UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

---

FORM 10-K

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

For the fiscal year ended March 31, 2008

Commission File Number 000-30189

---

VYYO INC.(Exact Name of Registrant as Specified in Its Charter)

|Delaware(State or Other Jurisdiction
of Incorporation or Organization)                        |  | 94-3241270(IRS Employer
Identification No.)
|--------------------------------------------------------------------------------------------- |  | -------------------------------------------
|6625 The Corners Parkway, Suite 100
Norcross, Georgia(Address of Principal Executive Offices) |  | 30092(Zip Code)                            

Registrant's
Telephone Number, Including Area Code:(678) 282-8000

Securities Registered Pursuant to Section 12(b) of the Act:None

Securities Registered Pursuant to Section 12(g) of the Act:Common Stock, $0.0001 Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. o Yes    ý No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. ý Yes    o No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. ý Yes    o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ý

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller
reporting company)

Smaller reporting company ý


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

Aggregate market value of the voting stock held by non-affiliates of the registrant as of June 25, 2008 (computed by reference to the closing
price of the registrant's Common Stock as quoted on the Pink Sheets quotation system on such date): approximately $1,169,119.

The
number of shares outstanding of the registrant's Common Stock, $0.0001 par value per share, as of June 25, 2008, was 18,701,012.



---



VYYO INC.

2008 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

|            |  |                                                                                                              |  | Page
|----------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|PART I     
|            |  | Forward-Looking Statements                                                                                   |  | 3   
|Item 1.     |  | Business                                                                                                     |  | 4   
|Item 1A.    |  | Risk Factors                                                                                                 |  | 9   
|Item 1B.    |  | Unresolved Staff Comments                                                                                    |  | 24  
|Item 2.     |  | Properties                                                                                                   |  | 24  
|Item 3.     |  | Legal Proceedings                                                                                            |  | 24  
|Item 4.     |  | Submission of Matters to a Vote of Security Holders                                                          |  | 24  
|PART II    
|Item 5.     |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 25  
|Item 6.     |  | Selected Financial Data                                                                                      |  | 26  
|Item 7.     |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                        |  | 26  
|Item 7A.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 42  
|Item 8.     |  | Financial Statements and Supplementary Data                                                                  |  | 42  
|Item 9.     |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 42  
|Item 9A(T). |  | Controls and Procedures                                                                                      |  | 42  
|Item 9B.    |  | Other Information                                                                                            |  | 43  
|PART III   
|Item 10.    |  | Directors, Executive Officers and Corporate Governance                                                       |  | 44  
|Item 11.    |  | Executive Compensation                                                                                       |  | 49  
|Item 12.    |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 60  
|Item 13.    |  | Certain Relationships and Related Transactions and Director Independence                                     |  | 63  
|Item 14.    |  | Principal Accountant Fees and Services                                                                       |  | 65  
|PART IV    
|Item 15.    |  | Exhibits and Financial Statement Schedules                                                                   |  | 66  
|SIGNATURES  |  | 67                                                                                                          

2

---





Forward-Looking Statements

The matters discussed in this Annual Report on Form 10-K, with the exception of the historical information presented, contain forward-looking
statements involving risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our business and results of operations to differ materially
from those expressed or implied by such forward-looking statements. Such forward-looking statements include:



You
can identify these and other forward-looking statements by the use of words such as "may," "will," "should," "could," "intend," "expect," "plan," "estimate," "project," "anticipate,"
"believe," "potential," "continue," or the negative of such terms, or other comparable terminology. The risks, uncertainties and assumptions referred to above that could cause our actual results to
differ materially from the results expressed or implied by such forward-looking statements include those set forth in Item 1A in this Annual Report on Form 10-K and the
risks, uncertainties and assumptions discussed from time to time in our other public filings and public announcements. All forward-looking statements included in this Annual Report on
Form 10-K are based on
information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

3

---





PART I

Item 1.    Business

Overview

Vyyo Inc. and its wholly-owned subsidiaries (collectively, "we," "us" or "our") provide extended bandwidth solutions for cable system operators ("MSOs").
Our UltraBand® Spectrum Overlay technology expands MSOs' typical hybrid-fiber coax ("HFC") network capacity in the "last mile" by up to two times in the downstream and up to four times in
the upstream. Our results also includes operations of Xtend Networks Ltd., an Israeli company, and its wholly-owned, United States-based subsidiary, Xtend Networks Inc. (collectively,
"Xtend").

We
have experienced significant losses and negative cash flows from operations since our incorporation. For the year ended March 31, 2008, we incurred a net loss of $29,939,000
and had an accumulated deficit of $305,554,000. These matters raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend upon our
ability to raise additional capital during the next three months. We are pursuing raising additional capital to fund our operations although there is no assurance that such capital will be available
to us. We also are seeking to expand our revenue base by adding new customers and to further reduce expenses, beyond the reductions realized in the restructuring plan discussed below. Failure to
secure additional capital in the very short term or to expand our revenue base in the longer term will result in depleting our available funds and not being able to pay our obligations when they
become due. See "Liquidity, Capital Resources and Going Concern Considerations."

Since
our acquisition of Xtend in 2004, we had operated in two segments: the cable solutions segment and the wireless solutions segment. Beginning in 2007, we announced that our primary
focus and dedication of resources was in our cable solutions segment. In July 2007, we implemented a cost reduction program that reduced our workforce, including workforce in our wireless solutions
segment. In the three months ended March 31, 2008, we simplified our structure by further streamlining our corporate organization and reducing operating costs to better address market needs and
revenue opportunities in the cable market. As part of this restructuring plan, we ceased the marketing and support efforts for, and terminated all employees dedicated to, our wireless solutions
segment in March 2008. Accordingly we have no current wireless operations. For a discussion of our 2008 restructure plan, see note 1 of our fiscal 2008 annual Consolidated Financial Statements.

The
reductions of workforce and outsourced services and contractors implemented in 2007 and 2008 impacted all company functions, both in Israel and the United States, and included
management and non-management positions. As of June 30, 2008, all functions performed in Israel except research and development have been moved to the United States. These actions
are consistent with our previous disclosures concerning operating cost reductions and exit from the wireless business. We continue to evaluate additional opportunities to reduce operating costs.

On
June 13, 2008, we completed a financing which resulted in $4,500,000 of new funding. See Management's Discussion and Analysis of Financing Condition and Results of
OperationsSubsequent Events."

We
were incorporated in Delaware in 1996. Effective December 3, 2007, we changed our fiscal year end from December 31 to March 31. Reference to a particular fiscal
year means the period beginning April 1 and ending March 31 of the stated year.

Cable Solutions

Our focus and dedication of resources is now entirely on our cable solutions and the cable market. In fiscal year 2007 and 2008, we strengthened our efforts to
penetrate the cable industry and expect to

4

---



continue
this strategy in fiscal year 2009 and beyond. We believe this renewed focus and dedication of our internal resources on our cable solutions will enhance our prospects and thereby increase
stockholder value.

Our
Spectrum Overlay solution is a radio frequency ("RF") family of products with node, amplifier, splitter and passive elements targeted to the coaxial portion of existing cable
infrastructure. Our
solution is designed to enable the layer-one expansion of available spectrum in a typical cable HFC network, which in turn allows MSOs to provide more bandwidth-intensive services to their
customers.

Our
cable solutions provide MSOs with the opportunity to increase raw bandwidth on their legacy HFC network. Our advanced technology has the potential to help MSOs develop new sources of
revenue by (a) providing residential subscribers with the enhanced "quadruple play" of voice, data, video and wireless services; (b) increasing capacity for high definition television,
video-on-demand, network-based digital video recording, high definition video-on-demand, peer-to-peer gaming and
peer-to-peer video conferencing; and (c) enabling residential and commercial high-speed symmetrical data services.

Our
solutions are designed to be "backwards compatible" with the existing network equipment so as not to affect existing residential services. This is accomplished by overlaying spectrum
in parallel to current networks which allows the utilization of pre-existing digital equipment. We designed our solutions to pass through all of the legacy services and overlay the
expanded services without interfering with MSOs' traditional services. The products provide a compatible architecture, through Block Division Multiplexing technology, that, for example,
enables the continued use of existing, standardized equipment, such as DOCSIS® (Data Over Cable Service Interface Specifications) cable modem termination systems, cable modems and digital
set-top units.

Solutions and Technology

We have developed a broad range of Spectrum Overlay solutions to increase the bandwidth of existing cable television networks and have optimized our solutions for
residential applications. Our Spectrum Overlay solution consists of the following elements:

Node Products: XHUB.The XHUB is located at the fiber node and converts the HFC network standard frequency band to the
coaxial plant's extended bands. Our Spectrum Overlay XHUB 3006 is a block multiplexer and frequency converter which multiplexes two downstream blocks, each carrying a different content, onto a single
cable coaxial plant while demultiplexing five upstream blocks.

Trunk Amplifiers: Xtendifier and XBridger.The Xtendifier is the amplification and gain control element of the overlaid
coaxial plant. The Xtendifier is installed along the coaxial line, in parallel to existing line extenders. Our XFR 3000 is a bi-directional, wide-band amplifier which operates
in conjunction with the legacy amplifier. The XBridger performs the same functions, but is placed in conjunction with a multiple output legacy XBridger amplifier.

Passive Elements.Our 3GHz passive elements replace the existing passive elements (taps, splitters, line power inserters and
line equalizers). The XSP replaces existing splitters and directional couplers; the XFFT and XPTF replace existing taps; the XLPI replaces existing power line inserters and the XLEQ replaces existing
line equalizers, all providing bandwidth performance supporting the increased frequencies used with the Spectrum Overlay solution.

Customer Premise Equipment Device: XTB.The Spectrum Overlay XTB is a block division multiplexer and frequency converter that
interfaces with existing standard customer premise equipment devices, enabling subscribers to enjoy true quadruple play services.

5

---



Customers

We sell our cable solutions directly to MSOs. We generally sell our solutions based on individual purchase orders; accordingly, customers are not obligated by
long-term contracts. Our customers can generally cancel or reschedule orders upon short notice and can discontinue using our solutions at any time.

To
date, we have not recognized significant revenue from our cable solutions, and these revenues have been generated by only a small number of customers. We continue to expect that a
relatively small number of customers will account for a large percentage of our revenues.

Sales and Marketing

Our direct sales force in the United States targets domestic MSOs of all sizes. We promote our products through direct personal contact, presentations at trade
shows, expositions, seminars and lectures and public relations efforts. Our current strategy also includes pursuing strategic licensing and technology transfer agreements with cable equipment vendors,
which could include licensing our intellectual property associated with our passive and active solutions. These strategic relationships will allow for broader customer acceptance and multiple supply
channels while increasing our revenues from licensing fees. We believe that such strategic relationships will facilitate future product development and accelerate deployment of our solutions. We also
believe that the licensing of complementary technologies to third parties with specific expertise is an effective means of expanding the features and functionality of our products and range of
offerings.

We
are an approved vendor with Cox Communications for our Spectrum Overlay solution. In addition, our Spectrum Overlay solution is being evaluated at different levels at other leading
MSOs in North America.

Suppliers and Manufacturing

We are dedicated to establishing long-term relationships with our suppliers and manufacturers. Through these relationships, we benefit from new
innovations, higher quality, reduced lead times, smoother/faster manufacturing ramp-up of product introductions and lower total costs of doing business.

We
outsource manufacturing to contract manufacturers that have the expertise and ability to respond quickly to customer orders while maintaining high quality standards. Any inability of
these manufacturers to provide the necessary capacity or output could result in significant production delays that could harm our business. We purchase components for our solutions on a purchase order
basis and do not rely in a material way on guaranteed supply or long-term contracts with any suppliers. In addition, some of the components used in our solutions are obtained from a single
source or limited group of suppliers. The partial or complete loss of such suppliers could increase our costs, delay shipments or require redesigns of our solutions.

Research and Development

Our research and development activities are focused on responding to the needs of MSOs and technological changes in the cable market. See "Management's Discussion
and Analysis of Financial Condition and Results of OperationsResults of OperationsResearch and Development" for a description of our research and development expenses.

6

---



Competition

The market for cable equipment vendors is competitive, rapidly evolving and subject to rapid technological change. The principal competitive factors in this
market include:



Our
cable solutions compete with technologies such as higher modulation over cable (1024QAM) and high-end encoding/compression (e.g., MPEG-4), Switched
Digital Video, the upgrading of coaxial networks to 1GHz and fiber optic solutions. MSOs have partial alternatives to our technology for increasing bandwidth on their systems, including fiber-based
solutions and node-splitting. In addition, MSOs themselves face competition from the high bandwidth solutions offered by satellite providers and incumbent telecommunications operators,
including digital subscriber line ("DSL") technology, and from fiber-to-the-home/curb technologies.

Many
of our competitors have substantially greater financial, technical, distribution, marketing and other resources than we have and, therefore, may be able to respond more quickly to
new or changing
opportunities, technologies and other developments. In addition, many of our competitors have longer operating histories, greater name recognition and established relationships with MSOs. These
competitors may also be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies and devote substantially more resources to developing new products. Our primary
competitors are currently Cisco Systems, Inc.; Motorola, Inc.; BigBand Networks, Inc.; C-Cor Incorporated; Arris Group, Inc.; Aurora Networks and
Harmonic Inc. Most of these competitors have existing relationships with one or more of our prospective customers. We may not be able to compete successfully against current and future
competitors and competitive pressures may seriously harm our business.

Employees

As of June 30, 2008, we have 28 employees in the United States and Israel, all but one of whom are full-time employees. Our United States
employees are not represented by a labor union and we have not experienced any work stoppages.

Our
Israeli subsidiaries are subject to Israeli labor laws and regulations with respect to their employees. These laws principally concern matters such as paid annual vacation, paid sick
days, length of work day and work week, minimum wages, pay for overtime, insurance for work related accidents, severance pay, prior notice and other conditions of employment.

Our
Israeli subsidiaries are subject to provisions of certain collective bargaining agreements by order of the Israeli Ministry of Labor and Welfare. These provisions principally concern
wages, cost of living expenses and other conditions of employment. We provide our Israeli employees with benefits and working conditions above the required minimums. Our Israeli employees are not
represented by a labor union and we have not experienced any work stoppages.

7

---



Government Regulation

We are subject to export control laws and regulations with respect to certain of our products and technology. Additional export control requirements could be
imposed in the future on product classes that include solutions exported by us, which would result in additional compliance burdens and could impair the enforceability of our contract rights.

Intellectual Property

We rely on a combination of patent, copyright and trademark laws, trade secrets and confidentiality and other contractual provisions to establish and protect our
proprietary rights, each of which is vital to our business. We have two issued patents in the United States and 31 patent applications pending worldwide, including 10 in the United States, related to
our cable solutions. We have 13 issued patents, all in the United States, and five patent applications pending worldwide, including one in the United States, related to our wireless technology.

Our
success depends in part on our ability to protect our proprietary technologies. Our pending or future patent applications may not be approved and the claims covered by such
applications may be reduced. If allowed, our patents may not be of sufficient scope or strength, and others may independently develop similar technologies or products. Further, patents held by third
parties may prevent the commercialization of products incorporating our technologies or third parties may challenge or seek to narrow, invalidate or circumvent any of our pending or future patents. We
also believe that foreign patents, if obtained, and the protection afforded by such foreign patents and foreign intellectual property laws, may be more limited than that provided under United States
patents and intellectual property laws. Litigation, which could result in substantial costs and diversion of effort by us, may also be necessary to enforce any patents issued or licensed to us or to
determine the scope and validity of third-party proprietary rights. Any such litigation, regardless of outcome, could be expensive and time-consuming, and adverse determinations in any
such litigation could seriously harm our business.

We
also rely on unpatented trade secrets and know-how and proprietary technological innovation and expertise which are protected in part by confidentiality and invention
assignment agreements with our employees, advisors and consultants and non-disclosure agreements with our suppliers and distributors. These agreements may be breached, we may not have
adequate remedies for any breach or our unpatented proprietary intellectual property may otherwise become known or independently discovered by competitors. Further, the laws of certain foreign
countries may not protect our products or intellectual property rights to the same extent as do the laws of the United States.

From
time to time, third parties, including our competitors, may assert patent, copyright and other intellectual property rights to technologies that are important to us. We expect that
we will be subject increasingly to license offers and infringement claims as the number of products and competitors in our market grows and the functionality of products overlaps.

Patents
of third parties may be determined to be valid, or some or all of our products may ultimately be determined to infringe those patents. Patent holders may pursue litigation with
respect to these or other claims. The results of any litigation are inherently uncertain. In the event of any future adverse result in any litigation with respect to intellectual property rights
relevant to our products, we could be required to obtain licenses to the infringing technology, to pay substantial damages under applicable
law, to cease the manufacture, use and sale of infringing products or to expend significant resources to develop non-infringing technology. Licenses may not be available from third
parties, either on commercially reasonable terms or at all. In addition, litigation frequently involves substantial expenditures and can require significant management attention, even if we ultimately
prevail. Accordingly, any infringement claim or litigation against us could significantly harm our business, operating results and financial condition.

8

---



Environmental Matters

We lease all of our facilities. Accordingly, compliance with federal, state and local environmental laws and regulations has not had, nor do we expect it to have,
a material effect on our capital expenditures, earnings or competitive position.

Cessation of Wireless Business

During 2007, we began to focus substantially all of our efforts and internal resources on our cable solutions business. In March 2008, we ceased our marketing and
support efforts for, and terminated all employees dedicated to, our wireless solutions business. In addition, we wrote off our wireless inventory valued at $1,067,000 in the three months ended
March 31, 2008.

In
2006, we signed an equipment purchase agreement with Arcadian Networks, Inc. ("ANI"), a service provider to the utilities industry. ANI accounted for a significant portion of
our revenues in the 2008 fiscal year. Following cessation of our wireless operations, we entered into a lease agreement with ANI for the rental of test equipment related to our wireless business.
Notwithstanding this lease agreement, we continue to own all of our intellectual property, including patents and patent applications, related to our wireless solutions. See note 4 of our fiscal
2008 annual Consolidated Financial Statements for a description of this relationship.

Item 1A.    Risk Factors

Our business is subject to substantial risks, including the risks described below.

We have insufficient capital to continue as a going concern.

