that imposes or that seeks to impose any restriction, condition or obligation upon IIS or Witech that could reasonably be expected to adversely impact, in any material respect, any of the anticipated benefits to IIS of the Exchange.

    5.2.11.       Witech Shareholder Waiver. Each holder of Witech Shares will provide to IIS the Witech Shareholder Waiver.

    5.2.12.       Witech Option holder Waiver. Each holder of Witech Options will provide to Witech and IIS an Undertaking, Release and Waiver in the form attached hereto as Schedule 5.2.12.

    5.2.13.       Indemnification Agreement. Each of the Witech Shareholders will have signed the Indemnification Agreement in the form attached hereto as Schedule 5.2.13 .

    5.2.14.       Escrow Agreement. The Shareholders Representative on behalf of the Witech Shareholders and the Escrow Agent will have signed the Escrow Agreement.

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    5.2.15.       Tax Ruling. IIS shall have received the Tax Ruling from the Israeli Income Tax Authorities.

    5.2.16.       Employment Agreements. Each ofthe Designated Executives will have entered into the Designated Executives Employment Agreements.

    5.2.17.       Non Compete. All the Witech Shareholders who are employees or consultants of Witech or the Subsidiary (directly or through affiliates), as well as officers and directors of Witech listed on Schedule 5.2.17 hereto shall deliver an executed non-compete undertaking with respect to Witech’s business for a period of twenty-four months following the Closing in the form attached hereto as Schedule 5.2.17.

ARTICLE VI

TERMINATION AND ABANDONMENT

    6.1.        Termination. Anything contained in this Agreement to the contrary notwithstanding, this Agreement may be terminated and the Exchange abandoned at any time (whether before or after the approval and adoption thereof by the stockholders of Witech) before the Closing Date:

    6.1.1.        By Mutual Consent. By mutual written consent of IIS and Witech.

    6.1.2.        By IIS Because of Conditions Precedent. By IIS, if there has been a breach by Witech of its representations, warranties, covenants, or agreements set forth in this Agreement if, as a result of such breach, the conditions set forth in Section 5.2 would not be satisfied, and Witech fails to cure such breach within 15 business days after written notice thereof from IIS (except that no cure period shall be provided for any breach by Witech which by its nature cannot be cured).

    6.1.3.        By IIS Because of Material Adverse Change. By IIS, if there has been since December 31, 2006, a Material Adverse Change with respect to Witech which condition or event shall not have been ameliorated such that it no longer constitutes a Material Adverse Change within fifteen (15) business days following receipt by Witech of notice from IIS (except that no cure period shall be provided for any Material Adverse Change which by its nature cannot be cured); provided, however, for purposes of this Section 6.1.3 a Material Adverse Change shall not include any loss of revenues or sales and support personnel during the period from the date hereof to the Closing Date other than losses of revenues or sales and support personnel attributable to an event the occurrence or existence of which would result in a representation or warranty made by Witech in this Agreement being untrue or would result in the breach of a covenant made by Witech in this Agreement.

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    6.1.4.        By Witech Because of Conditions Precedent. By Witech, if there has been a breach by IIS of any of its representations, warranties, covenants or agreements set forth in this Agreement if, as a result of such breach, the conditions set forth in Section 5.1 would not be satisfied, and IIS fails to cure such breach within 15 business days after written notice thereof from Witech (except that no cure period shall be provided for any breach by IIS which by its nature cannot be cured).

    6.1.6        By IIS or Witech Because of Legal Proceedings. By IIS or Witech if (i) a statute, rule, regulation or executive order shall have been enacted, entered or promulgated prohibiting the consummation of the transactions contemplated hereby or (ii) an order, decree, ruling or injunction shall have been entered permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby and such order, decree, ruling or injunction shall have become final and non-appealable; provided, that the party seeking to terminate this Agreement pursuant to this Section 6.1.5 shall have used its reasonable best efforts to remove such injunction, order or decree.

    6.1.7.        By IIS or Witech if Exchange not Effective by December 31, 2007. By either IIS or Witech and the Witech Shareholders, if all conditions to consummation of the Exchange shall not have been satisfied or waived on or before December 31, 2007, (or any other date agreed by IIS and Witech), other than as a result of a breach of this Agreement by the terminating party.

    6.2.        Termination by Board of Directors. An election of IIS to extend the period specified in Section 6.1.7 or to terminate this Agreement and abandon the Exchange as provided in Section 6.1 shall be exercised on behalf of IIS by its board of directors. An election of Witech to extend the period specified in Section 6.1.7 or to terminate this Agreement and abandon the Exchange as provided in Section 6.1 shall be exercised on behalf of Witech by its board of directors, and an election of the Witech Shareholders to terminate this Agreement and abandon the Exchange as provided in Section 6.1 shall be exercised by a resolution of the Witech Shareholders.

    6.3        Effect of Termination. Subject to Section 6.5, in the event of the termination and abandonment of this Agreement pursuant to and in accordance with the provisions of Section 6.1 hereof, this Agreement shall become void and have no effect, without any liability on the part of any party hereto (or its stockholders or controlling persons or directors or officers in accordance with this agreement), and (ii) neither party shall be released or relieved from any liability arising from the willful breach by such party of any of its representations, warranties, covenants or agreements as set forth in this Agreement.

    6.4.        Waiver of Conditions. Subject to the requirements of any applicable law, any of the terms or conditions of this Agreement may be waived at any time by the party, which is entitled to the benefit thereof, by action taken by its board of directors, or to the extent such party is an individual, in writing by such individual.

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    6.5.           Consequences of Termination. If this Agreement is terminated due to the fact that the Exchange is not consummated due to the failure of Witech and/or the Shareholders to receive a favorable tax ruling, without derogating from any other rights and remedies at law or according to any agreement and without releasing Witech from its obligation to repay the loans provided by IIS to Witech pursuant to the Loan Agreement dated April 17, 2007 and May_ 2007 and any other loan agreement between IIS and Witech and related documents according to their terms, in consideration for IIS’s efforts and investment of time and money in pursuing the Exchange, Witech will immediately issue to IIS five percent (5%) of the issued and outstanding share capital of Witech, on a fully diluted basis and the interest on such loans will be increased to LIBOR plus 10% (or the maximum rate permitted by law, whichever is lower) retroactively to the date they were provided to Witech, and IIS will have the option for a period of sixty (60) days following termination of this Agreement to convert all or part of the loans provided by IIS to Witech (and interest thereon) to Ordinary Shares of Witech at a price per share reflecting a pre-conversion Company valuation of $5,000,000 on a fully diluted basis.

ARTICLE VII

ADDITIONAL AGREEMENTS

    7.1       Registration Statement. IIS will file a registration statement to register the Exchange Shares for resale pursuant to the United States Securities Act of 1933 within one hundred and twenty (120) days following the Closing and shall make its best efforts to have the registration statement declared effective as soon as practical.

    7.2       Issuance of Options. Immediately prior to or at the Closing, IIS will grant stock options to the senior management of Witech including the Designated Executives and other executives designated by Witech and agreed by IIS, to purchase an aggregate of 2,300,000 shares of IIS at an exercise price equal to the average trading price per share of the Exchange Shares during the twenty (20) trading days prior to the Closing, vesting in eight (8) semi-annual installments as long as each such executive continues to be employed by IIS. It is intended that these options will be issued according to the capital gains route under Section 102 of the Israeli Income Ordinance or in accordance with Section 3(i) of theIsraeli Income Ordinance, as applicable. In addition, on or prior to the Closing, IIS will increase the shares reserved for issuance to directors, employees, consultants and service providers of IIS and its subsidiaries pursuant to its incentive stock option plans by an additional 1,000,000 shares so that the total amount of shares reserved for issuance pursuant to such plan will be 3,300,000.

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    7.3        Issuance of warrants to IIS Shareholders. Each of the Witech Shareholders acknowledges and agrees that, subject to and following compliance with applicable Israeli and United States securities laws and regulations, IIS intends to issue to all shareholders of IIS at the record date determined for the purpose of voting at the general meeting of shareholders of IIS to be convened to approve this Agreement, warrants to purchase an aggregate of 4,600,000 Ordinary Shares of IIS nominal value NIS 0.003 per share, on a pro-rata basis according to the percentage holding of each such shareholder in the issued and outstanding share capital of IIS on such record date . These warrants will be exercisable until the earlier of (i) five years from the date of issuance, and (ii) the closing of a Transaction. A “Transaction” means each of (i) merger, acquisition or reorganization of IIS with one or more other entities in which IIS is not the surviving entity, or (ii) a sale of all or substantially all of the assets or shares of IIS. The exercise price of each warrant shall be the average trading price per share of IIS’s Ordinary Shares during the twenty trading days prior to the Closing. These warrants will be non-transferable and non-exercisable until all applicable Israeli and United States securities laws and regulations have been complied with in connection with the warrants and the underlying shares, including without limitation, that a registration statement covering the underlying shares is declared effective by the United States Securities and Exchange Commission. Each of the Witech Shareholders understakes that such Witech Shareholder will not oppose issuance of these warrants.

    7.4        Legend in Share Certificate. The Exchange Shares are characterized as “restricted securities” under the US federal securities laws in asmuch as the Exchange Shares are being acquired from IIS in a transaction not involving a public offering, and such securities may be resold without registration under the Exchange Act only in certain limited circumstances. It understands that the certificates evidencing the Exchange Shares will be printed with legends restricting transfer except in compliance with applicable securities laws in the form of the following or similar legend:

        “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE “ACT”), OR ANY STATE SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS SET OUT IN AN ESCROW AGREEMENT DATED ___, 2007.

ARTICLE VIII

MISCELLANEOUS

    8.1.        Entirety. This Agreement, together with the Schedules hereto constitute the entire agreement between the parties with respect to the subject matter hereof, and all prior agreements between the parties with respect thereto are hereby superseded and replaced in their entirety. In order to remove doubt, it is expressly agreed and clarified that any loan agreements and related documents between IIS and Witech entered into prior to the Closing Date shall continue in full force and effect.

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    8.2.        Counterparts/Fax Signatures. Any number of counterparts of this Agreement may be executed and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one instrument. Facsimile signatures shall be considered originals.

    8.3.        Notices and Waivers. Any notice or waiver to be given to any party hereof shall be in writing and shall be delivered by courier, sent by facsimile transmission or registered or certified mail, postage prepaid.

If to IIS:

Addressed to:
IIS
Twin Towers, 33 Jabotinsky Street
Ramat Gan 52511, Israel
Attention:
Facsimile: (972) 3 575 0595

with a copy (which shall not constitute notice) to:

Amit, Pollak, Matalon & Co.
17 Yitzhak Sadeh Street
Tel Aviv, Israel
Facsimile: 972-3-568-9001
Attn: Ian Rostowsky, Adv.

If to Witech:

Addressed to:
Witech Communications Ltd.
17 Ha’atasia Street, Or Yehuda 60212

Attention: Charles Moss
Facsimile: 972-3-5333868

with a copy (which shall not constitute notice) to:

Fischer, Behar, Chen, Well, Orion and Co.
3 Daniel Frisch Street
Tel Aviv, Israel 64731
Facsimile: +972-3- 609-1116
Attn: Ron Lehmann, Adv.

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and if to the Witech Shareholders to:
Charles Moss
(acting as the Witech Shareholders representative)
c/o Witech Communications Ltd.
17 Ha’atasia Street, Or Yehuda 60212
Facsimile: 972-3-5333868

        Any communication so addressed and mailed by first-class registered or certified mail, postage prepaid, shall be deemed to be received on the fifth business day after so mailed, and if delivered by courier or facsimile to such address, upon delivery during normal business hours on any business day together with proof of deliver in the case of courier or proof of transmission in the case of facsimile.

    8.4.        Captions. The captions contained in this Agreement are solely for convenient reference and shall not be deemed to affect the meaning or interpretation of any article, section, or paragraph hereof.

    8.5.        Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the successors and assigns of the parties hereto provided that no party may assign this agreement to any third party without the prior written approval of the other parties.

    8.6.        Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants and restrictions shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable.

    8.7.        Applicable Law/Jurisdiction. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Israel without regard to conflict of law principles thereof. The courts of Tel-Aviv will have exclusive jurisdiction in all matters relating to or arising out of this Agreement.

