**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-KSB** ****





**x**
            **Annual
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**




**For
      the fiscal year ended: December 31, 2005**




**o**
            **Transition
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**




**For
      the transition period from ______________to ______________**




**Commission
      File Number 000-51259**




**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


(Name
      of
      Small Business Issuer in Its Charter)





**Delaware**
              (State
                of Incorporation)
            **20-2374143**
              (Small
                Business Issuer
              I.R.S.
                Employer I.D. Number)**7
                Gush Etzion, 3rd Floor, Givaat Shmuel, Israel**
              (Address
                of principal executive offices)
            **54030**
              (zip
                code)





**972-3-5325918**


(Issuer’s
      Telephone Number, Including Area Code)





**Securities
      registered pursuant to Section 12(b) of the Act:**


None





**Securities
      registered pursuant to Section 12(g) of the Act:**


Units
      consisting of one share of Common Stock, par value $.0001 per share, and two
      Warrants


Common
      Stock, $.0001 par value per share


Warrants
      to purchase shares of Common Stock







Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o




Check
      whether the Issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the past 12 months (or for such shorter
      period that the registrant was required to file such reports), and (2) has
      been
      subject to such filing requirement for the past 90
      days. Yes x No
o




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of the registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act) Yes x No
o




Issuer’s
      revenues for the fiscal year ended December 31, 2005 were $0.




As
      of
      March 24, 2006, the aggregate market value of the common stock held by
      non-affiliates of the Registrant was approximately $34,117,200.




As
      of
      March 28, 2006, there were 7,818,000 shares of Common Stock, $.0001 par value
      per share, outstanding.




Transitional
      Small Business Disclosure Format (check one): Yes o No
x








**PART
      I**




**ITEM
      1. DESCRIPTION OF BUSINESS**




Israel
      Technology Acquisition Corp. isa blank
      check company formed on February 22, 2005 toeffect
      a
      merger, capital stock exchange, asset acquisition or other similar business
      combination with an operating business that has manufacturing operations or
      research and development facilities located in Israel.




On
      July
      19, 2005, we closed our initial public offering of 6,000,000 units, with each
      unit consisting of one share of our common stock and two warrants, each to
      purchase one share of our common stock at an exercise price of $5.00 per share. On
      August
      5, 2005, we consummated the closing of an additional 318,000 units which were
      subject to the over-allotment option. **** The
      units
      were sold at an offering price of $6.00 per unit, generating gross proceeds
      of
      $37,908,000. After deducting the underwriting discounts and commissions and
      the
      offering expenses, the total net proceeds to us from the offering were
      approximately $33,965,000, of which $32,955,360 was deposited into a trust
      fund
      and the remaining proceeds (approximately $1,010,000) became available to be
      used to provide for business, legal and accounting due diligence on prospective
      business combinations and continuing general and administrative expenses.
      Through December 31, 2005, we have used $240,970 of the net proceeds that were
      not deposited into the trust fund to pay general and administrative expenses.
      The net proceeds deposited into the trust fund remain on deposit in the trust
      fund earning interest. As of December 31, 2005, there was $33,472,678 held
      in
      the trust fund.




We
      are
      not presently engaged in, and we will not engage in, any substantive commercial
      business until we consummate a business combination. We intend to utilize our
      cash, including the funds held in the trust fund, capital stock, debt or a
      combination of the foregoing in effecting a business combination. A business
      combination may involve the acquisition of, or merger with, a company which
      does
      not need substantial additional capital but which desires to establish a public
      trading market for its shares, while avoiding what it may deem to be adverse
      consequences of undertaking a public offering itself. These include time delays,
      significant expense, loss of voting control and compliance with various Federal
      and state securities laws. In the alternative, we may seek to consummate a
      business combination with a company that may be financially unstable or in
      its
      early stages of development or growth.




**Recent
      Developments**




On
      February 28, 2006, we entered into an Agreement and Plan of Merger with IXI
      Mobile, Inc. (“IXI”). A wholly owned subsidiary of ours, formed to effectuate
      the merger by merging with and into IXI, is also a party to the Merger
      Agreement. As a result of the merger, IXI will be the surviving corporation
      and
      will become a wholly owned subsidiary of ours. Upon consummation of the merger,
      we will change our name to IXI Mobile, Inc. and IXI will change its name to
      IXI
      Mobile (USA), Inc. IXI is a privately owned company founded in 2000 that
      delivers devices and services designed to improve mobile communications and
      increase mobile data usage. Its OgoTM devices are designed to deliver popular
      messaging applications, such as instant messaging, email, news, and SMS on
      optimized devices, increasing data usage and enhancing the mobile experience.
      IXI markets its solutions to mobile operators and Internet service providers
      worldwide.




Pursuant
      to the merger agreement, immediately following the merger, the holders of equity
      interests of IXI (including holders of employee options and warrants to purchase
      IXI common stock) will own or have the right to acquire approximately 7.8
      million shares of our common stock. Of this amount, approximately 1.4 million
      shares will be available for issuance to IXI’s senior management and employees
      under IXI’s Employee Stock Option Plan. As further consideration, the holders of
      equity interests of IXI will receive or have the right to acquire up to an
      additional 10.0 million shares of our common stock based on attaining various
      targets described in the agreement.




2




Upon
      consummation of the merger, our board of directors will be increased to seven
      members, of whom five have been designated in the Merger Agreement and two
      will
      be designated by us prior to the closing, subject to the reasonable approval
      of
      IXI. All seven designees will be presented for election by our stockholders
      at
      the meeting called to approve the merger. In connection with the merger, we
      will
      seek approval of an amendment to our certificate of incorporation removing
      the
      board classification requirement from our certificate and the new board will
      not
      be classified into different classes, as presently required under our
      certificate of incorporation.




For
      a
      more complete discussion of our proposed business combination, including the
      risk that are applicable to us with respect to our acquisition of IXI, see
      our
      Current Report on Form 8-K dated February 28, 2006 and filed with the SEC on
      March 1, 2006.




We
      expect
      that the transaction will be consummated in the third quarter of 2006, after
      the
      required approval by our stockholders. However, unless otherwise indicated,
      the
      remainder of this Annual Report on Form 10-KSB assumes that the foregoing
      transaction is not consummated and that we must seek a different business
      combination.




**Opportunities
      in Israel**




We
      believe that Israel represents an attractive operating environment for a target
      business for several reasons including, among others:




·
            Israel’s
                large population of scientists and technicians compared to other
                countries;




·
            favorable
                tax incentives and government funding plans offered to Israeli companies;
                and




·
            Israel’s
                reputation as being one of the most attractive centers for technology
                innovation outside of the United States.




Additionally,
      according to the Israel Venture Capital Research Center, since 1999, nine
      billion dollars in venture capital was invested in Israel’s high-tech industry,
      which funded over 1,500 high-tech companies. We believe that this high degree
      of
      venture capital being invested in Israel, when compared to other countries,
      makes Israel a favorable environment for making acquisitions as there should
      be
      a greater number of prospective target businesses searching for liquidity
      events. We also believe that the costs, risks and management disruption involved
      in the traditional initial public offering process makes a transaction with
      us
      an attractive alternative exit strategy.




Although
      our efforts in identifying a prospective target business will not be limited
      to
      a particular industry, we are initially focusing our search on businesses in
      Israel that are engaged in providing high-technology solutions in the areas
      of
      telecommunications and enterprise software.




**Israeli
      Government Programs**




For
      a
      complete discussion of the various policies implemented by the Government of
      Israel and the regulations that will be applicable to us following the business
      combination with IXI, see our filings referred to above under “Recent
      Developments.” If
      we are
      unable to consummate the business combination with IXI, we will continue
      searching for attractive business combinations and may be subject to the
      following benefits and regulations, **** including
      reduced taxation and special subsidy programs, designed to stimulate economic
      activity, particularly the high technology exporting industry.




*Law
                for the Encouragement of Capital Investments, 1959*




The
      Law
      for the Encouragement of Capital Investments, 1959, known as the Investment
      Law,
      provides that capital investment in a production facility (or other eligible
      assets) may, upon application to and approval by the Investment Center of the
      Israeli Ministry of Industry, Trade and Labor, be designated as an Approved
      Enterprise. The principal stated objectives of the Law for the Encouragement
      of
      Capital Investments are to promote the development of industry, the creation
      of
      jobs and the growth of exports. In order to obtain Approved Enterprise status,
      a
      company must file an application with the Investment Center of the Israeli
      Ministry of Industry, Trade and Labor with respect to a proposed capital
      investment program. The application needs to specify the details of the proposed
      capital investment (including timetable, specific capital assets/ equipment
      in
      which the company will invest and budget for each item) and how the investment
      will further the objectives that underlie the Approved Enterprise program.
      Each
      certificate of approval for an Approved Enterprise relates to a specific
      investment program in the Approved Enterprise, delineated both by the financial
      scope of the investment and by the physical characteristics of the facility
      or
      the asset. An Approved Enterprise is entitled to certain benefits, including
      Israeli government cash grants or tax benefits.




3




An
      Approved Enterprise may elect to forego any entitlement to the grants otherwise
      available under the Investment Law and, in lieu of the foregoing, participate
      in
      an alternative benefits program under which the undistributed income from the
      Approved Enterprise is fully exempt from corporate tax for a defined period
      of
      time. We expect that a target business with an Approved Enterprise is most
      likely to elect the alternative benefits program rather than grants. The period
      of tax exemption ranges from between two and ten years, depending upon the
      location within Israel of the Approved Enterprise and the type of Approved
      Enterprise. Upon expiration of the exemption period, the Approved Enterprise
      would be eligible for the otherwise applicable reduced tax rates under the
      Investment Law for the remainder, if any, of the otherwise applicable benefits
      period. If a company has more than one Approved Enterprise program or if only
      a
      portion of its capital investments are approved, its effective tax rate is
      the
      result of a weighted combination of the applicable rates. The tax benefits
      from
      any certificate of approval relate only to taxable profits attributable to
      the
      specific Approved Enterprise. Income derived from activity that is not integral
      to the activity of the enterprise should not be divided between the different
      enterprises and would therefore not enjoy tax benefits.




Income
      derived from an Approved Enterprise is generally subject to a reduced tax rate
      of 25% for a period of seven years. However, further reductions in tax rates
      may
      apply depending on the percentage of the non-Israeli investment in a company’s
      share capital and the percentage of its combined share and loan capital owned
      by
      non-Israeli residents. We cannot assure you that the current benefit program
      will continue to be available or that we will qualify for its benefits following
      a business combination.




A
      company
      that has elected to participate in the alternative benefits program and that
      subsequently pays a dividend out of the income derived from the Approved
      Enterprise during the tax exemption period will be subject to corporate tax
      in
      respect of the amount distributed (including withholding tax thereon) at the
      rate that would have been applicable had the company not elected the alternative
      benefits program. The dividend recipient is taxed at the reduced withholding
      tax
      rate of 15%, applicable to dividends from Approved Enterprises if the dividend
      is distributed within 12 years after the benefits period or other rate provided
      under a treaty. The withholding tax rate will be 25% after such period or a
      lower rate as provided by a relevant treaty. In the case of a company with
      a
      foreign investment level (as defined by the Investment Law) of 25% or more,
      the
      12-year limitation on reduced withholding tax on dividends does not apply.




The
      Investment Law also provides that an Approved Enterprise is entitled to
      accelerated tax depreciation on property and equipment included in an approved
      investment program.




The
      benefits available to an Approved Enterprise would be conditional upon the
      ability of the entity to adhere to the investment program filed with the
      Investment Center of the Israeli Ministry of Industry, Trade and Labor and
      to
      the fulfillment of periodic reporting obligations. If, following a business
      combination, we fulfilled the required conditions and became designated as
      an
      Approved Enterprise but subsequently violated those conditions, in whole or
      in
      part, we would be required to refund the amount of tax benefits that we were
      entitled to, plus an amount linked to the Israeli consumer price index, interest
      and penalties.




4




*Grants
                from the Israeli Office of the Chief Scientist*




Under
      the
      Encouragement of Research and Development in Industry Law, 5744-1984, commonly
      referred to as the R&D Law, research and development programs that are
      approved by the research committee of the Office of the Chief Scientist of
      Israel’s Ministry of Industry, Trade & Labor are eligible for grants to
      reimburse certain approved expenditures of such programs, as determined by
      the
      committee. 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 Office of the Chief Scientist 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 Chief Scientist grants can be between 20%
      and
      75% of the approved research expenses, although in most cases the Chief
      Scientist participation is 50%.




In
      exchange, the recipient of the grants is required to pay the Office of the
      Chief
      Scientist royalties emanating from products incorporating know-how developed
      within the framework of each 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 in respect of such program,
      plus interest, unless the recipient manufactures the product outside Israel,
      in
      which case additional royalties are payable, as mentioned below.




The
      terms
      of the Israeli government participation also require that the manufacture of
      products developed with government grants be performed in Israel, unless
      otherwise approved by the research committee. 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 upon the manufacturing
      volume that is performed outside of Israel.




