----

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| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|---------------------------------------------------------------------------------------------------|

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

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| Delaware                                                      |   | 20-4988129                          |
|---------------------------------------------------------------|--------|-------------------------------------|
| (State or other jurisdiction ofIncorporation or Organization) |   | (I.R.S. EmployerIdentification No.) |
|                                                          |   |                                |
| 44 W. 28th Street New York, New York                          |   | 10001                               |
| (Address of Principal Executive Offices)                      |   | (Zip Code)                          |

| 18 East 16th Street, 7th Floor, New York, New York10003       |
|---------------------------------------------------------------|
| (Former name or former address, if changed since last report) |

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| Large accelerated filer |  ̈                                                          | Accelerated filer              |  ̈ |
|-----------------------------------|-----------------------------------------------------------------|-------------------------------------|--------|
|                              |                                                            |                                |   |
| Non-accelerated filer             |  ̈  (Do not check if a smaller reporting company) | Smaller reporting company | x      |

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|                                    |                                                                                  | Page   |
|-----------------------------------------|---------------------------------------------------------------------------------------|--------|
|                                    |                                                                                  |
| PART I. FINANCIAL INFORMATION | 3                                                                                     |
|                                    |                                                                                  |   |
| Item 1.                            | Financial Statements                                                                  | 3      |
| Item 2.                            | Management's Discussion and Analysis of Financial Condition and Results of Operations | 19     |
| Item 3.                            | Quantitative and Qualitative Disclosures About Market Risk                            | 34     |
| Item 4T.                           | Controls and Procedures                                                               | 34     |
|                                    |                                                                                  |
| PART II. OTHER INFORMATION    | 35                                                                                    |
|                                    |                                                                                  |   |
| Item 1.                            | Legal Proceedings                                                                     | 35     |
| Item 1A.                           | Risk Factors                                                                          | 35     |
| Item 2.                            | Unregistered Sales of Equity Securities and Use of Proceeds                           | 35     |
| Item 3.                            | Defaults Upon Senior Securities                                                       | 35     |
| Item 5.                            | Other Information                                                                     | 35     |
| Item 6.                            | Exhibits                                                                              | 35     |

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|                                                                                                                                                          |   |   |   |   | June 30,2011 |   |    | December 31,2010 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------|--------|---------|-----------------------|--------|
|                                                                                                                                                          |   | Note   |   |   | U.S.$        |   |    | U.S.$                 |   |
| Current assets                                                                                                                                                |   |   |   |   |         |   |    |                  |   |
| Cash and cash equivalents                                                                                                                                     |   |   |   |   |         | 407    |    |                  |   | 5,407 |   |
| Restricted cash equivalents                                                                                                                                   |   | 4      |   |   |         | 1,051  |    |                  |   | — |   |
| Short-term deposit (restricted)                                                                                                                               |   |   |   |   |         |   | — |                  |   |   | 20 |   |
| Accounts receivable                                                                                                                                           |   |   |   |   |         |   | 243     |                  |   |   | 80 |   |
| Prepaid expenses and other current assets                                                                                                                     |   |   |   |   |         |   | 151     |                  |   |   | 168 |   |
|                                                                                                                                                          |   |   |   |   |         |   |    |                  |   |   |   |   |
| Total current assets                                                                                                                                          |   |   |   |   |         |   | 1,852   |                  |   |   | 5,675 |   |
|                                                                                                                                                          |   |   |   |   |         |   |    |                  |   |   |   |   |
| Long-term deposit                                                                                                                                             |   |   |   |   |         |   | 9       |                  |   |   | 9 |   |
| Property and equipment, at cost, net of $431 and $393 accumulated depreciation and amortization, as of June 30, 2011 and December 31, 2010, respectively |   |   |   |   |         |   | 169     |                  |   |   | 178 |   |
| Deferred tax assets—long-term                                                                                                                           |   |   |   |   |         |   | 28      |                  |   |   | 27 |   |
| Total assets                                                                                                                                                  |   |   |   |   |         |   | 2,058   |                  |   |   | 5,889 |   |

----

|                                                                                                                                                                      |   |   |   |   | June 30,2011 |    |    | December 31,2010 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|-------------------|---------|---------|-----------------------|--------|
|                                                                                                                                                                      |   | Note   |   |   | U.S.$             |    |    | U.S.$                 |   |
| Current liabilities                                                                                                                                                       |   |   |   |   |              |    |    |                  |   |
| Deferred short-term tax liabilities, net                                                                                                                                  |   |   |   |   |              | 68      |    |                  |   | 50 |   |
| Accounts payable and accrued expenses*                                                                                                                                    |   |   |   |   |              | 437     |    |                  |   | 421 |   |
| Accrued employee compensation                                                                                                                                             |   |   |   |   |              | 345     |    |                  |   | 358 |   |
| Accrued short-term severance pay                                                                                                                                          |   |   |   |   |              | — |    |                  |   | 178 |   |
| Current maturities of venture loan                                                                                                                                        |   |   | 4      |   |              |    | 1,051   |                  |   |   | 1,262 |   |
| Total current liabilities                                                                                                                                                 |   |   |   |   |              |    | 1,901   |                  |   |   | 2,269 |   |
| Long-term liabilities                                                                                                                                                     |   |   |   |   |              |    |    |                  |   |   |   |   |
| Accrued severance pay                                                                                                                                                     |   |   |   |   |              |    | 185     |                  |   |   | 178 |   |
| Venture loan                                                                                                                                                              |   |   | 4      |   |              |    | — |                  |   |   | 1,911 |   |
| Derivative liabilities on account of warrants                                                                                                                             |   |   | 3      |   |              |    | 1,725   |                  |   |   | 1,770 |   |
| Total long-term liabilities                                                                                                                                               |   |   |   |   |              |    | 1,910   |                  |   |   | 3,859 |   |
| Commitments and contingencies                                                                                                                                             |   |   | 6      |   |              |    |    |                  |   |   |   |   |
| Deficit in stockholders' equity                                                                                                                                           |   |   | 5      |   |              |    |    |                  |   |   |   |   |
| Preferred stock, $0.01 par value per share; 5,000,000 authorized; none issued and outstanding as of June 30, 2011 and December 31, 2010                              |   |   |   |   |              |    | — |                  |   |   | — |   |
| Common stock, $0.01 par value per share 28,000,000 authorized; 5,963,614 and 5,405,080 issued and outstanding as of June 30, 2011 and December 31, 2010 respectively |   |   |   |   |              |    | 60      |                  |   |   | 54 |   |
| Additional paid-in capital                                                                                                                                                |   |   |   |   |              |    | 30,867  |                  |   |   | 29,774 |   |
| Deficit accumulated during the development stage                                                                                                                          |   |   |   |   |              |    | (32,680 | )                     |   |   | (30,067 | )  |
| Total deficit in stockholders' equity                                                                                                                                     |   |   |   |   |              |    | (1,753  | )                     |   |   | (239 | )  |
| Total liabilities and deficit in stockholders' equity                                                                                                                     |   |   |   |   |              |    | 2,058   |                  |   |   | 5,889 |   |