    8.8.        Public Announcements. The parties agree that before the Closing Date that they shall consult with each other before the making of any public announcement regarding the existence of this Agreement, the contents hereof or the transactions contemplated hereby, and to obtain the prior approval of the other party as to the content of such announcement, which approval shall not be unreasonably withheld. However, the foregoing shall not apply to any announcement or written statement which, upon the written advice of counsel, is required by law to be made, except that the party required to make such announcement shall, whenever practicable, consult with and solicit prior approval from such other party concerning the timing and content of such legally required announcement or statement before it is made.

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    8.9.        Termination of MOA. The MOA shall terminate, if not earlier terminated in accordance with its terms, and be of no further effect as of the Closing Date and the parties shall have no obligations with respect thereto.

    8.10        Business Day. For purposes of this Agreement, the term “business day”refers to a day in which the banks in Israel are open for business, excluding Friday.

    8.11        Entire Agreement. This Agreement constitute the entire agreement between the parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings, oral and written, between the parties. Any modification to this Agreement must be done in writing, signed by IIS,Witech and the Witech Shareholders holding a majority of the Witech Shares.

    8.12        Payment of Taxes. Each party hereto shall be solely responsible for all tax payments and liabilities appluacle to such party relating to or arising out of this Agreement.

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    8.13        Definitions. The following terms are defined in the indicated place:

Term	Section
Agreement	Premises
Applicable Environmental Laws	2.18.
Bank Approval	2.2.2
Combined 20-F	2.23
Closing Date	1.2.
Closing	1.2.
Designated Executives	5.1.11
Designated Executives Employment Agreements	5.1.11
Exchange	Premises
Exchange Shares	1.1
Encumbrances	1.1.
Escrow Agreement	5.1.9.
Exchange Act	2.23.
Executive Options	5.1.11
Family	2.26
Financial Statements	2.5.
Governmental Entity	2.2.2.
Grants	2.28.
Intellectual Property	2.11.1.
Indemnification Agreement	5.2.13
IIS	Premises
IIS Disclosure Schedule	3.2.2
IIS Tax Returns	3.17.1
IIS Tax	3.17.1
Licenses	2.13.1.
Marketing Agreements	2.13.2.
Material Adverse Effect or Material Adverse Change	1.3.
OCS	2.28.
OCS Approval	2.2.2
Person	4.4.3
Proxy Statement	2.23
Related Persons	2.26
SEC	4.2.3.1
Subsidiary	2.4
Shareholders Representative	5.1.9
Software Programs	2.11.1
Technical Documentation	2.12
Tax or Taxes	2.10.1.
Tax Returns	2.10.1
Technical Documentation	2.12.
US GAAP	2.5
Witech	Premises
Witech Shares	Premises
Witech Transactional Proposals	4.3.6
Witech Disclosure Schedule	2.3
Witech Plans	2.7.1
Witech Share Certificate	1.5.4
Witech Option Agreements	1.6.
Witech Options	1.6.
Witech Option Plans	1.6.
Witech Shareholders	Premises
Witech Shareholder Waiver	1.7
Witech Third Party Consents	2.2.3

[Signature page follows]

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        IN WITNESS WHEREOF, the parties hereto have caused this Share Exchange Agreement to be duly executed as of the date first above written.

IIS INTELLIGENT INFORMATION SYSTEMS, LTD.


By:
——————————————
Name:
Title:

WITECH COMMUNICATIONS LTD.


By:
——————————————
Name:
Title:

[Signature Pages of the Witech Shareholders Follow]

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SIGNATURE PAGE OF WITECH SHAREHOLDERS

SHARE EXCHANGE AGREEMENT, dated as November 5, 2007,
by and among I.I.S Intelligent Information Systems Ltd., Witech Communications
Ltd., (“Witech”) and the shareholders of Witech

Name of Shareholder: _____________________________

Signature of Shareholder: __________________________

Name of Signatory:______________________________

The undersigned Notary/Attorney, hereby confirms that ______________ appeared before me and signed above in my presence on this ____ day of November. 2007.

Name of Notary or Attorney:____________________________

Signature of Notary or Attorney: __________________________

License Number: _____________________________________

Address: ____________________________________________

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AMENDMENT NO. 1 (this “Amendment”)

dated January 2, 2008

to the

SHARE EXCHANGE AGREEMENT (the "Agreement")

Made and entered into on November 5, 2007

by and among I.I.S Intelligent Information Systems Ltd., an Israeli company (“IIS”), Witech Communications Ltd., an Israeli company (“Witech”) and the shareholders of Witech listed on Schedule 1.1 to the Agreement (the “Witech Shareholders”).

WHEREAS, the Agreement may be amended pursuant to Section 8.11 thereof;

The parties to the Agreement agree as follows:

1.     Defined Terms. All capitalized terms used in this Amendment, which are not otherwise defined, shall have the meaning ascribed to such terms in the Agreement.

2.     Amendment to Agreement. The parties agree that the Agreement shall be amended as follows:

2.1 The Exchange will not take place in accordance with Section 103K of the Israeli Income Tax Ordinance [New Version] and receipt of the Tax Ruling or any other tax ruling is not a condition for Closing; provided, however, that this Amendment shall not preclude receipt of a tax ruling that is acceptable to IIS and Witech.

2.2 In accordance with the foregoing, (i) the phrase “in accordance with Section 103K of the Israeli Income Tax Ordinance [New Version]” in the first “Whereas”clause; (ii) Section 5.1.10; (iii) Section 5.2.15; and (iv) other references to the “Tax Ruling” or a tax ruling (including without limitation in Section 6.5 of the Agreement) in the Agreement are hereby deleted.

2.3 The date of December 31, 2007 specified in Sections 1.2 and 6.1.7 of the Agreement will be amended to January 2, 2008;

2.4 The Escrow Agreement attached as Schedule 5.1.9 to the Agreement shall be replaced by the Escrow Agreement substantially in the form attached hereto (the “New Escrow Agreement”);

2.5 The period of one hundred and twenty (120) days in Section 7.1 will be extended to one hundred and eighty (180) days;

2.6 Options to purchase up to 190,680 shares of IIS granted in accordance with Section 7.2 of the Agreement may be granted to current shareholders of Witech (in addition to the Designated Executives and other employees of Witech ).

2.7 The date of the Escrow Agreement in the legend in Section 7.4 will be "JANUARY ___, 2008";

2.8 Notwithstanding anything to the contrary in the Agreement, each Witech Shareholder signing this Amendment agrees and undertakes that all such Witech Shareholder’s Exchange Shares shall be held in escrow according to the New Escrow Agreement and, except for an amount of Exchange Shares not exceeding 250,000 as shall be specified in writing in a notice from the Shareholders’ Representative to IIS and except as may otherwise be agreed in writing by IIS, such Witech Shareholder shall not directly or indirectly, (1) offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of), or (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of, the Exchange Shares, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Exchange Shares or other securities, in cash or otherwise, or (3) publicly disclose the intention to do any of the foregoing, for a period commencing on the date of the Closing and the ending twelve (12) months following the Closing.

3.     Effectiveness of this Amendment. This Amendment shall become effective when signed by IIS, Witech and the Witech Shareholders holding a majority of the Witech Shares.

4.     Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original and enforceable against the parties actually executing such counterpart and all of which together shall constitute one and the same instrument. Fax signatures shall be considered originals.

[signature pages follow]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above-written.

IIS INTELLIGENT INFORMATION SYSTEMS LTD.


By:
——————————————
Name:
Title:

WITECH COMMUNICATIONS LTD.


By:
——————————————
Name:
Title:

[Signature Pages of the Witech Shareholders Follow]

SIGNATURE PAGE OF WITECH SHAREHOLDERS

AMENDMENT # 1 TO SHARE EXCHANGE AGREEMENT, dated as November 5, 2007,
by and among I.I.S Intelligent Information Systems Ltd., Witech Communications Ltd.,
(“Witech”) and the shareholders of Witech

Name of Shareholder: _____________________________

Signature of Shareholder: __________________________

Name of Signatory:______________________________

Date: January ___, 2008

EX-4.5

Exhibit 4.5

INDEMNIFICATION AGREEMENT

Duly made and entered into as of the 5th day of November 2007

by and between

I.I.S. Intelligent Information Systems Ltd.
(“IIS”)

and

Witech Communications Ltd.
(“Witech”)

and

All the shareholders of Witech listed on the signature page hereto
(the “Shareholders”)

and

Charles Moss as Shareholder Representative

1. Preamble

1.1 IIS, Witech and the Shareholders have signed a Share Exchange Agreement dated November 5, 2007 (the “Exchange Agreement”) with regard to the exchange of the Witech Shares for the Exchange Shares (the “Exchange”); and

1.2 Witech and the Shareholders have made representations and given certain warranties contained in the Exchange Agreement regarding Witech and/or CDRide Inc, its wholly owned subsidiary, and undertake to provide certain indemnities in relation to such representations and warranties as set out in this Agreement.

1.3 Save to the extent expressly defined otherwise in this Agreement, the capitalized terms used in this Agreement and not otherwise defined terms shall have the meanings set forth in the Exchange Agreement with all such definitions incorporated into this Agreement by reference.

2. Indemnification.

2.1 Subject to the terms of this Agreement, the Shareholders, severally and jointly, will indemnify, defend and hold IIS and its shareholders, officers, directors, representatives, agents, successors and assigns (the “IIS Indemnified Parties”) harmless from, against and in respect of any and all losses, diminution in value, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, reasonable attorneys’ fees and expenses) arising from or related to any of the following liabilities and obligations in relation to the Excluded Liabilities and/or that are not assumed by IIS (each an “IIS Claim”):

2.1.1 Any misrepresentation or breach of warranty made by the Witech and/or the Shareholders in the Exchange Agreement or in any document, certificate or other instrument required to be delivered by Witech and/or the Shareholders under the Exchange Agreement;

2.1.2 Any breach or non fulfillment of any covenant or agreement made or to be performed by Witech and/or the Shareholders in the Exchange Agreement or in any agreement or instrument entered into in connection with the Exchange Agreement;

2.1.3 Any fraud or intentional misrepresentation or breach of the Exchange Agreement by Witech and/or the Shareholders;

2.1.4 (i) Any Action or claim related to any Liability other than as specifically permitted pursuant to Section 1.7 of the Exchange Agreement, or (ii) any Action or claim related to the products of Witech and/or CDRide Inc, including product warranty and service claims under customer contracts, or the Assumed Liability, but only to the extent that such Action or claim is based upon or is related to facts or circumstances that occurred or arose prior to the Closing; and

2.1.5 Any Actions or claims arising out of or related to the transactions contemplated under this Agreement, including actions brought by IIS to enforce this Agreement.

2.2 Notwithstanding Section 2.1 above, the obligations of a Shareholder with respect to the Witech Shares held by such Shareholders shall be several and not joint with the other Shareholders.

3. Survival of Representations and Warranties

The representations and warranties of Witech and the Shareholders contained in the Exchange Agreement shall survive the Closing for two (2) years following the Closing Date, except with respect to capitalization and ownership of shares in which case such representations and warranties will survive until the expiration of the applicable statute of limitations with respect to the matters in question. Neither the period of survival nor the liability of the Shareholders with respect to the representations and warranties of Witech and the Shareholders shall be reduced by any investigation made at any time by or on behalf of IIS. If written notice of an IIS Claim describing the basis for such claim in reasonable detail has been given prior to the expiration of the applicable representations and warranties by the IIS to the Shareholders’ Representative, then the indemnification obligation with respect to such item as to which an IIS Claim has been given shall survive, until such claim has been finally resolved.

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4. Sole remedy

The sole source of the indemnification according to this Agreement shall be twenty five percent (25%) of the Exchange Shares held in escrow according to the Escrow Agreement (the “Escrow Shares”), except in the case of fraud or willful misrepresentation and breaches of the capitalization and ownership of shares for which the remedy may exceed the aggregate monetary value of the Exchange Shares at the Closing Date and for which claims could be made until the expiration of the applicable statute of limitations. The aggregate monetary value of the Exchange Shares at the Closing Date will be equal to the Closing Price multiplied by the amount of Exchange Shares. It is hereby agreed and clarified that in the event of fraud or willful misrepresentation and breaches of the capitalization and ownership of shares, the liability of the Shareholders shall be several and not collective. The parties hereby expressly agree that Mizrahi Tefahout Bank Ltd. (the “Bank”) shall not be liable for any fraud or willful misrepresentation of any third party under any circumstances and in any event shall not be required to indemnify IIS, the Shareholders or the Company under any circumstances in connection with the Exchange Agreement, in excess of the Exchange Shares received by the Bank or the equivalent of the aggregate monetary value of the Exchange Shares at the Closing Date as calculated according to Section 4.1 above.