The
      R&D Law also provides that the know-how developed under an approved research
      and development program 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
      R&D 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 Office of the
      Chief Scientist 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 Office of the Chief Scientist
      to
      comply with the R&D Law. In addition, the rules of the Office of the Chief
      Scientist may require prior approval of the Office of the Chief Scientist or
      additional information or representations in respect of certain of such events.
      Accordingly, if we acquire a target business that has know-how developed under
      an approved research and development program, any non-Israeli who acquires
      5% or
      more of our common stock may be required to notify the Office of the Chief
      Scientist that it has become an interested party and to sign an undertaking
      to
      comply with the R&D Law.




The
      funds
      available for Office of the Chief Scientist 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 or abolish Office of the Chief
      Scientist grants in the future. Even if these grants are maintained, we cannot
      presently predict whether any target business would be eligible for or seek
      these grants, or what would be the amounts of future grants, if any, that we
      might receive following a business combination.




5




**Selection
      of a target business and structuring of a business
      combination**




We
      anticipate that target business candidates will be brought to our attention
      from
      various unaffiliated sources, including investment bankers, venture capital
      funds, private equity funds, leveraged buyout funds, management buyout funds
      and
      other members of the financial community, who may present solicited or
      unsolicited proposals. Our officers and directors as well as their affiliates
      may also bring to our attention target business candidates. While we do not
      currently have any agreements or plans to engage professional firms that
      specialize in business acquisitions to assist us in our search for a target
      business, we may do so in the future. If we do, we may be required to pay such
      firm a finder’s fee or other compensation. In no event, however, will we pay any
      of our initial officers, directors or stockholders (collectively, our
“Founders”) or any entity with which they are affiliated any finder’s fee or
      other compensation for services rendered to us prior to or in connection with
      the consummation of a business combination.




Subject
      to the requirement that our initial business combination must be with a target
      business that has manufacturing operations or research and development
      facilities located in Israel and have a fair market value that is at least
      80%
      of our net assets at the time of such acquisition, ** our
      management has virtually unrestricted flexibility in identifying and selecting
      a
      prospective target business. In evaluating a prospective target business, our
      management considers, among other factors, the following:




·
            financial
                condition and results of operation;




·
            growth
                potential;




·
            experience
                and skill of management and availability of additional
                personnel;




·
            capital
                requirements;




·
            competitive
                position;




·
            barriers
                to entry;




·
            stage
                of development of the products, processes or
                services;




·
            degree
                of current or potential market acceptance of the products, processes
                or
                services;




·
            proprietary
                features and degree of intellectual property or other protection
                of the
                products, processes or services;




·
            regulatory
                environment of the industry; and




·
            costs
                associated with effecting the business
                combination.




These
      criteria are not intended to be exhaustive. Any evaluation relating to the
      merits of a particular business combination will be based, to the extent
      relevant, on the above factors as well as other considerations deemed relevant
      by our management in effecting a business combination consistent with our
      business objective. In evaluating a prospective target business, we conduct
      extensive due diligence reviews which encompass, among other things, meetings
      with incumbent management and inspection of facilities, as well as review of
      financial and other information which will be made available to us.




**Fair
      Market Value of Target Business**




The
      initial target business that we acquire must have a fair market value equal
      to
      at least 80% of our net assets at the time of such acquisition. The fair market
      value of such business will be determined by our board of directors based upon
      standards generally accepted by the financial community, such as actual and
      potential sales, earnings and cash flow and book value. If our board is not
      able
      to independently determine that the target business has a sufficient fair market
      value, we will obtain an opinion from an unaffiliated, independent investment
      banking firm with respect to the satisfaction of such criteria. We will not
      be
      required to obtain an opinion from an investment banking firm as to the fair
      market value if our board of directors independently determines that the target
      business has sufficient fair market value.


6




**Opportunity
      for stockholder approval of business combination**




Prior
      to
      the completion of a business combination, we will submit the transaction to
      our
      stockholders for approval, even if the nature of the acquisition is such as
      would not ordinarily require stockholder approval under applicable state law.
      In
      connection with seeking stockholder approval of a business combination, we
      will
      furnish our stockholders with proxy solicitation materials prepared in
      accordance with the Securities Exchange Act of 1934, which, among other matters,
      will include a description of the operations of the target business and audited
      historical financial statements of the business.




In
      connection with the vote required for any business combination, our Founders
      have agreed to vote their respective shares of common stock owned by them
      immediately prior to our initial public offering (“Founder Shares”) in
      accordance with the vote of the majority of the shares of our common stock
      sold
      in such offering (“IPO Shares”). This voting arrangement shall not apply to any
      shares included in units purchased by our Founders in our initial public
      offering or purchased by them after such offering in the open market. We will
      proceed with the business combination only if a majority of the IPO Shares cast
      at
      the meeting to approve the business combination are voted for the approval
      of
      such business combination and
      stockholders holding less than 20% of the IPO Shares exercise their conversion
      rights. ****




**Conversion
      rights**




At
      the
      time we seek stockholder approval of any business combination, we will offer
      the
      holders of IPO Shares (but
      not
      any of our Founders to the extent they purchased IPO Shares) the
      right
      to have such shares converted to cash if the stockholder votes against the
      business combination and the business combination is approved and completed.
      The
      actual per-share conversion price will be equal to the amount in the trust
      fund,
      inclusive of any interest, as of two business days prior to the consummation
      of
      the business combination, divided by the total number of IPO Shares. As of
      December 31, 2005, the per-share conversion price would have been approximately
      $5.30. An eligible stockholder may request conversion at any time after the
      mailing to our stockholders of the proxy statement and prior to the vote taken
      with respect to a proposed business combination at a meeting held for that
      purpose, but the request will not be granted unless the stockholder votes
      against the business combination and the business combination is approved and
      completed. Any request for conversion, once made, may be withdrawn at any time
      up to the date of the meeting. It is anticipated that the funds to be
      distributed to stockholders entitled to convert their shares who elect
      conversion will be distributed promptly after completion of a business
      combination. We will not complete any business combination if stockholders
      owning 20% or more of the IPO Shares exercise their conversion rights. Holders
      of IPO Shares who convert their stock into their share of the trust fund still
      have the right to exercise any warrants they continue to hold that they
      purchased as part of the units.


**Liquidation
      if no business combination**




If
      we do
      not complete a business combination by January 19, 2007, or by July 19, 2007
      if
      the extension criteria described below have been satisfied, we will be dissolved
      and will distribute to all holders of IPO Shares, in proportion to the number
      of
      IPO Shares held by them, an aggregate sum equal to the amount in the trust
      fund,
      inclusive of any interest, plus any remaining net assets. The Founders have
      waived their rights to participate in any liquidation distribution with respect
      to their Founder Shares. There will be no distribution from the trust fund
      with
      respect to our warrants.




If
      we
      enter into either a letter of intent, an agreement in principle or a definitive
      agreement to complete a business combination prior to January 19, 2007, but
      are
      unable to complete the business combination prior to this date, then we will
      have an additional six months in which to complete the business combination
      contemplated by the letter of intent, agreement in principle or definitive
      agreement. If we are unable to do so by July 19, 2007, we will then liquidate.
      Upon notice from us, the trustee of the trust fund will commence liquidating
      the
      investments constituting the trust fund and will turn over the proceeds to
      our
      transfer agent for distribution to our stockholders. We anticipate that our
      instruction to the trustee would be given promptly after the expiration of
      the
      applicable time periods.




7




If
      we
      were to expend all of the net proceeds of our initial public offering, other
      than the proceeds deposited in the trust fund, the per-share liquidation price
      as of December 31, 2005 would have been approximately $5.30. However, the
      proceeds deposited in the trust fund could become subject to the claims of
      our
      creditors which could be prior to the claims of our public stockholders. Our
      directors have severally agreed
      that, if
      we
      liquidate prior to the consummation of a business combination, they  will
      be
      personally liable to pay debts and obligations to target businesses or vendors
      or other entities that are owed money by us for services rendered or contracted
      for or products sold to us to
      the
      extent they have claims against the funds in our trust account.




**Competition**




In
      identifying, evaluating and selecting a target business, we expect to encounter
      intense competition from other entities having a business objective similar
      to
      ours. There are numerous blank check companies that have completed initial
      public offerings that are seeking to carry out a business plan similar to our
      business plan. Additionally, we may be subject to competition from other
      companies looking to expand their operations through the acquisition of a target
      business. Many of these entities are well established and have extensive
      experience identifying and effecting business combinations directly or through
      affiliates. Many of these competitors possess greater technical, human and
      other
      resources than us and our financial resources will be relatively limited when
      contrasted with those of many of these competitors. While we believe there
      are
      numerous potential target businesses that we could acquire, our ability to
      compete in acquiring certain sizable target businesses will be limited by our
      available financial resources. This inherent competitive limitation gives others
      an advantage in pursuing the acquisition of a target business.
      Further:




·
            our
                obligation to seek stockholder approval of a business combination
                may
                delay the completion of a
                transaction;




·
            our
                obligation to convert into cash shares of common stock held by our
                public
                stockholders in certain instances may reduce the resources available
                to us
                for a business combination; and


·
            our
                outstanding warrants and options, and the future dilution they potentially
                represent, may not be viewed favorably by certain target businesses.




Any
      of
      these factors may place us at a competitive disadvantage in successfully
      negotiating a business combination. Our management believes, however, that
      our
      status as a public entity and potential access to the United States public
      equity markets may give us a competitive advantage over privately-held entities
      having a similar business objective as us in acquiring a target business on
      favorable terms.




If
      we
      succeed in effecting a business combination, there will be, in all likelihood,
      intense competition from competitors of the target business. Numerous companies,
      most of which have substantially greater financial resources available to them
      than we do, are already engaged in the industry segments we are focusing on.
      We
      cannot assure you that, subsequent to a business combination, we will have
      the
      resources or ability to compete effectively.




**Employees**




We
      have
      three executive officers. These individuals are not obligated to contribute
      any
      specific number of hours to our matters and intend to devote only as much time
      as they deem necessary to our affairs. The amount of time they devote in any
      time period will vary based on the availability of suitable target businesses
      to
      investigate. We do not intend to have any full time employees prior to the
      consummation of a business combination.




8




***Risks
      associated with our business***




In
      addition to other information included in this report, the following factors
      should be considered in evaluating our business and future
      prospects.




***We
      are a development stage company with no operating history and very limited
      resources.***




We
      are a
      recently incorporated development stage company with no operating results to
      date. Since we do not have an operating history, you will have no basis upon
      which to evaluate our ability to achieve our business objective, which is to
      acquire an operating business that has manufacturing operations or research
      and
      development facilities located in Israel. We will not generate any revenues
      until, at the earliest, after the consummation of a business
      combination.




***If
      third parties bring claims against us, the proceeds held in trust could be
      reduced and the per-share liquidation price received by stockholders will be
      less than approximately $5.30 per share.***




Our
      placing of funds in trust may not protect those funds from third party claims
      against us. The proceeds held in trust could be subject to claims which could
      take priority over the claims of our public stockholders. We cannot assure
      you
      that the per-share liquidation price will not be less than the approximate
      $5.30
      per share held in trust as of December 31, 2005 due to claims of
      creditors. **** If
      we
      liquidate before the completion of a business combination, our directors have
      severally agreed that they will be personally liable to ensure that the proceeds
      in the trust fund are not reduced by the claims of target businesses or vendors
      or other entities that are owed money by us for services rendered or contracted
      for or products sold to us. However, we cannot assure you that they will be
      able
      to satisfy those obligations. **** Furthermore,
      even after our liquidation (including the distribution of the monies then held
      in the trust fund), under the Delaware General Corporation Law, stockholders
      may
      be held liable for claims by third parties against a corporation to the extent
      of distributions received by them in a dissolution. Accordingly, we cannot
      assure you that third parties will not seek to recover from our stockholders
      amounts owed to them by us.




***Because
      there are numerous companies with a business plan similar to ours seeking to
      effectuate a business combination, it may be more difficult for us to do so.***




There
      are
      numerous similarly structured blank check companies have completed initial
      public offerings in the United States with business plans similar to ours and
      there are a number of additional offerings for blank check companies that are
      still in the registration process but have not completed initial public
      offerings. While some of those companies must complete a business combination
      in
      specific industries, a number of them may consummate a business combination
      in
      any industry they choose. Therefore, we may be subject to competition from
      these
      and other companies seeking to consummate a business plan similar to ours.
      Because of this competition, we cannot assure you that we will be able to
      effectuate a business combination within the required time periods.




***We
      may incorrectly ascertain the merits or risks of the target business' operations
      with which we enter into an acquisition agreement.***




To
      the
      extent we complete a business combination with a financially unstable company
      or
      an entity in its development stage, we may be affected by numerous risks
      inherent in the business operations of those entities. Although our management
      will endeavor to evaluate the risks inherent in a particular target business,
      we
      cannot assure you that we will properly ascertain or assess all of the
      significant risk factors. We also cannot assure you that an investment in our
      securities will not ultimately prove to be less favorable than a direct
      investment, if an opportunity were available, in a target business.