On June 13, 2008, we received $4,500,000 of new funding after closing a financing of $41,000,000, which included $38,000,000 from Goldman Sachs Investment
Partners Master Fund, LP ("Goldman") and $3,000,000 from Syntek Capital AG ("Syntek), as further described in "Management's Discussion and Analysis of Financial Condition and Results of
OperationsSubsequent Events2008 Financing" (the "2008 Financing"). In the 2008 Financing, we delivered to Goldman a $38,000,000 20% Senior Secured Convertible Note, payable
on December 13, 2008 (the "2008 Goldman Note"), $35,000,000 of which we used to payoff the outstanding $35,000,000 5% Convertible Note due March 28, 2012 (the "2007 Goldman Note") issued
to Goldman in the financing completed in March 2007. We also delivered a $3,000,000 20% Senior Secured Convertible Note, payable on December 13, 2008, to Syntek (the "2008 Syntek Note," and
collectively with the 2008 Goldman Note, the "2008 Notes"), $1,500,000 of which we used to payoff the remaining outstanding principal on the amended promissory note, dated December 16, 2005,
issued to Syntek (the "2005 Syntek Note"). Concurrent with the 2008 Financing, we paid approximately $400,000 to Goldman and Syntek for accrued interest on the 2007 Goldman Note and the 2005 Syntek
Note, which resulted in approximately $4,000,000 of cash available for general corporate purposes (after debt issuance costs). Our obligations under the 2008 Notes are guarantied by certain of our
subsidiaries and secured by a security interest in substantially all of our assets and those of our subsidiaries. Notwithstanding the 2008 Financing, we need additional capital to continue as a going
concern and to execute our business plan. If we are unsuccessful in securing additional cash in the next three months, either through additional equity and/or debt financings, we will not be able to
continue as a going concern.

We have a history of significant losses, expect future losses and may never achieve or sustain profitability.

We have incurred significant losses since our inception, and we expect to continue to incur losses for the foreseeable future. We incurred losses of $29,939,000
for the year ended March 31, 2008 and as of that date our accumulated deficit was $305,554,000. Our revenues and gross margins may not grow

9

---



or
even continue at their current levels and could decline. If our revenues do not rapidly increase, or if our expenses increase at a greater pace than our revenues, we will never become profitable.

Our substantial level of secured debt could adversely affect our financial condition and ability to execute our business plan.

We have substantial secured debt totaling $41,000,000. This debt could have important consequences and significant effects on our business. For example, it could:



Any
of these factors could have a material adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the 2008
Notes.

If
we fail to generate sufficient cash flow from future operations, we may have to attempt to refinance all or a portion of our debt or seek to obtain additional financing.

Our shares of common stock have been de-listed from The Nasdaq Global Market; stocks traded on the over-the-counter markets are subject to
greater market risks than those of exchange-traded stocks.

Our shares of common stock were de-listed from The Nasdaq Global Market effective April 21, 2008 due to our failure to maintain minimum
capitalization requirements in accordance with Nasdaq Marketplace Rules. Since that time, our common stock has been quoted on the OTC Bulletin Board and, currently, on the Pink Sheets. Securities
traded in over-the-counter markets are, for the most part, thinly traded and generally are not subject to the level of regulation imposed on securities listed or traded on
Nasdaq or other national securities exchanges. As a result, an investor may find it difficult to dispose of our common stock or to obtain accurate quotations as to its price.

De-listing
has negatively impacted the value of our common stock, as our common stock is less liquid. We also have lost support from certain institutional investors,
brokerage firms and market makers that historically bought and sold our stock. Given the de-listing, we may find it difficult to obtain future financing for the continuation of our
operations or to use our stock in acquisitions. Further, de-listing could result in the loss of confidence by our suppliers, customers and employees. Any of these results could negatively
impact our business.

10

---



Our obligation to file periodic reports under the Securities Exchange Act of 1934 (the "Exchange Act") has been suspended.

On April 24, 2008, we filed Form 15 certifying that our common stock was held by 300 or fewer record holders as of the beginning of the 2008 fiscal
year. This action suspended our reporting obligations under the Exchange Act. We do not intend to continue to file periodic reports on Forms 8-K, 10-Q and
10-K. Because the quantity and timeliness of information about us, our financial condition and our operations will be reduced, our common stock will be less attractive to investors,
analysts and market-makers. Trading activity in our common stock may be reduced, and our investors may find it difficult to execute transactions in our stock.

Stockholders in our common stock may suffer significant dilution if the holders of the 2008 Notes convert such notes into shares of our common stock.

The aggregate principal and accrued interest under the 2008 Notes may be converted, at the option of Goldman and Syntek, into an aggregate of 8,826,531 shares of
our common stock in accordance with the terms of the 2008 Notes. If the holders elect to the convert the 2008 Notes, our stockholders would experience significant dilution of our common stock.

Our success depends on future demand for additional bandwidth by MSOs and their customers and the willingness and ability of MSOs to substantially increase available bandwidth
on their networks using our alternative technology solution.

Because our cable solutions expand available bandwidth over existing infrastructure, demand for these solutions depends on demand for additional bandwidth by MSOs
and their customers. The scope and timing of customer demand for additional bandwidth is uncertain and hard to predict. The factors influencing this demand include competitive offerings, applications
availability, pricing models, costs, regulatory requirements and the success of initial roll-outs.

For
our cable solutions to be sold in significant quantities, MSOs also must be willing and able to substantially increase the available bandwidth on their networks. MSOs may not be
willing or able to develop additional services and revenue streams to justify the deployment of our technology. If the future demand for bandwidth is insubstantial, is addressed by alternative
technologies or does not develop in the near future, our prospects would be adversely affected.

If we fail to achieve significant market penetration and customer acceptance of our cable solutions, our prospects would be substantially harmed.

The market for broadband products in the cable industry is extremely competitive, subject to drastic technological changes, changes in capital expenditure budgets
and highly fragmented. Our cable solutions are new and relatively unknown; accordingly, we have not generated significant revenue in this business. We have only relatively recently shipped our first
commercial orders for our UltraBand solution to various systems of a MSO. There can be no assurance that installations of our cable solutions will be successful. As some of our cable solutions
continue to be in a development stage, we may face challenges such as market resistance to new products, perceptions regarding customer support and quality control.

Since we have recently significantly reduced our workforce, our research and development efforts will be harmed.

In the three months ended March 31, 2008, we simplified our structure by streamlining our corporate organization and reducing operating costs to better
address market needs and revenue opportunities in the cable market. A significant portion of the costs of the restructuring plan were

11

---



related
to our continuing strategy to focus exclusively on the cable market, to consolidate our facilities in the United States and to eliminate resources related to our wireless business.

The
reduction of approximately 78% of our workforce (when compared to the workforce levels as of January 31, 2008) impacted all company functions, both in Israel and the United
States, and included management and non-management positions. These reductions were in addition to a cost reduction program implemented in July 2007 that reduced our workforce by
approximately 16% (when compared to the workforce levels as of June 30, 2007). The largest effect of these reductions was on our research and development activities. Our ability to further
develop and market our solutions may be limited if we have not accurately predicted the appropriate workforce requirements for our research and development efforts.

We
will generate significant sales only if we are able to penetrate the market and create market share in the cable market. If we are unable to do so, our business would be harmed and
our prospects significantly diminished.

We have written down and may need to further write-down our inventory in the future if our sales levels do not match our expectations, or if selling prices decline
more than we anticipate, which could adversely impact our operating results.

We operate in an industry that is characterized by intense competition, supply shortages or oversupply, rapid technological change, unpredictable sales patterns,
declining average selling prices and rapid product obsolescence, all of which make it more challenging to effectively manage our inventory. In addition, some of the components we require have long
lead-times and we are required to order or build inventory well in advance of the time of anticipated sales.

Our
inventory is stated at the lower of cost or market value. Determining market value of our inventory requires numerous judgments, including, but not limited to, judgments regarding
average selling prices and sales volumes for future periods. We primarily utilize estimated selling prices for measuring any potential declines in market value below cost. When market value is
determined to be below cost, we make appropriate allowances to reduce the value of inventories to net realized value. We may reduce the value of our inventory when we determine that inventory is slow
moving, obsolete or excessive or if the selling price of the product is insufficient to cover product costs and selling expenses.

In
the past, our inventory increased given that our sales were substantially less than our anticipated demand and we were required to make advance inventory purchase commitments for
anticipated sales. Accordingly, we recorded a $424,000 write down of inventory for the year ended December 31, 2006 and a $1,250,000 write down of inventory for the year ended March 31,
2008.

If
our sales do not increase, the sales price of our products decrease or we are otherwise unable to control inventory levels consistent with actual demand, we may be required to write
down additional inventory. Any such write-down would adversely affect our operating results in future periods.

We have not yet produced or deployed our cable solutions in high volumes.

We have not yet produced our UltraBand solutions in high volumes and there may be challenges and unexpected delays, such as quality control issues, in our
attempts to increase volume and lower
production costs. Our long-term success depends on our ability to produce high quality solutions at a low cost and, in particular, to reduce the production cost of our cable solutions
designed for residential use.

Because
we have not yet deployed our UltraBand solutions in high volumes, there is significant technology risk associated with any such future deployment. We cannot be sure that any such
high volume deployment would be successful.

12

---



Our future growth depends on market acceptance of several emerging broadband services, on the adoption of new broadband technologies and on several other broadband industry
trends.

Future demand for our broadband products will depend significantly on the growing market acceptance of various broadband services, including digital video,
video-on-demand, high definition television, very high-speed data services and voice-over-internet protocol ("VoIP") telephony. The
effective delivery of these services will depend in part on a variety of new network architectures, such as fiber-to-the premises networks, video compression standards such as
MPEG-4 and Microsoft's Windows Media 9, the greater use of protocols such as IP and the introduction of new consumer devices, such as advanced set-top boxes and digital video
recorders. If adoption of these emerging services and/or technologies is not as widespread or as rapid as we expect, our net sales growth would be materially and adversely affected.

Furthermore,
other technological, industry and regulatory trends will affect the growth of our business. These trends include the following:



If,
for instance, MSOs do not pursue the triple play as aggressively as we expect, our net sales growth would be materially and adversely affected. Similarly, if our expectations
regarding these and other trends are not met, our net sales could be materially and adversely affected.

We will need to develop distribution channels to market and sell our cable solutions.

Our UltraBand solutions are in the early stages of commercialization. We currently have limited relationships with potential customers and distributors as well as
limited sales staff. We will be successful only if we are able to develop distribution channels to market and sell our cable solutions in sufficient volumes.

To
develop such channels and market and sell our cable solutions, we may need to grow our sales and marketing team at the same time that we have drastically little cash. It may be
difficult for us to hire and retain additional qualified personnel. We currently have limited exposure to global business opportunities, and cannot be able to take advantage of meaningful potential
global demand for our solutions unless and until we are able to develop meaningful global distribution channels and strategies.

Because of our long product development process and sales cycle, we may continue to incur substantial expenses without sufficient revenues that could cause our operating
results to fluctuate.

A customer's decision to purchase our solutions typically involves a significant technical evaluation, formal internal procedures associated with capital
expenditure approvals and testing and acceptance of new systems that affect key operations. For these and other reasons, the sales cycle associated with our solutions can be lengthy and subject to a
number of significant risks, over which we have little or no control. Because of the growing sales cycle and the likelihood that we may rely on a small number of
customers for our revenues, our operating results would be seriously harmed if such revenues do not materialize when anticipated, or at all.

13

---



We depend on cable industry capital spending for our revenue and any decrease or delay in such spending would adversely affect our prospects.

Demand for our products will depend on the size and timing of capital expenditures by MSOs. These capital spending patterns are dependent upon factors including:



If
MSOs and telecommunications service providers do not make significant capital expenditures, our prospects would be adversely affected.

Competition may result in lower average selling prices, and we may be unable to reduce our costs at offsetting rates, which may impair our ability to achieve profitability.

There has been significant price erosion in the broadband equipment field. We expect that continued price competition among broadband access equipment and systems
suppliers will reduce our gross margins in the future. We anticipate that the average selling prices of broadband access solutions will continue to decline as product technologies mature. We may be
unable to reduce our manufacturing costs in response to declining average per unit selling prices. Our competitors may be able to achieve greater economies of scale and may be less vulnerable to the
effects of price competition than we are. These declines in average selling prices will generally lead to declines in gross margins and profitability for these solutions. If we are unable to reduce
our costs to offset declines in average selling prices, we may not be able to achieve or maintain profitability.

If the communications, Internet and cable television industries do not grow and evolve in a manner favorable to our business strategy, our business may be seriously harmed.

Our future success depends upon the growth of the communications industry, the cable television industry and, in particular, the Internet. These markets continue
to evolve rapidly because of advances in technology and changes in customer demand. We cannot predict growth rates or future trends in technology development. It is possible that cable operators,
telecommunications companies or other suppliers of broadband services will decide to adopt alternative architectures or technologies that are incompatible with our current or future products. If we
are unable to design, develop, manufacture and sell solutions that incorporate or are compatible with these new architectures or technologies, our business will suffer. Also, decisions by customers to
adopt new technologies or products are often delayed by extensive evaluation and qualifications processes and can result in delays of current products.

In
addition, the deregulation, privatization and economic globalization of the worldwide communications market, which resulted in increased competition and escalating demand for new
technologies and services, may not continue in a manner favorable to us or our business strategies. In

14

---



addition,
the growth in demand for Internet services and the resulting need for high-speed or enhanced communications products may not continue at its current rate or at all.

The loss of one or more of our key customers would result in a loss of a significant amount of our revenues and adversely affect our business.

A relatively small number of customers account for a large percentage of our revenues. We expect that we will continue to depend on a limited number of customers
for a substantial portion of our revenues in future periods. The loss of a major customer could seriously harm our ability to sustain revenue levels, which would seriously harm our operating results.
A significant portion of our revenues in the year ended March 31, 2008 was from sales of our wireless products, a business for which we have ceased all marketing and support functions. In this
regard, our future revenues must be derived from our cable solutions.

If we do not effectively manage our costs, our business could be substantially harmed.

We will need to continue to monitor closely our costs and expenses. If the market for our cable solutions does not expand or takes longer to develop than we
expect, we may need to further reduce our operations.

If we do not adequately protect our intellectual property, we may not be able to compete and our ability to provide unique products may be compromised.

Our success depends in part on our ability to protect our proprietary technologies. We rely on a combination of patent, copyright and trademark laws, trade
secrets and confidentiality and other contractual provisions to establish and protect our proprietary rights. Our pending or future patent applications may not be approved and the claims covered by
such applications may be reduced. If allowed, our patents may not be of sufficient scope or strength, and others may independently develop
similar technologies or products. Litigation, which could result in substantial costs and diversion of our efforts, may also be necessary to enforce any patents issued or licensed to us or to
determine the scope and validity of third party proprietary rights. Any such litigation, regardless of the outcome, could be expensive and time consuming, and adverse determinations in any such
litigation could seriously harm our business.

Similarly,
our pending or future trademark applications may not be approved and may not be sufficient to protect our trademarks in the markets where we either do business or hope to
conduct business. The inability to secure any necessary trademark rights could be costly and could seriously harm our business.

We
regularly evaluate and seek to explore and develop derivative products relating to our cable solutions. We may not be able to secure all desired intellectual property protection
relating to such derivative products. Furthermore, because of the rapid pace of change in the broadband industry, much of our business and many of our products rely on technologies that evolve
constantly and this continuing uncertainty makes it difficult to forecast future demand for our products.

We may not be able to successfully operate businesses that we may acquire, in a cost-effective and non-disruptive manner and realize anticipated
benefits.

We may explore investments in or acquisitions of other companies, products or technologies, including companies or technologies that are not complementary or
related to our current solutions. We ultimately may be unsuccessful in operating and/or integrating an acquired company's personnel, operations, products and technologies into our business. These
difficulties may disrupt our ongoing business, divert the time and attention of our management and employees and increase our expenses.

15

---



Moreover,
the anticipated benefits of any acquisition may not be realized or may not be realized in the time period we expect. Future acquisitions could result in dilutive issuances of
equity securities, the incurrence of debt, contingent liabilities or amortization expenses related to goodwill and other identifiable intangible assets and the incurrence of large and immediate
write-offs, any of which could seriously harm our business. In addition, we could spend significant resources in searching for and investigating new business opportunities, and ultimately
may be unsuccessful in acquiring new businesses.

Our participation or lack of participation in industry standards groups may adversely affect our business.

We do not participate in the standards process of the Cable Television Laboratories, Inc., a cable industry consortium that establishes cable technology
standards and administers compliance testing. In the future, we may determine to join or not join other standards or similar organizations. Our membership in these organizations could dilute our
proprietary intellectual property rights in our products while our failure to participate in others could jeopardize acceptance of any of our products that do not meet industry standards.

Product standardization, as may result from initiatives of MSOs, could adversely affect our prospects.

Product standardization initiatives encouraged by MSOs and telecommunications companies may adversely affect revenues, gross margins and profits. In the past,
standardization efforts by major MSOs have negatively impacted equipment vendors by leading to equipment obsolescence, commoditization and reduced margins. If our solutions do not comply with future
standards, our prospects could be adversely affected.

Our quarterly operating results fluctuate, which may cause our share price to further decline.

Our quarterly operating results have varied significantly in the past and are likely to vary significantly in the future. These variations result from a number of
factors, including:



A
delay in the recognition of revenue, even from one customer, could have a significant negative impact on our results of operations for a given period. Also, because only a small
portion of our expenses vary with our revenues, if revenue levels for a quarter fall below our expectations, we would

16

---



not
be able to timely adjust expenses accordingly, which would harm our operating results in that period. We believe that period-to-period comparisons of our results of
operations are not meaningful and should not be relied upon as indicators of future performance. If our operating results fall below the expectations of investors in future periods, our share price
would likely decline.

Because we rely on international suppliers, we are exposed to additional risks which could cause our operations to suffer.

Our reliance on international suppliers exposes us to foreign political and economic risks, which may impair our ability to generate revenues. These risks
include:



Any
of the foregoing difficulties of conducting business internationally could seriously harm our business.

Because we do not have contracts with our customers, our customers can discontinue purchases of our solutions at any time, which could adversely affect future revenues and
operating results.

We generally sell our cable solutions based on individual purchase orders. Our customers are not obligated by agreements to purchase our solutions, and the
agreements we have entered into do not obligate our customers to purchase a minimum number of solutions. Our customers can generally cancel or reschedule orders on short notice and discontinue using
our solutions at any time. Further, having a successful field system trial does not necessarily mean that the customer will order large volumes of our solutions. The reduction, delay or cancellation
of orders from one or more of our customers could seriously harm our operating results.