5. Third Party Actions

5.1 In the event any Action is instituted against an IIS Indemnified Party by any party (“Third Party Claims”) which involves or appears reasonably likely to involve an IIS Claim for which indemnification may be sought or if IIS intends to initiate an IIS claim, IIS will, promptly after receipt of notice of any such Action, notify the Shareholders of the commencement thereof. The failure to so notify the Shareholders of the commencement of any such Action will relieve the Shareholders from liability in connection therewith only to the extent that such failure materially and adversely affects the ability of the Shareholders to defend their interests in such Action.

5.2 If the Shareholders’ Representative, as defined in Section 8, acknowledge in writing the obligation of the Shareholders to indemnify the IIS Indemnified Party hereunder against any IIS Claim that may result from such Third Party Claim, then the Shareholders shall be entitled to assume and control the defense of such Third Party Claim at their expense and through counsel of their choice if they give notice of their intention to do so to the IIS Indemnified Party within ten business days of the receipt of such notice from the IIS Indemnified Party; provided that such counsel is not reasonably objected to by the IIS Indemnified Party; and provided, further, that if there is reasonably likely to exist a conflict of interest that would make it inappropriate in the judgment of the IIS Indemnified Party in its reasonable discretion for the same counsel to represent both the IIS Indemnified Party and the Shareholders, then the IIS Indemnified Party shall be entitled to retain its own counsel in each jurisdiction for which the IIS Indemnified Party reasonably determines counsel is required, at the expense of the Shareholders.

5.3 In the event that the Shareholders exercise the right to undertake any such defense against any such Third Party Claim as provided above, the IIS Indemnified Party shall agree to any judgment, settlement, compromise or discharge of such Third Party Claim that the Shareholders may recommend that by its terms obligates the IIS Indemnifying Party to pay the full amount of the liability in connection with such Third Party Claim (or the full amount will be paid from the Escrow Shares), which releases the IIS Indemnified Party completely in connection with such Third Party Claim and that would not otherwise materially adversely affect the IIS Indemnified Party, provided that without derogating from Section 4 above, if such judgment, settlement, compromise or discharge shall be in an amount which is higher than the equivalent of the aggregate monetary value of the Exchange Shares at the Closing Date as calculated according to Section 4.1 above, it shall require the consent of the IIS Indemnified Party.

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5.4 In the event that the Shareholders exercise the right to undertake any such defense against any such Third Party Claim as provided above, the IIS Indemnified Party shall, at the expense of the Shareholders, cooperate with the Shareholders in such defense and make available to the Shareholders, at the Shareholders’ expense, all witnesses, pertinent records, materials and information in the IIS Indemnified Party’s possession or under the IIS Indemnified Party’s control relating thereto as is reasonably required by the Shareholders. Similarly, in the event that the Shareholders are, directly or indirectly, conducting the defense against any such Third Party Claim, the Shareholders shall cooperate with the IIS Indemnified Party in such defense and make available to the IIS Indemnified Party, at the Shareholders’ expense, all such witnesses, records, materials and information in the Shareholders’ possession or under the Shareholders’ control relating thereto as is reasonably required by the IIS Indemnified Party. No such Third Party Claim may be settled by the IIS Indemnified Party without the prior written consent of the Shareholders (not to be unreasonably withheld).

6. Distributions from Escrow Fund

In the event that:

6.1 the Shareholders’ Representative shall not have objected to the amount claimed by IIS for indemnification with respect to any IIS Claim in accordance with the procedures set forth in the Escrow Agreement and in this Agreement; or

6.2 the Shareholders’ Representative shall have delivered notice of their disagreement as to the amount of any indemnification requested by IIS and either (i) the Shareholders’ Representative and the IIS Indemnified Party shall have, subsequent to the giving of such notice, mutually agree in writing that the Shareholders are obligated to indemnify the IIS Indemnified Party for a specified amount and shall have so jointly notified the Escrow Agent or (ii) a final nonappealable judgment shall have been rendered by the court having jurisdiction over the matters relating to such claim by the IIS Indemnified Party for indemnification from the Shareholders and the Escrow Agent shall have received, in the case of clause (i) above, written instructions from the Shareholders’ Representative and the IIS Indemnified Party, or, in the case of clause (ii) above, a copy of the final nonappealable judgment of the court;

The Escrow Agent shall, at the request of IIS, either (i) sell the necessary amount of the Exchange Shares and deliver the proceeds of the sale to the IIS Indemnified Party, in accordance with the Escrow Agreement, or (ii) transfer the Escrow Shares to IIS or any subsidiary or other entity or person designated in writing by IIS..

7. Treatment of Indemnification Payments

The Shareholders and IIS agree to treat any payments received pursuant to this Agreement as adjustments to the Purchase Price for all tax purposes, to the maximum extent permitted by Legal Requirements. In the event that such a payment cannot be treated as an adjustment to the Purchase Price, then the Shareholders shall further indemnify the IIS Indemnified Party for any tax cost incurred by the IIS Indemnified Party arising from the receipt of such indemnification payment (and the receipt of additional amounts pursuant to this sentence).

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8. Shareholders’Representative

8.1 The Shareholders hereby appoint, authorize and empower Charles Moss (such person and any successor or successors to such person in such capacity being the “Shareholders’ Representative”), to act as the representative and as the exclusive agent and attorneys in fact of each Shareholder, and the Shareholders’Representative is hereby authorized and empowered to act on behalf of the Shareholders, to execute the Escrow Agreement on behalf of the Shareholders and to take any and all actions required or permitted to be taken by the Shareholders’ Representative under this Agreement or the Escrow Agreement, with respect to any claims made by IIS or the Shareholders for indemnification pursuant to this Agreement and with respect to any actions to be taken by the Shareholders’ Representative pursuant to the terms of the Escrow Agreement, including, without limitation, to:

8.1.1 Execute the Escrow Agreement on behalf of the Shareholders;

8.1.2 Execute any agreement or instrument required to be executed and delivered by the Shareholders’ Representative under this Agreement or the Escrow Agreement;

8.1.3 Authorize delivery to any IIS Indemnified Party of the proceeds from the sale of any of the Escrow Shares, or any portion thereof, in satisfaction of indemnification claims under this Agreement;

8.1.4 Agree to, negotiate, enter into settlements and compromises of and comply with orders of courts and awards of arbitrators with respect to such indemnification claims;

8.1.5 Resolve any indemnification claims under this Agreement; and

8.1.6 Take all actions necessary in the sole discretion of the Shareholders’ Representative for the accomplishment of the foregoing and all of the other terms, conditions and limitations of this Agreement or the Escrow Agreement.

8.2 The Shareholders’ Representative shall at all time act in their capacity as Shareholders’ Representatives in a manner that the Shareholders’ Representative believes in good faith to be in the best interests of the Shareholders.

8.3 The Shareholders’ Representative shall not be liable to any Person for any error of judgment, or any action taken, suffered or omitted to be taken, under this Agreement or the Escrow Agreement, except in the case of its fraud, intentional misrepresentation, or willful misconduct. The Shareholders’ Representative may in his discretion consult with legal counsel, independent public accountants and other experts selected by him and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts or failure to seek advice.

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8.4 The Shareholders’ Representatives shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the Escrow Agreement. As to any matters not expressly provided for in this Agreement or the Escrow Agreement, the Shareholders’ Representative shall not be required to exercise any discretion or take any action. The Shareholders shall, severally and not jointly, on a pro rata basis based on their Pro Rata Share, indemnify, defend and hold the Shareholders’ Representative harmless against any liabilities, losses, damages, claims, costs or expenses that may be incurred as such liabilities, losses, damages, claims, costs or expenses are incurred by the Shareholders’ Representative and arising out of or in connection with the acceptance or administration of the Shareholders’ Representative’s duties hereunder, including, but not limited, the legal costs and expenses of defending such Shareholders’ Representative against any claim or liability (and all actions, claims, proceedings and investigations in respect thereof), in connection with, caused by or arising out of, directly or indirectly, the performance of the Shareholders’ Representative’s duties (except for bad faith or willful misconduct).

8.5 The Shareholders shall be responsible for and shall reimburse the Shareholders’Representative on a pro rata basis upon demand for all reasonable expenses, disbursements and advances incurred or made by the Shareholders’ Representative in accordance with any of the provisions of this Agreement, the Escrow Agreement or any other documents executed in connection herewith or therewith, including, without limitation, the costs and expenses of receiving advice of counsel according to this Agreement and the Escrow Agreement.

8.6 The indemnification and reimbursement of costs and expenses obligations of the Shareholders vis-à-vis the Shareholders’ Representative pursuant to this Section 8 shall remain in full force and effect following the appointment of a new Shareholders’ Representative or termination of this Agreement for any reason. Notwithstanding anything to contrary herein or in the Escrow agreement, (a) the Shareholders’ Representative is not authorized to, and shall not, accept on behalf of any Shareholder any purchase price consideration to which such Shareholder is entitled under the Exchange Agreement and (b) the Shareholders’ Representative shall not in any manner exercise, or seek to exercise, any voting power whatsoever with respect to shares of IIS now or hereafter owned of record or beneficially by a Shareholder unless the Shareholders’ Representative is expressly authorized to do so in a writing signed by such Shareholders.

8.7 The shareholders may appoint a new Shareholders’ Representative as set forth in the Escrow Agreement, such an appointment to be notified in writing to IIS.

8.8 IIS shall be entitled to rely exclusively on all statements, representatives and decisions of the Shareholders’ Representative as statements, representations and decisions of the Shareholders.

9. General Provisions

9.1 Amendments. Except as otherwise permitted herein, this Agreement may be modified only by a written amendment signed by IIS, Witech and the Shareholders Representative, and no waiver of any provision hereof shall be effective unless expressed in a writing signed by the IIS or Witech or the Shareholders Representative, according to the party to be charged.

9.2 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by telecopy or registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.2):

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if to IIS:

Twin Towers, 33 Jabotinsky Street

Ramat Gan 52511, Israel

Attention: Chairman and CEO

Facsimile: (972) 3 575 0595 

with a copy (which shall not constitute notice) to:

Amit, Pollak, Matalon & Co.

17 Yitzhak Sadeh Street

Tel Aviv, Israel

Facsimile: 972-3-568-9001 

Attn: Ian Rostowsky, Adv

if to Witech:

Witech Communications Ltd.

17 Ha'atasia Street, Or Yehuda 60212 

Fax Number: 972-3-533-3868 

Attention: Charles Moss

with a copy (which shall not constitute notice) to:

Fischer, Behar, Chen, Well, Orion and Co.

3 Daniel Frisch Street

Tel Aviv, Israel 64731 

Facsimile: +972-3-609-1116 

Attn: Ron Lehmann, Adv.

If to a Shareholder, or to the Shareholder Representative, to the Shareholder Representative

with a copy (which shall not constitute notice) to:

Fischer, Behar, Chen, Well, Orion and Co.

3 Daniel Frisch Street

Tel Aviv, Israel 64731 

Facsimile: +972-3-609-1116 

Attn: Ron Lehmann, Adv.

9.3 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible.

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9.4 Entire Agreement. This Agreement, the Exchange Agreement, the Escrow Agreement and any other agreements contemplated hereby constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between the IIS, Witech and the Shareholders with respect to the subject matter hereof and thereof.

9.5 Assignment. This Agreement may not be assigned by operation of law or otherwise without the express written consent of the IIS, Witech and the Shareholders Representative (which consent may be granted or withheld in the sole discretion of the Parties).

9.6 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Israel. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any court sitting in the city of Tel-Aviv. The parties hereto hereby (a) submit to the exclusive jurisdiction of any court sitting in the city of Tel-Aviv for the purpose of any action arising out of or relating to this Agreement brought by any party hereto, and (b) irrevocably waive, and agree not to assert by way of notion, defense, or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the action is brought in an inconvenient forum, that the venue of the action is improper, or that this Agreement or the transactions contemplated by this Agreement may not be enforced in or by any of the above-named courts.