| * | Amounts recorded as of June 30, 2011 and December 31, 2010 include $21 and $20 to a related party, respectively. |
|---|------------------------------------------------------------------------------------------------------------------|

----

|                                                                                             |   | Three months ended June 30, |      |   | Six months ended June 30, |   |    | Cumulativefrom inceptionto June 30, |   |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|-----------|--------|-----------------------------------------------|--------|---------|-----------------------------------------------|--------|
|                                                                                             |   | 2011                                            |      |   | 2010                                          |   |    | 2011                                          |   |   | 2010 |   |   | 2011 |   |
|                                                                                             |   | U.S.$                                           |      |   | U.S.$                                         |   |    | U.S.$                                         |   |   | U.S.$ |   |   | U.S.$ |   |
| Revenue                                                                                          |   |                                            | 227       |   |                                          |   | 44      |                                          |   |   | 374 |   |   |   | 74 |   |   |   | 605 |   |
|                                                                                             |   |                                            |      |   |                                          |   |    |                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Costs and Expenses*                                                                              |   |                                            |      |   |                                          |   |    |                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of revenue                                                                                  |   |                                            | 45        |   |                                          |   | 34      |                                          |   |   | 70 |   |   |   | 67 |   |   |   | 281 |   |
| Research and development                                                                         |   |                                            | 460       |   |                                          |   | 603     |                                          |   |   | 979 |   |   |   | 1,180 |   |   |   | 12,305 |   |
| Marketing                                                                                        |   |                                            | 685       |   |                                          |   | 632     |                                          |   |   | 1,306 |   |   |   | 1,107 |   |   |   | 10,605 |   |
| General and administrative                                                                       |   |                                            | 690       |   |                                          |   | 504     |                                          |   |   | 1,355 |   |   |   | 714 |   |   |   | 6,594 |   |
| Total operating expenses                                                                         |   |                                            | 1,880     |   |                                          |   | 1,773   |                                          |   |   | 3,710 |   |   |   | 3,068 |   |   |   | 29,785 |   |
| Operating loss                                                                                   |   |                                            | (1,653    | )      |                                          |   | (1,729  | )                                             |   |   | (3,336 | ) |   |   | (2,994 | ) |   |   | (29,180 | ) |
|                                                                                             |   |                                            |      |   |                                          |   |    |                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-operating income                                                                             |   |                                            | —   |   |                                          |   | 10      |                                          |   |   | 4 |   |   |   | — |   |   |   | 470 |   |
| Non-operating expenses                                                                           |   |                                            | (7        | )      |                                          |   | — |                                          |   |   | (18 | ) |   |   | (16 | ) |   |   | (177 | ) |
| Interest and amortization of debt discount expense                                               |   |                                            | (118      | )      |                                          |   | (3,355  | )                                             |   |   | (227 | ) |   |   | (4,009 | ) |   |   | (5,359 | ) |
| Decrease (increase) in the fair value of warrants                                                |   |                                            | (663      | )      |                                          |   | 480     |                                          |   |   | 45 |   |   |   | 448 |   |   |   | 997 |   |
| Gain on restructuring of venture loan                                                            |   |                                            | 963       |   |                                          |   | — |                                          |   |   | 963 |   |   |   | — |   |   |   | 963 |   |
| Loss on extinguishment of debt                                                                   |   |                                            | —   |   |                                          |   | — |                                          |   |   | — |   |   |   | — |   |   |   | (321 | ) |
|                                                                                             |   |                                            |      |   |                                          |   |    |                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss before taxes on income                                                                      |   |                                            | (1,478    | )      |                                          |   | (4,594  | )                                             |   |   | (2,569 | ) |   |   | (6,571 | ) |   |   | (32,607 | ) |
| Income tax expense                                                                               |   |                                            | (26       | )      |                                          |   | (18     | )                                             |   |   | (44 | ) |   |   | (38 | ) |   |   | (73 | ) |
|                                                                                             |   |                                            |      |   |                                          |   |    |                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                         |   |                                            | (1,504    | )      |                                          |   | (4,612  | )                                             |   |   | (2,613 | ) |   |   | (6,609 | ) |   |   | (32,680 | ) |
| Basic and diluted net loss per common share                                                      |   |                                            | (0.26     | )      |                                          |   | (5.20   | )                                             |   |   | (0.45 | ) |   |   | (10.54 | ) |   |   | (23.90 | ) |
|                                                                                             |   |                                            |      |   |                                          |   |    |                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares used in computing basic and dilutive net loss per common share |   |                                            | 5,845,738 |   |                                          |   | 887,567 |                                          |   |   | 5,784,337 |   |   |   | 627,174 |   |   |   | 1,367,246 |   |
|                                                                                             |   |                                            |      |   |                                          |   |    |                                          |   |   |   |   |   |   |   |   |   |   |   |   |