9




***We
      may issue shares of our common stock and preferred stock to complete a business
      combination, which would reduce the equity interest of our stockholders and
      likely cause a change in control of our ownership.***




Our
      certificate of incorporation authorizes the issuance of up to 30,000,000 shares
      of common stock, par value $.0001 per share, and 1,000,000 shares of preferred
      stock, par value $.0001 per share. We currently have 8,646,000 authorized but
      unissued shares of our common stock available for issuance (after appropriate
      reservation for the issuance of shares upon full exercise of our outstanding
      warrants and options) and all of the 1,000,000 shares of preferred stock
      available for issuance. Although we currently have no commitments to issue
      our
      securities, we will, in all likelihood, issue a substantial number of additional
      shares of our common stock or preferred stock, or a combination of common and
      preferred stock, to complete a business combination. The issuance of additional
      shares of our common stock or any number of shares of our preferred
      stock:




·
            may
                significantly reduce the equity interest of
                stockholders;




·
            may
                subordinate the rights of holders of common stock if preferred stock
                is
                issued with rights senior to those afforded to our common stock;




·
            will
                likely cause a change in control if a substantial number of our shares
                of
                common stock are issued, which may affect, among other things, our
                ability
                to use our net operating loss carry forwards, if any, and most likely
                also
                result in the resignation or removal of our present officers and
                directors; and




·
            may
                adversely affect prevailing market prices for our common
                stock.




Similarly,
      if we issue debt securities, it could result in:




·
            default
                and foreclosure on our assets if our operating revenues after a business
                combination were insufficient to pay our debt
                obligations;




·
            acceleration
                of our obligations to repay the indebtedness even if we have made
                all
                principal and interest payments when due if the debt security contains
                covenants that require the maintenance of certain financial ratios
                or
                reserves and any such covenant is breached without a waiver or
                renegotiation of that covenant;




·
            our
                immediate payment of all principal and accrued interest, if any,
                if the
                debt security is payable on demand;
                and




·
            our
                inability to obtain additional financing, if necessary, if the debt
                security contains covenants restricting our ability to obtain additional
                financing while such security is
                outstanding.




***Our
      ability to successfully effect a business combination and to be successful
      thereafter will be totally dependent upon the efforts of our key personnel,
      some
      of whom may join us following a business combination.***




Our
      ability to successfully effect a business combination will be totally dependent
      upon the efforts of our key personnel. The future role of our key personnel
      in
      the target business, however, cannot presently be ascertained. Although it
      is
      possible that some of our key personnel will remain associated in various
      capacities with the target business following a business combination, it is
      likely that the management of the target business at the time of the business
      combination will remain in place. Moreover, our key personnel will be able
      to
      remain with the company after the consummation of a business combination only
      if
      they are able to negotiate employment or consulting agreements in connection
      with the business combination, the terms of which, including the compensation
      to
      be paid to such individuals, would be determined at such time between the
      respective parties. However, the ability of our key personnel to remain with
      the
      company after the consummation of a business combination will not be the
      determining factor in our decision as to whether or not we will proceed with
      any
      potential business combination. While we intend to closely scrutinize the
      management of a prospective target business in connection with evaluating the
      desirability of effecting a business combination, we cannot assure you that
      our
      assessment of management will prove to be correct. These individuals may be
      unfamiliar with the requirements of operating a public company which could
      cause
      us to have to expend time and resources helping them become familiar with such
      requirements. This could be expensive and time-consuming and could lead to
      various regulatory issues which may adversely affect our operations.




10




***Our
      officers and directors allocate their time to other businesses thereby causing
      conflicts of interest in their determination as to how much time to devote
      to
      our affairs. This could have a negative impact on our ability to consummate
      a
      business combination.***




Our
      officers and directors are not required to commit their full time to our
      affairs, which may result in a conflict of interest in allocating their time
      between our operations and other businesses. We
      do not
      intend to have any full time employees prior to the consummation of a business
      combination. All
      of
      our executive officers are engaged in several other business endeavors and
      are
      not obligated to contribute any specific number of hours to our affairs. If
      our
      executive officers’ other business affairs require them to devote more
      substantial amounts of time to such affairs, it could limit their ability to
      devote time to our affairs and could have a negative impact on our ability
      to
      consummate a business combination.




***Our
      officers and directors may in the future become affiliated with entities engaged
      in business activities similar to those intended to be conducted by us and,
      accordingly, may have conflicts of interest in determining which entity a
      particular business opportunity should be presented
      to.***




Our
      officers and directors may in the future become affiliated with entities,
      including other “blank check” companies, engaged in business activities similar
      to those intended to be conducted by us. Additionally, our officers and
      directors may become aware of business opportunities which may be appropriate
      for presentation to us as well as the other entities with which they have
      fiduciary obligations to. Accordingly, they may have conflicts of interest
      in
      determining to which entity a particular business opportunity should be
      presented. We cannot assure you that these conflicts will be resolved in our
      favor.




***All
      of our officers and directors own shares of our common stock and warrants which
      will not participate in liquidation distributions and therefore they may have
      a
      conflict of interest in determining whether a particular target business is
      appropriate for a business combination.***




All
      of
      our officers and directors own stock in our company, but have waived their
      right
      to receive distributions upon our liquidation with respect to their Founder
      Shares. They also own warrants to purchase additional shares of our common
      stock. The Founders Shares and warrants owned by our directors and officers
      will
      be worthless if we do not consummate a business combination. The personal and
      financial interests of our directors and officers may influence their motivation
      in identifying and selecting a target business and completing a business
      combination timely. Consequently, our directors’ and officers’ discretion in
      identifying and selecting a suitable target business may result in a conflict
      of
      interest when determining whether the terms, conditions and timing of a
      particular business combination are appropriate and in our stockholders’ best
      interest.




***It
      is probable that we will only be able to complete one business combination,
      which will cause us to be solely dependent on a single business and a limited
      number of products or services.***




As
      of
      December 31, 2005, we had $33,472,678 on deposit in a trust fund that we may
      use
      to complete a business combination. Our initial business combination must be
      with a business with a fair market value of at least 80% of our net assets
      at
      the time of such acquisition. Consequently, it is probable that we will
      consummate a business combination with a single operating business. Accordingly,
      the prospects for our success may be:




11




·
            solely
                dependent upon the performance of a single business,
                or




·
            dependent
                upon the development or market acceptance of a single or limited
                number of
                products, processes or services.




In
      this
      case, we will not be able to diversify our operations or benefit from the
      possible spreading of risks or offsetting of losses, unlike other entities
      which
      may have the resources to complete several business combinations in different
      industries or different areas of a single industry.




***The
      ability of our stockholders to exercise their conversion rights may not allow
      us
      to effectuate the most desirable business combination or optimize our capital
      structure.***




When
      we
      seek stockholder approval of any business combination, we will offer each public
      stockholder the right to have his, her or its shares of common stock converted
      to cash if the stockholder votes against the business combination and the
      business combination is approved and completed. Such holder must both vote
      against such business combination and then exercise his, her or its conversion
      rights to receive a pro rata portion of the trust account. Accordingly, if
      our
      business combination requires us to use substantially all of our cash to pay
      the
      purchase price, because we will not know how many stockholders may exercise
      such
      conversion rights, we may either need to reserve part of the trust account
      for
      possible payment upon such conversion, or we may need to arrange third party
      financing to help fund our business combination in case a larger percentage
      of
      stockholders exercise their conversion rights than we expect. Therefore, we
      may
      not be able to consummate a business combination that requires us to use all
      of
      the funds held in the trust account as part of the purchase price, or we may
      end
      up having a leverage ratio that is not optimal for our business combination.
      This may limit our ability to effectuate the most attractive business
      combination available to us.




***Because
      of our limited resources and structure, we may not be able to consummate a
      business combination with growth potential.***




We
      expect
      to encounter intense competition from other entities having a business objective
      similar to ours, including venture capital funds, leveraged buyout funds and
      operating businesses competing for acquisitions. Many of these entities are
      well
      established and have extensive experience in identifying and effecting business
      combinations directly or through affiliates. Many of these competitors possess
      greater technical, human and other resources than we do and our financial
      resources will be relatively limited when contrasted with those of many of
      these
      competitors. While we believe that there are numerous potential target
      businesses that we could acquire, our ability to compete in acquiring certain
      sizable target businesses will be limited by our available financial resources.
      This inherent competitive limitation gives others an advantage in pursuing
      the
      acquisition of certain target businesses. Further, the obligation we have to
      seek stockholder approval of a business combination may delay the consummation
      of a transaction, and our obligation to convert into cash the shares of common
      stock held by public stockholders in certain instances may reduce the resources
      available for a business combination. Additionally, our outstanding warrants,
      and the future dilution they potentially represent, may not be viewed favorably
      by certain target businesses. Any of these obligations may place us at a
      competitive disadvantage in successfully negotiating a business combination.
      Additionally, because of our structure, there may be fewer attractive target
      businesses available to acquire or privately held target businesses may not
      be
      not inclined to enter into a transaction with a publicly held blank check
      companies like us.




***We
      may be unable to obtain additional financing, if required, to complete a
      business combination or to fund the operations and growth of the target
      business, which could compel us to restructure the transaction or abandon a
      particular business combination.***




Although
      we believe our current assets will be sufficient to allow us to consummate
      a
      business combination, in as much as we have not yet identified any prospective
      target business, we cannot ascertain the capital requirements for any particular
      transaction. If we require further funds, either because of the size of the
      business combination or the depletion of our available cash in search of a
      target business, or because we become obligated to convert into cash a
      significant number of shares from dissenting stockholders, we will be required
      to seek additional financing. We cannot assure you that such financing would
      be
      available on acceptable terms, if at all. To the extent that additional
      financing proves to be unavailable when needed to consummate a particular
      business combination, we would be compelled to restructure the transaction
      or
      abandon that particular business combination and seek an alternative target
      business candidate. In addition, if we consummate a business combination, we
      may
      require additional financing to fund the operations or growth of the target
      business. The failure to secure additional financing could have a material
      adverse effect on the continued development or growth of the target business.
      None of our officers, directors or stockholders is required to provide any
      financing to us in connection with or after a business combination.




12




***Our
      existing stockholders, including our officers and directors, control a
      substantial interest in us and thus may influence certain actions requiring
      stockholder vote.***




Our
      board
      of directors is divided into three classes, each of which will generally serve
      for a term of three years with only one class of directors being elected in
      each
      year. It is unlikely that there will be an annual meeting of stockholders to
      elect new directors prior to the consummation of a business combination, in
      which case all of the current directors will continue in office at least until
      the consummation of the business combination. If there is an annual meeting,
      as
      a consequence of our “staggered” board of directors, only a minority of the
      board of directors will be considered for election and our existing
      stockholders, because of their ownership position, will have considerable
      influence regarding the outcome. Accordingly, our existing stockholders will
      continue to exert control at least until the consummation of a business
      combination.




***Our
      outstanding warrants may have an adverse effect on the market price of common
      stock and make it more difficult to effect a business
      combination.***




We
      currently have outstanding warrants to purchase 12,636,000 shares of common
      stock and options to purchase 300,000 shares of common stock and warrants to
      purchase an additional 600,000 shares of common stock. To the extent we issue
      shares of common stock to effect a business combination, the potential for
      the
      issuance of substantial numbers of additional shares upon exercise of these
      warrants and options could make us a less attractive acquisition vehicle in
      the
      eyes of a target business as such securities, when exercised, will increase
      the
      number of issued and outstanding shares of our common stock and reduce the
      value
      of the shares issued to complete the business combination. Accordingly, our
      warrants and options may make it more difficult to effectuate a business
      combination or increase the cost of the target business. Additionally, the
      sale,
      or even the possibility of sale, of the shares underlying the warrants and
      options could have an adverse effect on the market price for our securities
      or
      on our ability to obtain future public financing. If and to the extent these
      warrants and options are exercised, you may experience dilution to your
      holdings.




***If
      we are unable to effect a business combination and are forced to liquidate,
      our
      warrants will expire worthless.***




If
      we do
      not complete a business combination by January 19, 2007, or by July 19, 2007
      if
      certain criteria have been satisfied, we will be dissolved and will distribute
      to all holders of IPO Shares, in proportion to the number of IPO Shares held
      by
      them, an aggregate sum equal to the amount in the trust fund, inclusive of
      any
      interest, plus any remaining net assets. **** In
      such
      event, there will be no distribution with respect to our outstanding warrants.
      Accordingly, the warrants will expire worthless.




***If
      our Founders exercise their registration rights, it may have an adverse effect
      on the market price our common stock and the existence of these rights may
      make
      it more difficult to effect a business combination.***




13




Our
      Founders are entitled to demand that we register the resale of their shares
      of
      common stock at any time commencing three months prior to the date on which
      the
      shares of common stock are to be released from escrow. If our Founders exercise
      their registration rights with respect to all of their shares of common stock,
      then there will be an additional 1,500,000 shares of common stock eligible
      for
      trading in the public market. The presence of this additional number of shares
      of common stock eligible for trading in the public market may have an adverse
      effect on the market price of our common stock. In addition, the existence
      of
      these rights may make it more difficult to effectuate a business combination
      or
      increase the cost of the target business, as the stockholders of the target
      business may be discouraged from entering into a business combination with
      us or
      will request a higher price for their securities as a result of these
      registration rights and the potential future effect their exercise may have
      on
      the trading market for our common stock.