9.7 Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

9.8 Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

[signature pages follow]

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IN WITNESS WHEREOF, the Parties hereto have executed this Indemnification Agreement on the date first written above:

——————————————————
I.I.S. Intelligent Information Systems Ltd.
By: __________________________
Name: _______________________
Title: _________________________ ——————————————————
Witech Communications Ltd.
By: __________________________
Name: Charles Moss
Title: President and CEO

——————————————————
Charles Moss (as Shareholder
Representative)

[Signature Pages of the Witech Shareholders Follow]

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SIGNATURE PAGE OF WITECH SHAREHOLDERS

INDEMNIFICATIONAGREEMENT, dated as November 5, 2007,
by and among I.I.S Intelligent Information Systems Ltd., Witech Communications Ltd.,
("Witech") and the shareholders of Witech

Name of Shareholder: _____________________________

Signature of Shareholder: __________________________

Name of Signatory:______________________________

The undersigned Notary/Attorney, hereby confirms that ______________ appeared before me and signed above in my presence on this ____ day of November. 2007.

Name of Notary or Attorney:____________________________

Signature of Notary or Attorney: __________________________

License Number: _____________________________________

Address: ____________________________________________

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EX-4.6

Exhibit 4.6

I.I.S Intelligent Information Systems Ltd..

2007 ISRAELI SHARE OPTION PLAN

Approved by the Board of Directors on: November 5, 2007

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PREFACE

This plan, as amended from time to time, shall be known as the “I.I.S Intelligent Information Systems Ltd. – 2007 Israeli Share Option Plan” (the “ISOP”).

1. PURPOSE OF THE ISOP

The purpose of this ISOP is to foster and promote the long-term financial success of the Company and its Affiliates and increase shareholder value by:

(a) motivating superior performance by means of performance-related incentives;

(b) encouraging and providing for the acquisition of an ownership interest in the Company by eligible Employees, directors, consultants, service providers and any other entity which the Board shall decide their services are considered valuable to the Company; and

(c) enabling the Company to attract and retain the services of outstanding management team and other qualified and dedicated employees directors, consultants, service providers upon whose judgment, interest and special effort the successful conduct of its operations is largely dependent.

2. DEFINITIONS

For purposes of this ISOP and related documents, including the Grant Letter, the following definitions shall apply:

2.1 “Administrator” – means the Board or the Committee as shall be administering this ISOP, in accordance with Section 3 hereof.

2.2 “Affiliate” - means any "employing company" within the meaning of Section 102(a) of the Ordinance.

2.3 “Approved 102 Option” – means an Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Optionee.

2.4 “Articles of Association” – means the Articles of Association of the Company as same are in effect from time to time.

2.5 “Board” - means the Board of Directors of the Company.

2.6 “Capital Gain Option” or “CGO” - as defined in Section 5.4 below.

2.7 “Cause” – means, (1) with respect to an Employee (i) as such term is defined in the individual employment agreement or other engagement agreement between the Employee and the Company or its Affiliates, or (ii) if no such agreement is in place, then ‘Cause’ shall mean any one of the following: (a) conviction of any felony involving moral turpitude or affecting the Company; (b) any failure to carry out, as an employee of the Company or its Affiliates, a reasonable directive of the chief executive officer, the Board or the Optionee’s direct supervisor, which involves the business of the Company or its Affiliates and which was capable of being lawfully performed by Optionee; (c) embezzlement or theft of funds of the Company or its Affiliates; (d) any breach of the Optionee’s fiduciary duties or duties of care of the Company; including, without limitation, self-dealing, prohibited disclosure of confidential information of, or relating to, the Company, or engagement in any business competitive to the business of the Company or of its Affiliates; (e) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Company, and (f) any other circumstances under which the Company is entitled to terminate Optionee’s employment with the Company without paying Optionee severance pay under applicable law; and (2) with respect to a Non-Employee (i) as such term is defined in the individual engagement agreement between the Optionee and the Company or its Subsidiaries, or (ii) if no such agreement is in place, then ‘Cause’ shall mean any one of the circumstances set forth in (ii) (a) through and including (e) herein, as applicable to such Non-Employee.

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2.8 “Chairman” - means the chairman of the Committee.

2.9 “Committee” – means a share option compensation committee appointed by the Board, which shall consist of no fewer than two members of the Board, and if no such compensation committee is appointed, then the Board.

2.10 “Company” - means I.I.S Intelligent Information Systems Ltd., a company incorporated under the laws of the State of Israel, corporate registration number 520035049.

2.11 “Companies Law” – means the Israeli Companies Law, 5759-1999, including any rules and regulations promulgated thereunder and any provisions of the Companies Ordinance [New Version], 1983 still in effect, as amended from time to time.

2.12 “Controlling Shareholder” - shall have the meaning ascribed to it in Section 32(9) of the Ordinance.

2.13 “Date of Grant” – means, the date of grant of an Option, as determined by the Board and set forth in the Optionee’s Grant Letter, and in any event not earlier than the first date on which the Company is permitted to effect Option grants under this ISOP and the provisions of the Ordinance.

2.14 “Employee” – means a person who is employed by the Company or its Affiliates, including an individual who is serving as a director or an office holder, but excluding a Controlling Shareholder.

2.15 “Expiration Date” – means the date upon which an Option shall expire, as set forth in Section 9.2 of this ISOP.

2.16 “Fair Market Value” - means as of any date, the value of a Share determined as follows:

2.16.1 If the Shares are listed on any stock exchange or other national market system, including without limitation the Tel Aviv Stock Exchange, NASDAQ National Market system, or the NASDAQ SmallCap Market of the NASDAQ Stock Market, the Fair Market Value shall be the closing sales price for such Shares (or the closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to time of determination, as reported in the Wall Street Journal, or such other source as the Board deems reliable.

2.16.2 Without derogating from the above, solely for the purpose of determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if at the Date of Grant of a 102 CGO the Company’s shares are listed on any established stock exchange or a national market system or if the Company’s shares will be registered for trading within ninety (90) days following the Date of Grant, the Fair Market Value of a Share at the Date of Grant shall be determined in accordance with the average value of the Company’s shares on the thirty (30) trading days preceding the Date of Grant or on the thirty (30) trading days following the date of registration for trading, as the case may be;

2.16.3 If the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Shares on the last market trading day prior to the day of determination, or;

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2.16.4 In the absence of an established market for the Shares, the Fair Market Value thereof shall be determined in good faith by the Board.

2.17 “Grant Letter” – means the grant letter given by the Company to the Optionee and signed by the Company and the Optionee, and which sets out the terms and conditions of an Option.

2.18 “IPO” – means the underwritten initial public offering of the Company’s shares pursuant to a registration statement filed with and declared effective under the Israeli Securities Law, 1968, under the U.S. Securities Act of 1933, as amended, or under any similar law of any other jurisdiction.

2.19 “ISOP” - means as defined in the preface hereto.

2.20 “ITA”– means the Israeli Tax Authorities.

2.21 “NIS” –means New Israeli Shekels.

2.22 “Non-Employee” – means a consultant, adviser, service provider, and Controlling Shareholder of the Company prior to the issuance of the relevant Option or as a result thereof, or any other person who is not an Employee.

2.23 “Ordinary Income Option” or "OIO" - as defined in Section 5.5 below.

2.24 “Option” - means an option to purchase one or more Shares of the Company pursuant to this ISOP.

2.25 “102 Option” – means an Option that the Board intends to be a “102 Option” which shall only be granted to Employees, and shall be subject to and construed consistently with the requirements of Section 102 of the Tax Ordinance. The Company shall have no liability to an Optionee, or to any other party, if an Option (or any part thereof), which is intended to be a 102 Option, does not eventually qualify as a 102 Option.

2.26 “3(i) Option” – means an Option that is either specifically granted pursuant to Section 3(i) of the Ordinance to any person who is a Non-Employee or that does not contain terms as will cause such option to qualify under Section 102 of the Tax Ordinance.

2.27 “Optionee” - means a person who receives or holds an Option under this ISOP.

2.28 “Ordinance” – means the Israeli Income Tax Ordinance [New Version] 1961, including any and all rules and regulations promulgated thereunder, as now in effect or as hereafter amended.

2.29 “Purchase Price” - means the purchase price for each Share underlying an Option.

2.30 “Section 102” – means Section 102 of the Ordinance, including any and all rules, regulations, orders and procedures promulgated thereunder, as now in effect or as hereafter amended.

2.31 “Share” - means the Ordinary Shares of the Company, of nominal value NIS 0.003 each.

2.32 “Successor Company” – means any entity into or with which the Company is merged or by which, the Company is acquired, pursuant to a Transaction in which the Company is not the surviving entity.

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2.33 “Transaction” – means each (i) merger, acquisition or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, or (ii) a sale of all or substantially all of the assets or shares of the Company.

2.34 “Trustee” – means any individual appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance.

2.35 “US$” - means United States of America dollars.

2.36 “Vested Option” - means any Option that has already become vested and exercisable according to its Vesting Dates or otherwise (e.g. acceleration upon certain events).

2.37 “Vesting Dates” – means with respect to any Option, the date(s) as of which the Optionee shall be entitled to exercise all or part of such Option, as set forth in the Optionee’s individual Grant Letter, and if no such date(s) are specified in Optionee’s individual Grant Letter, then as set out in Section 10.2 of this ISOP.

2.38 “Unapproved 102 Option” – means an Option granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee.

3. ADMINISTRATION OF THIS ISOP

This ISOP shall be administered by the Board. The Board shall have the authority in its sole discretion, subject and not inconsistent with the express provisions of this ISOP, to administer this ISOP and to exercise all the powers and authorities specifically granted to it under this ISOP as necessary and advisable in the administration of this ISOP.

Provided that the Board is entitled by law to delegate all and any of its powers and authority granted to it under this ISOP to a Committee, then such powers and authority may be delegated to the Committee. The Committee shall have the responsibility of construing and interpreting this ISOP and of establishing and amending such rules and regulations, as it deems necessary or desirable for the proper administration of this ISOP.

3.1 The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places, as the Chairman shall determine or as otherwise convened in accordance with the Articles of Association. The Committee shall keep records of its meetings and shall make such rules and regulations for the conduct of its business, as it shall deem advisable.

3.2 The Committee shall have the power to recommend to the Board and the Board shall have the full power and authority to: (i) designate Optionees; (ii) determine the, Date of Grant, terms and provisions of the respective Grant Letters (which need not be identical), including, but not limited to, the number of Options to be granted to each Optionee, the number of Shares to be covered by each Option, provisions concerning the time and extent to which the Options may be exercised, and the nature and duration of restrictions as to the transferability, or restrictions constituting substantial risk of forfeiture upon occurrence of certain events; (iii) determine the Fair Market Value of the Shares covered by each Option; (iv) designate the type of Options; and (v) cancel or suspend Options, as necessary.

3.3 Subject to the provisions of this ISOP, the applicable laws and, the specific duties delegated by the Board to the Committee, and subject to the approval of any relevant authorities, the Committee shall have the authority, in its discretion:

(i) To construe and interpret the terms of this ISOP and any Options granted pursuant hereto;

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(ii) To designate the Employees and Non-Employees to whom Options may from time to time be granted hereunder;

(iii) To determine the number of Shares to be covered by each such Option granted hereunder;

(iv) To prescribe forms of agreements and/or Grant Letters for use under this ISOP;

(v) To determine the terms of any Option granted hereunder;

(vi) To determine the Purchase Price of any Option granted hereunder;

(vii) To determine the Fair Market Value of Shares;

(viii) To prescribe, amend and rescind rules and regulations relating to this ISOP, provided that any such amendment or rescindment that would adversely affect the rights of an Optionee that has received or been granted an Option shall not be made without the Optionee’s written consent.

(ix) To take all other action and make all other determinations necessary for the administration of this ISOP.

(x) To determine the total number of Shares with in the pool allocated for the purpose of this ISOP from time to time, and or any additional awards hereafter, subject to this ISOP.

3.4 Subject to the Articles of Association, all decisions and selections made by the Board or the Committee pursuant to the provisions of this ISOP shall be made by a majority of its members except that no member of the Board or the Committee shall vote on, or be counted for quorum purposes, with respect to any proposed action of the Board or the Committee relating to any Option to be granted to that member. Any decision reduced to writing shall be executed in accordance with the provisions of the Articles of Association, as the same may be in effect from time to time.