----

| * | The amount recorded for the three and six months ending June 30, 2011 and 2010 and the cumulative period from inception include $31, $162, $31, $89 and $1,213, respectively, to related parties. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                           |    | Common stock |     |    | Series Aconvertiblepreferredstock |   |    | Additionalpaid-in capital |         |   | Deficitaccumulatedduring thedevelopmentstage |         |   | Total  |    |
|--------------------------------------------------------------------------------|--------------|-------------------|----------|--------------|----------------------------------------|--------|--------------|--------------------------------|--------------|--------|---------------------------------------------------|--------------|--------|--------|---------|
|                                                                           |    | U.S.$             |     |    | U.S.$                                  |   |    | U.S.$                          |         |   | U.S.$                                             |         |   | U.S.$  |    |
| Balance as of January 9, 2006 (inception)                                 |    |              | —  |    |                              |   | —      |                      |    |   | —                                           |    |   |   | — |    |   |   | — |    |
| Issuance of common stock                                                       |    |              | *— |    |                              |   | —      |                      |    |   | —                                           |    |   |   | — |    |   |   | *— |    |
| Issuance of series A convertible preferred stock, net of issuance costs of $33 |    |              | —  |    |                              |   | *—     |                      |    |   | 2,321                                             |    |   |   | — |    |   |   | 2,321 |    |
| Stock dividend                                                                 |    |              | 20       |    |                              |   | 24           |                      |    |   | (44                                               | )            |   |   | — |    |   |   | — |    |
| Grants of stock options, net of forfeitures—employees                    |    |              | —  |    |                              |   | —      |                      |    |   | 7                                                 |    |   |   | — |    |   |   | 7 |    |
| Grants of stock options, net of forfeitures—non employees                |    |              | —  |    |                              |   | —      |                      |    |   | 4                                                 |    |   |   | — |    |   |   | 4 |    |
|                                                                           |         |              |     |         |                                   |   |         |                           |         |   |                                              |         |   |   |    |   |   |   |   |   |
| Net loss for the period                                                        |    |              | —  |    |                              |   | —      |                      |    |   | —                                           |    |   |   | (1,481  | ) |   |   | (1,481 | ) |
| Balance as of December 31, 2006                                           |    |              | 20       |    |                              |   | 24           |                      |    |   | 2,288                                             |    |   |   | (1,481  | ) |   |   | 851 |    |
| Issuance of common stock as part of conversion of convertible loan             |    |              | 2        |    |                              |   | —      |                      |    |   | 138                                               |    |   |   | — |    |   |   | 140 |    |
| Discounts to temporary equity                                                  |    |              | —  |    |                              |   | —      |                      |    |   | 43                                                |    |   |   | — |    |   |   | 43 |    |
| Amortization of discounts to temporary equity                                  |    |              | —  |    |                              |   | —      |                      |    |   | (4                                                | )            |   |   | — |    |   |   | (4 | ) |
| Grants of stock options, net of forfeitures—employees                    |    |              | —  |    |                              |   | —      |                      |    |   | 98                                                |    |   |   | — |    |   |   | 98 |    |
| Grants of stock options, net of forfeitures—non employees                |    |              | —  |    |                              |   | —      |                      |    |   | 15                                                |    |   |   | — |    |   |   | 15 |    |
|                                                                           |         |              |     |         |                                   |   |         |                           |         |   |                                              |         |   |   |    |   |   |   |   |   |
| Net loss for the year                                                          |    |              | —  |    |                              |   | —      |                      |    |   | —                                           |    |   |   | (5,163  | ) |   |   | (5,163 | ) |
| Balance as of December 31, 2007                                           |    |              | 22       |    |                              |   | 24           |                      |    |   | 2,578                                             |    |   |   | (6,644  | ) |   |   | (4,020 | ) |
| Issuance of warrants                                                           |    |              | —  |    |                              |   | —      |                      |    |   | 360                                               |    |   |   | — |    |   |   | 360 |    |
| Amortization of discounts to temporary equity                                  |    |              | —  |    |                              |   | —      |                      |    |   | (7                                                | )            |   |   | — |    |   |   | (7 | ) |
| Grants of stock options, net of forfeitures—employees                    |    |              | —  |    |                              |   | —      |                      |    |   | 18                                                |    |   |   | — |    |   |   | 18 |    |
| Grants of stock options, net of forfeitures—non employees                |    |              | —  |    |                              |   | —      |                      |    |   | 11                                                |    |   |   | — |    |   |   | 11 |    |
|                                                                           |         |              |     |         |                                   |   |         |                           |         |   |                                              |         |   |   |    |   |   |   |   |   |
| Net loss for the year                                                          |    |              | —  |    |                              |   | —      |                      |    |   | —                                           |    |   |   | (7,332  | ) |   |   | (7,332 | ) |