Competition may decrease our market share, net revenues and gross margins.

The market for broadband access equipment and systems is intensely competitive, rapidly evolving and subject to rapid technological change. The main competitive
factors in our markets include:



17

---









Certain
of our competitors and potential competitors have substantially greater financial, technical, distribution, marketing and other resources than we have and, therefore, may be able
to respond more quickly to new or changing opportunities, technologies and other developments. In addition, many of our competitors have longer operating histories, greater name recognition, broader
product lines and established relationships with system integrators and service providers. Our primary competitors are Cisco Systems, Inc.; Motorola, Inc.; BigBand Networks, Inc.;
C-Cor Incorporated; Arris Group, Inc.; Aurora Networks and Harmonic Inc. Most of these competitors have existing relationships with one or more of our prospective customers.
Our cable solutions face competition from technologies such as digital set-top boxes, high-end compression technologies and DVRs. Furthermore, the move toward open standards
may increase the number of operators who will offer new services, which in turn may increase the number of competitors and drive down the capital expenditures per subscriber deployed. We may not be
able to compete successfully against our current and future competitors, and competitive pressures could seriously harm our business.

Hardware defects or firmware errors could increase our costs and impair the market acceptance of our solutions, which would adversely affect our future operating results.

Our solutions occasionally contain certain defects or errors. This may result either from defects in components supplied by third parties or from errors or
defects in our firmware or hardware that we have not detected. We have in the past experienced, and may experience from time-to-time, defects in new or enhanced solutions after
shipments, or defects in deployed solutions. This could occur in connection with stability or other performance problems. Our customers integrate our solutions into their networks with components from
other vendors. Accordingly, when problems occur in a network system, it may be difficult to identify the component that caused the problem. Regardless of the source of these defects or errors, we will
need to divert the attention of our very limited engineering personnel from our product development efforts to address the defect or error. Given the significant reductions we have made to our
research and development department, we may not be successful in efficiently addressing any such defect or error. We have incurred in the past and may again incur significant warranty and repair costs
related to defects or errors, and we also may be subject to liability claims for damages related to these defects or errors. The occurrence of defects or errors, whether caused by our solutions or the
components of another vendor, may result in significant customer relationship problems and injury to our reputation and may impair the market acceptance of our solutions.

We depend on contract manufacturers and third party equipment and technology suppliers, and these manufacturers and suppliers may be unable to fill our orders or develop
compatible, required technology on a timely basis, which would result in delays that could seriously harm our results of operations.

We currently have relationships with a limited number of contract manufacturers for the manufacturing of our products, substantially all of whom are located in
Taiwan. These relationships may be terminated by either party with little or no notice. If our manufacturers are unable or unwilling to continue manufacturing our solutions in required volumes, we
would have to identify qualified alternative manufacturers, which would result in delays causing our results of operations to suffer. Our relatively limited experience with these manufacturers and
lack of visibility as to the manufacturing

18

---



capabilities
of these companies if our volume requirements significantly increase does not provide us with a reliable basis on which to project their ability to meet delivery schedules, yield targets
or costs. If we are required to find alternative manufacturing sources, we may not be able to satisfy our production requirements at acceptable prices and on a timely basis, if at all. Any significant
interruption in supply would affect the allocation of solutions to customers, which in turn could seriously harm our business.

In
addition to sales to system integrators, we also sell in some instances directly to service providers. Such direct sales require us to resell equipment to service providers
manufactured by third party suppliers and to integrate this equipment with the solutions we manufacture. We are particularly
dependent on third party radio suppliers in selling our 3GHz and other solutions. We currently have limited relationships with third party suppliers. If we are unable to establish meaningful
relationships with suppliers, or if these suppliers are unable to provide equipment that meets the specifications of our customers on the delivery schedules required by our customers, and at
acceptable prices, our business would be substantially harmed.

Our
UltraBand solutions are implemented over the HFC plant and, as such, they interface and integrate with existing products from multiple other vendors. Future offerings by these
vendors may not be sufficiently compatible with our UltraBand solutions. In addition, we depend on the continuous delivery of components by various manufacturers of electronic connectors, filters,
boards and transistors.

Furthermore,
we have produced certain of our solutions only in limited quantities. If demand for these solutions increases significantly, we will need to implement and address additional
processes, procedures and activities necessary to support increased production. If we are unable to do so, our business would be substantially harmed.

We obtain some of the components included in our solutions from a single source or a limited group of suppliers, and the loss of any of these suppliers or delay or shortages in
the supply of components could cause production delays and a substantial loss of revenue.

We currently obtain key components from a limited number of suppliers, and some of these components are obtained from a single source supplier. We generally do
not have long-term supply contracts with our suppliers. Further, we have experienced delays and shortages on more than one occasion. These factors present us with the following risks:



The
occurrence of any of these or similar events would harm our business. Our inability to obtain adequate manufacturing capacity at acceptable prices, or any delay or interruption in
supply, could reduce our revenues or increase our cost of revenue and could seriously harm our business.

19

---



Third parties may bring infringement claims against us that could harm our ability to sell our solutions and result in substantial liabilities.

Third parties could assert, and it could be found, that our solutions infringe their proprietary rights. We could incur substantial costs to defend any
litigation, and intellectual property litigation could force us to do one or more of the following:



Any
infringement claim or litigation against us could significantly harm our business, operating results and financial condition.

Government regulation and industry standards may increase our costs of doing business, limit our potential markets or require changes to our business model and adversely affect
our business.

The emergence or evolution of regulations and industry standards for broadband products, through official standards committees or widespread use by operators,
could require us to modify our solutions, which may be expensive and time-consuming, and to incur substantial compliance costs.

Some
of our solutions and technology are subject to export control laws and regulations. We are subject to the risk that more stringent export control requirements could be imposed in
the future on product classes that include solutions exported by us, which would result in additional compliance burdens and could impair the enforceability of our contract rights. We may not be able
to renew our export licenses as necessary from time to time. In addition, we may be required to apply for additional licenses to cover modifications and enhancements to our products. Any revocation or
expiration of any requisite license, the failure to obtain a license for product modifications and enhancements, or more stringent export control requirements could seriously harm our business.

Transfers of our securities may be restricted by virtue of state securities "blue sky" laws which prohibit trading absent compliance with individual state laws. These
restrictions may make it difficult or impossible to sell shares in those states.

Transfers of our common stock may be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions,
commonly referred to as "blue sky" laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities held by stockholders
generally have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them should be aware that there may be significant
state blue sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. These restrictions may prohibit the secondary trading of our common
stock. Investors should consider the secondary market for our securities to be a limited one.

We are subject to the penny stock rules and these rules may adversely affect trading in our common stock.

Our common stock is a "penny stock" security under rules promulgated under the Exchange Act. In accordance with these rules, broker-dealers participating in
transactions in such securities must first deliver a risk disclosure document that describes the risks associated with such stocks, the broker-dealer's duties in selling the stock, the customer's
rights and remedies and certain market and other information. Furthermore, the broker-dealer must make a suitability determination approving the

20

---



customer
for low-priced stock transactions based on the customer's financial situation, investment experience and objectives. The effect of these restrictions may decrease the willingness
of broker-dealers to make a market in our common stock and may decrease the liquidity of our common stock.

Our success depends significantly on Davidi Gilo, our Chairman of the Board of Directors, and Wayne H. Davis, our Chief Executive Officer, the loss of either of whom
could seriously harm our business.

Our future success depends in large part on the continued services of our senior management and key personnel. In particular, we significantly depend on the
services of Davidi Gilo, our chairman of the board of directors, and Wayne H. Davis, our chief executive officer. We do not carry key person life insurance on our senior management or key
personnel. Any loss of the services of Messrs. Gilo or Davis or other members of senior management or other key personnel could seriously harm our business.

Recent regulations related to equity compensation could adversely affect earnings, affect our ability to raise capital and affect our ability to attract and retain key
personnel.

Since our inception, we have used stock options as a fundamental component of our employee compensation packages. We believe that our stock option plans are an
important tool to link the long-term interests of stockholders and employees, especially executive management, and serve to motivate management to make decisions that will, in the long
run, give the best returns to stockholders. FASB has adopted changes to generally accepted accounting principals in the United States that require us to record a charge to earnings for employee stock
option grants, as well as other equity based awards. The change has negatively impacted our earnings and, if such impact is material in the future, could affect our ability to raise capital on
acceptable terms. To the extent these regulations make it more difficult or unacceptably expensive to grant stock options to employees, we may incur increased compensation costs, change our equity
compensation strategy or find it difficult to
attract, retain and motivate employees, each of which could materially and adversely affect our business.

The government programs and benefits we receive require us to satisfy prescribed conditions. These programs and benefits may be terminated or reduced in the future, which would
increase our costs and taxes and could seriously harm our business.

Certain of our capital investments have been granted "approved enterprise" status under Israeli law providing us with certain Israeli tax benefits. The benefits
available to an approved enterprise are conditioned upon the fulfillment of conditions stipulated in applicable law and in the specific certificate of approval. 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 enjoyed the tax benefits and would likely be denied these benefits in the future. From time to
time, the government of Israel has considered reducing or eliminating the benefits available under the approved enterprise program. These tax benefits may not be continued in the future at their
current levels or at all. The termination or reduction of these benefits would increase our taxes and could seriously harm our business. As of the date hereof, our Israeli subsidiaries have
accumulated loss carry forwards for Israeli tax purposes and therefore have not enjoyed any tax benefits under current approved enterprise programs.

In
the past, we have received grants from the government of Israel for the financing of a portion of our research and development expenditures for previous products in Israel. The
regulations under which we received these grants restrict our ability to manufacture products or transfer technology outside of Israel for products developed with this technology. Furthermore, these
grants may not be available to us in the future.

21

---



As
of April 1, 2005, the government of Israel eliminated the ability of companies to submit new applications for approved enterprise status. This change in the government policy
may hinder us in the future with respect to any benefits we may have received for new undertakings which would have been entitled to "approved enterprise" status.

We may lose our United States income tax net operating loss carryforwards if we experience a significant change in ownership.

The utilization of net operating loss carryforwards may be subject to substantial annual limitations if there has been a significant "change in ownership." Any
"change in ownership," as described in Section 382 of the Internal Revenue Code, may substantially limit our ability to utilize the net operating losses carryforwards. As of March 31,
2008, we had United States federal net operating loss carryforwards of approximately $94,148,000, which will expire between 2011 through 2028 and state net operating loss carryforwards of
approximately $75,046,000 which will expire between 2008 through 2018.

Several of our directors and certain officers have relationships with Davidi Gilo and his affiliated companies that could be deemed to limit their independence.

Several members of our board of directors, Lewis Broad, Neill Brownstein (who resigned effective as of June 26, 2008), Avraham Fischer, Samuel Kaplan and
Alan Zimmerman, have had professional relationships with Davidi Gilo, our chairman of the board of directors and former chief executive officer, and his affiliated companies for several years. These
members of our board of directors previously served on the boards of directors of DSP Communications, Inc. and/or DSP Group, Inc., of which Mr. Gilo was formerly the controlling
stockholder and the chairman of the board. In addition, Avraham Fischer is a senior partner of the law firm of Fischer, Behar, Chen & Co., which represents us on matters relating to
Israeli law, is an investor and co-chief executive officer of an Israeli investor group in which Mr. Gilo was an investor until October 2005, and is co-chief executive
officer and a director of Clal Industries and Investments, Ltd., which has made a significant investment in ANI, a related party of our company. The long-term relationships between
these directors and officers and Mr. Gilo and his affiliated companies could be considered to limit their independence.

Because our management has the ability to control stockholder votes, the premium over market price that an acquirer might otherwise pay could be reduced and any merger or
takeover could be delayed.

As of March 31, 2008, our management collectively owned approximately 33.95% of our outstanding common stock (based on the number of shares owned by these
individuals and the number of shares issuable upon exercise of options within 60 days of March 31, 2008). As a result, these stockholders, acting together, will be able to control the
outcome of all matters submitted for stockholder action, including:



This
concentration of ownership may have the effect of impeding a merger, consolidation, takeover or other business consolidation involving us, or discouraging a potential acquirer from
making a tender offer for our shares. This concentration of ownership could also negatively affect our stock's market price or decrease any premium over market price that an acquirer might otherwise
pay.

22

---



Because stock markets are likely to continue to experience extreme price and volume fluctuations, the price of our stock may decline.

The market price of our shares has been and likely will continue to be highly volatile and could be subject to wide fluctuations in response to numerous factors,
including the following:



Many
of these factors are beyond our control and may negatively impact the market price of our common stock, regardless of our performance. In addition, the stock market in general, and
the market for technology and telecommunications related companies in particular, have been highly volatile. Our common stock may not trade at the same levels compared to shares of other technology
companies and shares of technology companies, in general, may not sustain their current market prices.

To
date, the trading volume in our common stock generally has been relatively low and significant price fluctuations can occur as a result. If the generally low trading volumes
experienced to date continue, such price fluctuations could continue in the future and the sale prices of our common stock could decline significantly. Investors may therefore have difficulty selling
their shares.

In
the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. We could become the target
of similar litigation in the future. Securities litigation could result in substantial costs and divert management's attention and resources, which could seriously harm our business and operating
results.

Provisions of our governing documents and Delaware law could discourage acquisition proposals or delay a change in control.

Our Fifth Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws contain anti-takeover provisions that could make it more
difficult for a third party to acquire control of us, even if that change in control would be beneficial to stockholders. Specifically:



In
addition, provisions of Delaware law and our stock option plans may also discourage, delay or prevent a change of control or unsolicited acquisition proposals.

23

---



Item 1B.    Unresolved Staff Comments

None.

Item 2.    Properties

The following table sets forth information concerning the properties that we lease. We believe these properties are suitable for their intended purposes and
adequate to meet our requirements for the foreseeable future. We do not own any real property.

|Location                   |  | Major Activity                                                                                      |  | Leased Space
(square footage) |  | Expiration of
Current Lease
|-------------------------- |  | --------------------------------------------------------------------------------------------------- |  | ----------------------------- |  | ---------------------------
|Norcross, Georgia          |  | Corporate headquarters; sales and marketing, finance, technical customer support and administration |  | 14,654                        |  | January 2012               
|Denver, Colorado           |  | Executive and sales                                                                                 |  | 3,558                         |  | August 2010                
|Modi'in District of Israel |  | Research and development and warehousing                                                            |  | 17,050                        |  | April 2011                 

Item 3.    Legal Proceedings

We are involved from time to time in litigation incidental to the ordinary course of our business activities. While the results of any such litigation cannot be
predicted with certainty, we do not believe that the final resolution of any such matters will have a material adverse effect on our consolidated financial position or results of operations.

Item 4.    Submission of Matters to a Vote of Security Holders

None.

24

---





PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Historically, our common stock was traded on The Nasdaq Global Market under the symbol "VYYO." Effective April 21, 2008, our common stock was
de-listed from The Nasdaq Global Market. Following this de-listing, our common stock is quoted on the Pink Sheets quotation service.

The
following table presents the high and low sales prices of our common stock in each quarter of fiscal years ending March 31, 2008 and 2007, as reported by The Nasdaq Global
Market:

Price Range of
Common StockHigh

LowYear Ended March 31, 2008First Quarter

$
8.02

$
5.51Second Quarter


7.18


5.28Third Quarter


6.04


3.12Fourth Quarter


3.17


0.30Year Ended March 31, 2007First Quarter

$
7.97

$
5.12Second Quarter


6.45


4.25Third Quarter


4.57


3.21Fourth Quarter


8.44


4.09


On
March 31, 2008, the closing price of our common stock as reported on The Nasdaq Global Market was $0.41 per share. As of March 31, 2008, there were approximately 192
holders of record of our common stock.

Dividend Policy.We have never declared or paid any cash dividends on shares of our common stock. We
presently intend to retain any future earnings to fund the development and expansion of our business, and do not anticipate paying cash dividends on our common stock in the foreseeable future.

Through
our Israeli subsidiaries we participate in the "alternative benefits program" under the Israeli law for the Encouragement of Capital Investments, 1959, under which we realize
certain tax exemptions. If an Israeli subsidiary distributes a cash dividend to us from income which is tax exempt, other than in connection with the subsidiary's complete liquidation, it would be
taxed at the corporate rate applicable to such income (currently between 10% to 25%). Pursuant to Article 12 of the Income Tax Treaty between Israel and the United States, if we were to receive
a dividend from an Israeli subsidiary from income derived during any period for which the subsidiary is entitled to the reduced tax rate applicable to an approved enterprise, then that subsidiary
would be required to withhold 15% of the gross amount of the dividend payable to us under certain conditions.

Securities Authorized for Issuance under Equity Compensation Plans.The following chart sets forth
certain information as of March 31, 2008, with respect to our outstanding stock options granted under our 1996 Equity Incentive Plan and Fourth Amended and Restated 2000 Employee and Consultant
Equity
Incentive Plan (the "2000 Plan"). We only grant stock options under our 2000 Plan, and as of a current date there are no stock options outstanding under the 1996 Equity Incentive Plan.

Each
of our plans has been approved by our stockholders. The number of shares reserved for issuance under the 2000 Plan automatically increases on the first day of each fiscal year by
the lesser of

25

---



(i) 1,500,000
shares, or (ii) 10% of the number of shares of our common stock outstanding on the last day of the immediately preceding fiscal year.

|Plan Category                                              |  | Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
(a) |  | Weighted-average
exercise price of
outstanding options,
warrants and rights
(b) |      | Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected
in column (a))
(c)
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders     |  | 7,848,325                                                                                       |  | $                                                                               | 2.63 |                                                                                                                                                
|Equity compensation plans not approved by security holders |  | None                                                                                            |  |                                                                                 | None |                                                                                                                                                
|Total                                                      |  | 7,848,325                                                                                       |  | $                                                                               | 2.63 |                                                                                                                                                

Item 6.    Selected Financial Data

Not applicable.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read this Management's Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our fiscal 2008 annual Consolidated
Financial Statements and accompanying notes appearing in this Annual Report on Form 10-K. The matters addressed in this Management's Discussion and Analysis of Financial Condition
and Results of Operations, with the exception of the historical information presented, contain forward-looking statements involving risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in Item 1A above and elsewhere in this report.

Overview

Our focus is now entirely on our cable solutions as we have ceased our marketing and support activities in our wireless business and have terminated all employees
dedicated to those efforts. All of our internal resources are currently focused on enhancing our visibility in and penetration of the cable market. See note 1 of our fiscal 2008 annual
Consolidated Financial Statements.