***If
      we are deemed to be an investment company, we may be required to institute
      burdensome compliance requirements and our activities may be restricted, which
      may make it difficult for us to complete a business
      combination.***




If
      we are
      deemed to be an investment company under the Investment Company Act of 1940,
      we
      may be subject to certain restrictions that may make it more difficult for
      us to
      complete a business combination, including:




·
            restrictions
                on the nature of our investments;
                and




·
            restrictions
                on the issuance of securities.




In
      addition, we may have imposed upon us burdensome requirements,
      including:




·
            registration
                as an investment company;’




·
            adoption
                of a specific form of corporate structure;
                and




·
            reporting,
                record keeping, voting, proxy and disclosure requirements and other
                rules
                and regulations.




We
      do not
      believe that our anticipated principal activities will subject us to the
      Investment Company Act of 1940. To this end, the proceeds held in trust may
      only
      be invested by the trust agent in “government securities” with specific maturity
      dates. By restricting the investment of the proceeds to these instruments,
      we
      intend to meet the requirements for the exemption provided in Rule 3a-1
      promulgated under the Investment Company Act of 1940. If we were deemed to
      be
      subject to the act, compliance with these additional regulatory burdens would
      require additional expense that we have not allotted for.




***Risks
      related to operations in Israel and the technology sector***




Acquisitions
      of companies with operations in Israel entail special considerations and risks.
      Additionally, although we are not limited to any particular industry, we are
      currently focusing our search on target businesses in Israel that are engaged
      in
      providing high-technology solutions in the areas of telecommunications and
      enterprise software. If we are successful in acquiring a target business with
      operations in Israel in the technology sector, we will be subject to, and
      possibly adversely affected by, the following risks:




***If
      there are significant shifts in the political, economic and military conditions
      in Israel, it could have a material adverse effect on our profitability.***




If
      we
      consummate a business combination with a target business in Israel, it will
      be
      directly influenced by the political, economic and military conditions affecting
      Israel at that time. 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 the target business and its operating results
      and
      financial condition. Furthermore, several countries restrict business with
      Israeli companies. This may impair our ability following a business combination
      to be profitable.




14




***The
      termination or reduction of tax and other incentives that the Israeli Government
      provides to domestic companies may increase the costs involved in operating
      a
      company in Israel.***




The
      Israeli Government currently provides tax and capital investment incentives
      to
      domestic companies. Additionally, the Israeli Government currently provides
      grant and loan programs relating to research and development, marketing and
      export activities. In recent years, the Israeli Government has reduced the
      benefits available under these programs and Israel Government authorities have
      indicated that the government may in the future further reduce or eliminate
      the
      benefits of those programs. We cannot assure you that such benefits and programs
      would continue to be available following a business combination, or if
      available, to what extent. If such benefits and programs were terminated or
      further reduced, it could have an adverse affect on our results of operations
      following a business combination or make a specific business combination less
      attractive.




***If
      relations between the United States and Israel deteriorate, it could cause
      potential target businesses or their goods or services to become less
      attractive.***




Israel
      and the United States have historically had a positive relationship. A
      significant amount of Israel’s economic development has been financed
      principally by military and economic aid from the United States and many Israeli
      companies have been financed by United States venture capital and investment
      concerns. If the relationship between the United States and Israel deteriorates,
      it could adversely affect our operations or cause potential target businesses
      or
      their goods or services to become less attractive.




***Because
      some of our directors and officers reside outside of the United States and,
      after the consummation of a business combination, substantially all of our
      assets will be located outside of the United States, it may be difficult for
      investors to enforce their legal rights against such individuals.***




Some
      of
      our directors and officers reside outside of the United States and, after the
      consummation of a business combination, substantially all of our assets will
      be
      located outside of the United States. As a result, it may not be possible for
      investors in the United States to enforce their legal rights, to effect service
      of process upon our directors or officers or to enforce judgments of United
      States courts predicated upon civil liabilities and criminal penalties of our
      directors and officers under Federal securities laws.




***Our
      operations could be disrupted as a result of the obligation of personnel to
      perform military service.***




Executive
      officers or key employees of a target business may also reside in Israel and
      be
      required to perform similar annual military reserve duty. Our operations could
      be disrupted by the absence for a significant period of one or more of these
      officers or key employees due to military service. Any such disruption could
      adversely affect our business, results of operations and financial
      condition.




***Because
      a substantial portion of many Israeli companies’ revenues is generated in
      dollars and euros, while a significant portion of their expenses is incurred
      in
      Israeli currency, a target business’ revenue may be reduced due to inflation in
      Israel and currency exchange rate fluctuations.***




A
      substantial portion of many Israeli companies’ revenues is generated in dollars
      and euros, while a significant portion of their expenses, principally salaries
      and related personnel expenses, are paid in Israeli currency. As a result,
      a
      target business will likely be exposed to the risk that the rate of inflation
      in
      Israel will exceed the rate of devaluation of Israeli currency in relation
      to
      the dollar or the euro, or that the timing of this devaluation will lag behind
      inflation in Israel. Because inflation has the effect of increasing the dollar
      and euro costs of an Israeli company’s operations, it would therefore have an
      adverse effect on our dollar-measured results of operations following a business
      combination.




15




***Exchange
      controls may restrict our ability to utilize our cash flow.***




If
      we
      acquire a company in Israel, we may be subject to existing or future rules
      and
      regulations on currency conversion. In 1998, the Israeli currency control
      regulations were liberalized significantly, and there are currently no currency
      controls in place. However, legislation remains in effect pursuant to which
      such
      currency controls could be imposed in Israel by administrative action at any
      time. We cannot assure you that such controls will not be reinstated, and if
      reinstated, would not have an adverse effect on our operations.




***Any
      Israeli government grants we receive for research and development expenditures
      may be reduced or eliminated due to government budget cuts, and these grants
      limit or prohibit our ability to manufacture products and transfer know-how
      outside of Israel and require us to satisfy specified conditions.***




Following
      a business combination, the target business we acquire may be receiving, or
      may
      receive in the future, grants from the government of Israel through the Office
      of the Chief Scientist of Israel’s Ministry of Industry, Trade and Labor for the
      financing of a portion of our research and development expenditures in Israel.
      Upon our acquisition of such entity, the Office of Chief Scientist will
      determine whether the entity will be eligible to continue receiving grants
      following the business combination. Additionally, the Israeli government has
      reduced the benefits available under this program in recent years and has
      indicated that it may reduce or eliminate these benefits in the future. When
      know-how or products are developed using Chief Scientist grants, the terms
      of
      these grants prohibit the transfer of the know-how out of Israel and would
      limit
      our ability to manufacture products based on this know-how outside of Israel
      without the prior approval of the Office of the Chief Scientist. Any approval,
      if given, will generally be subject to additional financial obligations. If
      we
      fail to comply with the conditions imposed by the Office of the Chief Scientist,
      including the payment of royalties with respect to grants received, we may
      be
      required to refund any payments previously received, together with interest
      and
      penalties. The difficulties in obtaining the approval of the Office of the
      Chief
      Scientist for the transfer of manufacturing rights out of Israel could have
      a
      material adverse effect on strategic alliances or other transactions that we
      may
      enter into in the future that provide for such a transfer. If we acquire a
      target business in Israel, any non-Israeli who becomes a holder of 5% or more
      of
      our outstanding common stock will be required to notify the Office of the Chief
      Scientist and to undertake to observe the law governing the grant programs
      of
      the Office of the Chief Scientist.




***If
      we fail to satisfy the conditions specified by any “Approved Enterprise”
program, we may be required to pay increased taxes and would likely be denied
      the tax benefits to which we are currently entitled in the future.***




Following
      a business combination, the Investment Center of the Ministry of Industry,
      Trade
      and Labor, a part of the Israeli Government, may grant, or have already granted,
      “Approved Enterprise” status to some investment programs at our manufacturing
      facilities. “Approved Enterprises” are companies incorporated in Israel that
      qualify, based on certain criteria, for special treatment in respect of
      governmental benefits and grants designed to promote foreign and domestic
      investment. When we generate net income from Approved Enterprise programs,
      the
      portion of our income derived from these programs would be exempt from tax
      for a
      period of two years and is subject to reduced tax for an additional period
      thereafter. The benefits available to an Approved Enterprise program depend
      upon
      the ability of the entity to adhere to the investment program filed with the
      Investment Center of the Israeli Ministry of Industry, Trade and Labor, and
      to
      the fulfillment of periodic reporting obligations. If we fail to comply with
      these conditions, in whole or in part, we may be required to pay additional
      taxes for the period in which we benefited from the tax exemption or reduced
      tax
      rates and would likely be denied these benefits in the future.




16




***The
      ability of any Israeli subsidiary to pay dividends is subject to Israeli law
      and
      the amount of cash dividends payable may be subject to devaluation in the
      Israeli currency.***




After
      the
      completion of any business combination, if such business combination involves
      us
      maintaining an Israeli subsidiary, the ability of such Israeli subsidiary to
      pay
      dividends to us will be governed by Israeli law, which provides that cash
      dividends may be paid by an Israeli corporation only out of retained earnings
      as
      determined for statutory purposes in Israeli currency. In the event of a
      devaluation of the Israeli currency against the dollar, the amount in dollars
      available for payment of cash dividends out of prior years’ earnings will
      decrease accordingly. Cash dividends paid by an Israeli corporation to United
      States resident corporate parents are subject to the Convention for the
      Avoidance of Double Taxation between Israel and the United States. Under the
      terms of the Convention, such dividends are subject to taxation by both Israel
      and the United States and, in the case of Israel, such dividends out of income
      derived in respect of a period for which an Israeli company is entitled to
      the
      reduced tax rate applicable to an Approved Enterprise are generally subject
      to
      withholding of Israeli income tax at source at a rate of 15%. Any Israeli
      subsidiary would also be subject to additional Israeli taxes in respect of
      such
      dividends, generally equal to the tax benefits previously granted in respect
      of
      the underlying income by virtue of any Approved Enterprise status.




***The
      technology industry is highly cyclical, which may affect our future performance
      and ability to sell our products, and in turn, reduce the revenues we may
      receive.***




Technology
      products and services tend to be relatively complex and expensive to implement
      and buyers tend to defer purchases during periods of economic weakness, opting
      instead to continue to use what they already own. Conversely, during periods
      of
      economic strength, technology sales frequently exceed expectations. As a
      consequence, revenues and earnings for technology companies may fluctuate more
      than those of less economically sensitive companies. Due to the cyclical nature
      of the technology industry, inventories may not always be properly balanced,
      resulting in lost sales when there are shortages or write-offs when there are
      excess inventories. This may adversely affect our profitability following a
      business combination.




***The
      technology sector is highly competitive and we may not be able to compete
      effectively which could adversely affect our revenues and profitability
      following a business combination.***




The
      technology industry is rapidly evolving and intensely competitive. We expect
      competition to continue and intensify in the future. Many of the competitors
      we
      will face following a business combination may have significantly greater
      financial, technical, marketing and other resources than we do. Some of these
      competitors may also offer a wider range of services than we can and have
      greater name recognition and a larger client base. These competitors may be
      able
      to respond more quickly to new or changing opportunities, technologies and
      client requirements. They may also be able to undertake more extensive
      promotional activities, offer more attractive terms to clients, and adopt more
      aggressive pricing policies. If we are unable to compete effectively, it could
      harm our business.




***If
      we are unable to protect the intellectual property rights we obtain in a
      business combination, competitors may be able to use our technology or
      trademarks, which could weaken our competitive position.***




Because
      of the competitive nature of the technology industry, we will likely rely on
      a
      combination of copyright, trademark and trade secret laws and restrictions
      to
      protect our proprietary technology and rights. Despite our efforts to protect
      our proprietary technology and rights, unauthorized parties may attempt to
      copy
      or otherwise obtain and use our products or technology, particularly in foreign
      countries where the laws may not protect our proprietary rights as fully as
      in
      the United States. Any unauthorized use of our proprietary technology and rights
      could have a material adverse affect on our operations. In addition, the
      telecommunications and enterprise software industries are characterized by
      the
      existence of a large number of patents and frequent litigation based on
      allegations of patent infringement and the violation of other intellectual
      property rights. Many companies in these sectors have extensive patent
      portfolios with broad claims. As the number of competitors in the market grows,
      the possibility of an intellectual property claim against us will increase.
      Any
      infringement or other intellectual property claims, with or without merit,
      which
      are brought against us could be time consuming and expensive to litigate or
      settle and could divert management’s attention from our business.




17




**ITEM
      2. DESCRIPTION OF PROPERTY**




We
      maintain our executive offices at 7 Gush Etzion, 3rd Floor, Givaat Shmuel,
      Israel pursuant to an agreement with A.F. Services Ltd., an affiliate of Israel
      Frieder, our chairman of the board and chief executive officer. We pay A.F.
      Serivces a monthly fee of $7,500 for general and administrative services,
      including office space, utilities and secretarial support. We believe, based
      on
      rents and fees for similar services in Israel, that the fee charged by A.F.
      Services is at least as favorable as we could have obtained from an unaffiliated
      person. We also maintain an office at 79 Madison Avenue, 6th Floor, New York,
      New York 10016. We consider our current office space adequate for our current
      operations.