3.5 Any decision or action taken or to be taken by the Committee, arising out of or in connection with the construction, administration, interpretation and effect of this ISOP and of its rules and regulations, shall, to the maximum extent permitted by applicable law, be within its absolute discretion (except as otherwise specifically provided herein) and shall be conclusive and binding upon all Optionees and any person claiming under or through any Optionee.

3.6 No member of the Board or the Committee shall be liable for any action taken or determination made in good faith with respect to this ISOP or any Option granted hereunder.

3.7 Any member of such Committee shall be eligible to receive Options under this ISOP while serving on the Committee, unless otherwise specified herein. No person shall be eligible to be a member of the Committee if that person’s membership would prevent this ISOP from complying with exemptions provided under applicable laws.

4. DESIGNATION OF OPTIONEES

4.1 The persons eligible for participation in this ISOP as Optionees shall include any Employees and/or Non-Employees of the Company or of any Affiliate thereof; provided, however, that (i) Employees may only be granted 102 Options; and (ii) Non-Employees may only be granted 3(i) Options.

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4.2 Each Option granted pursuant to this ISOP shall be evidenced by a Grant Letter, in such form as is customarily used by the Company for such purpose. Each Grant Letter shall state, among other matters, the number of Shares to which the Option relates, the type of Option granted thereunder (whether an CGO, OIO, Unapproved 102 Option or a 3(i) Option), the Vesting Dates, the Purchase Price per share, the Expiration Date and such other terms and conditions as are customarily included in such letters or option agreements, including any such other terms that the Committee or the Board in their discretion may prescribe, provided in all cases that they are consistent with this ISOP. The Grant Letter shall be delivered to the Optionee and executed by the Company and the Optionee and shall incorporate the terms of this ISOP by reference and specify the terms and conditions thereof and any rules applicable thereto.

4.3 The grant of an Option hereunder shall neither entitle the Optionee to participate nor disqualify the Optionee from participating in, any other grant of Options pursuant to this ISOP or any other option or share plan of the Company or any of its Affiliates.

4.4 Notwithstanding anything in the ISOP to the contrary, all grants of Options to directors and office holders shall be authorized and implemented in accordance with the provisions of the Companies Law.

5. DESIGNATION OF OPTIONS PURSUANT TO SECTION 102

5.1 The Company may designate Options granted to Employees pursuant to Section 102 as Unapproved 102 Options or Approved 102 Options.

5.2 The grant of Approved 102 Options under this ISOP shall be made in accordance with the provisions herein, including the provisions of Section 6 below, and shall be conditioned upon the approval of this ISOP by the ITA.

5.3 Approved 102 Option may either be classified as Capital Gain Option (CGO) or Ordinary Income Option (OIO).

5.4 Approved 102 Option elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) shall be referred to herein as CGO.

5.5 Approved 102 Option elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) shall be referred to herein asOIO.

5.6 The Company’s election of the type of Approved 102 Options as CGO or OIO granted to Employees (the “Election”) shall be appropriately filed with the ITA before the first Date of Grant of an Approved 102 Option under such Election. Such Election shall become effective beginning the first Date of Grant of an Approved 102 Option under such Election and shall remain in effect at least until the end of the year following the year during which the Company first granted Approved 102 Options under such Election. The Election shall obligate the Company to grant only the type of Approved 102 Option it has elected, and shall apply to all Optionees who were granted Approved 102 Options during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For avoidance of doubt, such Election shall not prevent the Company from granting Unapproved 102 Options simultaneously.

5.7 Designation of Approved 102 Options – if an Optionee exercises and sells his Shares within the Restricted Period (as defined in Section 6.1 below), the matter of employer’s tax liability of the Company or an Affiliate shall be dealt with in accordance with the provisions of Section 22 below.

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5.8 All Approved 102 Options must be held in trust by the Trustee, as described in Section 6 below.

5.9 For avoidance of doubt, the designation of Unapproved 102 Options and Approved 102 Options shall be subject to the terms and conditions set forth in Section 102 of the Ordinance.

6. TRUSTEE

6.1 Approved 102 Options which shall be granted under this ISOP and/or any Shares allocated or issued upon exercise of such Approved 102 Options and/or other shares received subsequently following any realization of rights, including, without limitation, bonus shares, shall be allocated or issued to the Trustee (and registered in the Trustee’s name in the Company’s shareholders register) and held by the Trustee for the benefit of the Optionees to whom such Approved 102 Options were granted for such period of time as required by Section 102 (the “Restricted Period”). All certificates representing Shares issued to the Trustee under this ISOP shall be deposited with the Trustee, and shall be held by the Trustee until such time that such Shares are released from the aforesaid trust as herein provided. If the requirements for Approved 102 Options are not met, the Approved 102 Options may be treated as Unapproved 102 Options, all in accordance with the provisions of Section 102.

6.2 Notwithstanding anything to the contrary herein, the Trustee shall not release any Shares allocated or issued upon exercise of Approved 102 Options prior to the full payment of the Optionee’s tax liabilities arising from Approved 102 Options, which were granted to such Optionee and/or any Shares allocated or issued upon exercise of such Options.

6.3 With respect to any Approved 102 Option, subject to the provisions of Section 102, an Optionee shall not sell or release from trust any Share received upon the exercise of an Approved 102 Option and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Restricted Period required under Section 102. Notwithstanding the above, if any such sale or release occurs during the Restricted Period, the sanctions under Section 102 shall apply to and shall be borne by such Optionee.

6.4 Upon receipt of Approved 102 Option, the Optionee will sign an undertaking to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with this ISOP, or any Approved 102 Option or Share granted to him hereunder. Such release may be incorporated within the Grant Letter.

7. SHARES RESERVED FOR THE ISOP; RESTRICTIONS THEREON

7.1 The Company shall from time to time reserve, out of its authorized but un-issued share capital, such number of Shares as the Board deems appropriate (subject to the Articles of Association) for the purposes of this ISOP and/or for the purposes of any other share option plans which have previously been, or may in the future be, adopted by the Company, subject to adjustment as set forth in Section 11 below. Any Shares which remain un-issued and which are not subject to then outstanding Options at the termination or expiration of this ISOP shall cease to be reserved for the purpose of this ISOP, but may continue to be reserved for other share option plans then in effect, and in any event, until termination of this ISOP the Company shall at all times reserve a sufficient number of Shares to meet the requirements of any then outstanding Options. Should any Option for any reason expire or be canceled prior to its exercise or relinquishment in full, the Shares subject to such Option may again be subjected to a new Option under this ISOP or under the Company’s other share option plans, provided, however, that Shares that have actually been issued under this ISOP shall not be returned to the pool under this ISOP and shall not become available for future distribution under this ISOP.

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7.2 The Company, at its sole discretion, may require that, until the consummation of an IPO any Shares issued upon exercise of Options (and securities of the Company issued with respect thereto) shall be voted by an irrevocable proxy (the “Proxy”), in the form attached to each Grant Letter, pursuant to the directions of the Board, such Proxy to be assigned to the person(s) designated by the Board (the “Proxy Holder”) and to provide for the power of such Proxy Holder to act, instead of the Optionee and on its behalf, with respect to any and all aspects of the Optionee’s shareholdings in the Company. The Proxy Holder shall vote the Shares and/or execute any written instruments relating to the Shares in the same manner as the votes of the majority of the shareholders of the Company present and voting at the applicable meeting. The Proxy may be contained in the individual Optionee’s Grant Letter or otherwise as the Committee determines. If contained in the Grant Letter, no further document shall be required to implement such Proxy, and the signature of the Optionee on the Grant Letter shall indicate approval of the Proxy thereby granted. The Proxy Holder shall be indemnified and held harmless by the Company and the Optionees against any cost or expense (including counsel fees) reasonably incurred by him/her, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the voting of such Proxy unless arising out of the Proxy Holder’s own fraud or bad faith, to the extent permitted by applicable law. Such indemnification shall be in addition to any rights of indemnification the Proxy Holder may have as a director or otherwise under the Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise. Without derogating from the above, with respect to Shares issuable upon exercise of Approved 102 Options, such Shares shall be voted in accordance with the provisions of Section 102 and of any rules, regulations or orders promulgated thereunder.

8. PURCHASE PRICE

8.1 The Purchase Price of each Share subject to an Option shall be equal to the Share’s Fair Market Value or as otherwise determined by the Committee in its sole and absolute discretion in accordance with applicable law, subject to any guidelines as may be determined by the Board from time to time. Each Grant Letter will contain the Purchase Price determined for each Option covered thereby (but in any event, not less than the nominal value of the Share issuable upon exercise thereof).

8.2 The total consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator and may consist entirely of (1) cash, (2) check, or (3) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. The Committee shall have the authority to postpone the date of payment on such terms as it may determine.

8.3 The Purchase Price shall be denominated in NIS or US$ or otherwise as determined by the Committee.

8.4 The proceeds received by the Company from the issuance of Shares subject to the Options will be added to the general funds of the Company and used for its corporate purposes.

9. TERM AND EXERCISE OF OPTIONS

9.1 Options shall be exercised by the Optionee by giving written notice to the Company and/or to any third party designated by the Company (the “Representative”), in such form and method as may be determined by the Committee and when applicable, by the Trustee in accordance with the requirements of Section 102, which exercise shall be effective upon receipt of such notice by the Company and/or the Representative and the full payment of the Purchase Price at the Company’s or the Representative’s principal office, which payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. The notice shall specify the number of Shares with respect to which the Option is being exercised.

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9.2 Options, to the extent not previously exercised, shall terminate forthwith upon the earlier of: (i) the date set forth in the Grant Letter (and unless otherwise determined in accordance with the provisions of this ISOP with respect to any Option(s), such date shall be ten (10) years from the respective Date of Grant); or (ii) the expiration of any extended period in any of the events set forth in Section 9.5 below.

9.3 The Options may be exercised by the Optionee in whole at any time or in part from time to time, to the extent that the Options become vested and exercisable, prior to the Expiration Date, and provided that, subject to the provisions of Section 9.5 below, the Optionee who is an Employee is employed by or providing services to the Company or any of its Affiliates, at all times during the period beginning with the granting of the Option and ending upon the date of exercise. An Optionee who is a Non-Employee may exercise the Options in whole at any time or in part from time to time, to the extent that the Options have become vested and exercisable, prior to the Expiration Date.

9.4 Shares issued upon exercise of an Option (excluding Shares underlying an Approved 102 Option, which Shares shall be issued in the name of the Trustee) shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 11 of the Plan.

9.5 Exercise of an Option in any manner shall result in a decrease in the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

9.6 An Option may not be exercised for fractional shares.

9.7 Subject to the provisions of Section 9.5 below, in the event of termination of Optionee’s employment or services, with the Company or any of its Affiliates, all Options granted to such Optionee that are at the time of termination non-vested will immediately expire. A notice of termination of employment or service shall be deemed to constitute the termination of employment or service and of the vesting of any non-vested Options at the date of such termination. For the avoidance of doubt, in case of such termination of employment or service, the unvested portion of the Optionee’s Option shall not vest and shall not become exercisable and any unvested portion of the Optionee’s Option shall revert to the pool of Shares under this ISOP or that of any other one or more share option plans of the Company then in effect.

9.8 Anything in this Plan to the contrary notwithstanding, but subject to the provisions of section 102 of the Ordinance and the tax regulations thereto, if an Optionee ceases to be an Employee or a Consultants of the Company or any Subsidiary thereof, but continues to provide services to the Company or any Subsidiary thereof, such Optionee will be deemed to have continuously remained a Consultant of the Company during such term, and his Options shall vest pursuant to their original terms.

9.9 Notwithstanding anything to the contrary herein and unless otherwise determined in the Optionee’s Grant Letter, an Option may be exercised after the date of termination of Optionee’s employment or service with the Company or any Affiliates during an additional period of time beyond the date of such termination, but only with respect to the number of Vested Options at the time of such termination according to the Vesting Dates, as follows:

(i) If termination is without Cause, then any Vested Option still in force and un-expired may be exercised within a period of three (3) months after the date of such termination;

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(ii) If termination is the result of death, or Disability (defined below) of the Optionee, then any Vested Option still in force and un-expired may be exercised within a period of twelve (12) months after the date of such termination;

(iii) With respect to (i) and (ii) above, prior to the expiration of the periods set out therein (i.e., the 3-month period in (i) above, and the 12-month period in (ii) above), the Committee may authorize an extension of the terms of exercise post-termination of all or part of the Vested Options beyond the date of such termination for a period not to exceed the period during which the Options by their terms would otherwise have been exercisable.