We
have experienced significant losses and negative cash flows from operations since our incorporation. For the year ended March 31, 2008, we incurred a net loss of $29,939,000
and had an accumulated deficit of $305,554,000. These matters raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend upon our
ability to raise additional capital during the next three months. We are pursuing raising additional capital to fund our operations although there is no assurance that such capital will be available
to us. We also are seeking to expand our revenue base by adding new customers and to further reduce expenses, beyond the reductions realized in the restructuring plan discussed below. Failure to
secure additional capital in the very short term or to expand our revenue base in the longer term will result in depleting our available funds and not being able to pay our obligations when they
become due. See "Liquidity, Capital Resources and Going Concern Considerations."

Since
our acquisition of Xtend in 2004, we had operated in two segments: the cable solutions segment and the wireless segment. Beginning in 2007, we announced that our primary focus and
dedication of resources was in our cable solutions segment. In July 2007, we implemented a cost reduction program that reduced our workforce, including workforce in our wireless solutions segment. In
the three months ended March 31, 2008, we simplified our structure by further streamlining our

26

---



corporate
organization and reducing operating costs to better address market needs and revenue opportunities in the cable market. As part of this restructure plan, we ceased the marketing and support
efforts for, and terminated all employees dedicated to, our wireless solutions segment in March 2008. Accordingly, we have no current wireless operations.

In
this regard, we recorded a restructuring charge in the three months ended March 31, 2008 of $2,356,000. This charge is being utilized to cover additional severance payments and
other employee-related costs of approximately $2,102,000 associated with the involuntary termination of approximately 100 employees, and impairment of long lived assets and other expenses of
approximately $254,000. In connection with the cessation of our wireless business and the significant reduction of our Israeli operating activity, we wrote-off inventory of approximately
$1,067,000 and we expect to accrue additional expenses of approximately $300,000 to $450,000 due to vacating building leases in Israel. For a discussion of our 2008 restructuring, see note 1 of
our fiscal 2008 annual Consolidated Financial Statements.

The
reductions of workforce and outsourced services and contractors implemented in 2007 and 2008 impacted all company functions, both in Israel and the United States, and included
management and non-management positions. These actions are consistent with our previous disclosures concerning operating cost reductions and exit from the wireless business. All functions
currently performed in Israel except research and development have been moved to the United States and we are currently exploring our options to mitigate our affected real estate lease obligations. We
also expect to record other costs related to the consolidation of our operations at our Georgia facility, but at this time we are unable to estimate the costs expected to be incurred and whether these
costs will be material. We continue to evaluate additional opportunities to reduce operating costs.

We
completed the restructuring plan in the three months ended June 30, 2008 and expect to reduce annual operating expenses by approximately $20,000,000, after payment of the
severance costs described above.

On
March 23, 2006, we closed the private placement of shares of common stock, a convertible note, a senior secured note and warrants to purchase common stock with Goldman,
Sachs & Co. (an affiliate of Goldman) in exchange for $25,000,000 (the "2006 Financing"). In the 2006 Financing we issued (a) 1,353,365 shares of our common stock, (b) a
$10,000,000 10% Convertible Note (the "$10,000,000 2006 Note"), (c) a $7,500,000 9.5% Senior Secured Note (the "$7,500,000 2006 Note"), and (d) warrants
to purchase 298,617 shares of our common stock, all of which were exercised in 2006. Our net proceeds from the 2006 Financing were $23,400,000.

On
March 28, 2007, we received $35,000,000 from Goldman under the $35,000,000 5% Convertible Note due March 28, 2012 (the "2007 Goldman Note"), which included $17,500,000
of new funding and $17,500,000 of which we used to pay off the $10,000,000 2006 Note and $7,500,000 2006 Note described above.

On
June 13, 2008, we received $4,500,000 of new funding after closing a financing of $41,000,000, which included $38,000,000 from Goldman and $3,000,000 from Syntek (the "2008
Financing"). The proceeds in the 2008 Financing redeemed the 2007 Goldman Note and the 2005 Syntek Note. See "Subsequent Events2008 Financing" and note 17 of our
fiscal 2008 annual Consolidated Financial Statements.

Effective
April 21, 2008, our common stock was de-listed from The Nasdaq Global Market. Currently, our common stock is quoted on the Pink Sheets. On April 24,
2008, we filed Form 15 with the SEC which suspended our reporting obligations under the Exchange Act.

On
March 4, 2008, we implemented a repricing program for all outstanding options previously granted to current employees, including executive officers, and our chairman and vice
chairman of the board of directors. The options, all of which had been previously granted under our Fourth Amended

27

---



and
Restated 2000 Employee and Consultant Equity Incentive Plan were repriced to $1.40 per share, the closing price of our common stock on The Nasdaq Global Market on the date of the repricing. The
other terms of the options, including vesting schedules and term, remain unchanged as a result of the repricing.

The
repriced options had originally been issued with exercise prices ranging from $3.35 to $8.43 per share, which prices reflected the then current market prices of our common stock on
the original grant dates. See note 12 of our fiscal 2008 annual Consolidated Financial Statements.

Critical Accounting Policies

This discussion and analysis of our financial condition and results of operations is based upon our fiscal 2008 annual Consolidated Financial Statements, which
have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial
statements requires us to make estimates, judgments and assumptions that affect the reported assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities
at the date of the financial statements. Actual results may differ from these estimates, judgments and assumptions under different conditions.

Our
critical accounting policies are described in the notes to our fiscal 2008 annual Consolidated Financial Statements as of and for the year ended March 31, 2008. We determined
these critical policies by considering accounting policies that involve the most complex or subjective decisions or assessments. We believe our most critical accounting policies include the following:

Revenue Recognition

Substantially all of our revenue is generated from sales of our solutions. As of March 31, 2008, our revenues from services were not significant. Our
solutions are off-the-shelf products, sold "as is," without further adjustment or installation. When establishing a relationship with a new customer, we also may sell our
solutions together as a package, in which case we typically ship solutions at the same time to the customer.

We
record revenues from our solutions when (a) persuasive evidence of an arrangement exists; (b) delivery has occurred and customer acceptance requirements have been met,
if any, and we have no additional obligations; (c) the price is fixed or determinable; and (d) collection of payment is reasonably assured. Our standard sales terms generally do not
include customer acceptance provisions. However, if there is a right of return, customer acceptance provision or uncertainty about customer acceptance, we defer the associated revenue until we have
evidence of customer acceptance.

Emerging
Issues Task Force ("EITF") No. 00-21, "Revenue Arrangements with Multiple Deliverables," addresses when and how an arrangement involving multiple deliverables
should be divided into separate units of accounting. Our multiple deliverables arrangements are those arrangements with new customers in which we sell our solutions together as a package. Because we
deliver these off-the-shelf solutions at the same time, the four revenue recognition criteria discussed above are met.

We
recognize revenues related to the exclusivity provisions contained in the equipment purchase agreement with ANI described in note 4 of our fiscal 2008 annual Consolidated
Financial Statements on a straight line basis, over the 10-year term of that agreement.

Impairment of Long-Lived Assets and Intangible Assets

Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"), requires that long-lived assets, including finite intangible assets to be held and used or disposed of by an entity, be reviewed for impairment whenever

28

---



events
or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Under SFAS 144, if the sum of the expected future cash flows (undiscounted and without
interest charges) of the long-lived assets is less than the carrying amount, we would recognize an impairment loss and would write down the assets to their estimated fair values.

Employee Stock-Based Compensation

Effective January 1, 2006, we adopted SFAS No. 123 (revised 2004), "Share-based Payment" ("SFAS 123(R)"). SFAS 123(R) supersedes
APB 25 "Accounting for Stock Issued to Employees" and related interpretations and amends SFAS No. 95, "Statement of Cash Flows." SFAS 123(R) requires that awards classified as
equity awards be accounted for using the grant-date fair value method. The fair value of stock options is determined based on the number of shares granted and the price of our common
stock, and determined based on the Black-Scholes, Monte Carlo and the binomial option-pricing models, net of estimated forfeitures. We estimate forfeitures based on historical experience and
anticipated future conditions. We use the Monte Carlo valuation model only for stock options granted to executives in 2005, 2006 and repriced in 2008 where vesting is subject to specific stock price
performance.

We
recognize compensation cost for options granted with service conditions that have graded vesting schedules using the graded vesting attribution method.

We
adopted the modified prospective transition method permitted by SFAS 123(R). Under this transition method, we implemented SFAS 123(R) as of the first quarter of 2006
with no restatement of prior periods. The valuation provisions of SFAS 123(R) apply to new awards and to awards modified, repurchased or cancelled after January 1, 2006. Additionally, we
recognize compensation cost over the remaining service period for the portion of awards for which the requisite service has not been rendered using the grant-date fair value of those
awards as calculated for pro forma disclosure purposes under SFAS 123 "Accounting for Stock-Based Compensation."

We
account for equity instruments issued to third party service providers (non-employees) in accordance with the fair value based on an option-pricing model, pursuant to the
guidance in EITF 96-18 "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services." We revalue the
fair value of the options granted over the related service periods and recognize the value over the vesting period, using the Black-Scholes model.

Inventory

We regularly monitor inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of future
product demand and production requirements. Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or
technological developments would significantly impact the value of our inventory and reported operating results. If actual market conditions are different than our assumptions, additional provisions
may be required. Our estimate of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventory. If we
later determine that our inventory is overvalued, we would be required to recognize such costs in our costs of sales at the time of such determination. If we later determine that our inventory is
undervalued, we may have overstated our costs of sales in previous periods and would be required to recognize additional operating income only when the undervalued inventory was sold. During the year
ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, we recorded an inventory valuation write-down of
approximately $1,250,000, $0 and $424,000, respectively.

29

---



We
adopted the provisions of FASB Statement No. 151, "Inventory Costs" ("FASB 151"), as of January 1, 2006, which did not have a material effect on our financial
statements. Under FASB 151 we are required to recognize abnormal idle facility expenses as current-period charges, and to allocate fixed production overhead expenses to inventory based on
normal capacity of the production facility.

Short-Term Investments

We have designated our investments in debt securities as available-for-sale. Available-for-sale securities are
carried at fair value, which is determined based upon the quoted market prices of the securities, with unrealized gains and losses reported in accumulated other comprehensive income (loss),
a component of stockholders' equity until realized. Realized gains and losses and declines in value judged to be other-than-temporary on
available-for-sale securities are included in interest income, net. We view our available-for-sale portfolio as available for use in our current
operations. Accordingly, we have classified all investments as short-term under "short-term investments," even though the stated maturity date may be one year or more beyond
the current balance sheet date. Interest, amortization of premiums, accretion of discounts and dividends on securities classified as available-for-sale are included in interest
income, net.

We
recognize an impairment charge when the decline in the fair values of these investments below their cost basis is deemed to be other-than-temporary. We
consider various factors in determining whether to recognize an impairment charge, including the length of time and the extent to which the fair value has been below the cost basis, the current
financial condition of the investee and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Fair Value of Financial Instruments

The fair value of our financial instruments included in working capital approximates carrying value. The 2005 Syntek Note described in note 7 of our fiscal
2008 annual Consolidated Financial Statements is presented in the Balance Sheet for the year ended March 31, 2008 as "Current Liabilities." This note is presented in the Balance Sheet for the
three-month transition period ended March 31, 2007 and the year ended December 31, 2006 as "Long-Term Liabilities." The 2007 Goldman Note delivered in the 2007 Financing and
the $10,000,000 2006 Note and $7,500,000 2006 Note (each as described in note 10 of our fiscal 2008 annual Consolidated Financial Statements) are presented in the Balance Sheets as
"Long-Term Liabilities," at their estimated fair value.

Debt Issuance Costs

Costs incurred in the issuance of the 2007 Goldman Note consisted of cash payments to legal advisors in the transition period ended March 31, 2007. Costs
incurred in the issuance of the $10,000,000 2006 Note and the $7,500,000 2006 Note included warrants to purchase shares of our common stock issued to our financial advisor and cash payments made to
legal and financial advisors in the year ended December 31, 2006. In the year ended December 31, 2006, we determined the fair value of the warrants based on the Black-Scholes
option-pricing model. Issuance costs are deferred and amortized as a component of interest expense over the period from issuance through the first redemption date.

Costs
incurred in the issuance of the 2008 Notes consists of cash payments to legal advisors and other miscellaneous expenses estimated to be $100,000.

Extinguishment of Debt

In the 2007 Financing we repaid the $10,000,000 2006 Note and the $7,500,000 2006 Note. We accounted for this repayment as "extinguishment of debt" under Emerging
Issues Task Force 96-19,

30

---



"Debtor's
Accounting for a Modification or Exchange of Debt Instruments" ("EITF 96-19"). We initially recorded the 2007 Goldman Note at its estimated fair value, and we used that
amount to determine the debt extinguishment loss of $3,263,000 resulting from recognition of $2,231,000 in unamortized accretion and $1,032,000 in unamortized issuance expenses related to the
$10,000,000 2006 Note and the $7,500,000 2006 Note.

The
2008 Notes were used to repay the 2007 Goldman Note and the 2005 Syntek Note. We expect to record a debt extinguishment loss of approximately $115,000 related to these repayments.

Recent Accounting Pronouncements

In March 2008, FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement
No. 133" ("SFAS 161"). SFAS 161 requires enhanced disclosures regarding derivatives and hedging activities, including: (a) the manner in which a company uses derivative
instruments; (b) the manner in which derivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities;"
and (c) the effect of derivative instruments and related hedged items on a company's financial position, financial performance and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November 15, 2008. We are evaluating the impact, if any, that adoption of SFAS 161 will have on our financial
statements.

In
December 2007, the SEC issued Staff Accounting Bulletin No. 110 ("SAB 110"), relating to the use of a "simplified" method in developing an estimate of the expected term
of "plain vanilla" share options. SAB 107 previously allowed the use of the simplified method until December 31, 2007. SAB 110 permits the extension, under certain circumstances,
of the use of the simplified method beyond December 31, 2007. We believe that adoption of SAB 110 will not have a material impact on our consolidated financial statements.

In
December 2007, FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141(R)"), which changes the accounting for business combinations. Under
SFAS 141(R), an acquirer will be required to recognize all of the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited
exceptions. SFAS 141(R) will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141(R) will impact us if we
complete any future acquisition.

In
December 2007, FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statementsan amendment of Accounting Research Bulletin
No. 51" ("SFAS 160"). SFAS 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. We do not believe that SFAS 160 will have a material impact on our consolidated
financial statements.

In
February 2007, FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits companies to choose to
measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159
will be effective for us beginning January 1, 2008. We are currently evaluating the impact that adoption of SFAS 159 would have on our consolidated financial statements.

In
September 2006, FASB issued SFAS 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework and gives guidance regarding
the methods used for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for

31

---



financial
statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Subsequent to the issuance of SFAS 157, FASB issued FASB
Staff Positions 157-1, "Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement under Statement 13" ("FSP 157-1") and FSP 157-2 "Effective Date of FASB Statement No. 157"
("FSP 157-2"). FSP 157-1 excludes, in certain circumstances, SFAS 13 and other accounting pronouncements that address fair value measurements for purposes
of lease classification or measurement under Statement 13 from the provision of SFAS 157. FSP 157-2 delays the effective date of SFAS 157 for nonfinancial
assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years. We are currently assessing the impact that SFAS 157 will have on our consolidated financial statements.

Results of Operations

In 2007 we changed our fiscal year end from December 31 to March 31. The following discussion compares our audited March 31, 2008 annual
financial statements to our audited December 31, 2006 annual financial statements. We also compare the results for our three-month transition period ended March 31, 2007 to the three
months ended March 31, 2006.

Year Ended March 31, 2008 Compared to Year Ended December 31, 2006



Revenue fluctuates from quarter to quarter depending on our customer's needs and requirements. Revenues were $7,667,000 and $8,000,000 for the years ended
March 31, 2008 and December 31, 2006, respectively. Revenue for the year ended March 31, 2008 consisted of $4,561,000 of revenue from sales of our wireless solutions sold to ANI,
a related party as discussed in note 4 of our fiscal 2008 annual Consolidated Financial Statements. We ceased marketing and support efforts for, and terminated all employees dedicated to, our
wireless solutions segment in March 2008. Our revenue has shifted from sales of wireless solutions to sales of cable solutions. Revenue from sales of cable solutions increased from $1,084,000 for the
year ended December 31, 2006 to $3,047,000 for the year ended March 31, 2008. These revenues were generated primarily from sales to one top-five MSO.

Our
revenue is concentrated among relatively few customers, as set forth in the following table. Though our principal revenue-generating customers are likely to vary on a quarterly
basis, we anticipate that our revenues will remain concentrated among a few customers for the foreseeable future.

Year Ended

Three-Month Transition
Period EndedMarch 31,
2008

December 31,
2006

March 31,
2007Customer A (related party)

59
%
84
%
26
%Customer B

39
%
13
%
72
%


Sales
to customer A were of our wireless solutions. See note 4 of our fiscal 2008 annual Consolidated Financial Statements for a description of this relationship. Customer B is an
MSO.



Cost of revenues was $8,232,000 and $5,824,000 for the years ended March 31, 2008 and December 31, 2006, respectively, and consisted of component
and material costs, direct labor costs, warranty costs and overhead related to manufacturing our solutions.

32

---



The
increase in cost of revenues for the year ended March 31, 2008 compared to the year ended December 31, 2006 related to (a) an increase in inventory valuations
and write-downs from $424,000 in the year ended December 31, 2006 to $1,250,000 in the year ended March 31, 2008, resulting from our cessation of sales and support of our wireless
products and (b) reimbursement of $710,000 in insurance
proceeds in the year ended December 31, 2006 for damage to certain of our inventory that we had written down in previous years compared to $101,000 in the year ended March 31, 2008.

We
took these inventory write-downs to account for excess inventory resulting from longer than expected sales cycle and customer acceptance of our solutions. Based on our experience in
prior years in which we sold inventory that was previously written down, it is possible that in the future we may sell some or even a significant portion of the written-down inventory.
However, due to the fact that we cannot predict when, if ever, such inventory will be sold given the lack of visibility and lack of acceptable predictability into our sales cycle, we have determined
to record the write-down described above.

We
anticipate that our gross margins will continue to fluctuate based on our product and customer mix, revenue level and inventory valuations.