**ITEM
      3. LEGAL PROCEEDINGS**




None.




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**




None.






**PART
      II**




**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**




**Market
      Information**




Our
      units, common stock and warrants are traded on the Over-the-Counter Bulletin
      Board under the symbols ISLTU, ISLT and ISLTW, respectively. The following
      table
      sets forth the range of high and low closing bid prices for the units, common
      stock and warrants for the periods indicated since the units commenced public
      trading on July 14, 2005 and since the common stock and warrants commenced
      public trading on September 12, 2005. The over-the-counter market quotations
      reflect inter-dealer prices, without retail mark-up, mark-down or commission
      and
      may not necessarily reflect actual transactions.







Units
            
            Common
                Stock
            
            WarrantsHigh
            
            Low
            
            High
            
            Low
            
            High
            
            Low2006:First
                Quarter*
            
            
            7.30
            
            
            5.86
            
            
            5.52
            
            
            5.05
            
            
            0.91
            
            
            0.432005:Fourth
                Quarter
            
            
            6.22
            
            
            5.55
            
            
            5.12
            
            
            4.95
            
            
            0.63
            
            
            0.34Third
                Quarter
            
            
            6.10
            
            
            5.70
            
            
            5.05
            
            
            4.80
            
            
            0.61
            
            
            0.50




*Through
        March 24, 2005


18


**Holders**




As
      of
      March 28, 2006, there was one holder of record of our units, five holders of
      record of our common stock and one holder of record of our warrants.




**Dividends**




We
      have
      not paid any cash dividends on our common stock to date and do not intend to
      pay
      cash dividends prior to the completion of a business combination. The payment
      of
      cash dividends in the future will be contingent upon our revenues and earnings,
      if any, capital requirements and general financial condition subsequent to
      completion of a business combination. The payment of any dividends subsequent
      to
      a business combination will be within the discretion of our then board of
      directors. It is the present intention of our board of directors to retain
      all
      earnings, if any, for use in our business operations and, accordingly, our
      board
      does not anticipate declaring any dividends in the foreseeable
      future.




**Recent
      Sales of Unregistered Securities and Use of Proceeds**




In
      February 2005, we sold the following shares of common stock without registration
      under the Securities Act of 1933, as amended:




Stockholders
            Number
                of SharesIsrael
                Frieder
            225,000Glen
                Shear
            225,000Dael
                Schnider
            225,000Victor
                Halpert
            75,000





Such
      shares were issued in connection with our organization pursuant to the exemption
      from registration contained in Section 4(2) of the Securities Act as they were
      sold to sophisticated, wealthy individuals. The shares issued to the individuals
      above were sold at a purchase price of approximately $0.033 per share. On April
      14, 2005, our board of directors authorized a stock dividend of one share of
      common stock for each outstanding share of common stock, effectively lowering
      the purchase price to approximately $0.0167 per share.





**Initial
      Public Offering**





On
      July
      19, 2005, we closed our initial public offering of 6,000,000 units, with each
      unit consisting of one share of our common stock and two warrants, each to
      purchase one share of our common stock at an exercise price of $5.00 per share.
      On August 5, 2005, we consummated the closing of an additional 318,000 units
      which were subject to the over-allotment option. The units were sold at an
      offering price of $6.00 per unit, generating gross proceeds of $37,908,000.
      The
      managing underwriter in the offering was EarlyBirdCapital, Inc. The securities
      sold in the offering were registered under the Securities Act of 1933 on a
      registration statement on Form S-1 (No. 333-123331). The Securities and Exchange
      Commission declared the registration statement effective on July 12,
      2005.


We
        paid a
        total of $3,033,000 in underwriting discounts and commissions and approximately
        $910,000 for other costs and expenses related to the offering, including
        $360,000 for the underwriters' non-accountable expense allowance of 1% of
        the
        gross proceeds. After deducting the underwriting discounts and commissions
        and
        the other offering expenses, the total net proceeds to us from the offering
        were
        approximately $33,965,000, of which $32,955,360 was deposited into a trust
        fund
        and the remaining proceeds (approximately $1,010,000) became available to
        be
        used to provide for business, legal and accounting due diligence on prospective
        business combinations and continuing general and administrative expenses.
        The
        net proceeds deposited into the trust fund remain on deposit in the trust
        fund
        and have earned $568,092 in interest through December 31,
        2005.


19





**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**




We
      were
      formed on February 22, 2005 to serve as a vehicle to effect a merger, capital
      stock exchange, asset acquisition or other similar business combination with an
      operating business that has manufacturing operations or research and development
      facilities located in Israel .
      We
      intend to utilize cash derived from the proceeds of our recently completed
      public offering, our capital stock, debt or a combination of cash, capital
      stock
      and debt, in effecting a business combination.




We
      consummated our initial public offering on July 19, 2005. All activity from
      February 22, 2005 through July 19, 2005 related to our formation and our initial
      public offering. Since July 19, 2005, we have been searching for prospective
      target businesses to acquire.




Net
      income of $184,518 for the fiscal year ended December 31, 2005 consisted of
      net
      financial income of $424,305 offset by $143,787 of general and administrative
      expenses and a tax provision of $96,000.




$32,955,360
      of the net proceeds of our initial public offering are in trust, with the
      remaining net proceeds of $1,010,000 to pay for business, legal and accounting
      due diligence on prospective acquisitions and continuing general and
      administrative expenses. We will use substantially all of the net proceeds
      of
      our initial public offering not held in trust to identify and evaluate
      prospective acquisition candidates, select the target business, and structure,
      negotiate and consummate the business combination. We
      intend
      to utilize our cash, including the funds held in the trust fund, capital stock,
      debt or a combination of the foregoing to effect a business combination. To
      the
      extent that our capital stock or debt securities are used in whole or in part
      as
      consideration to effect a business combination, the proceeds held in the trust
      fund as well as any other available cash will be used to finance the operations
      of the target business. At December 31, 2005, we had cash outside of the trust
      fund of $872,952 and total liabilities of $103,921, leaving us with working
      capital of $769,031. We believe that we have sufficient available funds outside
      of the trust fund to operate through July 19, 2007, assuming that a business
      combination is not consummated during that time. However, we may need to raise
      additional funds through a private offering of debt or equity securities if
      such
      funds are required to consummate a business combination that is presented to
      us.
      We would only consummate such a financing simultaneously with the consummation
      of a business combination.




We
      are
      obligated to pay to A.F. Services a monthly fee of $7,500 for general and
      administrative services. In addition, in February and May 2005, our directors
      advanced an aggregate of $83,000 to us, on a non-interest bearing basis, for
      payment of offering expenses on our behalf. These amounts were repaid in July
      2005 out of proceeds of our initial public offering.




In
      connection with our initial public offering, we issued an option, for $100,
      to
      EarlyBirdCapital to purchase 300,000 units at an exercise price of $7.50 per
      unit, with each unit consisting of one share of common stock and two warrants.
      The warrants underlying such units are exercisable at $6.25 per share. We
      accounted for the fair value of the option, inclusive of the receipt of the
      $100
      cash payment, as an expense of the public offering resulting in a charge
      directly to stockholders’ equity. We estimated that the fair value of this
      option is approximately $660,000 ($2.20 per unit) using a Black- Scholes option
      - pricing model. The fair value of this option granted to EarlyBirdCapital
      was
      estimated as of the date of grant using the following assumptions: (1) expected
      volatility of 44.5%, (2) risk- free interest rate of 3.8% and (3) expected
      life
      of 5 years. The option may be exercised for cash or on a “cashless” basis at the
      holder’s option, such that the holder may use the appreciated value of the
      option (the difference between the exercise prices of the option and the
      underlying warrants and the market price of the units and underlying securities)
      to exercise the option without the payment of any cash.




20





**ITEM
      7. FINANCIAL STATEMENTS**





This
      information appears following Item 14 of this Report and is incorporated herein
      by reference.




**ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.**




None.




**ITEM
      8A. CONTROL AND PROCEDURES**




Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in company reports filed or
      submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is
      recorded, processed, summarized and reported, within the time periods specified
      in the Securities and Exchange Commission’s rules and forms. Disclosure controls
      and procedures include, without limitation, controls and procedures designed
      to
      ensure that information required to be disclosed in company reports filed or
      submitted under the Exchange Act is accumulated and communicated to management,
      including our chief executive officer and treasurer, as appropriate to allow
      timely decisions regarding required disclosure.





As
      required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief
      executive officer and chief financial officer carried out an evaluation of
      the
      effectiveness of the design and operation of our disclosure controls and
      procedures as of December 31, 2005. Based upon their evaluation, they concluded
      that our disclosure controls and procedures were effective.





Our
      internal control over financial reporting is a process designed by, or under
      the
      supervision of, our chief executive officer and chief financial officer and
      effected by our board of directors, management and other personnel, to provide
      reasonable assurance regarding the reliability of our financial reporting and
      the preparation of our financial statements for external purposes in accordance
      with generally accepted accounting principles. Internal control over financial
      reporting includes policies and procedures that pertain to the maintenance
      of
      records that in reasonable detail accurately and fairly reflect the transactions
      and dispositions of our assets; provide reasonable assurance that transactions
      are recorded as necessary to permit preparation of our financial statements
      in
      accordance with generally accepted accounting principles, and that our receipts
      and expenditures are being made only in accordance with the authorization of
      our
      board of directors and management; and provide reasonable assurance regarding
      prevention or timely detection of unauthorized acquisition, use or disposition
      of our assets that could have a material effect on our financial
      statements.




During
      the most recently completed fiscal quarter, there has been no change in our
      internal control over financial reporting that has materially affected, or
      is
      reasonably likely to materially affect, our internal control over financial
      reporting.




**ITEM
      8B. OTHER INFORMATION**





None.




21





**PART
      III**





**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
      WITH
      SECTION 16(a) OF THE EXCHANGE ACT.**





**Directors
      and Executive Officers**




Our
      current directors and executive officers are as follows:





Name
            Age
            PositionIsrael
                Frieder
            55
            Chairman
                of the Board and Chief Executive OfficerGlen
                Shear
            45
            Chief
                Financial Officer, Secretary and DirectorDael
                Schnider
            31
            Executive
                Vice President and DirectorVictor
                Halpert
            45
            Director





**Israel
      Frieder** has
      served as our chairman of the board and chief executive officer since our
      inception. Since January 2005, Mr. Frieder has provided management consulting
      services to Teledata Networks NV, a Netherlands provider of wireline access
      products and next generation network solutions for telecom operators and service
      providers. From May 2001 to December 2004, Mr. Frieder served as the president
      and chief executive officer of Kardan Communications Ltd., an Israeli private
      investment company active in various fields including telecommunications and
      information technology. From 1999 to May 2001, Mr. Frieder served as corporate
      vice president of business development and strategic planning for ECI Telecom
      Ltd., an Israeli Nasdaq listed provider of network and access solutions for
      digital telecommunications networks, and from 1996 to 1998 he served as
      president of ECI Telecom Inc./DNI (USA), a wholly owned subsidiary of ECI
      Telecom Ltd. From 1987 to 1996, Mr. Frieder served as president of Tadiran
      Telecommunications Ltd. Network Systems, a company that provides
      telecommunications solutions for operators and which was acquired by ECI
      Telecom. Mr. Frieder has served as a member of the board of directors of RiT
      Technologies Ltd., an Israeli Nasdaq SmallCap Market listed company that
      provides solutions for improved control, utilization and maintenance of computer
      networks, since January 2002. He has also served as a member of the board of
      directors of a number of private companies, including RRSat Ltd., an Israeli
      provider of end-to-end transmission and production services to the global
      satellite broadcasting industry, and Cellvine Ltd., an Israeli developer and
      marketer of cellular coverage and capacity solutions for the wireless
      telecommunications industry, and served as a member of the investment committee
      of Aviv Venture Capital, an Israeli venture capital firm. Mr. Frieder is a
      former winner of the Israel Defense Prize and the Israel Kaplan Prize. Mr.
      Frieder received a B.Sc. (Electrical Engineering) from the Technion Israel
      Institute of Technology in Haifa, Israel and an M.B.A. (with distinction) from
      the Hebrew University of Jerusalem in Israel.