----

|                                                                |    | Common stock |     |         | Series Aconvertiblepreferredstock |   |    | Additionalpaid-in capital |   |   | Deficitaccumulatedduring thedevelopmentstage |         |   | Total  |    |
|---------------------------------------------------------------------|--------------|-------------------|----------|--------------|----------------------------------------|--------|---------|--------------------------------|--------|--------|---------------------------------------------------|--------------|--------|--------|---------|
|                                                                |    | U.S.$             |     |         | U.S.$                                  |   |    | U.S.$                          |   |   | U.S.$                                             |         |   | U.S.$  |    |
| Balance as of December 31, 2008                                |    |              | 22       |    |                                   |   | 24      |                      |   |   | 2,960                                             |    |   |   | (13,976 | ) |   |   | (10,970 | ) |
| Issuance of warrants                                                |    |              | —  |    |                                   |   | — |                      |   |   | 60                                                |    |   |   | — |    |   |   | 60 |    |
| Loan modification                                                   |    |              | —  |    |                                   |   | — |                      |   |   | 500                                               |    |   |   | — |    |   |   | 500 |    |
| Amortization of discounts to temporary equity                       |    |              | —  |    |                                   |   | — |                      |   |   | (7                                                | )            |   |   | — |    |   |   | (7 | ) |
| Grants of stock options, net of forfeitures—employees         |    |              | —  |    |                                   |   | — |                      |   |   | 178                                               |    |   |   | — |    |   |   | 178 |    |
| Grants of stock options, net of forfeiture—non employees      |    |              | —  |    |                                   |   | — |                      |   |   | 10                                                |    |   |   | — |    |   |   | 10 |    |
| Net loss for the year                                               |    |              | —  |    |                                   |   | — |                      |   |   | —                                           |    |   |   | (6,149  | ) |   |   | (6,149 | ) |
| Balance as of December 31, 2009                                |    |              | 22       |    |                                   |   | 24      |                      |   |   | 3,701                                             |    |   |   | (20,125 | ) |   |   | (16,378 | ) |
| Issuance of common stock, net of issuance costs of $1,768           |    |              | 24       |    |                                   |   | — |                      |   |   | 9,239                                             |    |   |   | — |    |   |   | 9,263 |    |
| Exchange of series A convertible preferred stock for common stock   |    |              | 24       |    |                                   |   | (24     | )                              |   |   | —                                           |    |   |   | — |    |   |   | — |    |
| Conversion of Bridge notes                                          |    |              | 9        |    |                                   |   | — |                      |   |   | 2,536                                             |    |   |   | — |    |   |   | 2,545 |    |
| Amortization of discounts to temporary equity                       |    |              | —  |    |                                   |   | — |                      |   |   | (3                                                | )            |   |   | — |    |   |   | (3 | ) |
| Grants of stock options, net of forfeitures—employees         |    |              | —  |    |                                   |   | — |                      |   |   | 883                                               |    |   |   | — |    |   |   | 883 |    |
| Grants of stock options, net of forfeitures—non employees     |    |              | —  |    |                                   |   | — |                      |   |   | 29                                                |    |   |   | — |    |   |   | 29 |    |
| Exercise of warrants to charity                                     |    |              | *— |    |                                   |   | — |                      |   |   | 11                                                |    |   |   | — |    |   |   | 11 |    |
| Grants of warrants to lead investors                                |    |              | —  |    |                                   |   | — |                      |   |   | 1,342                                             |    |   |   | — |    |   |   | 1,342 |    |
| Grants of warrants to charity                                       |    |              | —  |    |                                   |   | — |                      |   |   | 37                                                |    |   |   | — |    |   |   | 37 |    |
| Exercise of stock options                                           |    |              | 1        |    |                                   |   | — |                      |   |   | —                                           |    |   |   | — |    |   |   | 1 |   |
| Exercise of warrants                                                |    |              | 2        |    |                                   |   | — |                      |   |   | —                                           |    |   |   | — |    |   |   | 2 |    |
| Stock dividend                                                      |    |              | 19       |    |                                   |   | — |                      |   |   | (19                                               | )            |   |   | — |    |   |   | — |    |
| Reverse stock split                                                 |    |              | (93      | )            |                                   |   | — |                      |   |   | 93                                                |    |   |   | — |    |   |   | — |    |
| Exchange of series B convertible preferred stock for common stock   |    |              | 46       |    |                                   |   | — |                      |   |   | 11,925                                            |    |   |   | — |    |   |   | 11,971 |    |
| Cashless exercise of warrants to charity                            |    |              | *— |    |                                   |   | — |                      |   |   | *—                                          |    |   |   |    |   |   |   | *— |    |
| Net loss for the year                                               |    |              | —  |    |                                   |   | — |                      |   |   | —                                           |    |   |   | (9,942  | ) |   |   | (9,942 | )  |
| Balance as of December 31, 2010                                |    |              | 54       |    |                                   |   | — |                      |   |   | 29,774                                            |    |   |   | (30,067 | ) |   |   | (239 | )  |
| Grants of stock options, net of forfeitures—employees         |    |              | —  |    |                                   |   | — |                      |   |   | 764                                               |    |   |   | — |    |   |   | 764 |    |
| Grants of stock options, net of forfeitures—non employees     |    |              | —  |    |                                   |   | — |                      |   |   | 30                                                |    |   |   | — |    |   |   | 30 |    |
| Exercise of warrants                                                |    |              | 3        |    |                                   |   | — |                      |   |   | —                                           |    |   |   | — |    |   |   | 3 |    |
| Issuance of shares to a consultant                                  |    |              | *— |    |                                   |   | — |                      |   |   | 46                                                |    |   |   | — |    |   |   | 46 |    |
| Issuance of shares in connection with restructuring of venture loan |         |              | 3        |         |                                   |   | — |                           |   |   | 210                                               |         |   |   | — |   |   |   | 213 |   |
| Grants of warrants to charity                                       |    |              | —  |    |                                   |   | — |                      |   |   | 43                                                |    |   |   | — |    |   |   | 43 |    |
| Net loss for the period                                             |    |              | —  |    |                                   |   | — |                      |   |   | —                                           |    |   |   | (2,613  | )  |   |   | (2,613 | ) |
| Balance as of June 30, 2011                                         |    |              | 60       |    |                                   |   | — |                      |   |   | 30,867                                            |    |   |   | (32,680 | ) |   |   | (1,753 | )  |

----

|                                                                          |   |                                          |    |   |                  |   |    | Cumulative          |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------|---------|--------|-----------------------|--------|---------|---------------------|--------|
|                                                                          |   |                                          |    |   |                  |   |    | from inception |   |
|                                                                          |   | Six months ended June 30, |    |   | to June 30, |   |
|                                                                          |   | 2011                                          |    |   | 2010                  |   |    | 2011                |   |
|                                                                          |   | U.S.$                                         |    |   | U.S.$                 |   |    | U.S.$               |   |
| Cash flows from operating activities                                          |   |                                          |    |   |                  |   |    |                |   |
| Net loss                                                                      |   |                                          | (2,613  | )      |                  |   | (6,609  | )                   |   |   | (32,680 | ) |
| Adjustments to reconcile net cash flows used in operating activities:         |   |                                          |    |   |                  |   |    |                |   |   |   |   |
| Items not affecting cash flows                                                |   |                                          |    |   |                  |   |    |                |   |   |   |   |
| Depreciation and amortization                                                 |   |                                          | 38      |   |                  |   | 45      |                |   |   | 431 |   |
| Change in deferred tax assets and liabilities                                 |   |                                          | 16      |   |                  |   | (8      | )                   |   |   | 44 |   |
| Increase (decrease) in accrued severance pay                                  |   |                                          | (179    | )      |                  |   | — |                |   |   | 148 |   |
| Share-based payment expenses                                                  |   |                                          | 883     |   |                  |   | 1,817   |                |   |   | 3,576 |   |
| Accrued interest expense                                                      |   |                                          | 98      |   |                  |   | 2,398   |                |   |   | 2,855 |   |
| Decrease (increase) in fair value of warrants                                 |   |                                          | (45     | )      |                  |   | (448    | )                   |   |   | (997 | ) |
| Gain on restructuring of venture loan                                         |   |                                          | (963    | )      |                  |   | — |                |   |   | (963 | ) |
| Loss on extinguishment of debt                                                |   |                                          | — |   |                  |   | — |                |   |   | 321 |   |
| Exchange rate (gains) losses                                                  |   |                                          | (24     | )      |                  |   | (18     | )                   |   |   | 28 |   |
| Changes in current assets and liabilities                                     |   |                                          |    |   |                  |   |    |                |   |   |   |   |
| Decrease (increase) in receivables, prepaid expenses and other current assets |   |                                          | (145    | )      |                  |   | 45      |                |   |   | (394 | ) |
| Increase (decrease) in payables and accruals                                  |   |                                          | 18      |   |                  |   | (9      | )                   |   |   | 792 |   |
| Net cash used in operating activities                                         |   |                                          | (2,916  | )      |                  |   | (2,787  | )                   |   |   | (26,839 | ) |
| Cash flows from investing activities                                          |   |                                          |    |   |                  |   |    |                |   |   |   |   |
| Acquisition of property and equipment                                         |   |                                          | (28     | )      |                  |   | (34     | )                   |   |   | (599 | ) |
| Decrease in lease deposits                                                    |   |                                          | — |   |                  |   | — |                |   |   | (9 | ) |
| Investment in restricted short-term deposits and cash equivalents             |   |                                          | (1,031  | )      |                  |   | 2,582   |                |   |   | (1,051 | ) |
| Net cash provided by (used in) investing activities                           |   |                                          | (1,059  | )      |                  |   | 2,548   |                |   |   | (1,659 | ) |