Our research and development expenses were $10,776,000 and $11,216,000 for the years ended March 31, 2008 and December 31, 2006, respectively. These
expenses consisted primarily of personnel, facilities, equipment and supplies. All of our internal research and development activities are conducted in our facility in Israel and are charged to
operations as incurred.

We
anticipate that our research and development expenses will decrease in the future due to our restructuring efforts. We have no ongoing research and development of wireless products
and a greatly reduced research and development staff for cable solutions.



Sales and marketing expenses were $7,941,000 and $9,261,000 for the years ended March 31, 2008 and December 31, 2006, respectively. Sales and
marketing expenses consisted of salaries and related costs of sales and marketing employees, consulting fees and expenses for travel, trade shows, market research, branding and promotional activities.
Expenses decreased due to our restructuring efforts in 2007 and 2008. Following the termination of all employees dedicated to the wireless business, we no longer have sales and marketing expenses for
our wireless business.

Given
our reduction in workforce as a result of our restructuring efforts, we anticipate that our sales and marketing expenses will continue to decrease in future periods.



General and administrative expenses were $9,306,000 and $8,710,000 during the years ended March 31, 2008 and December 31, 2006, respectively.
General and administrative expenses consisted primarily of personnel and related costs for general corporate functions, including finance, accounting, Sarbanes-Oxley Act of 2002 related
implementation, strategic and business development and legal.

The
increase in general and administrative expenses during the year ended March 31, 2008 compared to the year ended December 31, 2006 resulted from (a) an increase
of $875,000 in professional and consulting fees, and (b) a one-time payment for market research of $300,000 during the year ended March 31, 2008. These increases were partly
offset by a decrease in salaries, compensation and recruiting fees of $531,000 for the year ended March 31, 2008 compared to the year ended December 31, 2006.

We
anticipate that our general and administrative expenses will decrease in future periods given our reduction in workforce and facilities as a result of our restructuring efforts.

33

---







During the year ended March 31, 2008, we recorded restructuring expenses of $2,356,000 resulting from the restructuring plan implemented in the three
months ended March 31, 2008. This charge is being utilized to cover additional severance payments and other employee-related costs of approximately $2,102,000 associated with the involuntary
termination of approximately 100 employees and impairment of long-lived assets and other expenses of approximately $254,000.



Financial Income (Financial Expenses), net includes interest income from investment and foreign currency remeasurement gains and losses. Net interest expense in
the years ended March 31, 2008 and December 31, 2006 was $2,029,000 and $1,691,000, respectively. Net interest expense increased due to increased interest on the 2005 Syntek Note and the
2007 Goldman Note compared to interest on the notes delivered in the 2006 Financing. These increases were partially offset by interest income derived mainly from our cash and short-term
investment balances.

During
the years ended March 31, 2008 and December 31, 2006, we recognized an other-than-temporary impairment in our
available-for-sale securities of $0 and $42,000, respectively, and realized losses of $0 and $42,000, respectively. Our recognition of the
other-than-temporary investment impairment is due to the effect of rising interest rates on our fixed-interest debt investments that we potentially may not hold until maturity.
Our interest income is derived from our cash and short-term investment balances.

We
will incur increased interest expenses due to the 2008 Notes issued in the 2008 Financing in which the 2008 Notes bear an annual interest rate of 20% and the amortization of deferred
expenses incurred as part of the 2008 Financing. The 2007 Goldman Note carried a 5% annual interest rate. We recorded expenses of $1,099,000 during the year ended March 31, 2008 related to the
2005 Syntek Note.



Our tax rate reflects a mix of the federal and state taxes on our United States income and Israeli tax on non-exempt income. As of March 31,
2008, we had United States federal net operating loss carryforwards of approximately $94,148,000, which will expire between 2011 through 2028 and state net operating loss carryforwards of
approximately $75,046,000 which will expire between 2008 through 2018. The utilization of net operating loss carryforwards may be subject to substantial annual limitations if there has been a
significant "change in ownership," as defined in Section 382 of the Internal Revenue Code of 1986. Any "change in ownership" may substantially limit our utilization of the net operating losses.

As
of March 31, 2008, our Israeli subsidiaries, had net operating loss carryforwards of approximately $110,000,000. These loss carryforwards have no expiration date.

Our
Israeli subsidiaries have been granted "approved enterprise" status for several investment programs. The "approved enterprise" status entitles these subsidiaries to receive tax
exemption periods, ranging from two to six years, on undistributed earnings commencing in the year in which the subsidiaries attain taxable income. In addition, this "approved enterprise" status
provides a reduced corporate tax rate of between 10% to 25% (as opposed to the usual Israeli corporate tax rate of 27% for 2008) for the remaining term of the program based on the program's
proportionate share of income.

Since
our Israeli subsidiaries do not have taxable income, the tax benefits periods have not yet commenced. The subsidiaries' losses are expected to offset certain future earnings of the
subsidiaries during the tax-exempt period; therefore, the utilization of the net operating losses will generate no tax

34

---



benefits.
Accordingly, deferred tax assets from such losses have not been included in our fiscal 2008 annual Consolidated Financial Statements. We are entitled to the above benefits if the
subsidiaries fulfill conditions stipulated by the law, regulations published thereunder and instruments of approval for the specific investments in approved enterprises.

One
of our subsidiaries is taxed at the regular Israeli corporate tax rate. Following a series of changes in Israeli tax rates, the corporate tax rates are as follows: 2006: 31%, 2007:
29%, 2008: 27%, 2009: 26% and for 2010 and thereafter: 25%.

On
January 1, 2003, the Israeli Law for Amendment of the Income Tax Ordinance (Amendment No. 132), 5762-2002, as amended, known as the "Tax Reform," came into
effect. The Tax Reform is aimed at broadening the categories of taxable income and reducing the tax rates imposed on employment income. Pursuant to these reforms, we have chosen to grant options
without a trustee intermediary under our 2000 Plan to employees (excluding controlling stockholders) of our subsidiaries who are Israeli tax residents. This permits employees to exercise stock options
and sell shares of common stock without the holding period requirements and other restrictions imposed upon options granted through a trustee intermediary. In the absence of a trustee intermediary,
the Tax Reform generally permits such employees to recognize ordinary income at the time the employee sells the shares, rather than on the date of grant or exercise, but precludes us from deducting
the resulting expense for tax purposes at any time.

We
have provided a full valuation allowance against our United States federal and state deferred tax assets because the future realization of the tax benefit is not sufficiently assured.



Charges for stock-based compensation for the years ended March 31, 2008 and December 31, 2006 were $5,103,000 and $5,402,000, respectively. The
stock-based compensation charges resulted from stock option grants to service providers, members of our board of directors members and employees accounted for on the fair value based method.

The
charges for stock-based compensation relating to the continuing operations were as follows:

Year EndedMarch 31,
2008

December 31,
2006(in thousands of U.S. $)Cost of products sold

$
32

$
83Research and development

$
440

$
820Sales and marketing

$
1,768

$
1,543General and administrative

$
2,863

$
2,956


Three-Month Transition Period Ended March 31, 2007 Compared to Three Months Ended March 31, 2006



Revenues decreased to $623,000 in the three-month transition period ended March 31, 2007 from $2,369,000 in the three months ended March 31, 2006.
This decrease was primarily due to a decrease in revenues of $161,000 compared to $1,800,000 from our wireless solutions sold to ANI in the three-month transition period ended March 31, 2007
and three months ended March 31, 2006, respectively. ANI is a related party as discussed in note 4. Sales of our cable solutions were $462,000 and $463,000 in the three-month transition
period ended March 31, 2007 and the three months ended March 31, 2006, respectively.

35

---



Our
revenue was concentrated among relatively few customers, as set forth in the following table.

Three-Month Transition
Period Ended
March 31,
2007

Three Months
Ended
March 31,
2006Customer A

72
%
18
%Customer B (related party)

26
%
76
%


Customer
A is an MSO. Sales to customer B were of our wireless solutions.



Cost of revenues consists of component and material costs, direct labor costs, warranty costs and overhead related to manufacturing our solutions.

Cost
of revenues decreased to $698,000 during the three-month transition period ended March 31, 2007 from $1,810,000 during the three months ended March 31, 2006. This
decrease in cost of revenues was primarily attributable to decreases in shipments of our wireless solutions. Our gross margins during the three-month transition period ended March 31, 2007
decreased primarily due to the decrease in shipment of our solutions together with flat fixed costs.



Our research and development expenses were $2,868,000 and $2,461,000 during the three-month transition period ended March 31, 2007 and the three months
ended March 31, 2006, respectively.
Approximately $2,206,000 and $1,135,000 of these expenses were from our cable solutions and approximately $662,000 and $1,326,000 were from our wireless solutions for the three-month transition period
ended March 31, 2007 and the three months ended March 31, 2006, respectively. These expenses consisted primarily of personnel, facilities, equipment and supplies and are charged to
operations as incurred. All of our internal research and development activities were conducted in our facility in Israel.



Sales and marketing expenses decreased to $1,881,000 during the three-month transition period ended March 31, 2007 compared to $2,643,000 during the three
months ended March 31, 2006. Sales and marketing expenses consisted of salaries and related costs for sales and marketing employees, consulting fees and expenses for travel, trade shows, market
research, branding and promotional activities.



General and administrative expenses were $2,047,000 compared to $3,009,000 during the three-month transition period ended March 31, 2007 and the three
months ended March 31, 2006, respectively. General and administrative expenses consisted primarily of personnel and related costs for general corporate functions, including finance, accounting,
implementation of the Sarbanes-Oxley Act of 2002, strategic and business development and legal.

The
decrease in general and administrative expenses during the three-month transition period ended March 31, 2007 compared to the three months ended March 31, 2006 was
primarily due to (a) decreased charges for stock-based compensation from $1,281,000 to $447,000 and (b) decreased professional fees from $332,000 to $209,000.

36

---





"Financial Income (expense), net" includes interest and investment income, foreign currency remeasurement gains and losses. Net interest expense was $3,918,000
for the three-month transition period ended March 31, 2007 compared to $269,000 for the three months ended March 31, 2006. As a result of the extinguishment of the $10,000,000 2006 Note
and the $7,500,000 2006 Note, we recorded $3,263,000 in the three-month transition period ended March 31, 2007 as financial expenses consisting of $2,231,000 of unamortized accretion and
$1,032,000 of unamortized issuance expenses. In addition, we had increased interest expenses due to the 2005 Syntek Note, the $10,000,000 2006 Note and the $7,500,000 2006 Note. These increases were
partially offset by interest income derived mainly from our cash and short-term investment balances, and recognition of an other-than-temporary impairment in our
available-for-sale securities of $0 and ($42,000) and realized losses of $0 and $31,000 for the three-month transition period ended March 31, 2007 and the three months
ended March 31, 2006, respectively.

We
recorded accretion of $323,000 during the three-month transition period ended March 31, 2007 on the 2005 Syntek Note.



As of March 31, 2008, our Israeli subsidiaries had net operating loss carryforwards of approximately $110,000,000. These carryforwards have no expiration
date.

Our
Israeli subsidiaries have been granted "Approved Enterprise" status for several investment programs. The Approved Enterprise status entitles these subsidiaries to receive tax
exemption periods, ranging from two to six years, on undistributed earnings commencing in the year in which the subsidiaries attain taxable income. In addition, this Approved Enterprise status
provides a reduced corporate tax rate of between 10% to 25% (as opposed to the usual Israeli corporate tax rate of 27% for 2008) for the remaining term of the program on the plan's proportionate share
of income.

Since
our Israeli subsidiaries have not achieved taxable income, the tax benefits periods have not yet commenced. The subsidiaries' losses are expected to offset certain future earnings
of the subsidiaries during the tax-exempt period; therefore, the utilization of the net operating losses will generate no tax benefits. Accordingly, deferred tax assets from such losses
were not included in our fiscal 2008 annual Consolidated Financial Statements. The entitlement to the above benefits is conditioned upon the subsidiaries fulfilling the conditions stipulated by the
law, regulations published thereunder and the instruments of approval for the specific investments in approved enterprises.

Liquidity, Capital Resources and Going Concern Considerations

Since inception, we have financed our operations principally through bank borrowings and other loans and equity sales of our common stock for approximately
$198,650,000.

As
of March 31, 2008, our principal source of liquidity was $6,021,000 of cash, cash equivalents and short-term investments. On June 13, 2008, we received
$4,500,000 of new funding after closing a financing of $41,000,000, which included $38,000,000 from Goldman and $3,000,000 from Syntek (the "2008 Financing"). In the 2008 Financing, we delivered the
2008 Goldman Note, $35,000,000 of which we used to payoff the outstanding 2007 Goldman Note issued in the 2007 Financing. We also delivered the 2008 Syntek Note, $1,500,000 of which we used to payoff
the outstanding 2005 Syntek Note (which had $1,500,0000 of principal outstanding). The 2008 Notes are payable on December 13, 2008. Concurrent with the 2008 Financing, we paid approximately
$400,000 to Goldman and Syntek for accrued interest on the 2007 Goldman Note and the 2005 Syntek Note which resulted in approximately $4,000,000 of cash available for general corporate purposes (after
debt issuance costs). Our obligations under the 2008 Notes are guarantied by certain of our subsidiaries and secured by a security interest in

37

---



substantially
all of our assets and those of our subsidiaries. See "Subsequent Events" and note 17 of our fiscal 2008 annual Consolidated Financial Statements.

On
March 28, 2007, we received $35,000,000 from Goldman under the 2007 Goldman Note, which included $17,500,000 of new funding and $17,500,000 of which we used to pay off the
$10,000,000 2006 Note and the $7,500,000 2006 Note. The 2007 Goldman Note was redeemed with the 2008 Financing.

Our
financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have
experienced significant losses and negative cash flows from operations since incorporation. For the year ended March 31, 2008, we incurred a net loss of $29,939,000 and had an accumulated
deficit of $305,554,000. This raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend upon our ability to raise additional
capital during the next three months. We are pursuing raising additional capital to fund our operations although there is no assurance that such capital will be available to us. We also are seeking to
expand our revenue base by adding new customers.

We
expect that the proceeds from the 2008 Financing will allow us to operate until September 2008. Failure to secure additional capital in the very short term or to expand our revenue
base in the longer term will result in depleting our available funds and not being able to pay our obligations when they
become due. The accompanying fiscal 2008 annual Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from our possible inability to continue as a going concern.

Net Cash Used in Operating Activities

Net cash used in operating activities was $26,080,000 and $16,722,000 for the years ended March 31, 2008 and December 31, 2006, respectively. During
the year ended March 31, 2008, we used cash primarily to (a) fund our net loss which included non-cash charges related to (i) depreciation and amortization of
$1,039,000, (ii) write-downs of inventory of $1,250,000, (iii) financing expenses of $1,129,000 resulting from accretion of the 2005 Syntek Note and the 2007 Goldman Note, and
(iv) stock-based compensation expenses of $5,103,000; (b) increase inventory by $931,000, (c) increase other current assets by $285,000; (d) increase trade payables and
accrued liabilities by $4,400,000; (e) increase accrued restructuring charges by $1,282,000; (f) increase account receivables by $85,000; (g) decrease deferred revenues from a
related party by $333,000 and (h) increase our liability for employee rights upon retirement by $112,000.

During
the year ended December 31, 2006, we used cash primarily to (a) fund our net loss which included non-cash charges related to (i) depreciation and
amortization of $850,000, (ii) write-downs of inventory and non-cancelable purchase commitments of $514,000, (iii) financing expenses of $1,470,000 resulting from accretion of the 2005
Syntek Note, the $10,000,000 2006 Note and the $7,500,000 2006 Note, and (iv) stock-based compensation expenses of $5,402,000; (b) increase inventory by $385,000, (c) increase
other current assets by $61,000; (d) decrease trade payables and accrued liabilities by $814,000; (e) increase related parties' accounts receivable by $991,000; (f) decrease
account receivables by $674,000; (g) increase deferred revenues from a related party by $3,795,000 and (h) increase our liability for employee rights upon retirement by $651,000.

During
the three-month transition period ended March 31, 2007, net cash used in operations was $5,302,000, comprised mainly of our loss of $11,039,000, partially offset by
(a) non-cash charges related to depreciation and amortization of $218,000, (b) stock-based compensation of $886,000, (c) financing expenses of $3,715,000 resulting
from accretion of the 2005 Syntek Note, the $10,000,000 2006 Note and the $7,500,000 2006 Note delivered in the 2006 Financing and the 2007 Goldman Note delivered in

38

---



the
2007 Financing, (d) an increase of liability for employee rights upon retirement of $234,000, and (e) changes in other working capital accounts of $688,000.

During
the three months ended March 31, 2006, net cash used in operations was $4,087,000, comprised mainly of our loss of $7,980,000, partially offset by
(a) non-cash charges related to
depreciation and amortization of $229,000, (b) financing expenses of $365,000 resulting from accretion of the 2005 Syntek Note, the $10,000,000 2006 Note and the $7,500,000 2006 Note,
(c) stock-based compensation of $1,981,000, (d) an increase of liability for employee rights upon retirement of $301,000, and (e) changes in other working capital accounts of
$1,017,000.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by (used in) investing activities was $5,746,000 and ($4,428,000) for the years ended March 31, 2008 and December 31, 2006,
respectively.

During
the year ended March 31, 2008, cash provided from sales and maturities of our short-term investments net of purchases of short-term investments was
$6,303,000. Net purchases of property and equipment were $440,000, primarily related to investment in equipment for research and development and manufacturing.

During
the year ended December 31, 2006, cash used for the purchase of short-term investments was $3,872,000. Net purchases of property and equipment were $382,000,
primarily related to investment in equipment for research and development and manufacturing.

During
the three-month transition period ended March 31, 2007 and the three months ended March 31, 2006, cash provided from investing activities was $3,772,000 and
$3,674,000, respectively.

During
the three-month transition period ended March 31, 2007, cash provided from sales and maturities of short-term investments net of purchases of
short-term investments was $4,254,000. This amount was partially offset by purchases of property and equipment of $435,000. During the three months ended March 31, 2006, net cash
provided by investing activities was $3,674,000 comprised of $3,739,000, net of sales and purchases of short-term investments which were partially offset by purchases of property and
equipment of $34,000.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $1,503,000 and $26,018,000 for the years ended March 31, 2008 and December 31, 2006, respectively.
During the year ended March 31, 2008, we received $1,653,000 from exercises of stock options.