**Glen
      Shear** has
      served as our chief financial officer and secretary and a member of our board
      of
      directors since our inception. Mr. Shear has served as the executive director
      of
      Glenco Development Corp., a financial and strategic advisory firm, since 1999.
      Mr. Shear served as the chief financial officer of Glycominds Ltd., a private
      biotechnology company located in Israel from 2002 to February 2004 and since
      then as a consultant to the company. From 1997 to 1998, Mr. Shear served as
      executive director of the investment banking group of CIBC World Markets. From
      1994 to 1997, he served as a principal of Cole & Partners, a corporate
      finance and valuation firm. Mr. Shear received a B.A. (summa cum laude) from
      Brandeis University and an M.B.A. from the University of Chicago. ****





**Dael
      Schnider** has
      served as our executive vice president and a member of our board of directors
      since our inception. From 1999 to March 2005, Mr. Schnider served as vice
      president of Poalim Ventures, an Israeli venture capital fund investing and
      actively supporting Israeli and Israeli-related high-tech companies. During
      1998, Mr. Schnider served as an assistant to the vice president in charge of
      mortgages at Bank Carmel in Israel. Prior to this, Mr. Schnider served in the
      Israeli military and obtained the rank of lieutenant. Mr. Schnider has served
      on
      the board of directors of Carmel Group, a publicly traded investment company
      listed on the Tel Aviv Stock Exchange in Israel, since 2000. Mr. Schnider
      received an L.L.B. and an M.B.A. from Bar-Ilan University in Israel.




22




**Victor
      Halpert** has
      served as a member of our board of directors since our inception. Since February
      2004, Mr. Halpert has served as managing director of Halpert Capital Fund,
      a
      United States private fund that invests in small to mid capital companies.
      From
      February 2003 to January 2004, Mr. Halpert was engaged in independent advisory
      and consulting activities. From June 1999 to January 2003, Mr. Halpert served
      as
      director of equity research for Salomon Smith Barney where he focused on Israel
      technology companies. From January 1998 to May 1999, he served as vice president
      of equity research at Robertson Stephens where he focused on telecommunications
      and Israeli technology companies. Mr. Halpert serves as a member of the board
      of
      directors of Top Image Systems Ltd., an Israeli Nasdaq SmallCap Market listed
      software developer of various automated data collection and form processing,
      and
      information recognition systems and technologies and Unity Wireless, Inc.,
      a
      United States Over the Counter Bulletin Board listed manufacturer of wireless
      technologies. Mr. Halpert received a B.S. (cum laude) from the State University
      of New York, College at New Paltz, a M.S. from the University of Illinois at
      Chicago and an M.B.A. from the University of Chicago.





For
      more
      information on our officers and directors following the business combination
      with IXI, see our filings referred to above under Item 1, “Description of
      Business - Recent Developments.”




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Securities Exchange Act of 1934 requires our officers, directors
      and persons who own more than ten percent of a registered class of our equity
      securities to file reports of ownership and changes in ownership with the
      Securities and Exchange Commission. Officers, directors and ten percent
      stockholders are required by regulation to furnish us with copies of all Section
      16(a) forms they file. Based solely on copies of such forms received or written
      representations from certain reporting persons that no Form 5s were required
      for
      those persons, we believe that, during the fiscal year ended December 31, 2005,
      all filing requirements applicable to our officers, directors and greater than
      ten percent beneficial owners were complied with, except each of Glen
      Shear and Victor Halpert filed one Form 4 late disclosing one late transaction
      and Dael Schnider filed two Form 4s late each disclosing one late transaction.





**Code
      of Ethics**





In
      September 2005, our board of directors adopted a code of ethics that applies
      to
      our directors, officers and employees as well as those of our subsidiaries.
      Requests for copies of our code of ethics should be sent in writing to Israel
      Technology Acquisition Corp., 7 Gush Etzion, 3rd Floor, Givaat Shmuel, Israel
      54030, Attn: Corporate Secretary.




23




**ITEM
      10. EXECUTIVE COMPENSATION**




Commencing
      July 12, 2005 and ending upon the acquisition of a target business, we will
      pay
      A.F. Services a fee of $7,500 per month for providing us with office space
      and
      certain office and secretarial services. Other than this $7,500 per-month fee,
      no compensation of any kind, including finders and consulting fees, will be
      paid
      to any of our Founders or any of their respective affiliates, prior to, or
      for
      any services they render in order to effectuate, the consummation of a business
      combination. However, our Founders will be reimbursed for any out-of-pocket
      expenses incurred in connection with activities on our behalf such as
      identifying potential target businesses and performing due diligence on suitable
      business combinations.




Since
      our
      formation, we have not granted any stock options or stock appreciation rights
      or
      any awards under long-term incentive plans.




**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**




The
      following table sets forth information regarding the beneficial ownership of
      our
      common stock as of March 28, 2006 by:




·
            each
                person known by us to be the beneficial owner of more than 5% of
                our
                outstanding shares of common stock;




·
            each
                of our officers and directors; and




·
            all
                our officers and directors as a
                group.




Unless
      otherwise indicated, we believe that all persons named in the table have sole
      voting and investment power with respect to all shares of common stock
      beneficially owned by them.




Name
                and Address of Beneficial Owner(1)
            
            Amount
                and
              Nature
                of
              Beneficial
              Ownership
            
            Percent
                of
              ClassIsrael
                Frieder
            
            450,000(2)
            
            5.8%Glen
                Shear
            
            450,000(2)
            
            5.8%Dael
                Schnider
            
            450,000(2)
            
            5.8%Victor
                Halpert
            
            150,000(3)
            
            1.9%Fir
                Tree, Inc.(4)
            
            603,900(5)
            
            7.7%Amaranth
                LLC(6)
            
            411,000(7)
            
            5.3%All
                directors and executive officers as a group (four
                individuals)
            
            1,500,000(8)
            
            19.2%




**_________________________**


(1)
              Unless
                  otherwise indicated, the business address of each of the following
                  is 7
                  Gush Etzion, 3rd Floor, Givaat Shmuel, Israel
                  54030.





24




(2)
            Does
                not include 390,000 shares of common stock issuable upon exercise
                of
                warrants that are not currently exercisable and will not become
                exercisable within 60 days.




(3)
            Does
                not include 130,000 shares of common stock issuable upon exercise
                of
                warrants that are not currently exercisable and will not become
                exercisable within 60 days.




(4)
            The
                business address of Fir Tree, Inc. is 535 Fifth Avenue, 31stFloor, New York, New York 10017.




(5)
            Represents
                (i) 401,492 shares of common stock held by Sapling, LLC and (ii)
                202,408
                shares of common stock held by Fir Tree Recovery Master Fund, L.P.
                Fir
                Tree, Inc. is the investment manager of both entities. The foregoing
                information was derived from a Schedule 13G filed with the SEC on
                September 23, 2005.




(6)
            The
                business address of Amaranth LLC is c/o Amaranth Advisors L.L.C.,
                One
                American Lane, Greenwich, Connecticut
                06831.




(7)
            Amaranth
                Advisors L.L.C. is the trading advisor for Amaranth LLC. Nicholas
                M.
                Maounis is the managing member of Amaranth Advisors and exercises
                voting
                and dispositive power over these shares. The foregoing information
                was
                derived from a Schedule 13G filed with the SEC on November 28,
                2005.




(8)
            Does
                not include 1,300,000 shares of common stock issuable upon exercise
                of
                warrants held by our officers and directors that are not currently
                exercisable and will not become exercisable within 60
                days.




All
      1,500,000 shares of our outstanding common stock owned by our Founders prior
      to
      our initial public offering have been placed in escrow with Continental Stock
      Transfer & Trust Company, as escrow agent, pursuant to an escrow agreement
      described below.




Each
      of
      Messrs. Frieder, Shear, Schnider and Halpert may be deemed to be our “parents”
and “promoters,” as these terms are defined under the Federal securities
      laws.




**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**




In
      February 2005, we issued 750,000 shares of our common stock to the individuals
      set forth below for $25,000 in cash, at a purchase price of approximately $0.033
      per share, as follows:




Stockholders
            Number
                of Shares
            Relationship
                to UsIsrael
                Frieder
            225,000
            Chairman
                of the Board and Chief Executive OfficerGlen
                Shear
            225,000
            Chief
                Financial Officer, Secretary and DirectorDael
                Schnider
            225,000
            Executive
                Vice President and DirectorVictor
                Halpert
            75,000
            Director





On
      April
      14, 2005, our board of directors authorized a stock dividend of one share of
      common stock for each outstanding share of common stock, effectively lowering
      the purchase price to approximately $0.0167 per share.




25


**** Pursuant
      to an escrow agreement between us, the Founders and Continental Stock Transfer
      & Trust Company, all of the Founders Shares were placed in escrow, with
      Continental acting as escrow agent, pursuant to an escrow agreement, until
      the
      earliest of:




·
            July
                12, 2008;




·
            our
                liquidation; or




·
            the
                consummation of a liquidation, merger, stock exchange or other similar
                transaction which results in all of our stockholders having the right
                to
                exchange their shares of common stock for cash, securities or other
                property subsequent to our consummating a business combination with
                a
                target business.




During
      the escrow period, these shares cannot be sold, but the Founders will retain
      all
      other rights as stockholders, including, without limitation, the right to vote
      their shares of common stock and the right to receive cash dividends, if
      declared. If dividends are declared and payable in shares of common stock,
      such
      dividends will also be placed in escrow. If we are unable to effect a business
      combination and liquidate, none of our Founders will receive any portion of
      the
      liquidation proceeds with respect to common stock owned by them prior to our
      initial public offering.




We
      also
      entered into a registration rights agreement with the Founders pursuant to
      which
      the holders of the majority of the Founders Shares will be entitled to make
      up
      to two demands that we register these shares pursuant to an agreement to be
      signed prior to or on the date of this prospectus. The holders of the majority
      of these shares may elect to exercise these registration rights at any time commencing
      three months prior to the date on which these shares of common stock are
      released from escrow. In
      addition, these stockholders have certain “piggy-back” registration rights on
      registration statements filed subsequent to the date on which these shares
      of
      common stock are released from escrow. We will bear the expenses incurred in
      connection with the filing of any such registration statements.




Each
      of
      our Founders also entered into a letter agreement with us and EarlyBirdCapital
      pursuant to which, among other things:




·
            each
                agreed to vote all Founder Shares owned by him in accordance with
                the
                majority of the IPO Shares if we solicit approval of our stockholders
                for
                a business combination;




·
            if
                we fail to consummate a business combination by January 19,
                2007(or by July 19, 2007under
                certain limited circumstances), each agreed to take all reasonable
                actions
                within his power to cause us to liquidate as soon as reasonably
                practicable;




·
            each
                waived any and all rights he may have to receive any distribution
                of cash,
                property or other assets as a result of such liquidation with respect
                to
                his Founder Shares;




·
            each
                agreed to present to us for our consideration, prior to presentation
                to
                any other person or entity, any suitable opportunity to acquire an
                operating business, until the earlier of our consummation of a business
                combination, our liquidation or until such time as he ceases to be
                an
                officer or director of ours, subject to any pre-existing fiduciary
                obligations he might have;




·
            each
                agreed that we could not consummate any business combination which
                involves a company which is affiliated with any of the Foundersunless
                we obtain an opinion from an independent investment banking firm
                reasonably acceptable to EarlyBirdCapital that the business combination
                is
                fair to our stockholders from a financial
                perspective;




26




·
            each
                agreed that he and his affiliates will not be entitled to receive
                and will
                not accept any compensation for services rendered to us prior to
                the
                consummation of our business combination;
                and




·
            each
                agreed that he and his affiliates will not be entitled to receive
                or
                accept a finder’s fee or any other compensation in the event he or his
                affiliates originate a business
                combination.




A.F.
      Services, an affiliate of Israel Frieder, our chairman of the board and chief
      executive officer, has agreed that, through the acquisition of a target
      business, it will make available to us a small amount of office space and
      certain office and secretarial services, as we may require from time to time.
      We
      have agreed to pay A.F. Services $7,500 per month for these services.




During
      2005, our directors collectively advanced an aggregate of $83,000 to us to
      cover
      expenses related to our initial public offering. The loans were payable without
      interest on the earlier of May 28, 2006 or the consummation of our initial
      public offering. These loans were repaid in July 2005.




We
      will
      reimburse our officers and directors for any reasonable out-of-pocket business
      expenses incurred by them in connection with certain activities on our behalf
      such as identifying and investigating possible target businesses and business
      combinations.




Other
      than the $7,500 per-month administrative fee and reimbursable out-of-pocket
      expenses payable to our officers and directors, no compensation or fees of
      any
      kind, including finders and consulting fees, will be paid to any of our Founders
      or to any of their respective affiliates for services rendered to us prior
      to or
      with respect to the business combination.




All
      ongoing and future transactions between us and any of our officers and directors
      or their respective affiliates, will be on terms believed by us to be no less
      favorable than are available from unaffiliated third parties and will require
      prior approval in each instance by a majority of the members of our board who
      do
      not have an interest in the transaction.




**ITEM
      13. EXHIBITS, LIST AND REPORTS ON FORM 8-K**




(a)
      The
      following Exhibits are filed as part of this report.


Exhibit
                  No.
              