(iv) For avoidance of any doubt, notwithstanding anything herein to the contrary, if termination of employment or service is for Cause: (a) any outstanding unexercised Option (whether vested or non-vested), will immediately expire and terminate, and the Optionee shall not have any right in connection to such outstanding Options; and (b) all Shares issued upon exercise of Options prior to the date of termination of employment or service for Cause shall be subject to repurchase, against payment by the Repurchaser(s) (as defined in Section 12.3 below) of the total Purchase Price paid by such Optionee to the Company, provided however that in no case shall the Company provide financial assistance to purchase the Shares if doing so is prohibited by law. If the Repurchaser(s) exercise the right of repurchase of such Shares in accordance with the provisions of Section 12.3 below, and the Optionee (whose employment or engagement with the Company was terminated for Cause), fails to transfer his/her Shares as aforesaid, the Company, at the decision of the Board, shall be entitled to forfeit such Optionee’s Shares and to authorize any person to execute on behalf of the Optionee any instrument or document necessary to effect such transfer and to make the appropriate inscription in the Company’s records. Each Optionee, upon executing a Grant Letter, shall be deemed to have authorized and granted the Company and each of its officers an irrevocable power of attorney to execute in his/her behalf such instruments and documents that are necessary to give full effect to the repurchase provisions set forth herein. In this respect, each of the Company and its shareholders shall be deemed to be third party beneficiaries of this paragraph (iv) with rights to enforce the same against the Optionees.

(v) As used herein: the term “Disability” shall have the meaning ascribed thereto in the individual employment or engagement agreement between the Optionee and the Company or any of its Affiliates, as applicable and if no such definition exists, then ‘Disability’ shall mean Optionee’s inability to perform his/her duties towards the Company, or to any of its Affiliates, for a consecutive period of at least 180 days, by reason of any medically determinable physical or mental impairment.

(vi) If an Optionee should retire, he may, subject to the approval of the Administrator, continue to enjoy such rights, if any, under the Plan and on such terms and conditions, with such limitations and subject to such requirements as the committee in its sole discretion may determine at the time of such retirement or at any time theretofore

9.10 To avoid doubt, the Optionees shall not be deemed owners of the Shares issuable upon the exercise of Options and shall not have any of the rights or privileges of shareholders of the Company in respect of any Shares purchasable upon the exercise of any Option, nor shall they be deemed to be a class of shareholders of the Company for any purpose, including but not limited for the purpose of the operation of Sections 350 and 351 of the Companies Law or any successor to such section, until registration of the Optionee as holder of such Shares in the Company’s register of shareholders upon exercise of the Option in accordance with the provisions of this ISOP, but in case of Options and Shares held by the Trustee, subject to the provisions of Section 6 of this ISOP. Notwithstanding anything herein to the contrary, in no event shall the Optionees be deemed a class of creditors of the Company for any purpose whatsoever, including but not limited to for the purpose of the operation of Sections 350 and 351 of the Companies Law or any successor to such section.

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9.11 Any form of Grant Letter customarily used by the Company in connection with the grant of Options, provided it is consistent with the provisions of this ISOP, may contain such other provisions, as the Committee or the Board may, from time to time, deem advisable.

9.12 The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary for the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

9.13 With respect to Unapproved 102 Options, if the Optionee ceases to be employed by the Company or any Affiliate, the Optionee shall extend to the Company and/or its Affiliate a security or guarantee for the payment of tax due at the time of sale of Shares, all in accordance with the provisions of Section 102. In respect of any employer’s tax liability for the purpose of employment taxes such as in the case of social taxes, see Section 22 below.

9.14 Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option, the method of payment and the issuance and delivery of such Shares shall comply with applicable laws and this ISOP.

9.15 Upon their issuance, the Shares shall carry equal voting rights on all matters where such vote is permitted by applicable laws of the jurisdiction of incorporation of the Company, provided however, that the Company, at its sole discretion, may require that, until the consummation of an IPO any Shares issued upon exercise of Options (and securities of the Company issued with respect thereto) shall be voted by an irrevocable Proxy to be given to the Proxy Holder in the same manner as the votes of the majority of the other shareholders of the Company present and voting at the applicable meeting, such Proxy to be assigned to the Proxy Holder and provide for the power of the Proxy Holder to act, instead of the Optionee and on its behalf, with respect to any and all aspects of the Optionee’s shareholdings in the Company, as set forth in Section 7.2 above.

10. VESTING OF OPTIONS

10.1 Subject to the provisions of this ISOP, each Option shall vest and become exercisable commencing on the Vesting Date thereof, as determined by the Board or by the Committee, for the number of Shares as shall be provided in the Grant Letter. However, no Option shall be exercisable after the Expiration Date.

10.2 Unless otherwise stated in the Optionee’s Grant Letter, all Options granted pursuant to this ISOP, shall vest annually, in four (4) equal portions, over a 4-year period from its Date of Grant, with twenty-five percent (25%) of such Option becoming vested on the first anniversary of the Date of Grant, and another twenty-five percent (25%) becoming vested on each of the second, third and fourth anniversaries of such Date of Grant.

10.3 An Option may be subject to such other terms and conditions on the time or times when it may be exercised, as the Committee may deem appropriate. The vesting provisions of individual Options may vary.

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11. ADJUSTMENTS

11.1 Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Option, the number of Shares which have been reserved for issuance under this ISOP and/or any other share option plan adopted by the Company, but as to which no Options have yet been granted or which have been returned to this ISOP or such other share option plans upon cancellation or expiration of an Option, as well as the Purchase Price per share of Shares covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease resulting from a share split, bonus shares (share dividend), combination or reclassification of the Shares, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company. The adjustments described herein shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to the number or the price of Shares subject to an Option. If the Options or the Shares issued upon the exercise of such Options will be deposited with a Trustee, as determined by the Administrator, all of the Shares formed by these adjustments also will be deposited with the Trustee on the same terms and conditions as the original Options or Shares.

11.2 Dissolution or Liquidation. In the event of any dissolution or liquidation of the Company, whether voluntary or involuntary (the “Event”), the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such Event. The Option holders shall then have fifteen (15) days to exercise any unexercised Vested Options held by them at that time, in accordance with the exercise procedure set forth herein. Upon the expiration of such 15-day period, all remaining unexercised Options and any non Vested Options will terminate immediately. The Administrator in its sole discretion may allow the exercise of any or all-outstanding Options, whether or not such Options are Vested Options, during a longer period following such notification and prior to the Event, all subject to the provisions of applicable laws. To the extent it has not been previously exercised, an Option and all Optionee’s rights thereto will terminate immediately prior to the Event.

11.3 Merger, Acquisition, Shares’ sale, Assets’ Sale

(a) In the event of a Transaction, and to the extent possible by the terms of the Transaction, each outstanding Option shall be assumed for an equivalent option or right substituted by the Successor Company or a parent or subsidiary of the Successor Company, and appropriate adjustments shall be made in the number of options in order to reflect such an action and to keep the Optionee harmless due to the Transaction.

(b) In the event that as part of the Transaction the Successor Company refuses to assume or substitute outstanding Options, the vesting periods defined in the Grant Letters may be fully accelerated, in whole or in part, if so determined by the Board. In this event, the Administrator shall notify each Optionee in writing or electronically if and to what extent the Board has approved the acceleration of an Option, and as to each Option that has been accelerated, the period of time during which the Vested Option may be exercised by the Optionee. The determination as to acceleration of any then un-Vested Options and the duration during which any Vested Options may be exercised in connection with a Transaction shall be in the sole and absolute discretion of the Board. Subject to the following paragraph of this Section 11.3(b) below, any Vested Options shall be fully exercisable for such period as determined by the Board, where any un-Vested or Vested but un-exercised Options shall terminate upon the expiration of such period.

In any event, any Vested Option not exercised by the date on which the definitive agreement for the Transaction has been executed (the “Cut-Off Date”), and any un-Vested Options on such Cut-Off Date, shall immediately terminate and no longer be exercisable by the Optionee as of the Cut-Off Date.

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(c) Without derogating from the provisions of paragraph (b) above, if as a condition precedent to a Transaction, all Optionees are required to sell or exchange their Vested Options and/or any Shares issued upon exercise thereof as part of the Transaction, then each Optionee shall be obligated to sell or exchange, as the case may be, any Vested Options and/or Shares such Optionee holds or purchased under this ISOP, in accordance with the instructions of the Board, at its sole and absolute discretion, in connection with the Transaction, and on the same terms as shall be determined to all the holders of Ordinary Shares in the Company. For avoidance of doubt, on the Cut-Off Date of a Transaction, any Vested Options not sold or exchanged and any non-Vested Options shall terminate and expire as of the Cut-Off Date.

(d) For the purposes of this paragraph, the Option shall be considered assumed if, following a Transaction, the Optionee receives the right to purchase or receive, for each Share subject to the Option immediately prior to the Transaction, the consideration (whether in shares, stocks, cash, or other securities or property) received in the Transaction by holders of Shares for each Share held on the effective date of the Transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Transaction is not solely shares of the Successor Company or its parent or subsidiary, the Administrator may, with the consent of the Successor Company or its parent or subsidiary, provide for each Optionee to receive solely Shares of the Successor Company or its parent or subsidiary equal in Fair Market Value to the per share consideration received by holders of Shares in the Transaction.

11.4 Stock dividend, bonus shares, stock split, cash dividends.

(a) If the outstanding shares of the Company shall at any time be changed or exchanged by declaration of a share dividend (bonus shares), share split, combination or exchange of shares, recapitalization, or any other like event by or of the Company, and as often as the same shall occur, then the number, class and kind of the Shares subject to this ISOP or subject to any Options therefor granted, and the Purchase Prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of Shares without changing the aggregate Purchase Price, provided, however, that the Purchase Price shall not be less than the nominal value of the Share underlying any such Options, and provided further, that no adjustment shall be made by reason of the distribution of subscription rights (rights offering) on outstanding shares. Upon the occurrence of any of the foregoing, the class and aggregate number of Shares issuable pursuant to this ISOP (as set forth in Section 7 hereof), in respect of which Options have not yet been exercised, shall be appropriately adjusted, all as will be determined by the Board whose determination shall be final.

(b) Except as expressly provided herein, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option.

(c) With respect to any cash dividends distributable by the Company, should the determination date for such cash dividends be prior to the exercise date of any outstanding Option, including with respect to any then un-Vested Options, then the Purchase Price of all then outstanding Options shall be adjusted and reduced so as to reflect the net amount paid by the Company as a cash dividend on account of its Ordinary Shares, with respect to each Share underlying an Option.

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12. PURCHASE FOR INVESTMENT; LIMITATIONS UPON IPO; REPRESENTATIONS

12.1 The Company’s obligation to issue or allocate Shares upon exercise of an Option granted under this ISOP is expressly conditioned upon: (a) the Company’s completion of any registration or other qualifications of such Shares under all applicable laws, rules and regulations or (b) representations and undertakings by the Optionee (or his legal representative, heir or legatee, in the event of the Optionee’s death) to assure that the sale of the Shares complies with any registration exemption requirements which the Company in its sole discretion shall deem necessary or advisable. Such required representations and undertakings may include representations and agreements that such Optionee (or his legal representative, heir, or legatee): (a) is purchasing such Shares for investment and not with any present intention of selling or otherwise disposing thereof; and (b) agrees to have placed upon the face and reverse of any certificates evidencing such Shares a legend setting forth (i) any representations and undertakings which such Optionee has given to the Company or a reference thereto and (ii) that, prior to effecting any sale or other disposition of any such Shares, the Optionee must furnish to the Company an opinion of counsel, satisfactory to the Company, that such sale or disposition will not violate the applicable laws, rules, and regulations, whether of the State of Israel or of any other State having jurisdiction over the Company and the Optionee.

12.2 The Optionee acknowledges that in the event that the Company’s shares shall be registered for trading in any public market, Optionee’s rights to sell the Shares may be subject to certain limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Optionee unconditionally agrees and accepts any such limitations.