During
the year ended December 31, 2006, we received net proceeds from the 2006 Financing of approximately $23,400,000, as described in note 10 of our fiscal 2008 annual
Consolidated Financial Statements and $2,615,000 from exercises of stock options.

Financing
activities in the three-month transition period ended March 31, 2007 were approximately $18,248,000 related to the 2007 Financing which included the 2007 Goldman Note
and proceeds we received upon the exercise of stock options. Financing activities in the three months ended March 31, 2006 were approximately $24,874,000 and related to (a) the 2006
Financing, which included the issuance of our common stock, the $10,000,000 2006 Note, the $7,500,000 2006 Note and warrants to purchase our common stock, net of issuance cost and (b) proceeds
we received upon the exercise of stock options.

39

---



Selected Quarterly Data

The following table presents unaudited quarterly financial information for each quarter in the year ended March 31, 2008, the three month transition period
ended March 31, 2007 and the year ended December 31, 2006. You should read this information in conjunction with our fiscal 2008 annual Consolidated Financial Statements and the
accompanying notes.

|                                                              |                                                  | Quarter Ended |       
|------------------------------------------------------------- | ------------------------------------------------ | ------------- | ------
|
|
|Statements of Operations data:                                |                                                  |               |       
|Revenues                                                      |                                                  |               |       
|                                                              | Revenues                                         |               | $     
|                                                              | Revenues from related party                      |               |       
|                                                              |                                                  |               |       
|Total revenues                                                |                                                  | $             | 1,089 
|                                                              |                                                  |               |       
|Cost of revenues                                              |                                                  |               |       
|                                                              | Cost of products sold                            |               |       
|                                                              | Cost of products sold, related party             |               |       
|                                                              | Write-down of inventory and purchase commitments |               |       
|                                                              | Insurance reimbursement for damaged inventory    |               |       
|                                                              |                                                  |               |       
|Total cost of revenues                                        |                                                  |               | 2,168 
|                                                              |                                                  |               |       
|Gross profit (loss)                                           |                                                  |               | (1,079
|                                                              |                                                  |               |       
|Operating loss                                                |                                                  |               | (7,596
|                                                              |                                                  |               |       
|Loss                                                          |                                                  | $             | (8,060
|                                                              |                                                  |               |       
|Loss per share (basic and diluted)                            |                                                  | $             | (0.43 
|                                                              |                                                  |               |       
|Weighted average number of shares of common stock outstanding |                                                  |               |       
|                                                              | Basic and diluted                                |               |       
|                                                              |                                                  |               |       

40

---



|
|

|                                                              |                                                  | Quarter Ended |       
|------------------------------------------------------------- | ------------------------------------------------ | ------------- | ------
|
|
|Statements of Operations data:                                |                                                  |               |       
|Revenues                                                      |                                                  |               |       
|                                                              | Revenues                                         |               | $     
|                                                              | Revenues from related party                      |               |       
|                                                              |                                                  |               |       
|Total revenues                                                |                                                  | $             | 1,756 
|                                                              |                                                  |               |       
|Cost of revenues                                              |                                                  |               |       
|                                                              | Cost of products sold                            |               |       
|                                                              | Cost of products sold, related party             |               |       
|                                                              | Write-down of inventory and purchase commitments |               |       
|                                                              | Insurance reimbursement for damaged inventory    |               |       
|                                                              |                                                  |               |       
|Total cost of revenues                                        |                                                  |               | 984   
|                                                              |                                                  |               |       
|Gross profit                                                  |                                                  |               | 772   
|                                                              |                                                  |               |       
|Operating loss                                                |                                                  |               | (5,857
|                                                              |                                                  |               |       
|Loss from continuing operations                               |                                                  |               | (6,533
|Discontinued operations                                       |                                                  |               |      
|                                                              |                                                  |               |       
|Loss                                                          |                                                  | $             | (6,533
|                                                              |                                                  |               |       
|Loss per share (basic and diluted)                            |                                                  | $             | (0.36 
|                                                              |                                                  |               |       
|Weighted average number of shares of common stock outstanding |                                                  |               |       
|                                                              | Basic and diluted                                |               |       
|                                                              |                                                  |               |       

Off-Balance Sheet Arrangements

We did not undertake any off-balance sheet arrangements during the year ended March 31, 2008.

Subsequent Events



We previously delivered a $5,000,000 letter of credit in connection with the 2005 Syntek Note which was reflected as "Restricted cash" on our Balance Sheets. In
accordance with the terms of the 2005 Syntek Note, on April 14, 2008, Syntek drew upon the letter of credit for payment of the $5,000,000. See note 5 and note 7 of our fiscal 2008
annual Consolidated Financial Statements for a description of the restricted cash and the 2005 Syntek Note.



On June 13, 2008, we received $4,500,000 of new funding after closing a financing of $41,000,000, which included $38,000,000 from Goldman and $3,000,000
from Syntek (the "2008 Financing"). In the 2008 Financing, we delivered to Goldman a $38,000,000 20% Senior Secured Convertible Note, payable on December 13, 2008 (the "2008 Goldman Note"),
$35,000,000 of which we used to payoff the outstanding 2007 Goldman Note. We also delivered to Syntek a $3,000,000 20% Senior Secured Convertible Note, payable on December 13, 2008 (the "2008
Syntek Note"), $1,500,000 of which we used to payoff the 2005 Syntek Note. Following these redemptions, our net proceeds form the 2008 Financing were approximately $4,400,000. Concurrent with the 2008
Financing, we paid approximately $400,000 to Goldman and Syntek for accrued interest on the 2007 Goldman Note and the 2005 Syntek

41

---



Note
which resulted in approximately $4,000,000 of cash available for general corporate purposes (after debt issuance costs). Our obligations under the 2008 Notes are guarantied by certain of our
subsidiaries and secured by a security interest in substantially all of our assets and those of our subsidiaries. See note 17 of our fiscal 2008 annual Consolidated Financial Statements.

The
2008 Notes are convertible into shares of our common stock as follows: (a) at the holder's option, if there occurs a Qualified Equity Investment (as defined in the 2008
Notes), at a price per share equal to the price per share paid for Equity Securities (as defined in the 2008 Notes) in such Qualified Equity Investment by investors unaffiliated with us; (b) at
the holder's option, if there occurs a Non-Qualified Equity Investment (as defined in the 2008 Notes), at a price per share
equal to 90% of the price per share paid for Equity Securities (as defined in the 2008 Notes) in such Non-Qualified Equity Investment by investors unaffiliated with us; and (c) at
the holder's option at any time at an initial conversion price of $5 per share. In addition, a pro rata portion of the 2008 Syntek Note in the ratio of 35:1.5 will be automatically converted into
shares of our common stock upon the conversion of all or any portion of the 2008 Goldman Note pursuant to the Qualified Equity Investment option or the Non-Qualified Equity Investment
option.

In
the event of a Fundamental Transaction (as defined in the 2008 Notes to include sales of our assets and certain business combinations), the holder may, at its option, require us to
redeem all or any portion of the 2008 Notes at a price equal to 101% of the principal amount, plus all accrued and unpaid interest, if any, and subject to specified conditions, may be entitled to a
cash "make-whole" premium, calculated in accordance with the terms of the 2008 Notes. In addition, a pro rata portion of the 2008 Syntek Note in the ratio of 1/2:1 will be
automatically redeemed upon the redemption of all or any portion of the 2008 Goldman Note pursuant to the Fundamental Transaction option.

Under
the Amended and Restated Registration Rights Agreement executed in connection with the 2008 Notes, at any time after June 1, 2010, we must register and offer publicly all or
any part of our securities owned by Goldman or Syntek if Goldman or Syntek demands such a registration and offer, subject to certain conditions. In addition, Goldman and Syntek have "piggyback"
registration rights to include any of our securities owned by them in a registered offering of our securities, subject to certain conditions.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 8.    Financial Statements and Supplementary Data

See our fiscal 2008 annual Consolidated Financial Statements and accompanying notes appearing in this Annual Report on Form 10-K.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A(T).    Controls and Procedures



Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and
procedures pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures
must reflect the fact that there are resource constraints and that

42

---



management
is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based
on our evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2008, our disclosure controls and procedures are designed at a
reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive
officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.



Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

All
internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or
procedures may deteriorate.

Management
assessed the effectiveness of our internal control over financial reporting as of March 31, 2008. In making this assessment, management used the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on management's assessment and those criteria, management believes that we
maintained effective internal control over financial reporting as of March 31, 2008.



We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase
efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and
migrating processes.

There
were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2008 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information

None.

43

---





PART III

Item 10.    Directors, Executive Officers and Corporate Governance

Current Directors

Listed below are our current directors:

Margaret A. Bellville(age 54) has been a member of our board of directors since November 2006. Since 2004, Ms. Bellville
has been a partner at CarterBaldwin, a national executive search services firm based in Roswell, Georgia. From 2002 to 2004, Ms. Bellville served as chief operating officer and executive vice
president of Charter Communications, a broadband communications company (NASDAQ: CHTR). From 2001 to 2002, Ms. Bellville was president and chief executive officer of Incanta, Inc., a
technology-based streaming content business based in Atlanta, Georgia. Ms. Bellville also served in various capacities at Cox Communications from 1995 to 2001, last serving as executive vice
president of operations from 1999 to 2001.

Ronn Benatoff(age 58) has been a member of our board of directors since July 2004. Mr. Benatoff is a long-time
entrepreneur in international trade and from 2000 until August 2007 served as the Managing DirectorIsrael for Syntek Capital A.G., an investment holding company based in Germany
("Syntek"). Mr. Benatoff has served as chairman of Italinvest Ltd. since 1999 and as a director of Xcitel Ltd. from 2003 until 2007. Mr. Benatoff has been associated with
Fideco SpA since 1990, and at various times served as its chairman of the board of directors and/or an executive of the
company. From 2002 until 2004, Mr. Benatoff was a director with Adyoron Intelligent Systems Ltd., acting as chairman of the board from 2002 until mid-2003.
Mr. Benatoff also was previously chief executive officer of Cifideco Ltd., a Hong Kong-based company with subsidiaries in Spain and Argentina. Mr. Benatoff was a
member of the board of directors of Xtend Networks Ltd. from 2001 until 2004, when we acquired that company. Mr. Benatoff is fluent in English, French, Hebrew, Italian and Spanish. In
our acquisition of Xtend Networks Ltd., Syntek, a former shareholder of Xtend, was given the right to nominate one representative to our board of directors. Mr. Benatoff was nominated
pursuant to this right. In April 2008, irrevocably waived its right to nominate a representative to our board of directors.

Lewis S. Broad(age 50) has been a member of our board of directors since 1999. From May 2000 until December 2002, Mr. Broad
served as chief executive officer of Portfab LLC, a manufacturer of heating enclosures. Prior to November 1999, and since December 2002, Mr. Broad has been self-employed as a
private investor. From 1996 until July 2004, Mr. Broad was a member of the board of directors of Vesta Corp., a company specializing in payment processing and fraud prevention for telephone and
Internet transactions. From 1994 until 1999, Mr. Broad also served as a director of DSP Communications, Inc.

Neill H. Brownstein(age 64) has been a member of our board of directors since 1999. Since July 2005, Mr. Brownstein
has served as a founder of Footprint Ventures, a Cayman Island-based venture capital firm with operations in India, Israel and the United States. Mr. Brownstein is president of Neill H.
Brownstein Corporation, a strategic investment management consulting firm that he founded in 1976. From 1970 to 1995, Mr. Brownstein was associated with Bessemer Securities Corporation and
Bessemer Venture Partners, and during that period he served as a founding general partner of three affiliated venture capital funds. Mr. Brownstein also served on the board of directors of Giga
Information Group from December 1995 until March 2003, when Giga Information Group was acquired by Forrester Research. From 1994 until 1999, Mr. Brownstein also served as a director of DSP
Communications, Inc. Mr. Brownstein resigned from our board of directors effective June 26, 2008.

James A. (Jim) Chiddix(age 62) has served as vice chairman of our board of directors since March 2007. From 2004 until March 2007,
Mr. Chiddix served as chairman and chief executive officer of OpenTV Corp. (Nasdaq: OPTV), a provider of software solutions for the delivery of digital and interactive television.
Mr. Chiddix continues to serve as a director and vice chairman of OpenTV. From

44

---



2001
to 2004, Mr. Chiddix was president of Mystro TV, a business and technology development division of Time Warner Inc. Mr. Chiddix served as chief technical officer at Time
Warner Cable from 1998 to 2001 and senior vice president, engineering and technology from 1986 to 1998. Before joining Time Warner's corporate office, Mr. Chiddix held a variety of engineering
and operating positions with two Hawaiian cable companies which were acquired by Time Warner's predecessor, American Television & Communications Corporation. Mr. Chiddix was inducted
into the Cable Pioneers in 1991. In 1994, Mr. Chiddix and his Time Warner Cable engineering team won an Emmy Award for their work on hybrid fiber/coax architecture. Mr. Chiddix's other
cable industry awards include being named 1989 "Man of the Year" byCED Magazine, and the National Cable Television Association's (NCTA) 1983 Vanguard
Award for work on the introduction of addressable converters and NCTA's 1991 "President's Award" for his fiber work. Mr. Chiddix has served with numerous cable industry associations and
governmental boards, including the Computer Science and Telecommunications Board (an arm of the National Research Council), The Cable Center and Museum in Denver and The Society of Cable Television
Engineers. In addition to OpenTV, Mr. Chiddix currently serves on the board of directors of Symmetricom, Inc. (Nasdaq: SYMM) and Dycom Inc. (NYSE: DY). In 2007, the Cable Center
inducted Jim into the Cable Hall of Fame.

Avraham Fischer(age 52) has been a member of our board of directors since 1996. Mr. Fischer is co-managing
partner of Fischer Behar Chen Well Orion & Co., a law firm located in Tel Aviv, Israel, where he has served since 1982. Mr. Fischer is deputy chairman of IDB Holding
Corporation Ltd., Israel's largest holding company, and co-chief executive officer of Clal Industries and Investments Ltd., one of IDB's two principal subsidiaries focused on
the hi-tech, bio-tech, real estate and trade sectors. Mr. Fischer is also the co-founder and vice-chairman of Ganden Holdings Ltd., a
holding company that has a controlling interest in IDB Holdings, and a co-founder and co-chairman of Ganden Tourism and Aviation Ltd., Israel's second largest tourism
and aviation group. Mr. Fischer is a member of the board of directors of IDB Holding Corporation Ltd. (TASE: IDBH); Discount Investment Corporation Ltd. (TASE: DISI);
Makhteshim-Agan Industries Ltd. (TASE: MAIN); Koor Industries Ltd. (NASDAQ and TASE: KOR); Clal Industries and Investments Ltd. (TASE: CII) and other
privately-held corporations. Mr. Fischer is a founder and board member of Matan, a non-profit organization dedicated to supporting programs that improve the conditions
and prospects of people in need. Mr. Fischer earned his degree in law from the Tel Aviv University and is a Lieutenant Colonel (Res.) in the Israel Defense Forces.

Davidi Gilo(age 51) has served as chairman of our board of directors since 1996. Mr. Gilo served as our chief executive
officer from October 2001 until March 2007 and from April 1999 until October 2000. Mr. Gilo also served as our Interim chief financial officer from October 2001 until August 2002. From October
1998 until November 1999, Mr. Gilo served as chairman of the board of directors of DSP Communications, Inc., a developer of chip sets for wireless personal communication applications,
and from June 1999 until November 1999, he served as DSP Communications' chief executive officer. Mr. Gilo also served as the chairman of the board of directors of DSP Communications from its
founding in 1987 through 1999. Mr. Gilo served as chairman of the board of directors of Zen
Research N.V., a developer of technology and intellectual property for use in CD and DVD optical storage devices, between 1995 and 1999, and served as Zen Research plc's chairman from
April 2000 to October 2003. Between 1987 and 1993, Mr. Gilo was president and chief executive officer of DSP Group, Inc., and he served as chairman of the board of directors of DSP Group
from 1987 until 1995. Mr. Gilo is a director of Arcadian Networks, Inc. and OrNim Inc., both privately-held companies.

Samuel L. Kaplan(age 72) has been a member of our board of directors since 1999. Mr. Kaplan has been a partner in the law
firm of Kaplan, Strangis and Kaplan, P.A. of Minneapolis, Minnesota since 1978. Mr. Kaplan is a director of Piper Jaffray Companies (NYSE: PJC) and Cambria Enterprises. Mr. Kaplan served
as president of Banking Corporation of Florida from 2002 through 2006. From 1999 to 2004, Mr. Kaplan was a director of Associated Bank-Corp of Minnesota. From 1991 until June 1999,
Mr. Kaplan also served as a director of DSP Group, Inc.

45

---



Benita Fitzgerald Mosley(age 46) has been a member of our Board of Directors since September 2007. Ms. Fitzgerald Mosley
has served as President and CEO of Women in Cable Telecommunications ("WICT") since 2001, and is a current trustee and past president of the Board of Trustees of the Women's Sports Foundation and a
member of the advisory board of iVillage and We: Women's Entertainment. Prior to joining WICT, Ms. Fitzgerald Mosley served in a variety of roles with the United States Olympic Committee
beginning in 1995, including, Director of Olympic Training Centers from 1997 to 2000. She also served as the Director of the Olympic Training Center in San Diego from 1995 to 1997, and Director of all
public relations programs from 2000 to 2001. Ms. Fitzgerald Mosley was a member of the 1980 and 1984 U.S. Olympic Teams and won a gold medal in the 100-meter hurdles in the 1984
Olympic Games in Los Angeles.

Alan L. Zimmerman(age 65) has been a member of our board of directors since 1999. Since 1994, Mr. Zimmerman has served as
co-chief executive officer and director of Law Finance Group, Inc., a provider of financing to law firms, parties engaged in legal proceedings and probate executors, heirs and
trustees. Mr. Zimmerman also serves as a manager and/or director of several companies affiliated with Law Finance Group, Inc., including Law Finance Group Holdings, LLC; Law
Investment Company, LLC; BZM, LLC; Estate Finance Group, LLC; A.L. Zimmerman Capital, LLC; Law Finance Limited; and LFG National Capital, LLC. Mr. Zimmerman
is a partner of Litigation Resource Counsel, LLP, a law firm located in San Francisco, California.