----

|                                                                 |   |                                          |    |   |                  |   |    | Cumulative |   |
|----------------------------------------------------------------------|--------|-----------------------------------------------|---------|--------|-----------------------|--------|---------|------------|--------|
|                                                                 |   |                                          |    |   | from inception   |   |
|                                                                 |   | Six months ended June 30, |    |   | to June 30, |   |
|                                                                 |   | 2011                                          |    |   | 2010                  |   |    | 2011       |   |
|                                                                 |   | U.S.$                                         |    |   | U.S.$                 |   |    | U.S.$      |   |
| Cash flows from financing activities                                 |   |                                          |    |   |                  |   |    |       |   |
| Receipt of a venture loan                                            |   |                                          | — |   |                  |   | — |       |   |   | 5,000 |   |
| Repayment on account of venture loan                                 |   |                                          | (1,034  | )      |                  |   | (88     | )          |   |   | (2,590 | ) |
| Issuance of common stock and warrants, net                           |   |                                          | — |   |                  |   | 9,263   |       |   |   | 9,263 |   |
| Issuance of warrants                                                 |   |                                          | — |   |                  |   | — |       |   |   | 1,070 |   |
| Receipt of convertible loans                                         |   |                                          | — |   |                  |   | — |       |   |   | 3,976 |   |
| Issuance of convertible preferred stock                              |   |                                          | — |   |                  |   | — |       |   |   | 12,195 |   |
| Exercise of common stock options and warrants                        |   |                                          | 3       |   |                  |   | 11      |       |   |   | 17 |   |
| Net cash provided by (used in) financing activities                  |   |                                          | (1,031  | )      |                  |   | 9,186   |       |   |   | 28,931 |   |
| Effect of exchange rate changes on cash and cash equivalents         |   |                                          | 6       |   |                  |   | 1       |       |   |   | (26 | ) |
| Increase (decrease) in cash and cash equivalents                     |   |                                          | (5,000  | )      |                  |   | 8,948   |       |   |   | 407 |   |
| Cash and cash equivalents at beginning of period                     |   |                                          | 5,407   |   |                  |   | 744     |       |   |   | — |   |
| Cash and cash equivalents at end of period                           |   |                                          | 407     |   |                  |   | 9,692   |       |   |   | 407 |   |
| Supplemental disclosure of cash flows information                    |   |                                          |    |   |                  |   |    |       |   |   |   |   |
| Interest paid                                                        |   |                                          | 151     |   |                  |   | 199     |       |   |   | 1,137 |   |
| Non-cash investing and financing transactions                        |   |                                          |    |   |                  |   |    |       |   |   |   |   |
| Conversion of convertible loan into convertible preferred stock      |   |                                          | — |   |                  |   | — |       |   |   | 1,964 |   |
| Extinguishment of debt                                               |   |                                          |    |   |                  |   | — |       |   |   | 321 |   |
| Discount to the series B convertible preferred stock                 |   |                                          | — |   |                  |   | — |       |   |   | 43 |   |
| Allocation of fair value of loan warrants                            |   |                                          | — |   |                  |   | — |       |   |   | 334 |   |
| Allocation of fair value of conversion warrants                      |   |                                          | — |   |                  |   | 1,564   |       |   |   | 1,564 |   |
| Exchange of series B convertible preferred stock for common stock    |   |                                          | — |   |                  |   | 11,971  |       |   |   | 11,971 |   |
| Exchange of series A convertible preferred stock for common stock    |   |                                          | — |   |                  |   | 24      |       |   |   | 24 |   |
| Conversion of bridge notes into common stock                         |   |                                          | — |   |                  |   | 2,545   |       |   |   | 2,545 |   |
| Amortization of discounts to temporary equity                        |   |                                          | — |   |                  |   | 3       |       |   |   | 21 |   |
| Issuance of shares in consideration of restructuring of venture loan |   |                                          | 213     |   |                  |   | — |       |   |   | 213 |   |

----

----

----

----

|                                                                                             |   |                                            |      |   |                      |   |    | Cumulative     |   |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|-----------|--------|---------------------------|--------|---------|----------------|--------|
|                                                                                             |   |                                            |      |   |                      |   |    | from inception |   |
|                                                                                             |   | Three months ended June 30,                     |      |   | Six months ended June 30, |   |    | to June 30,    |   |
|                                                                                             |   | 2011                                            |      |   | 2010                      |   |    | 2011           |   |   | 2010 |   |   | 2011 |   |
| Numerator:                                                                                       |   | (in thousands, except share and per share data) |      |
|                                                                                             |   |                                            |      |   |                      |   |    |           |   |   |   |   |   |   |   |
| Net loss attributable to common stock shares (basic and diluted)                                 |   |                                            | (1,504    | )      |                      |   | (4,612  | )              |   |   | (2,613 | ) |   |   | (6,609 | ) |   |   | (32,680 | ) |
| Denominator:                                                                                     |   |                                            |      |   |                      |   |    |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common stock shares outstanding during the period (basic and diluted) |   |                                            | 5,756,345 |   |                      |   | 839,332 |           |   |   | 5,654,929 |   |   |   | 603,057 |   |   |   | 1,319,021 |   |
| Weighted average number of penny stock options and warrants (basic and diluted)                  |   |                                            | 89,393    |   |                      |   | 48,235  |           |   |   | 129,408 |   |   |   | 24,117 |   |   |   | 48,225 |   |
| Basic and diluted common stock share outstanding                                                 |   |                                            | 5,845,738 |   |                      |   | 887,567 |           |   |   | 5,784,337 |   |   |   | 627,174 |   |   |   | 1,367,246 |   |
| Basic and diluted net losses per common stock share                                              |   |                                            | (0.26     | )      |                      |   | (5.20   | )              |   |   | (0.45 | ) |   |   | (10.54 | ) |   |   | (23.90 | ) |