              Description3.1
              
              Amended
                  and Restated Certificate of Incorporation. (1)3.2
              
              By-laws.
                  (1)4.1
              
              Specimen
                  Unit Certificate. (1)4.2
              
              Specimen
                  Common Stock Certificate. (1)4.3
              
              Specimen
                  Warrant Certificate. (1)4.4
              
              Form
                  of Unit Purchase Option granted to EarlyBirdCapital, Inc.
                  (1)4.5
              
              Form
                  of Warrant Agreement between Continental Stock Transfer & Trust
                  Company and the Registrant. (1)
  27
  10.1
              
              Letter
                  Agreement among the Registrant, EarlyBirdCapital, Inc. and Israel
                  Frieder.
                  (1)10.2
              
              Letter
                  Agreement among the Registrant, EarlyBirdCapital, Inc. and Glen
                  Shear.
                  (1)10.3
              
              Letter
                  Agreement among the Registrant, EarlyBirdCapital, Inc. and Dael
                  Schnider.
                  (1)10.4
              
              Letter
                  Agreement among the Registrant, EarlyBirdCapital, Inc. and Victor
                  Halpert.
                  (1)10.5
              
              Form
                  of Investment Management Trust Agreement between Continental Stock
                  Transfer & Trust Company and the Registrant. (1)10.6
              
              Form
                  of Stock Escrow Agreement between the Registrant, Continental Stock
                  Transfer & Trust Company and the Founders. (1)10.7
              
              Form
                  of Letter Agreement between A.F. Services Ltd. and Registrant regarding
                  administrative support. (1)10.8
              
              Promissory
                  Note, dated February 28, 2005, issued to each of Israel Frieder,
                  Glen
                  Shear, Dael Schnider and Victor Halpert. (1)10.9
              
              Registration
                  Rights Agreement among the Registrant and the Founders.
                  (1)10.10
              
              Warrant
                  Purchase Agreement among each of Israel Frieder, Glen Shear, Dael
                  Schnider
                  and Victor Halpert and EarlyBirdCapital, Inc. (1)10.11
              
              Letter
                  agreement, dated July 13, 2005, from each of Israel Frieder, Glen
                  Shear,
                  Dael Schnider and Victor Halpert to the Registrant. (1)31.1
              
              Certification
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.31.2
              
              Certification
                  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.32
              
              Certification
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to Section
                  906 of the Sarbanes-Oxley Act of
                  2002.





(1)
            Incorporated
                by reference to the Registrant’s Registration Statement on Form S-1 (SEC
                File No. 333-123331).





28




**ITEM
      14. PRINCIPAL ACCOUNTING FEES AND SERVICES.**




In
      September 2005, we engaged the firm of Brightman Almagor & Co.
      (“Brightman”), a member firm of Deloitte Touche Tohmatsu, to act as our
      principal accountant. We had previously engaged Marcum
      & Kliegman LLP to act as our principal accountant in connection with our
      initial public offering. The
      following is a summary of fees paid to our principal accountants for services
      rendered during 2005.




**Audit
      Fees**




During
      the fiscal year ended December 31, 2005, we paid our principal accountant
      $28,500 for the services they performed in connection with our initial public
      offering, including the financial statements included in the Current Report
      on
      Form 8-K filed with the Securities and Exchange Commission on July 19, 2005,
      and
      $30,000 in connection with the review of our Quarterly Reports on Form
      10-QSB.




**Audit-Related
      Fees**




During
      2005, our principal accountants did not render assurance and related services
      reasonably related to the performance of the audit or review of financial
      statements.




**Tax
      Fees**




During
      2005, our principal accountants did not render services to us for tax
      compliance, tax advice and tax planning.




**All
      Other Fees**




During
      2005, there were no fees billed for products and services provided by the
      principal accountants other than those set forth above.




**Audit
      Committee Approval**




We
      currently do not have an audit committee.


29


**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**





**FINANCIAL
      STATEMENTS**




**AS
      OF DECEMBER 31, 2005**





**INDEX**





**Page****Report
                of Independent Registered Public Accounting Firm**
            **F-2****Balance
                Sheet**
            **F-3****Statement
                of Operations**
            **F-4****Statement
                of Stockholders' Equity**
            **F-5****Statement
                of Cash Flows**
            **F-6****Notes
                to Financial Statements**
            **F-7-F-12**













**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





**To
      the Stockholders of**





**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**





We
      have
      audited the accompanying balance sheet of Israel
      Technology Acquisition Corp. (a development stage enterprise) ("the
      Company") as of December 31, 2005, and the related statements of operations,
      stockholders' equity and cash flows for the period from February 22, 2005 (date
      of inception) to December 31, 2005. These financial statements are the
      responsibility of the Company's management. Our responsibility is to express
      an
      opinion on these financial statements based on our audit.





We
      conducted our audit 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. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, such financial statements referred to above, present fairly, in all
      material respects, the financial position of the Company as of December 31,
      2005, and the results of its operations and its cash flows for the period from
      February 22, 2005 (date of inception) to December 31, 2005, in conformity with
      U.S. generally accepted accounting principles.








/s/
      Brightman Almagor & Co.


Brightman
      Almagor & Co.


Certified
      Public Accountants


A
      member
      firm of Deloitte Touche Tohmatsu








Tel-Aviv,
                IsraelMarch
                22, 2006





F-2


**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**BALANCE
      SHEET**








**December
                  31,2005****ASSETS**CURRENT
                ASSETSCash
                and cash equivalents
            
            $
            372,952Short
                term deposit
            
            
            500,000Securities
                held in Trust Fund (Note 1)
            
            
            33,472,678Prepaid
                expenses
            
            
            30,000Total
                current assets
            
            $
            34,375,630**LIABILITIES
                AND STOCKHOLDERS' EQUITY**CURRENT
                LIABILITIESAccrued
                expenses
            
            $
            7,921Income
                tax payable
            
            
            96,000Total
                current liabilities
            
            
            103,921Common
                  stock, subject to possible conversion,1,262,968
                  shares at conversion value (Note 1)
            
            
            6,691,188COMMITMENT
                AND CONTINGENCIES (Note 3)STOCKHOLDERS'
                EQUITY (Notes 1 and 4)Share
                capital:Preferred
                Stock, $0.0001 par value - Authorized:1,000,000
                shares; none issuedCommon
                  stock, $0.0001 par value- Authorized 30,000,000 shares, issued
                  and
                  outstanding: 7,818,000 shares(which
                  includes 1,262,968 subject to possible conversion )
            
            
            656Additional
                paid-in capital
            
            
            27,395,347Accumulated
                earnings during development stage
            
            
            184,518Total
                stockholders' equity
            
            
            27,580,521Total
                liabilities and stockholders' equity
            
            $
            34,375,630





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




F-3





**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENERPRISE)**


**STATEMENT
      OF OPERATIONS**








**For
                the period February 22, 2005 (inception) to December
                31,****2005**General
                and administrative expenses
            
            $
            143,787Operating
                loss
            
            
            (143,787
            )Financial
                income, net
            
            
            424,305Net
                income before income taxes
            
            
            280,518Income
                taxes
            
            
            (96,000
            )Net
                income
            
            $
            184,518Basic
                and diluted net income per share
            
            
            0.04Weighted
                  average number of Common shares used in computing basic and diluted
                  net
                  income per share
            
            
            4,889,098





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




F-4


**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**STATEMENT
      OF STOCKHOLDERS’ EQUITY**




**Accumulated****earnings****Additional**
            
            
            **during
                the**
            
            
            **Total****Common
                Stock**
            
            
            **paid-in**
            
            
            **development**
            
            
            **stockholders'****Shares
                (1)**
            
            
            **Amount**
            
            
            **capital**
            
            
            **stage**
            
            
            **equity**Common
                shares issued February 22,2005
                at $0.0167
            
            
            1,500,000
            
            $
            150
            
            $
            24,850
            
            $
            —
            
            $
            25,000Sale
                of 6,000,000 units, net ofunderwriters’
                discount and offeringexpenses
                (including 1,199,400 sharessubject
                to possible conversion )
            
            
            6,000,000
            
            
            600
            
            
            32,238,542
            
            
            —
            
            
            32,239,142Proceeds
                from issuance of option
            
            
            —
            
            
            —
            
            
            100
            
            
            —
            
            
            100Allotment
                of 318,000 units, net ofunderwriters’
                discount and offeringexpenses
                (including 63,568 sharessubject
                to possible conversion)
            
            
            318,000
            
            
            32
            
            
            1,719,505
            
            
            —
            
            
            1,719,537Proceeds
                subject to possibleconversion
                of 1,262,968 shares
            
            
            (1,262,968
            )
            
            (126
            )
            
            (6,587,650
            )
            
            —
            
            
            (6,587,776
            )Net
                income
            
            
            —
            
            
            —
            
            
            —
            
            
            184,518
            
            
            184,518Balance
                as of December 31, 2005
            
            
            6,555,032
            
            $
            656
            
            $
            27,395,347
            
            $
            184,518
            
            $
            27,580,521





(1)
                Share amounts have been restated to reflect a stock dividend of one
                share
                of common stock for each outstanding share of common stock effected
                on
                April 14, 2005.





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




F-5


**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**STATEMENT
      OF CASH FLOWS**





**For
                the period February 22, 2005 (inception) to December
                31,****2005**Cash
                flows from operating activities:Net
                income
            
            $
            184,518Increase
                in prepaid expenses
            
            
            (30,000
            )Increase
                in accrued expenses and other current liabilities
            
            
            103,921Accumulated
                interest on cash held in trust
            
            
            (413,906
            )Net
                cash used in operating activities
            
            
            (155,467
            )Cash
                flows from investing activities:Short
                term deposit
            
            
            (500,000
            )Cash
                held in trust fund
            
            
            (32,955,360
            )Net
                cash used in investing activities
            
            
            (33,455,360
            )Cash
                flows from financing activities:Gross
                proceeds from issuance of common stock
            
            
            37,908,056Proceeds
                from notes payable, stockholders
            
            
            83,000Payment
                of notes payables, stockholders
            
            
            (83,000
            )Proceeds
                from issuance of shares of common stock
            
            
            25,000Proceeds
                from issuance of option
            
            
            100Payment
                of deferred offering costs
            
            
            (3,949,377
            )Net
                cash provided by financing activities
            
            
            33,983,779Net
                change in cash and cash equivalents
            
            
            372,952Cash
                and cash equivalents at the beginningof
                the period
            
            
            —Cash
                and cash equivalents at the endof
                the period
            
            $
            372,952


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




F-6





**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**NOTES
      TO FINANCIAL STATEMENTS** ****





**NOTE
              1 —** **GENERAL**




The
      Company was incorporated on February 22, 2005 as a blank check company whose
      objective is to acquire an operating business that has manufacturing operations
      or research and development facilities located in Israel.





The
      Company’s ability to commence operations was contingent upon obtaining adequate
      financial resources through a proposed public offering (“Offering”), which was
      consummated on July 19, 2005. Substantially all of the net proceeds of the
      Offering are intended to be generally applied toward consummating a business
      combination with an operating business that has manufacturing operations or
      research and development facilities located in Israel (“Business Combination”).
      An aggregate of $32,955,360, including the funds received from the over
      allotment options, has been deposited in an interest-bearing trust account
      (“Trust Fund”) until the earlier of (i) the consummation of a Business
      Combination or (ii) liquidation of the Company. Under the agreement governing
      the Trust Fund, funds will only be invested in United States government
      securities (Treasury Bills) with a maturity of 180 days or less. The remaining
      net proceeds (not held in the Trust Fund) may be used to pay for business,
      legal, and accounting due diligence on prospective acquisitions and continuing
      general and administrative expenses.





In
      February 2006, the Company signed a definitive agreement for the acquisition
      of
      a target business (See Note 6) and will submit such transaction for stockholder
      approval. In the event that stockholders owning 20% or more of the shares sold
      in the Offering vote against the Business Combination and exercise their
      conversion rights described below, the Business Combination will not be
      consummated. All of the Company’s stockholders prior to the Offering, including
      all of the officers and directors of the Company (“Initial Shareholders”), have
      agreed to vote their 1,500,000 founding shares of common stock in accordance
      with the vote of the majority in interest of all other stockholders of the
      Company (“Public Stockholders”) with respect to any Business Combination. After
      consummation of a Business Combination, these voting safeguards will no longer
      be applicable.




F-7


**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**NOTES
      TO FINANCIAL STATEMENTS**




**NOTE
              1 —** **GENERAL
              (CONT.)**




With
      respect to a Business Combination, which is approved and consummated, any Public
      Stockholder who voted against the Business Combination may demand that the
      Company convert his or her shares. The per share conversion price will equal
      the
      amount in the Trust Fund as of two days prior to the consummation of the
      proposed Business Combination divided by the number of shares of common stock
      held by Public Stockholders at the consummation of the Offering. Accordingly,
      Public Stockholders holding approximately 19.99% of the aggregate number of
      shares owned by all Public Stockholders may seek conversion of their shares
      in
      the event of Business Combination. Such Public Stockholders are entitled to
      receive their per share interest in the Trust Fund computed without regard
      to
      the shares held by the Initial Shareholders.





The
      Company’s Amended and Restated Certificate of Incorporation provides for
      mandatory liquidation of the Company in the event that the Company does not
      consummate a Business Combination within 18 months from the date of the
      consummation of the Offering, or 24 months from the consummation of the
      Offering. In the event of liquidation, it is likely that the per share value
      of
      the residual assets remaining available for distribution (including Trust Fund
      assets) will be less than the initial public offering price per share in the
      Offering.