Current Executive Officers

Listed below are our current executive officers:

Wayne H. Davis(age 54) was named our chief executive officer in March 2007. Prior to joining us, Mr. Davis joined Charter
Communications Inc. (NASDAQ: CHTR) in 2001 and most recently served as its executive vice president, engineering and chief technology officer. Prior to that time, Mr. Davis served in
various capacities at Charter Communications, including vice president engineering, western division. From 1999 to January 2000, Mr. Davis was vice president of engineering at Comcast
Corporation (Nasdaq: CMCSA), serving as Comcast's engineering lead in managing the integration and upgrade of plant acquired from Jones Intercable Inc., into the Comcast network.
Mr. Davis joined Jones Intercable, Inc. in 1984 and served until its acquisition by Comcast. While at Jones Intercable, Mr. Davis rose from fund engineering director for that
company's Midwest systems to vice president, technical operations and group vice president, engineering.

David Feldman(age 52) was named our chief technology officer in July 2007. Prior to joining us, Mr. Feldman served from
August 2006 to July 2007 as Principal Member Technical Staff at Advanced Micro Devices (Nasdaq: AMD), where he was responsible for PC-based digital cable television receiver solutions.
From 2003 to 2006, Mr. Feldman served as Vice President, Technology with Charter Communications (Nasdaq: CMCSA). Prior to 2003, Mr. Feldman was with Jones Intercable, Inc. for six
years. Prior to Charter and Jones Intercable, Mr. Feldman served as Vice President, Engineering for Nova-Net Communications for seven years, and was a staff engineer at Phasecom.
Mr. Feldman also served as a consultant for, or on staff of, a variety of other companies such as American Television & Communications; MediaOne; Sprint Nextel Corporation; U.S. West
Wireless; and Convacent Corporation.

Robert K. Mills(age 44) was named our chief financial officer in August 2007. Prior to joining us, Mr. Mills was chief
financial officer of Tri-S Security Corporation (NASDAQ: TRIS). From 1999 to 2005, Mr. Mills was chief financial officer of Knology, Inc. (Nasdaq: KNOL), a broadband
communications provider, where he was a key participant in growing the subscriber base, negotiating contracts, business planning and mergers and acquisitions. From 1994 to 1999, Mr. Mills was
Vice President, Treasurer and Strategic Planning for Powertel, Inc., a wireless telephone service provider. Mr. Mills is a certified public accountant and served as an auditor with an
international accounting firm for seven years.

46

---



Tashia L. Rivard(age 39) has served as our general counsel and corporate secretary since June 2006, and as our deputy general
counsel from July 2005 until her appointment as general counsel. Prior to
joining us, Ms. Rivard was an attorney at Adaptec, Inc. (Nasdaq: ADPT), a provider of storage solutions for data, practicing securities and general corporate law from January 2005 to
July 2005. Prior to that time, Ms. Rivard practiced securities, mergers and acquisitions and general corporate law at Montgomery & Hansen LLP (formerly Montgomery Law
Group, LLP) from November 2003 to December 2004; Brobeck, Phleger & Harrison, LLP in Palo Alto, California from May 2000 to December 2001; Warner Norcross & Judd LLP
in Grand Rapids, Michigan from 1995 to April 2000 and from April 2002 to November 2003. Ms. Rivard is licensed to practice law in California, Georgia and Michigan.

Walter Ungerer(age 39) has served as our executive vice president, corporate strategy and investor relations since September 2007,
and prior to that time, as vice president, corporate communications from November 2004 to September 2007. Mr. Ungerer has over 10 years of experience managing finance, investor relations
and communications within organizations that have earned recognition from Reuters, Frost and Sullivan and an Emmy Award from the National Academy of Television Arts and Sciences. Prior to joining us,
Mr. Ungerer was director of investor relations at Concurrent Computer Corporation (Nasdaq: CCUR) from 2001 until October 2004. Previously, Mr. Ungerer held various positions with
Scientific-Atlanta, a Cisco company (Nasdaq: CSCO), which he joined in 1996 as assistant manager of structured trade finance, and he was promoted to manager of corporate treasury services and manager
of investor relations before leaving the company in 2001. Previously, Mr. Ungerer spent four years in various finance related positions at Fortune 100 companies Eaton Corporation (NYSE: ETN)
and Cooper Industries (NYSE: CBE).

Former Executive Officers

The following individuals served as executive officers during the fiscal year ended March 31, 2008:

Avner Kol(age 55) served as our chief operating officer from November 2005 until January 2008. From February 2005 until November
2005, Mr. Kol served as site manager of our Norcross, Georgia operations and manager of our T1 business unit. From January 2000 until January 2005, Mr. Kol was general manager of
Vyyo Ltd., our wholly-owned subsidiary based in Israel. From 1977 to 1999, Mr. Kol was vice president of operations for DSP Communications, Inc., which was acquired by Intel
Corporation in 1999.

Arik Levi(age 38) served as our chief financial officer from February 2003 until August 2007, and previously served as our
corporate secretary from February 2006 until June 2006. Mr. Levi previously served as our interim chief financial officer from November 2002 until his appointment in February 2003 to chief
financial officer. Mr. Levi first served as our Israeli controller from March 2000 until November 2001 and as our vice president, finance from November 2001 until November 2002. Prior to
joining us, Mr. Levi was as an auditor at Kesselman & Kesselman CPAs (Isr.), a member of PricewaterhouseCoopers International Limited, and its predecessor accounting firm, from 1994
through 2000.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires our directors and officers, and persons who own more than 10%
of a registered class of our equity securities, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. The SEC regulations also require
these persons to furnish us with a copy of all Section 16(a) reports that they file. Based solely on our review of the copies of the forms furnished to us and written representations from our
executive officers and directors, we believe that all Section 16(a) filing requirements were met during the fiscal year ended March 31, 2008.

47

---



Code of Ethics

We have adopted a code of conduct and ethics for all of our employees and directors, including our chief executive officer, chief financial officer, other
executive officers and senior financial personnel. A copy of our code of conduct and ethics is posted on our website atwww.vyyo.com. Our code of
business conduct and ethics may be found on our website as follows:



We
intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of conduct and
ethics by posting the required information on our website, at the address and location specified above.

Corporate Governance and Independence Issues

We have not made any material changes to the procedures by which security holders may recommend nominees to our board of directors since the proxy statement that
we filed for our 2007 annual meeting of stockholders.

Pursuant
to our governance principles, our board of directors annually considers whether a director or nominee has any relationship which, in the opinion of the board, would interfere
with the exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that each of our directors other than Ms. Bellville and
Messrs. Chiddix, Fischer and Gilo, qualify as independent directors as defined by the Sarbanes-Oxley Act of 2002 and the National Association of Securities Dealers listing standards, including
such definitions applicable to each committee of the board of directors upon which he or she serves or served.

Our
board of directors has three standing committees: Audit Committee, Compensation Committee and Nominating Committee. All committees operate under written charters approved by our
board of directors, which are available at our website atwww.vyyo.com/Investors/Corporate Governance. We also will provide a copy of these charters to
any stockholder upon request.

The
Audit Committee of the board of directors is a separately-designated standing audit committee established in accordance with section 3(a)(58)(A) of the Exchange Act and the
rules thereunder. The Audit Committee operates under a written charter approved by our board of directors, which is available at our website atwww.vyyo.com/Investors/Corporate
Governance. We also will provide a copy of this charter upon request to Investor Relations, Vyyo Inc, 6625 The Corners Parkway, Suite 100, Norcross, Georgia 30092. The
current members of our Audit Committee are Neill H. Brownstein (chairman), Lewis S. Broad and Samuel L. Kaplan. The board of directors has determined that the members of the Audit Committee are
independent under the Nasdaq listing requirements and the Exchange Act and the rules thereunder, and that Mr. Brownstein is an "audit committee financial expert" in accordance with the rules
established by the SEC. Mr. Brownstein resigned from our board of directors effective June 26, 2008. Our board has not yet determined whether another member of our Audit Committee
qualifies as an "audit committee financial expert."

Our
Compensation Committee is comprised of Broad (chairman), Kaplan and Zimmerman, and our Nominating Committee is comprised of Messrs. Zimmerman (chairman), Broad and Kaplan, all
of whom are independent directors as defined by NASD listing standards.

As
previously described in this Annual Report on Form 10-K, our common stock was de-listed from The Nasdaq Global Market effective April 21, 2008.
Accordingly, the Nasdaq listing requirements no longer apply to us.

48

---





Item 11.    Executive Compensation

Summary Compensation Table

This table summarizes the compensation paid to or earned by our named executive officers. The "named executive officers" are our principal executive officer, our
two most highly compensated executive officers other than the principal executive officer who were serving as executive officers as of March 31, 2008 and Messrs. Kol and Levi, each of
whom would have been one of our two most highly compensated officers had they been serving as an executive officer as of March 31, 2008.

|Name and Principal Position                                                           |  | Year
(1)       |  | Salary
($)(2) |                        | Bonus
($) |                 | Option
Awards
($)(3) |   | All Other
Compensation |      | Total
($)
|------------------------------------------------------------------------------------- |  | -------------- |  | ------------- | ---------------------- | --------- | --------------- | -------------------- | - | ---------------------- | ---- | ---------
|Wayne H. Davis(4)
Chief Executive Officer                                             |  | Stub
2007
2006 |  | $             | 75,000
234,375
       |           | 

           |                      | $ | 296,042
624,590
      |      | $        
|Tashia L. Rivard
General Counsel and Corporate Secretary                              |  | Stub
2007
2006 |  |               | 55,000
206,667
185,417 |           | 
35,000
36,877 |                      |   | 51,530
131,155
148,705 |      |          
|Walter J. Ungerer
Executive Vice President, Corporate Strategy and Investor Relations |  | Stub
2007
2006 |  |               | 52,500
169,167
140,000 |           | 

           |                      |   | 50,464
98,062
114,725  |      |          
|Avner Kol
Former Chief Operating Officer                                              |  | Stub
2007
2006 |  |               | 20,833
250,000
250,000 |           | 
60,000
      |                      |   | 
256,833
359,187      | (11) |          
|Arik Levi(14)
Former Chief Financial Officer                                          |  | Stub
2007
2006 |  |               | 32,944
202,838
175,464 |           | 

50,000      |                      |   | 20,909
136,991
246,420 |      |          

---

49

---





50

---



Employment Agreements, Termination of Employment and Change-in-Control Arrangements

Wayne H. Davis.On March 21, 2007, we entered into an employment agreement with
Mr. Davis, our chief executive officer (the "Davis Agreement"). The Davis Agreement is for a three-year term, with automatic one-year renewals, subject to termination
upon prior notice by either party. Mr. Davis will receive an annual base salary of $300,000, which will be reviewed on or
before December 31, 2007 and thereafter based on Mr. Davis' services and our financial results. Mr. Davis may become eligible to receive an annual cash bonus up to $300,000 based
on performance objectives to be agreed to by Mr. Davis and our board of directors. We also granted Mr. Davis a stock option to purchase 600,000 shares of our common stock subject to
standard vesting for new employees: 25% vest at the one year anniversary of the grant with the remaining vesting in equal monthly installments for the next 36 months. The original exercise
price of the stock options was $6.31, the closing price of our common stock on the grant date. In connection with the repricing program described below in footnote 1 to the "Outstanding Equity Awards
at Fiscal-Year End" table, the exercise price was reduced to $1.40, the closing price of our common stock on the date of the repricing. Mr. Davis accrues 30 days of paid
vacation for each calendar year during the term of his agreement.

If
we terminate his employment without "Cause" (as defined in the Davis Agreement), (a) before the first anniversary of his employment, we must pay Mr. Davis severance
equal to six months of his annual salary (without bonus), (b) after the first anniversary of his employment but on or before the second anniversary of his employment, we must pay
Mr. Davis severance equal to nine months of his annual salary (without bonus), and (c) after the second anniversary of his employment, we must pay Mr. Davis severance equal to
12 months of his annual salary (without bonus).

If
Mr. Davis' employment is terminated upon a "Change of Control" (as defined in the Davis Agreement), Mr. Davis will be entitled to (a) in lieu of the severance
described in the foregoing paragraph, severance equal to his annual salary plus 100% of his annual target bonus in effect during the year in which a Change of Control occurs; (b) immediate
vesting of all unvested stock options; and (c) continuation of life, health, disability, vision, hospitalization, dental and other insurance coverage for one year for Mr. Davis and his
spouse and dependent children. If upon a Change of Control Mr. Davis is offered employment by our successor with responsibilities substantially similar to those in the Davis Agreement and
Mr. Davis does not accept the offer, 33.3% of Mr. Davis' stock options will immediately vest. If upon a Change of Control Mr. Davis accepts employment by our successor with
responsibilities substantially similar to those in the Davis Agreement, 33.3% of Mr. Davis' stock options will immediately vest. If Mr. Davis terminates his employment for Good Reason
(as defined in the Davis Agreement) with our successor on or after the six-month anniversary of his employment, all remaining stock options held by Mr. Davis will immediately vest.

Tashia L. Rivard.On November 8, 2007, we entered into an employment agreement with
Ms. Rivard, our general counsel and corporate secretary (the "Rivard Agreement"), effective as of September 1, 2007.

The
Rivard Agreement is for a two-year term, with automatic one-year renewals, subject to termination upon prior notice by either party. Ms. Rivard will
receive an annual base salary of $220,000, which will be reviewed on or before December 31, 2008 and thereafter based on Ms. Rivard's services and our financial results.
Ms. Rivard is eligible to receive employee benefits available to all employees and may become eligible to receive an annual cash bonus based on performance objectives to be agreed to by
Ms. Rivard and our chief executive officer.

If
the Rivard Agreement is terminated without "Cause" (as defined therein) before the initial two-year term, we must pay Ms. Rivard severance equal to six months of
her annual salary (without bonus), payable over such period in accordance with our usual payroll practices.

51

---



If
Ms. Rivard's employment is terminated upon a "Change of Control" (as defined in the Rivard Agreement), Ms. Rivard shall be entitled to (a) in lieu of the
severance described in the foregoing paragraph, severance equal to her annual salary in effect during the year in which a Change of Control occurs; (b) immediate vesting of all unvested stock
options; and (c) continuation of life, health, disability, vision, hospitalization, dental and other insurance coverage for one year. If upon a Change of Control, Ms. Rivard is offered
employment by our successor with responsibilities substantially similar to those in the Rivard Agreement and she does not accept the offer, 33.3% of her stock options will immediately vest. If upon a
Change of Control, Ms. Rivard accepts employment by our successor with responsibilities substantially similar to those in the Rivard Agreement, 33.3% of her stock options will immediately vest.
If Ms. Rivard terminates her employment for Good Reason (as defined in the Rivard Agreement) with our successor on or after the six-month anniversary of the effective date of the
Rivard Agreement, all remaining stock options held by Ms. Rivard will immediately vest.

Walter J. Ungerer.On November 8, 2007, Mr. Ungerer, our former vice president of
corporate communications and investor relations, was promoted to executive vice president, corporate strategy and investor relations pursuant to the terms of an employment agreement (the "Ungerer
Agreement"), effective as of September 1, 2007.

The
Ungerer Agreement is for a two-year term, with automatic one-year renewals, subject to termination upon prior notice by either party. Mr. Ungerer will
receive an annual base salary of $210,000, which will be reviewed on or before December 31, 2008 and thereafter based on Mr. Ungerer's services and our financial results.
Mr. Ungerer is eligible to receive employee benefits available to all employees and may become eligible to receive an annual cash bonus based on performance objectives to be agreed to by
Mr. Ungerer and our chief executive officer. Mr. Ungerer also was granted a stock option to purchase 30,000 shares of our common stock which will vest in equal monthly installments for
the next 48 months. The original exercise price of the stock options was $5.99, the closing price of our common stock on the grant date. In connection with the repricing program described below
in footnote 1 to the "Outstanding Equity Awards at Fiscal-Year End" table, the exercise price was reduced to $1.40, the closing price of our common stock on the date of the repricing.

If
the Ungerer Agreement is terminated without "Cause" (as defined therein) before the initial two-year term, we must pay Mr. Ungerer severance equal to six months of
his annual salary (without bonus), payable over such period in accordance with our usual payroll practices.

If
Mr. Ungerer's employment is terminated upon a "Change of Control" (as defined in the Ungerer Agreement), Mr. Ungerer shall be entitled to (a) in lieu of the
severance described in the foregoing paragraph, severance equal to his annual salary in effect during the year in which a Change of Control occurs; (b) immediate vesting of all unvested stock
options; and (c) continuation of life, health, disability, vision, hospitalization, dental and other insurance coverage for one year. If upon a Change of Control, Mr. Ungerer is offered
employment by our successor with responsibilities substantially similar to those in the Ungerer Agreement and he does not accept the offer, 33.3% of his stock options will immediately vest. If upon a
Change of Control, Mr. Ungerer accepts employment by our successor with responsibilities substantially similar to those in the Ungerer Agreement, 33.3% of his stock options will immediately
vest. If Mr. Ungerer terminates his employment for Good Reason (as defined in the Ungerer Agreement) with our successor on or after the six-month anniversary of the effective date
of the Ungerer Agreement, all remaining stock options held by Mr. Ungerer will immediately vest.

Separation Agreement and Consulting Agreement of Avner Kol.We entered into a separation agreement
and release and a consulting agreement with Mr. Kol, our former chief operating officer, both effective as of March 14, 2008. The separation agreement and release provides that
Mr. Kol will receive $104,167 (which amount includes accrued vacation pay) to be paid over normal pay periods for five months, subject to Mr. Kol's continued satisfaction of various
covenants set forth in the agreement.

52

---



Mr. Kol's
outstanding stock options will continue to vest through December 31, 2008, at which time he will hold 237,334 vested options, at exercise prices ranging from $3.35 to $6.92.
Mr. Kol will be allowed to exercise his options that have vested on or before December 31, 2008 no later than March 31, 2009.

The
consulting agreement provides that in exchange for certain services that may be performed by Mr. Kol to Vyyo Ltd, our wholly-owned Israeli subsidiary, Vyyo Ltd.
will pay Mr. Kol $20,833 per month for six months, subject to Mr. Kol's continued satisfaction of various covenants set forth in the consulting agreement. These payments will commence
after the payments have been made to Mr. Kol under the separation agreement and release described above. The monthly payments are inclusive of any and all other amounts for social or other
benefits, including, but not limited to, contributions or deductions with respect to National Insurance or social security, health tax or unemployment insurance.