----

|                                          |    |                 |   |    | Fair value measurement at reporting date using              |   |
|-----------------------------------------------|--------------|----------------------|--------|--------------|-------------------------------------------------------------------------------------------|--------|
|                                          |    | June 30,2011    |   |    | Quoted prices inactive marketsfor identicalassets (Level 1) |   |    | Significant otherobservableinputs (Level 2) |   |    | Significantunobservableinputs (Level 3) |   |
| Description                                   |    | U.S.$ thousands |   |
| Assets                                        |    |                 |   |         |                                                                                 |   |   |   |    |   |   |   |    |   |   |   |
| Cash equivalents                              |    |                 | 51     |    |                                                                                 |   | 51 |    |    |   | — |    |    |   | — |    |
| Cash equivalents (restricted)                 |         |                 | 1,051  |         |                                                                                      |   | 1,051 |   |   |   | — |   |   |   | — |   |
| Total assets                                  |    |                 | 1,102  |    |                                                                                 |   | 1,102 |    |    |   | — |    |    |   | — |    |
| Liabilities                                   |    |                 |   |         |                                                                                 |   |   |   |    |   |   |   |    |   |   |   |
| Derivative liabilities on account of warrants |    |                 | 1,725  |    |                                                                                 |   | — |    |    |   | — |    |    |   | 1,725 |    |
| Total liabilities                             |    |                 | 1,725  |    |                                                                                 |   | — |    |    |   | — |    |    |   | 1,725 |    |

----

|                                        |    |                  |   |    | Fair value measurement at reporting date using              |   |
|---------------------------------------------|--------------|-----------------------|--------|--------------|-------------------------------------------------------------------------------------------|--------|
|                                        |    | December 31,2010 |   |    | Quoted prices inactive marketsfor identicalassets (Level 1) |   |    | Significant otherobservableinputs (Level 2) |   |    | Significantunobservableinputs (Level 3) |   |
| Description                                 |    | U.S.$ thousands  |   |
| Assets                                      |    |                  |   |         |                                                                                 |   |   |   |    |   |   |   |    |   |   |   |
| Cash equivalents                            |    |                  | 4,542  |    |                                                                                 |   | 4,542 |    |    |   | — |    |    |   | — |    |
| Total assets                                |    |                  | 4,542  |    |                                                                                 |   | 4,542 |    |    |   | — |    |    |   | — |    |
| Liabilities                                 |    |                  |   |         |                                                                                 |   |   |   |    |   |   |   |    |   |   |   |
| Derivative liability on account of warrants |    |                  | 1,770  |    |                                                                                 |   | — |    |    |   | — |    |    |   | 1,770 |    |
| Total liabilities                           |    |                  | 1,770  |    |                                                                                 |   | — |    |    |   | — |    |    |   | 1,770 |    |

|                                                      |    | Level 3                |   |
|-----------------------------------------------------------|--------------|-----------------------------|--------|
|                                                      |    | Special BridgeWarrants |   |   | ConversionWarrants |   |   | Total |   |
|                                                      |    | U.S.$ thousands        |   |
| Original allocated amount                                 |    |                        | 1,070  |    |   |   | — |    |   |   | 1,070 |    |
| Additional allocated amount (upon IPO)                    |    |                        | 88     |    |   |   | 1,564 |    |   |   | 1,652 |    |
| Fair value adjustment included in statement of operations |    |                        | (382   | )  |   |   | (570 | )  |   |   | (952 | )  |
| Balance at December 31, 2010                         |    |                        | 776    |    |   |   | 994 |    |   |   | 1,770 |    |
| Fair value adjustment included in statement of operations |    |                        | 172    |   |   |   | (217 | )  |   |   | (45 | )  |
| Balance at June 30, 2011                                  |    |                        | 948    |    |   |   | 777 |    |   |   | 1,725 |    |

----

|         | June 30, 2011 |   | December 31, 2010 |   |
|--------------|-------------------------|--------|-----------------------------|--------|
|         | CarryingAmount          |   | Fair Value             |   | CarryingAmount |   | Fair Value |   |
|         | U.S.$ thousands    |   | U.S.$ thousands        |   |
| Venture loan |                    | 1,051  |                        |   | 1,051 |   |   | 3,173 |   |   | 3,317 |   |

----

|                  |    | No. of options toEmployees |    |    | No. of options toNon-Employees |   |    | Exerciseprice |         |    | Averagefair value ofgranted option |         |
|-----------------------|--------------|-------------------------------------------|---------|--------------|-----------------------------------------------|--------|--------------|---------------|--------------|--------------|---------------------------------------------------|--------------|
|                  |    |                                      |    |    |                                          |   |    | U.S.$         |         |    | U.S.$                                             |         |
| January 31, 2011 |    |                                      | 194,000 |    |                                     |   | 22,000       |     |    |         | 0.01                                              |    |    |   | 1.67 |    |
| January 31, 2011 |    |                                      | 252,500 |    |                                     |   | 12,000       |     |    |         | 5.50                                              |    |    |   | 0.42 |    |