12.3 If any Shares shall be registered under the United States Securities Act of 1933, no public offering otherwise than a national securities exchange (as defined in the United States Securities Exchange Act of 1934, as amended) of any Shares shall be made by the Optionee (or any other person) under such circumstances that he or she (or such other person) may be deemed an underwriter, as defined in the United States Securities Act of 1933.

12.4 Upon the grant of Options to an Optionee or the issuance of Shares upon the exercise thereof, the Company shall obtain from the Optionee the representations and undertakings along the line of those set out below, and/or any other representations and warranties that the Committee may deem advisable, and the giving of such representations and warranties by the Optionee shall be a condition precedent to Optionee’s right to receive the Option and/or be issued the Shares upon exercise thereof:

(a) That the Optionee knows that there is no certainty that the exercise of the Options will be financially worthwhile. The Optionee thereby undertakes not to have any claim against the Company or any of its directors, employees, stockholders or advisors if it emerges, at the time of exercising the Options, that the Optionee’s investment in the Company’s Shares was not worthwhile, for any reason whatsoever.

(b) That the Optionee knows and understands that his rights regarding the Options and the Shares are subject for all intents and purposes to the instructions of the Company’s documents of incorporation and to the agreements of the shareholders in the Company.

(c) That the Optionee knows that in addition to the allocations set forth above, the Company has allocated and/or is entitled to allocate Options and Shares to other employees and other people, and the Optionee shall have no claim regarding such allocations, their quantity, the relationship among them and between them and the other shareholders in the Company, exercising of the options or any matter related to or stemming from them.

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(d) That the Optionee knows that neither this ISOP nor the grant of Options or Shares thereunder shall impose any obligation on the Company to continue the engagement of the Optionee, and nothing in this ISOP or in any Option or Shares granted pursuant thereto shall confer upon any Optionee any right to continue being engaged by the Company, or restrict the right of the Company to terminate such engagement at any time.

13. DIVIDENDS

With respect to all Shares (but excluding, for avoidance of any doubt, any unexercised Options) allocated or issued upon the exercise of Options purchased by the Optionee and held by the Optionee or by the Trustee, as the case may be, the Optionee shall be entitled to receive dividends in accordance with the quantity of such Shares, subject to the provisions of the Articles of Association and subject to any applicable taxation on distribution of dividends, and, when applicable, subject to the provisions of Section 102.

14. RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS

14.1 No Option or any right with respect thereto, purchasable hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral or any right with respect to it given to any third party whatsoever, except as specifically allowed under this ISOP, and during the lifetime of the Optionee each and all of such Optionee’s rights to purchase Shares hereunder shall be exercisable only by the Optionee.

Any such action made directly or indirectly, for an immediate validation or for a future one, shall be void.

14.2 So long as Options and/or Shares are held by the Trustee on behalf of an Optionee, all rights of the Optionee over the Shares are personal, can not be transferred, assigned, pledged or mortgaged, other than by will or pursuant to the laws of descent and distribution.

15. EFFECTIVE DATE AND DURATION OF THE ISOP

This ISOP shall be effective as of the day it was adopted by the Board and shall terminate at the end of Ten (10) years from such day of adoption, unless terminated earlier in accordance with Section 16 hereof.

16. AMENDMENTS OR TERMINATION

The Board may at any time, but when applicable, after consultation with the Trustee, amend, alter, suspend or terminate this ISOP. No amendment, alteration, suspension or termination of this ISOP shall impair the rights of any Optionee granted to Optionee prior to such amendment, alteration, suspension or termination of this ISOP, unless mutually agreed otherwise between the Optionee and the Company, which agreement must be in writing and signed by the Optionee and the Company. Termination of this ISOP shall not affect the Committee’s ability to exercise the powers granted to it hereunder with respect to Options granted under this ISOP prior to the date of such termination.

17. GOVERNMENT REGULATIONS

This ISOP, and the grant and exercise of Options hereunder, and the obligation of the Company to sell and deliver Shares under such Options, shall be subject to all applicable laws, rules, and regulations, whether of the State of Israel any other State having jurisdiction over the Company and the Optionee, including, without limitation, the United States Securities Act of 1933, the Companies Law, the Securities Law, 1968, and the Ordinance, and to such approvals by any governmental agencies or national securities exchanges as may be required. Nothing herein shall be deemed to require the Company to register the Shares under the securities laws of any jurisdiction.

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18. CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES

Neither this ISOP nor the Grant Letter with the Optionee shall impose any obligation on the Company or an Affiliate thereof, to continue any Optionee in its employ or service, and nothing in this ISOP or in any Option granted pursuant thereto shall confer upon any Optionee any right to continue in the employ or service of the Company or an Affiliate thereof or restrict the right of the Company or an Affiliate thereof to terminate such employment or service at any time.

19. GOVERNING LAW & JURISDICTION

This ISOP shall be governed by and construed and enforced in accordance with the laws of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws. The competent courts of Tel Aviv district, Israel shall have sole and exclusive jurisdiction in any matters pertaining to this ISOP and any Grant Letters effected hereunder.

20. INTEGRATION OF SECTION 102 AND TAX COMMISSIONER’S PERMIT

20.1 With regards to Approved 102 Options, the provisions of this ISOP and the Grant Letter shall be subject to the provisions of Section 102 and the ITA Commissioner’s permit, and the said provisions and permit shall be deemed an integral part of this ISOP and of the individual Grant Letters with each Optionee.

20.2 Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in this ISOP or the individual Grant Letter of the Optionees, shall be considered binding upon the Company and the Optionees.

21. TAX CONSEQUENCES

21.1 Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company and/or its Affiliates, the Trustee or the Optionee), hereunder, shall be borne solely by the Optionee. The Company and/or its Affiliates and/or the Trustee shall withhold taxes according to the requirements of any applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Optionee shall agree to indemnify the Company and/or its Affiliates and/or the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Optionee.

21.2 The Company and/or, when applicable, the Trustee shall not be required to release any Share and/or share certificate representing such Shares to an Optionee until all required payments have been fully made.

21.3 To the extent provided by the terms of any Grant Letter, the Optionee may satisfy any tax withholding obligation relating to the exercise or acquisition of Shares under an Option by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Optionee by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) subject to the Committee’s approval on or prior to the payment date, authorizing the Company to withhold Shares from the Shares otherwise issuable to the Optionee as a result of the exercise or acquisition of Shares under the Option in an amount not to exceed the minimum amount of tax required to be withheld by law; or (iii) subject to Committee approval on or prior to the payment date, delivering to the Company owned and unencumbered Shares; provided that Shares acquired on exercise of Options have been held for at least 6 months from the date of exercise.

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21.4 The Company shall have the right to deduct from all amounts paid to an Optionee in cash (whether under this ISOP or otherwise) any taxes required by law to be withheld in respect of Options under this ISOP. In the case of any Option satisfied by the issuance of Shares, no Shares shall be issued unless and until arrangements satisfactory to the Committee shall have been made to satisfy any withholding tax obligations applicable with respect to such Option.

21.5 In connection with any Options granted and/or any Shares issued pursuant to this ISOP, the Company shall bear and be liable to pay only those any taxes arising from its liability as an employer pursuant to applicable law, where any other taxes shall be borne solely by the Optionee.

22. NON-EXCLUSIVITY OF THIS ISOP

The adoption of this ISOP by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangements or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of options to purchase shares of the Company otherwise than under this ISOP, and such arrangements may be either applicable generally or only in specific cases.

For the avoidance of doubt, prior grant of options to Employees and/or Non-Employees of the Company under their employment agreements or other engagement agreements, and not in the framework of any previous option plan, shall not be deemed an approved incentive arrangement for the purpose of this Section 22.

23. MULTIPLE AGREEMENTS

The terms of each Option may differ from the terms of other Options granted under this ISOP at the same time, or at any other time. The Board may also grant more than one Option to a given Optionee during the term of this ISOP, either in addition to, or in substitution for, one or more Options previously granted to that Optionee.

24. DISPUTES

Any dispute or disagreement which may arise under or as a result of or pursuant to this ISOP or the individual Grant Letters shall be determined by the Board in its sole discretion and any interpretation made by the Board of the terms of this ISOP or the individual Grant Letters shall be final, binding and conclusive.

This ISOP was adopted by the Board on November 5, 2007

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EX-4.7

Exhibit 4.7

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT (the “Agreement”) is made as of ______ __, 2007, by and between I.I.S Intelligent Information Systems Ltd., a company organized under the laws of the State of Israel (the “Company”), and _____________ (“Indemnitee”).

WHEREAS, the Company desires to attract and retain Indemnitee to serve as an Office Holder (as defined in the Companies Law-1999 (the “Law”)) in the Company and to provide Indemnitee with protection against liability and expenses incurred while acting in that capacity;

WHEREAS, the Company understands that Indemnitee has reservations about serving the Company without adequate protection against personal liability arising from such service, and that it is also of critical importance to Indemnitee that adequate provision be made for advancing costs and expenses of legal defense; and

WHEREAS, the Board of Directors and the shareholders of the Company have approved this Agreement as being in the best interests of the Company.

NOW, THEREFORE, in order to induce Indemnitee to serve or to continue to serve as an Office Holder of the Company the parties agree as follows:

1. Contractual Indemnity.

The Company hereby agrees, subject to the limitations of Sections 2, 3, and 6 hereof, and the limitations mentioned in the Company’s Articles of Association, to indemnify Indemnitee, to the greatest extent possible under applicable law, against any liability or expense in respect of any act or omission of Indemnitee in his capacity as an Office Holder of the Company or of a company controlled, directly or indirectly, by the Company (a “Subsidiary”), or as a director or observer at Board meetings of a company not controlled by the Company but in which the appointment as a director or observer results from the Company’s holdings in such company or is made at the Company’s request (“Affiliate”), including: (i) a monetary obligation imposed on Indemnitee in favor of another person by a court judgment, including a judgment given in settlement or an arbitrator’s award approved by court; (ii) reasonable litigation expenses, including advocates’ professional fees, incurred by the Office Holder pursuant to an investigation or a proceeding commenced against him by a competent authority and that was terminated without an indictment and without having a monetary charge imposed on him in exchange for a criminal procedure (as such terms are defined in the Law), or that was terminated without an indictment but with a monetary charge imposed on him in exchange for a criminal procedure in a crime that does not require proof of criminal intent; (iii) reasonable litigation expenses, including attorneys’ fees, expended by Indemnitee or charged to Indemnitee by a court, in a proceeding instituted against Indemnitee by the Company or on its behalf or by another person, or in a criminal charge from which Indemnitee was acquitted, or in a criminal proceeding in which Indemnitee was convicted of an offense that does not require proof of criminal intent (collectively referred to hereinafter as “Claim”).

The Company shall indemnify the Indemnitee with respect to actions or omissions occurring during his position as an Office Holder, even if (i) the actions or omissions occurred prior to the signing of this document or (ii) at the time of Claim Indemnitee is no longer an Office Holder.

The termination of any action or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that (i) Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in the best interests of the Company, or (ii) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

2. Limitations on Contractual Indemnity.

2.1 Indemnitee shall not be entitled to indemnification under Section 1, for financial obligation imposed consequent to any of the following: (i) a breach of the duty of fidelity by Indemnitee, unless the Indemnitee acted in good faith and had reasonable basis to assume that the act would not harm the Company; or (ii) a violation of the Indemnitee’s duty of care towards the Company, which was committed intentionally or recklessly (but not where the breach was negligent only); or (iii) an act committed with the intention to realize a personal unlawful profit; or (iv) a fine or monetary penalty imposed on Indemnitee; or (v) a counterclaim made by the Company or in its name in connection with a claim against the Company filed by Indemnitee.

2.2 The Company undertakes to indemnify all Office Holders it has resolved to indemnify for the matters and in the circumstances described herein, jointly and in the aggregate, in excess of the insurance proceeds received pursuant to Section 9, a total amount over the years, that shall not exceed an amount equal to US$2,500,000 (two million five hundred thousand US dollars), or such greater sum as shall, from time to time, be approved by the shareholders of the Company.