**NOTE 2
              —** **SIGNIFICANT ACCOUNTING
              POLICIES**




**Basis
      of presentation**




The
      financial statements have been prepared in conformity with accounting principles
      generally accepted in the U.S.




**Financial
      statements in U.S. dollars**




The
      reporting currency of the Company is the U.S. dollar ("dollar"). The dollar
      is
      the functional currency of the Company. Transactions and balances originally
      denominated in dollars are presented at their original amounts. Non-dollar
      transactions and balances are remeasured into dollars in accordance with the
      principles set forth in Statement of Financial Accounting Standards ("SFAS")
      No.
      52. All exchange gains and losses from translation of monetary balance sheet
      items resulting from transactions in non-dollar currencies are recorded in
      the
      statement of operations as they arise.




**Use
      of Estimates**




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and 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.




**Cash
      and Cash Equivalents**




Cash
      equivalents consist of short-term, highly liquid investments that are readily
      convertible into cash with original maturities of three months or less. Bank
      deposits with maturities of more than three months but less than one year are
      included in short-term investments.




F-8




**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**NOTES
      TO FINANCIAL STATEMENTS**




**NOTE 2
              —** **SIGNIFICANT ACCOUNTING
              POLICIES (CONT.)**




**Concentration
      of Credit Risk**




Financial
      instruments, which potentially subject the Company to credit risk, consist
      principally of cash instruments. The Company maintains cash and cash equivalents
      and investments with major financial institutions and limits the amount of
      credit exposure with any institution.




**Offering
      Expense**




Offering
      expenses consist primarily of placement fees and expenses, professional fees
      and
      printing costs. These expenses are charged against the related proceeds from
      the
      sale of Company stock in the periods in which they occur or charged to expense
      in the event of a terminated offering.




**Basic
      and Diluted Net Income Per Share**




Basic
      and
      diluted net Income per share are presented in conformity with *SFAS* No. 128 *"Earnings
      per Share"* .
      Basic
      and diluted net income per share have been computed using the weighted-average
      number of ordinary shares outstanding during the period.





**Fair
      Value of Financial Instruments**




The
      financial instruments of the Company consist mainly of cash and cash equivalents
      and short-term investments. In view of their nature, the fair value of the
      financial instruments included in working capital of the Company is usually
      identical or close to their carrying amounts.




**Income
      Taxes**





The
      Company accounts for income taxes, in accordance with the provisions of SFAS
      109 *"Accounting
      for Income Taxes,"* under
      the liability method. Deferred taxes are determined based on the differences
      between the financial statement and tax basis of assets and liabilities at
      enacted tax rates in effect in the year in which the differences are expected
      to
      reverse. Valuation allowances are established, when necessary, to reduce
      deferred tax assets to amounts expected to be realized.




**Recent
      Accounting Pronouncements**





In
      December 2004, the Financial Accounting Standards Board (FASB) issued
      SFAS No. 123(R). SFAS No. 123(R) requires employee
      share-based equity awards to be accounted for under the fair value method,
      and
      eliminates the ability to account for these instruments under the intrinsic
      value method prescribed by APB Opinion No. 25 and allowed under the
      original provisions of SFAS No. 123. SFAS No. 123(R)
      requires the use of an option-pricing model for estimating fair value, which
      is
      then amortized to expense over the service periods. SFAS No. 123(R)
      allows for either prospective recognition of compensation expense or
      retrospective recognition. In January 2005, the SEC issued SAB No. 107, which
      provides supplemental implementation guidance for SFAS No. 123(R). SFAS No.
      123(R) will be effective beginning in the first quarter of fiscal
      2006.




F-9


**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**NOTES
      TO FINANCIAL STATEMENTS**




**NOTE 2
              —** **SIGNIFICANT ACCOUNTING
              POLICIES (CONT.)**




**Recent
      Accounting Pronouncements (Cont.)**





In
      May
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
      Corrections.” SFAS No. 154 replaces APB Opinion No. 20. “Accounting
      Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial
      Statements.” SFAS No. 154 requires retrospective application to prior
      periods’ financial statements of changes in accounting principle, unless it is
      impracticable to determine either the period-specific effects or the cumulative
      effect of the change. The Company does not expect the adoption of SFAS
      No. 154 will have any material impact on its consolidated financial
      statements.





In
      November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, “The
      Meaning of Other-Than-Temporary Impairment and Its Application to Certain
      Investments” (“FSP 115-1 and 124-1”), which clarifies when an investment is
      considered impaired, whether the impairment is other than temporary, and the
      measurement of an impairment loss. It also includes accounting considerations
      subsequent to the recognition of an other-than-temporary impairment and requires
      certain disclosures about unrealized losses that have not been recognized as
      other-than-temporary impairments. FSP 115-1 and 124-1 are effective for all
      reporting periods beginning after December 15, 2005. At December 31,
      2005, the Company had no unrealized investment losses that had not been
      recognized as other-than-temporary impairments in its available-for-sale
      securities. The Company does not anticipate that the implementation of these
      statements will have a significant impact on its financial position or results
      of operations.





**NOTE 3
              —** **COMMITMENTS AND
              CONTINGENCIES**




a.
            The
                Company presently occupies office space provided by an affiliate
                of an
                Initial Stockholder. Such affiliate has agreed that, until the acquisition
                of a target business by the Company, it will make such office space,
                as
                well as certain office and secretarial services, available to the
                Company,
                as may be required by the Company from time to time. The Company
                has
                agreed to pay such affiliate $7,500 per month for such services commencing
                on the effective date of the
                Offering.





b.
            Pursuant
                to letter agreements dated March 9, 2005 with the Company and
                EarlyBirdCapital, Inc., the representative of the underwriters in
                the
                Offering (“Representative”), the Initial Stockholders have waived their
                right to receive distributions with respect to their founding shares
                upon
                the Company’s liquidation.


.


In
      accordance with agreements between the Initial Stockholders and the
      Representative, the Initial Stockholders collectively purchased 1,300,000
      Warrants in the public marketplace at an average price of $0.568 per
      Warrant.





F-10




**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**NOTES
      TO FINANCIAL STATEMENTS**




**NOTE 3
              —** **COMMITMENTS AND
              CONTINGENCIES (CONT.)**




The
      Initial Stockholders will be entitled to registration rights with respect to
      their founding shares pursuant to an agreement dated July 12, 2005. The holders
      of the majority of these shares are entitled to make up to two demands that
      the
      Company register these shares at any time commencing three months prior to
      the
      date on which these shares are to be released from escrow. In addition, the
      Initial Stockholders have certain “piggy-back” registration rights on
      registration statements filed subsequent to the third anniversary of the
      effective date of the Offering.





**NOTE 4
              —** **SHAREHOLDERS'
              EQUITY**




**a. COMMON
              STOCK**




In
      February 2005, the Company issued 750,000 shares of common stock to the Initial
      Stockholders for $25,000 in cash, at a purchase price of approximately $0.033
      per share. Effective April 14, 2005, the Company’s Board of Directors authorized
      a stock dividend of one share of common stock for each outstanding share of
      common stock, effectively lowering the purchase price to $0.0167 per share.
      Additionally, on  April
      14,
      2005, the Company’s Board of Directors authorized an amendment to the Company’s
      Amended and Restated Certificate of Incorporation to increase the number of
      authorized shares of common stock to 30,000,000. All references in the
      accompanying financial statements to the number of shares of stock have been
      retroactively restated to reflect these transactions.





**b. PUBLIC
              OFFERING**




On
      July
      19, 2005, the Company sold 6,000,000 units (“Units”) in the Offering. On August
      5, 2005 and August 25, 2005, the Company sold an additional 300,000 Units and
      18,000 Units, respectively, pursuant to the over-allotment option. Each Unit
      was
      sold at an offering price of $6.00 per Unit generating total gross proceeds
      of
      $37,908,000. Each Unit consists of one share of the Company’s common stock,
      $.0001 par value, and two Redeemable Common Stock Purchase Warrants
      (“Warrants”). Each Warrant will entitle the holder to purchase from the Company
      one share of common stock at an exercise price of $5.00 commencing the later
      of
      the completion of a Business Combination with a target business or July 12,
      2006and expiring on July 11, 2009. The Warrants will be redeemable, upon prior
      written consent of the Representative, at a price of $.01 per Warrant upon
      30
      days’ notice after the Warrants become exercisable, on in the event that the
      last sale price of the common stock is at least $8.50 per share for any 20
      trading days within a 30 trading day period ending on the third day prior to
      the
      date on which notice of redemption is given. In connection with this Offering,
      the Company paid the underwriters an underwriting discount of 8% of the gross
      proceeds of the Offering and a non-accountable expense allowance of 1% of the
      gross proceeds of the Initial Offering. The Company also issued an option,
      for
      $100, to the Representative to purchase 300,000 Units at an exercise price
      of
      $7.50 per Unit. The Units issuable upon exercise of the option are identical
      to
      the Units issued in the Offering except that the Warrants underlying such Units
      are exercisable at $6.25 per share.





F-11


**ISRAEL
      TECHNOLOGY ACQUISITION CORP.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**NOTES
      TO FINANCIAL STATEMENTS**









**NOTE 4
              —** **SHAREHOLDERS' EQUITY
              (Cont.)**




**b. PUBLIC OFFERING
              (Cont.)**




The
      Company accounted for the fair value of the option, inclusive of the receipt
      of
      the $100 cash payment, as an expense of the public offering resulting in a
      charge directly to stockholders’ equity. The Company estimated that the fair
      value of this option is approximately $660,000 ($2.20 per unit) using a Black-
      Scholes option - pricing model.




The
      fair
      value of this option granted to the Representative is estimated as of the data
      of grant using the following assumptions: (1) expected volatility of 44.5%,
      (2)
      risk-free interest rate of 3.8% and (3) expected life of 5 years. The option
      may
      be exercised for cash or on a “cashless” basis at the holder’s option, such that
      the holder may use the appreciated value of the option (the difference between
      the exercise prices of the option and the underlying Warrants and the market
      price of the Units and underlying securities) to exercise the option without
      the
      payment of any cash.





At
      December 31, 2005, 12,900,000 shares of common stock were reserved for issuance
      upon exercise of redeemable warrants and underwriters’ unit purchase
      option.




**NOTE 5
              —** **TRANSACTIONS WITH
              RELATED PARTIES**




The
      Company issued an aggregate of $83,000 unsecured, non-interest bearing,
      promissory notes to the Initial Stockholders. The notes were payable on the
      consummation of the Offering. Accordingly, such notes were repaid in July 2005
      out of the proceeds of the Offering.




**NOTE 6
              —** **SUBSEQUENT
              EVENT**




On
      February 28, 2006, the Company entered into an Agreement and Plan of Merger
      (“Merger Agreement”) with IXI Mobile, Inc. (“IXI”). A wholly owned subsidiary of
      the Company, formed to effectuate the merger by merging with and into IXI,
      is
      also a party to the Merger Agreement. As a result of the merger, IXI will be
      the
      surviving corporation and will become a wholly owned subsidiary of the Company.
      Upon consummation of the merger, the Company will change its name to IXI Mobile,
      Inc. and IXI will change its name to IXI Mobile (USA), Inc. IXI is a privately
      owned company founded in 2000 that delivers devices and services designed to
      improve mobile communications and increase mobile data usage. Its OgoTM devices
      are designed to deliver popular messaging applications, such as instant
      messaging, email, news, and SMS on optimized devices, increasing data usage
      and
      enhancing the mobile experience. IXI markets its solutions to mobile operators
      and Internet service providers worldwide.





Pursuant
      to the Merger Agreement, immediately following the merger, the holders of equity
      interests of IXI (including holders of employee options and warrants to purchase
      IXI common stock) will own or have the right to acquire approximately 7.8
      million shares of the Company’s common stock. As further consideration, the
      holders of equity interests of IXI will receive or have the right to acquire
      up
      to an additional 10.0 million shares of the Company’s common stock based on the
      combined company attaining various targets described in the Merger
      Agreement.





F-12





**SIGNATURES**





Pursuant
      to the requirements of the Section 13 or 15 or 15(d) of the Securities Exchange
      Act of 1934, the registrant has duly caused this report to be signed on its
      behalf by the undersigned, thereunto duly authorized on the 28 th day of
      March 2006.





**ISRAEL
              TECHNOLOGY ACQUISITION CORP.**By:
            /s/ Israel
              FriederIsrael
              FriederChairman
                of the
                Board and Chief Executive Officer
              (Principal
                Executive Officer)




In
      accordance with the Securities Exchange Act of 1934, this report has been signed
      below by the following persons on behalf of the registrant and in the capacities
      and on the dates indicated.





Name
            Title
            Date/s/
                Israel Frieder
              Israel
                Frieder
            Chairman
                of the Board and Chief Executive Officer (Principal Executive
                Officer)
            March
                28, 2006/s/
                Glen Shear
              Glen
                Shear
            Chief
                Financial Officer, Secretary and Director (Principal Accounting and
                Financial Officer)
            March
                28, 2006/s/
                Dael Schnider
              Dael
                Schnider
            Executive
                Vice President and Director
            March
                28, 2006/s/
                Victor Halpert
              Victor
                Halpert
            Director
            March
                28, 2006