----

|                                       |   | U.S.$     |   |
|--------------------------------------------|--------|-----------|--------|
|                                       |   | thousands |   |
| Year ending December 31,                   |   |      |   |
| 2011 (six months ending December 31, 2011) |   |      | 48     |   |
| 2012                                       |   |      | 55     |   |
| 2013                                       |   |      | 8      |   |
|                                       |   |      | 111    |   |

|   | (a) | The Company's primary business is to provide video ringtones globally by partnering with international telecommunication carriers. Principal markets targeted are the U.S., Europe and the Far East. The Company's business depends on the technological infrastructures, wireless networks and information systems of its international carrier partners. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | The wireless industry in which the Company conducts its business is characterized by rapid technological changes, frequent new product innovations, changes in customer requirements and expectations and evolving industry standards. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | The Company's data is hosted at a remote location. Although the Company has full alternative site data backed up, they do not have data hosting redundancy and are thus exposed to the business risk of significant service interruptions. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | A significant portion of the Company's expenses are denominated in NIS. The Company expects this level of NIS expenses to continue for the foreseeable future. If the value of the U.S. dollar weakens against the value of NIS, there will be a negative impact on the Company's operating costs. In addition, to the extent the Company holds monetary assets and liabilities that are denominated in currencies other than the U.S. dollar, the Company will be subject to the risk of exchange rate fluctuations. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | In order to continue operating as a going concern the Company needs to raise capital through further debt or equity transactions. The Company is thus exposed to a market risk that it will not be able to raise this capital, as disclosed in Note 1. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a)   | In July 2011, the Company repaid the outstanding $1,051 thousand balance of its venture loan, using the funds set aside in the restricted account (see Note 4). |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | In July 2011, the Company announced that it executed a Letter of Intent ("LOI") to acquire substantially all of the assets, and assume substantially all of the liabilities, including a long-term loan of up to $3 million, of Zlango Ltd., a mobile messaging company ("Zlango"). Under the terms of the LOI, the Company will issue 3 million shares of its common stock and provide Zlango's management with a retention package comprised of options to purchase 250 thousand shares of common stock. Further, as a condition of closing, Zlango’s long-term loan is to be renegotiated to provide a minimum eighteen month principal holiday and a reduced interest rate during the initial eighteen month period, with repayments to begin over the subsequent 48 month period. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | In July 2011, the Company issued convertible notes in a private placement, in the aggregate amount of $2.5 million, primarily to two venture capital firms: Benchmark Capital and DAG Ventures. These venture capital firms may participate in a subsequent financing, following the intended acquisition of Zlango (see Note 8 b). Should the subsequent financing occur, the convertible notes will automatically convert into the same securities as the subsequent financing, except that the conversion price for the convertible notes will be equal to the lower of: (i) the closing price of the Company's common stock on the day the private placement was announced; or (ii) the closing price of the Company's common stock on the closing date; or (iii) a 10% discount to the securities issued in the subsequent financing. Should the subsequent financing not occur by January 1, 2012, then the principal and all accrued but unpaid interest thereon shall be repayable in full to convertible note holders. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations. |
|--------------|----------------------------------------------------------------------------------------|

----

----

----

----

|         |   | Three months Ended June 30, |   |   | Six months Ended June 30, |   |   | Cumulativefrom inception toJune 30, |   |
|--------------|--------|-------------------------------------------------|--------|--------|-----------------------------------------------|--------|--------|----------------------------------------------------|--------|
|    |   | 2011                                            |   |   | 2010                                          |   |   | Change                                             |   |   | 2011 |   |   | 2010 |   |   | Change |   |   | 2011 |   |
|    |   |                                            |   |   | ($ - in thousands)             |   |   |                                               |   |   |   |   |   | ($ - in thousands) |   |   |   |   |   | ($ - in thousands) |   |
|         |   |                                            |   |   |                                          |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue      |   |                                            | 227    |   |                                          |   | 44     |                                               |   |   | 183 |   |   |   | 374 |   |   |   | 74 |   |   |   | 300 |   |   |   | 605 |   |

----

|            |   | Three months Ended June 30, |   |   | Six months Ended June 30,    |   |   | Cumulativefrom inception toJune 30, |   |
|-----------------|--------|----------------------------------|--------|--------|-----------------------------------|--------|--------|----------------------------------------------------|--------|
|       |   | 2011                             |   |   | 2010                              |   |   | Change                                             |   |   | 2011 |   |   | 2010 |   |   | Change |   |   | 2011 |   |
|       |   |                             |   |   | ($ - in thousands) |   |   |                                               |   |   |   |   |   | ($ - in thousands) |   |   |   |   |   | ($ - in thousands) |   |
|            |   |                             |   |   |                              |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of revenue |   |                             | 45     |   |                              |   | 34     |                                               |   |   | 11 |   |   |   | 70 |   |   |   | 67 |   |   |   | (15 | ) |   |   | 281 |   |

----

|                     |   | Three months Ended June 30, |   |   | Six months Ended June 30,    |   |   | Cumulativefrom inception toJune 30, |   |
|--------------------------|--------|----------------------------------|--------|--------|-----------------------------------|--------|--------|----------------------------------------------------|--------|
|                |   | 2011                             |   |   | 2010                              |   |   | Change                                             |   |   | 2011 |   |   | 2010 |   |   | Change |   |   | 2011 |   |
|                |   |                             |   |   | ($ - in thousands) |   |   |                                               |   |   |   |   |   | ($ - in thousands) |   |   |   |   |   | ($ - in thousands) |   |
|                     |   |                             |   |   |                              |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Research and development |   |                             | 460    |   |                              |   | 603    |                                               |   |   | (143 | ) |   |   | 979 |   |   |   | 1,180 |   |   |   | (201 | ) |   |   | 12,305 |   |

----

|         |   | Three months Ended June 30, |   |   | Six months Ended June 30,    |   |   | Cumulativefrom inception toJune 30, |   |
|--------------|--------|----------------------------------|--------|--------|-----------------------------------|--------|--------|----------------------------------------------------|--------|
|    |   | 2011                             |   |   | 2010                              |   |   | Change                                             |   |   | 2011 |   |   | 2010 |   |   | Change |   |   | 2011 |   |
|    |   |                             |   |   | ($ - in thousands) |   |   |                                               |   |   |   |   |   | ($ - in thousands) |   |   |   |   |   | ($ - in thousands) |   |
|         |   |                             |   |   |                              |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Marketing    |   |                             | 685    |   |                              |   | 632    |                                               |   |   | 53 |   |   |   | 1,306 |   |   |   | 1,107 |   |   |   | 199 |   |   |   | 10,605 |   |