3. Limitation of Categories of Claims. The indemnification pursuant to sub-section (i) of the first paragraph of Section 1 above, shall only relate to liabilities arising in connection with acts or omissions of Indemnitee in respect of the following events and circumstances which are deemed by the Board of Directors of the Company to be foreseeable at the date hereof:

3.1 Claims arising from breach of: safety laws, tax laws, anti-trust laws, rules promulgated by any competent Government agency, accounting rules, and such other similar rules of any applicable jurisdiction, and any Claims arising in connection with violations of laws requiring the Company to obtain regulatory and governmental licenses, permits and authorizations in any jurisdiction;

3.2 Claims of service providers and suppliers of products, subcontractors, clients and users of the Company's products or technology;

3.3 The offering of securities (including, inter alia, Claims based on disclosure or non-disclosure of facts in the offering documents, any report or failure to report as required by applicable rules, or the compliance or non-compliance with the Law) by the Company, a Subsidiary, or an Affiliate and/or by a shareholder thereof to the public and/or to private investors or the offer by the Company, a Subsidiary, and/or an Affiliate to purchase securities from the public and/or from private investors or other holders pursuant to a prospectus, agreements, notices, reports, tenders and/or other proceedings, whether in Israel or abroad;

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3.4 Claims of shareholders or creditors pertaining to breach of the Law and other related rules;

3.5 Claims of creditors or security holders, including (inter alia) Claims in dissolution, winding-up, settlement with creditors and other similar proceedings;

3.6 Claims based upon breach of privacy and other civil rights, libel and slander, misleading or wrongful distribution of information;

3.7 Claims made by business associates, including joint venture partners;

3.8 Claims arising out of any incentive plan in favor of employees, office holders, consultants and service providers;

3.9 Any claim or demand made by any third party suffering injury and/or damage through any act or omission attributed to the Company, it’s subsidiaries or Affiliates, or their respective employees, agents or other persons acting or allegedly acting on their behalf;

3.10 Claims based upon the participation and/or non participation of the Beneficiary in board meetings and board committee meetings, bona fide expression of opinion and/or voting and/or abstention from voting at board and board committee meetings and including any approval of corporate actions, including the approval of the acts of the Company’s management, their guidance and their supervision, and further including any Claims of failure to exercise business judgment and a reasonable level of proficiency, expertise and care in regard of the Company’s business;

3.11 Any claim or demand made directly or indirectly in connection with the complete or partial failure of the Company or any Subsidiary or Affiliate entity, or their respective directors, officers and employees, to keep applicable records, report and pay all applicable taxes and other compulsory payments of any nature, in any jurisdiction and locality; whether disputed or not and Claims in connection with publishing or providing any information, including any filings with governmental authorities, on behalf of the Company or any Subsidiary or Affiliate entity in the circumstances required under applicable laws;

3.12 Claims based upon failure to maintain appropriate insurance, and Claims based upon inadequate safety measures and/or a malpractice of risk management;

3.13 Claims concerning financing matters, including purchase of securities for investment purposes, other investments, hedging or the non performance of any such matters or the results thereof;

3.14 Occurrences including reporting obligations resulting from the status of the Company and/or a Subsidiary and/or an Affiliate as a public company, and/or from the fact that the securities thereof were offered to the public and/or are traded on a stock exchange, or other stock market whether in Israel or abroad;

3.15 Occurrences in connection with investments the Company and/or Subsidiaries and/or Affiliates make in other corporations whether before and/or after the investment is made, entering into the transaction, the execution, development and monitoring thereof, including actions taken by an Office Holder in the name of the Company and/or a Subsidiary and/or an Affiliate as a director, officer, employee and/or board observer of the corporation the subject of the transaction and the like;

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3.16 The sale, purchase and holding of securities or other investments for or in the name of the Company, a Subsidiary and/or an Affiliate;

3.17 Actions in connection with the merger of the Company, a Subsidiary and/or an Affiliate with or into another entity or the purchase of shares or assets of another person or entity;

3.18 Actions in connection with the sale of the operations and/or business, or part thereof, of the Company, a Subsidiary and/or an Affiliate;

3.19 Without derogating from the generality of the above, actions in connection with the purchase or sale of companies, legal entities or assets, and the division or consolidation thereof;

3.20 Actions taken in connection with labor relations and/or employment matters in the Company, Subsidiaries and/or Affiliates and trade relations of the Company, Subsidiaries and/or Affiliates, including with employees, independent contractors, customers, suppliers and various service providersand including the handling of pension funds, provident funds, insurance and savings funds, options, bonuses etc;

3.21 Actions in connection with the developing, testing and manufacturing of products by the Company, Subsidiaries and/or Affiliates or in connection with the distribution, sale, license or use of such products, including without limitation in connection with clinical trials, professional liability and product liability claims;

3.22 Actions taken in connection with the intellectual property of the Company, Subsidiaries and/or Affiliates, and its protection, including the registration or assertion of rights to intellectual property and the defense of claims related to intellectual propertyand any other Claim or demand based upon actual or alleged infringement, misuse or misappropriation of any third party’s intellectual property rights, including but not limited to confidential information, patents, copyrights, design rights, trade and service marks, trade secrets, copyrights, misappropriation of ideas; and any actions taken in connection with the Intellectual Property of the Subsidiary or Affiliate and its protection, including the registration or assertion of rights to intellectual property and the defense of claims relating thereof; and

3.23 Actions taken pursuant to or in accordance with the policies and procedures of the Company, Subsidiaries and/or Affiliates, that have been decided upon, whether such policies and procedures are published or not.

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4. Expenses; Indemnification Procedure. The Company shall advance Indemnitee all expenses incurred by Indemnitee in connection with a Claim on the date on which such amounts are first payable, but has no duty to advance payments in less than twenty (20) days following delivery of a written request therefor by Indemnitee to the Company. Advances given to cover legal expenses in criminal proceedings will be repaid by Indemnitee to the Company if Indemnitee is found guilty of a crime that requires criminal intent. Any Advances to repay pursuant to this Section 4 shall be unsecured and interest free. Other advances will be repaid by Indemnitee to the Company if it is determined by the Company’s legal counsel that Indemnitee is not lawfully entitled to such indemnification; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Company that Indemnitee would be not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Advance until a final judicial determination is made with respect thereto (and as to which all rights of appeal therefrom have been exhausted or lapsed).

5. Notification and Defense of Claim. If any action, suit, proceeding or other Claim is brought against Indemnitee in respect of which indemnity may be sought under this Agreement:

5.1 Indemnitee will promptly notify the Company in writing of the commencement thereof, and the Company will be entitled to participate therein at its own expense or to assume the defense thereof and to employ counsel reasonably satisfactory to Indemnitee. Indemnitee shall have the right to employ his own counsel in connection with any such Claim and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of Indemnitee unless (i) the Company shall not have assumed the defense of the Claim and employed counsel for such defense, or (ii) the named parties to any such action include both Indemnitee and the Company, and Indemnitee shall have reasonably concluded that joint representation is inappropriate under applicable standards of professional conduct due to a material conflict of interest between Indemnitee and the Company.

5.2 The Company shall not be liable to indemnify Indemnitee for any amounts paid in settlement of any Claim effected without the Company’s written consent, and the Company shall not settle any Claim in a manner which would impose any penalty or limitation on Indemnitee without Indemnitee’s written consent; provided, however, that neither the Company nor Indemnitee will unreasonably withhold its consent to any proposed settlement and, provided further, that if a Claim is settled by the Indemnitee with the Company’s written consent, or if there be a final judgment or decree for the plaintiff in connection with the Claim by a court of competent jurisdiction, the Company shall indemnify and hold harmless Indemnitee from and against any and all losses, costs, expenses and liabilities incurred by reason of such settlement or judgment.

5.3 Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

6. Partial Indemnification. If Indemnitee is entitled to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties incurred by him in the investigation, defense, appeal or settlement of any civil or criminal action or proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled.

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7. Other Indemnification. The Company will not indemnify Indemnitee for any liability with respect to which Indemnitee has received payment by virtue of an insurance policy or other indemnification agreement, other than for amounts which are in excess of the amount actually paid to Indemnitee pursuant to such agreements.

7A. Remedies of Indemnitee. In the event that (i) a determination is made pursuant to Sections 2 and 3 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) an Advance is not timely made pursuant to Section 4 of this Agreement, (iii) no determination of entitlement to indemnification is made by the Company after receipt by the Company of Indemnitee’s request for indemnification pursuant to Section 5 of this Agreement, or (iv) payment of indemnification is not made after a determination has been made that Indemnitee is entitled to indemnification, the Company shall not oppose Indemnitee’s right to seek adjudication of his entitlement to such indemnification in any court of competent jurisdiction.

8. Collection from a Third Party. The Company will be entitled to any amount collected from a third party in connection with liabilities indemnified hereunder.

9. Insurance. The Company shall maintain an insurance with a reputable insurer (the “Insurer”) to insure the liability of the Indemnitee for an obligation imposed on him in consequence of an act done in his capacity as an Office Holder of the Company, in any of the following cases:

9.1 a breach of the duty of care vis-à-vis the Company or vis-a-vis another person.

9.2 a breach of the duty of fidelity vis-à-vis the company, provided that the director acted in good faith and had reasonable basis to assume that the act would not harm the Company.

9.3 a monetary obligation imposed on him in favor of another person.

The abovementioned insurance for all of the Office Holders of the Company shall be in the total amount of not less than US$5,000,000 (five million US Dollars) (the “Insurance Policy”). The Company undertakes to maintain such insurance during the period the Indemnitee serves as a director of the Company and for a period of 7 (seven) years commencing on the day Indemnitee has ceased from serving as a director of the Company. Indemnitee shall be covered by such insurance in accordance with its terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy.

The Company shall give prompt written notice of any Claim to the Insurer in accordance with the procedures set forth in the Insurance Policy. The Company shall thereafter take all necessary or desirable action to cause the Insurer to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of the Insurance Policy.

10. No Restrictions. For the avoidance of doubt, it is hereby clarified that nothing contained in this Agreement or in the above resolutions derogate from the Company’s right to indemnify the Indemnitee post factum for any amounts which the Indemnitee may be obligated to pay as set forth in Section 1 above without the limitations set forth in Sections 2 and 3 above.

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11. Non-Exclusivity. The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the incorporation documents of the Company, any agreement, a vote of stockholders, a resolution of directors or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his role as Officer Holder of the Company prior to such amendment, alteration or repeal. To the extent that change in the law, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the incorporation documents of the Company and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or nor ow hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

12. Severability. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. In any event, the undertakings of the Company and the categories of claims in Section 3, shall be construed as widely as permitted by law.

13. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, and shall continue thereafter so long as Indemnitee shall be subject to any Claim (or any proceeding commenced under Section 7A hereof) by reason of his being an Office Holder of the Company, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement and with the expiration of any applicable statute of limitations with respect thereto.

14. Attorneys’ Fees. In the event of any litigation or other action or proceeding to enforce or interpret this Agreement, the prevailing party as determined by the court shall be entitled to an award of its reasonable attorneys’ fees and other costs, in addition to such relief as may be awarded by a court or other tribunal.

15. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand or by fax or other means of electronic communication and receipted for by the party addressee, on the date of such receipt, or (ii) if mailed by certified or registered mail with postage prepaid, on the third business day after the date postmarked.

16. Governing Law; Binding Effect; Amendment. This Agreement shall be governed by and construed under the laws of the State of Israel. The parties agree to submit themselves to the exclusive jurisdiction of the courts in Tel-Aviv or Jerusalem. This Agreement shall be binding upon Indemnitee and the Company, their successors and assigns, and shall inure to the benefit of Indemnitee, his heirs, personal representatives and assigns and to the benefit of the Company, its successors and assigns. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto.

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        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

I.I.S Intelligent Information Systems Ltd.	Indemnitee
By: _______________________	Name __________
Name: _____________________
Title: ______________________

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EX-8.1

Exhibit 8.1

Significant Subsidiaries of I.I.S. Intelligent Information Systems Limited

List of Significant Subsidiaries Jurisdiction of
Incorporation or
Organization

Witech Communications Ltd. Israel

EX-99

Exhibit 99.1

	Kesselman & Kesselman  Certified Public Accountants (Isr.)  Trade Tower, 25 Hamered Street  Tel Aviv 68125 Israel  P.O Box 452 Tel Aviv 61003  Telephone +972-3-7954555  Facsimile +972-3-7954556

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form 20-F of our report dated August 29, 2007 relating to the financial statements of I.I.S. Intelligent Information Systems Limited, which appears in such Registration Statement.

Tel-Aviv, Israel /s/ Kesselman & Kesselman
January 10, 2008 Certified Public Accountants (Isr.)
A member of PriceWaterhouseCoopers
International Limited