----

|                       |   | Three months Ended June 30, |   |   | Six months Ended June 30,    |   |   | Cumulativefrom inception toJune 30, |   |
|----------------------------|--------|----------------------------------|--------|--------|-----------------------------------|--------|--------|----------------------------------------------------|--------|
|                  |   | 2011                             |   |   | 2010                              |   |   | Change                                             |   |   | 2011 |   |   | 2010 |   |   | Change |   |   | 2011 |   |
|                  |   |                             |   |   | ($ - in thousands) |   |   |                                               |   |   |   |   |   | ($ - in thousands) |   |   |   |   |   | ($ - in thousands) |   |
|                       |   |                             |   |   |                              |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General and administrative |   |                             | 690    |   |                              |   | 504    |                                               |   |   | 186 |   |   |   | 1,355 |   |   |   | 714 |   |   |   | 641 |   |   |   | 6,594 |   |

----

|                                |   | Three months Ended June 30, |   |   | Six months Ended June 30, |   |   | Cumulativefrom inception toJune 30, |   |
|-------------------------------------|--------|-------------------------------------------------|--------|--------|-----------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                           |   | 2011                                            |   |   | 2010                                          |   |   | Change                                             |   |   | 2011 |   |   | 2010 |   |   | Change |   |   | 2011 |   |
|                           |   |                                            |   |   | ($ - in thousands)             |   |   |                                               |   |   |   |   |   | ($ - in thousands) |   |   |   |   |   | ($ - in thousands) |   |
|                                |   |                                            |   |   |                                          |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-operating income (expense), net |   |                                            | 175    |   |                                          |   | (2,865 | )                                                  |   |   | 3,040 |   |   |   | 767 |   |   |   | (3,577 | ) |   |   | 4,344 |   |   |   | (3,427 | ) |

----

|            |   | Three months Ended June 30, |   |   | Six months Ended June 30, |   |   | Cumulativefrom inception toJune 30, |   |
|-----------------|--------|-------------------------------------------------|--------|--------|-----------------------------------------------|--------|--------|----------------------------------------------------|--------|
|       |   | 2011                                            |   |   | 2010                                          |   |   | Change                                             |   |   | 2011 |   |   | 2010 |   |   | Change |   |   | 2011 |   |
|       |   |                                            |   |   | ($ - in thousands)             |   |   |                                               |   |   |   |   |   | ($ - in thousands) |   |   |   |   |   | ($ - in thousands) |   |
|            |   |                                            |   |   |                                          |   |   |                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxes on income |   |                                            | 26     |   |                                          |   | 18     |                                               |   |   | 8 |   |   |   | 44 |   |   |   | 38 |   |   |   | 6 |   |   |   | 73 |   |

----

|                                                |   | Six month period ended June 30, |   |   | Cumulativefrom inceptionto June 30, |   |
|-----------------------------------------------------|--------|----------------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                           |   | 2011                                                     |   |   | 2010                                               |   |   | Change |   |   | 2011 |   |
|                                           |   | ($ - in thousands)                             |   |   |                                               |   |
| Net cash used in operating activities               |   |                                                     | (2,916 | )      |                                               |   | (2,787 | ) |   |   | (129 | ) |   |   | (26,839 | ) |
| Net cash provided by (used in) investing activities |   |                                                     | (1,059 | )      |                                               |   | 2,548 |   |   |   | (3,607 | ) |   |   | (1,659 | ) |
| Net cash provided by (used in) financing activities |   |                                                     | (1,031 | )      |                                               |   | 9,186 |   |   |   | (10,217 | ) |   |   | 28,931 |   |

----

|                    |   | Payments due by period (in thousands of dollars) |   |
|-------------------------|--------|-------------------------------------------------------------------------------------|--------|
|               |   | Total                                                                               |   |   | Less than  1year |   |   | 1-3 years |   |   | 3-5 years |   |   | More than  5years |   |
| Contractual obligations |   |                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real estate leases (1)  |   |                                                                                | 56     |   |   |   | 56 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Auto leases (2)         |   |                                                                                | 54     |   |   |   | 31 |   |   |   | 23 |   |   |   | — |   |   |   | — |   |
| Venture loan (3)        |   |                                                                                | 1,051  |   |   |   | 1,051 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Total                   |   |                                                                                | 1,161  |   |   |   | 1,138 |   |   |   | 23 |   |   |   | — |   |   |   | — |   |

| (1) | We have a non-cancellable operating lease for our subsidiary's offices in Israel for which we pay approximately $6 thousand monthly. This commitment is for the period ending May 31, 2012. We have a non-cancellable operating lease for our offices in New York for which we pay approximately $3 thousand monthly. This commitment is for the period ending August 31, 2011. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The subsidiary leases three motor vehicles for certain employees with variable commencement and expiration dates. All leases are for a total of 36 months whereby the final three months of the contract have been prepaid. Total monthly expenses for these leases amount to approximately $3 thousand. Expiration dates for the leases are on various dates from November 2013 through December 2013. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Represents total future principal repayment which was settled in July 2011, after the balance sheet date, as per the venture loan settlement agreement. See Note 1 to these financial statements. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
|--------------|-------------------------------------------------------------|

| Item 4T. | Controls and Procedures. |
|---------------|--------------------------|

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| ExhibitNo. |         | Description                                                                                                                                                                                                                                                 |
|------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |         |                                                                                                                                                                                                                                                        |
| 10.1       |         | Settlement Agreement, by and between the Company, Silicon Valley Bank, SVB Financial Group and Gold Hill Venture Lending 03, L.P. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 14, 2011). |
|       |         |                                                                                                                                                                                                                                                        |
| 10.2       |         | Pledge and Security Agreement, between the Company and Silicon Valley Bank. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on June 14, 2011).                                                                 |
|       |         |                                                                                                                                                                                                                                                        |
| 31.1       |         | Certification of Principal Executive Officer Pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                    |
|       |         |                                                                                                                                                                                                                                                        |
| 31.2       |         | Certification of Principal Financial Officer Pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                    |
|       |         |                                                                                                                                                                                                                                                        |
| 32.1       |         | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                       |
|       |         |                                                                                                                                                                                                                                                        |
| 32.2       |    | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                       |

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|   |   |                          |
|--------|--------|-------------------------------|
|   |   | VRINGO, INC.                  |   |
|   |   |                          |   |
|   |   |                          |   |
|   | By:    | /s/ Ellen Cohl           |   |
|   |   | Ellen Cohl                    |   |
|   |   | Chief Financial Officer       |   |
|   |   | (Principal Financial Officer) |   |

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