Separation Agreement of Arik Levi.Vyyo Ltd., our wholly-owned subsidiary, entered into a
separation agreement and release with Mr. Levi, effective as of April 8, 2008. The separation agreement provides that Mr. Levi will receive approximately 833,000 NIS (New Israeli
Shekels), or approximately $229,000 in United States dollars, payable in monthly increments through November 30, 2008. The total amount payable to Mr. Levi is inclusive of all amounts
otherwise payable to Mr. Levi in connection with the termination of his employment, including severance payments required under contract and Israeli law, Employee Recreation Pay required by
Israeli law and accrued vacation days. In addition, Vyyo Ltd. will transfer to Mr. Levi the ownership of his Manager Insurance policies and Continuous Education Funds in accordance with
Israeli law. Mr. Levi's outstanding stock options will continue to vest through November 30, 2008, at which time he will hold 177,750 vested options, at exercise prices ranging from
$2.27 to $5.22. Mr. Levi will be allowed to exercise his options that have vested on or before November 30, 2008 no later than March 31, 2009.

53

---





Outstanding Equity Awards at Fiscal Year-End

The table below sets forth details concerning outstanding option awards as of March 31, 2008 made in the current and prior fiscal years to the named
executive officers. All of the following options have five-year terms.

Option Awards

|                  |  |                                          |  |                             |                | Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) |              |   |                                          |  |                                                                                 |                                 
|----------------- |  | ---------------------------------------- |  | --------------------------- | -------------- | ---------------------------------------------------------------------------------------------- | ------------ | - | ---------------------------------------- |  | ------------------------------------------------------------------------------- | --------------------------------
|
|
|
|
|Wayne H. Davis    |  | 150,000
                                |  | 450,000
                   | (2)            | 
336,000                                                                                      | (3)          | $ | 1.40
1.37                                |  | 3/20/2012
3/4/2013                                                              |                                 
|Robert K. Mills   |  | 
                                      |  | 150,000
                   | (4)            | 
140,000                                                                                      | (3)          |   | 1.40
1.37                                |  | 8/8/2012
3/4/2013                                                               |                                 
|Tashia L. Rivard  |  | 26,666
34,999
6,250
                    |  | 13,334
45,001
23,750
      | (5)(6)(7)      | 


140,000                                                                                  | (3)          |   | 1.40
1.40
1.40
1.37                      |  | 8/10/2010
6/28/2011
5/9/2012
3/4/2013                                           |                                 
|Walter J. Ungerer |  | 33,333
7,500
10,416
2,500
              |  | 6,667
2,500
39,584
27,500
 | (8)(9)(10)(11) | 



140,000                                                                                | (3)          |   | 1.40
1.40
1.40
1.40
1.37                 |  | 11/16/2009
3/21/2010
5/9/2012
11/7/2012
3/4/2013                                |                                 
|Avner Kol(12)     |  | 40,000
46,500
80,000
21,250              |  | 
46,500

108,750          | (14)           | 


                                                                                        |              |   | 3.40
5.22
3.35
6.92                      |  | 3/31/2009
3/31/2009
3/31/2009
3/31/2009                                         | (13)(15)(16)(17)                
|Arik Levi(18)     |  | 10,000
30,000
50,000



45,000
24,000 |  | 





45,000
        | (26)           | 


20,000
20,000
20,000

                                                                 | (22)(23)(24) |   | 2.27
2.90
3.92
7.50
9.00
10.50
5.22
3.35 |  | 3/31/2009
3/31/2009
3/31/2009
3/31/2009
3/31/2009
3/31/2009
3/31/2009
3/31/2009 | (19)(20)(21)(25)(25)(25)(27)(28)

---

54

---



55

---





Compensation of Directors

Non-employee directors serving on our board of directors do not receive any cash compensation for their service. See the discussion below entitled
"Amended and Restated Employment Agreement of Mr. Gilo" and "Amended and Restated Consulting Agreement of Mr. Chiddix" for compensation arrangements with our
chairman and vice chairman of the board of directors which are related to service other than as a director. All directors are reimbursed for their out-of-pocket expenses
incurred in attending meetings of our board of directors and committees on which they may serve.

Under
our 2000 Plan, each non-employee director receives an initial option to purchase 25,000 shares of our common stock on the date on which he or she becomes a director, at
the closing price of our common stock on the date of grant. These options have a 10-year term and vest in four equal annual installments on each of the first four anniversaries of the date
of grant. Thereafter, on the date of each of our annual meetings of stockholders, each of our non-employee directors receives an annual stock option grant to purchase 7,500 shares of our
common stock, provided such director has served on our board of directors for at least six months on such date. These options have a 10-year term and vest immediately upon the date of
grant.

In
addition, under the 2000 Plan in the fiscal year ended March 31, 2008, each non-employee director received a quarterly option grant to purchase 3,125 shares of our
common stock, other than the chairman of our Audit Committee, who, given his additional responsibilities, received a quarterly option grant to purchase 4,375 shares of our common stock. On
February 25, 2008, our board of directors approved an increase in the number of options granted to non-employee directors as

56

---



follows: (a) each
non-employee director who does not serve on a committee receives a quarterly grant of non-qualified stock options to purchase 5,000 shares of
our common stock; (b) each non-employee director who serves on a committee but does not chair the Compensation Committee or the Audit Committee receives a quarterly grant of
non-qualified stock options to purchase 7,500 shares of the our common stock; and (c) the chairman of the Compensation Committee and the chairman of the Audit Committee receive a
quarterly grant of non-qualified stock options to purchase 10,000 shares of our common stock.

The
following table sets forth information about the cash and stock-based compensation earned by our directors during the fiscal year ended March 31, 2008:

|Name                     |  | Option
Awards
($)(1) |         | All Other
Compensation
($) |   | Total
($)
|------------------------ |  | -------------------- | ------- | -------------------------- | - | ---------
|Margaret A. Bellville    |  | $                    | 58,662  |                            | $ | 428,077  
|Ronn Benatoff            |  |                      | 58,662  |                            |   |         
|Lewis S. Broad           |  |                      | 58,662  |                            |   |         
|Neill H. Brownstein      |  |                      | 71,562  |                            |   |         
|James A. Chiddix         |  |                      | 575,027 | (3)                        |   | 165,000  
|Avraham Fischer          |  |                      | 58,662  |                            |   |         
|Davidi Gilo              |  |                      | 114,655 | (5)                        |   | 344,507  
|Samuel L. Kaplan         |  |                      | 58,662  |                            |   |         
|Benita Fitzgerald Mosley |  |                      | 32,247  |                            |   |         
|Alan L. Zimmerman        |  |                      | 58,662  |                            |   |         

---



57

---





Name

Options
OutstandingMargaret A. Bellville(a)

48,125Ronn Benatoff(b)

91,250Lewis S. Broad

108,544Neill H. Brownstein

125,625James A. Chiddix(c)

287,500Avraham Fischer

111,875Davidi Gilo(d)

2,075,000Samuel L. Kaplan

111,875Benita Fitzgerald Mosley(e)

31,250Alan L. Zimmerman

111,875




58

---





Amended and Restated Employment Agreement of Mr. Gilo.In February 2006, we entered into a new
employment agreement with Mr. Gilo, our chairman of the board of directors and former chief executive officer, which replaced and superseded his prior employment agreement. On March 21,
2007, Mr. Davis became our new chief executive officer. As a result of this change in management, on April 5, 2007, we entered into an Amended and Restated Employment Agreement with
Mr. Gilo (the "2007 Gilo Agreement"). The term of the 2007 Gilo Agreement is three years from the effective date of the 2006 Gilo Agreement, with automatic renewals thereafter for
one-year terms, subject to termination upon prior notice by either party. In exchange for 20 hours of services per week, Mr. Gilo received an annual base salary of $200,000.
Mr. Gilo is eligible to participate in bonus plans that may be adopted by our board of directors and is entitled to receive an additional bonus based on his
performance and our performance each year as determined by our board of directors or our Compensation Committee. In addition, Mr. Gilo may become entitled to additional stock options that the
Compensation Committee deems appropriate, and he accrues 30 days of paid vacation for each 12 months of employment, up to a maximum of 60 days.

If
we terminate the 2007 Gilo Agreement without "Cause" (as defined in his employment agreement), all of Mr. Gilo's unvested options would vest immediately and he would receive a
severance payment equal to the greater of (a) the full amount of the compensation that he could have expected under the 2007 Gilo Agreement (based on his total compensation (salary and bonus)
earned in 2007), through the end of the term; or (b) the full amount of the compensation that he could have expected under the 2007 Gilo Agreement for 18 months (based on his total
compensation (salary and bonus) earned in 2007). If we terminate the 2007 Gilo Agreement without Cause after the initial three-year term, all of Mr. Gilo's unvested options would
vest immediately and he would receive a severance payment equal to the full amount of the compensation that he could have expected under the 2007 Gilo Agreement for 18 months (based on his
total compensation (salary and bonus) earned in 2007). If we terminate the 2007 Gilo Agreement for Cause, we must pay Mr. Gilo a severance payment equal to the full amount of the compensation
that he could have expected under the 2007 Gilo Agreement for three months (based on his total compensation (salary and bonus) earned in 2007). If Mr. Gilo voluntarily terminates the 2007 Gilo
Agreement, we must pay Mr. Gilo a severance fee equal to the amount of the compensation that he could have expected under the 2007 Gilo Agreement for nine months (based on his total
compensation (salary and bonus) earned in 2007).

Effective
as of February 1, 2008, the Company entered into a new amended and restated employment agreement with Mr. Gilo pursuant to which his annual salary was reduced
from $200,000 to $12,000. The 2008 amended and restated employment agreement also contains amendments for the purpose of complying with Section 409A of the Internal Revenue Code of 1986. Among
these changes,

59

---



the
amendments require the payment of amounts subject to Section 409A to be delayed in certain circumstances for six months following termination of Mr. Gilo's employment. If
Mr. Gilo becomes entitled to severance pay on or after January 1, 2009, and within one year following a "Change in Control" (as defined in his employment agreement), then his severance
pay shall be paid in a lump sum within five business days of the Change in Control. If Mr. Gilo becomes entitled to severance pay during 2008 following a Change in Control that occurs during
2008, then his severance pay shall be paid in accordance with normal payroll periods until January 1, 2009, at which time the remaining unpaid severance pay shall be paid in a lump sum. In all
other respects, the material terms of the 2007 Gilo Agreement remain in effect.

Amended and Restated Consulting Agreement of Mr. Chiddix.On March 21, 2007, we entered
into a consulting agreement with Mr. Chiddix pursuant to which he received $15,000 per month in exchange for providing certain services to us for on average 40 hours per month. On
February 1, 2008, we amended this agreement to reduce the monthly fees to $7,500 per month.

Mr. Chiddix
also was granted a stock option to purchase 250,000 shares of our common stock which vests in equal monthly installments over 48 months. The exercise price of
the stock options was $6.31, the closing price of our common stock on March 21, 2007. In connection with the stock option repricing program described above, the exercise price of these options
was repriced to $1.40 per share on March 4, 2008. The stock options granted to Mr. Chiddix may be accelerated upon the occurrence of specified events (as defined in his consulting
agreement), as follows:

Financing Event.If we were a party to a Financing Event (as defined in the consulting agreement, which did not include the
financing completed on March 28, 2007) on or before December 31, 2007, and it was determined that Mr. Chiddix contributed in a material way (as defined in the consulting
agreement) to the Financing Event, then 30,000 of Mr. Chiddix's outstanding and unvested stock options would have vested immediately. This vesting event did not occur on or before
December 31, 2007, and has expired by its terms.

Spectrum Overlay.If our Spectrum Overlay solution is approved by one of two identified cable companies which generates a
required level of revenue and if Mr. Chiddix contributed in a material way to the completion of such orders, then (a) 30,000 of Mr. Chiddix's stock options will immediately vest,
and (b) the remaining number of outstanding and unvested stock options held by Mr. Chiddix (other than the number of stock options that may vest monthly through December 31, 2008)
would be eligible to immediately vest if we subsequently receive the required approval and revenue from the second identified cable company.

Change of Control.If we enter into a definitive agreement on or before December 31, 2008 which would result in a
Change of Control (as defined in his consulting agreement), then the remaining number of outstanding and unvested stock options held by Mr. Chiddix will immediately vest as of the closing of
the Change of Control.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Securities Authorized for Issuance Under Equity Compensation Plans

This information is included in Part II, Item 5 of this Annual Report.

60

---





Security Ownership of Certain Beneficial Owners and Management

The following table presents certain information regarding the beneficial ownership of our common stock as of March 31, 2008 by: (a) each beneficial
owner of 5% or more of our outstanding common stock; (b) each of our current directors; (c) each of our named executive officers (as defined above in Item 11 "Summary Compensation
Table;" and (d) all of our current directors and executive officers as a group.

The
percentage of beneficial ownership in the table is based on approximately 18,700,012 shares of our common stock outstanding as of March 31, 2008. To our knowledge, except
under community property laws or as otherwise noted, the persons and entities named in the table have sole voting and sole investment power over their shares of our common stock. Unless otherwise
indicated, each beneficial owner listed below maintains a mailing address of c/o Vyyo Inc., 6625 The Corners Parkway, Suite 100, Norcross, Georgia 30092.

The
number of shares beneficially owned by each stockholder is determined under the rules of the SEC and is not necessarily indicative of beneficial ownership for any other purpose.
Under these rules, beneficial ownership includes those shares of our common stock over which the stockholder has sole or shared voting or investment power and those shares of our common stock that the
stockholder has the right to acquire within 60 days after March 31, 2008 through the exercise of any stock option or otherwise. The "Percentage Owned" column treats as outstanding all
shares underlying such options held by the stockholder, but not shares underlying options held by other stockholders.

|Name and Address of Beneficial Owner                                                           |  | Amount and Nature of
Beneficial Ownership(1) |  | Percentage
Owned |     
|---------------------------------------------------------------------------------------------- |  | -------------------------------------------- |  | ---------------- | ----
|GS Investment Strategies, LLC(2)
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004 |  | 5,186,982                                    |  | 23.36            | %(3)
|Gilder, Gagnon, Howe & Co. LLC(4)
1775 Broadway, 26th Floor
New York, New York 10019           |  | 2,141,821                                    |  | 11.45            | %   
|Syntek Capital A.G.(5)
Zugspitzstrasse 15
Pullach, Germany 82049                               |  | 972,675                                      |  | 5.20             | %   
|Davidi Gilo(6)                                                                                 |  | 4,969,439                                    |  | 25.10            | %   
|Margaret A. Bellville                                                                          |  | 29,375                                       |  | *                |     
|Ronn Benatoff(7)                                                                               |  | 85,000                                       |  | *                |     
|Lewis S. Broad(8)                                                                              |  | 145,973                                      |  | *                |     
|Neill H. Brownstein(9)                                                                         |  | 197,186                                      |  | 1.05             | %   
|James A. Chiddix                                                                               |  | 91,666                                       |  | *                |     
|Avraham Fischer                                                                                |  | 121,877                                      |  | *                |     
|Samuel L. Kaplan                                                                               |  | 187,838                                      |  | 1.00             | %   
|Benita Fitzgerald Mosley                                                                       |  | 6,250                                        |  | *                |     
|Alan L. Zimmerman                                                                              |  | 185,353                                      |  | *                |     
|Wayne H. Davis                                                                                 |  | 174,999                                      |  | *                |     
|Tashia L. Rivard                                                                               |  | 74,166                                       |  | *                |     
|Walter Ungerer                                                                                 |  | 79,165                                       |  | *                |     
|Arik Levi(10)                                                                                  |  | 164,625                                      |  | *                |     
|Avner Kol(11)                                                                                  |  | 197,813                                      |  | 1.05             | %   
|All current directors and executive officers as a group (15 persons)(12)                       |  | 6,348,287                                    |  | 30.39            | %   

---

61

---



Davidi Gilo

1,100,000Margaret A. Bellville

29,375Ronn Benatoff

85,000Lewis Broad

108,544Neill H. Brownstein

125,625James A. Chiddix

91,666Avraham Fischer

111,875Samuel L. Kaplan

111,875Benita Fitzgerald Mosley

6,250Alan L. Zimmerman

111,875Wayne H. Davis

174,999Tashia L. Rivard

74,166Walter Ungerer

59,165Arik Levi

164,625Avner Kol

197,813Directors and executive officers as a group

2,552,853


62

---



Item 13.    Certain Relationships and Related Transactions and Director Independence

Transactions with Entities Related to Davidi Gilo, our Chairman of the Board of Directors



Aircraft.Our board of directors previously authorized the use of charter aircraft for certain business travel subject to
certain procedures. In the year ended December 31, 2006, we were billed $26,686 by an unaffiliated third party management company in connection with several charters of aircraft for business
travel purposes. We were not billed in the three-month transition period ended March 31, 2007 or the year ended March 31, 2008 for any such charters. While we chartered the aircraft
directly from the management company, the chartered aircraft is leased by Harmony Management, Inc., of which Mr. Gilo and a trust for his benefit are the sole shareholders. Payments made
by us to the management company for the aircraft charters were ultimately paid to Harmony Management, after deductions for certain operating costs and charter management fees. At the instruction of
Harmony Management, the hourly rate charged by the management company for these charters was substantially less than the standard rate charged by the management company for similar charters to other
unaffiliated parties.

Strategic Investment and Miscellaneous Office Services.During the year ended December 31, 2006, we reimbursed Harmony
Management $10,135 for strategic investment and miscellaneous office

63

---



services.
We did not reimburse Harmony Management for services in the three-month transition period ended March 31, 2007 or the year ended March 31, 2008.

Gilo Family Partnership.In the year ended December 31, 2006, we paid rent and administrative
support of $12,000 and field labor support services of $36,279 to Harmony Management and an unaffiliated third party, respectively. We made no such payments in the three-month transition period ended
March 31, 2007 or the year ended March 31, 2008. Harmony Management is the general partner of the Gilo Family Partnership and Mr. Gilo, his former spouse and three trusts for the
benefit of Mr. Gilo's children are the limited partners of the Gilo Family Partnership.

Silicon Design Systems.In the year ended December 31, 2006 we reimbursed Silicon Design
Systems for $43,365 related to management information services provided by an employee of Silicon Design Systems in connection with our maintenance and operation of computer systems. We did not
reimburse Silicon Design Systems for services in the three-month transition period ended March 31, 2007 or the year ended December 31, 2008.

Transaction with Avraham Fischer.Avraham Fischer, a director of our company, is co-managing partner of the law firm of Fischer
Behar Chen Well Orion & Co., which represents us on matters relating to Israeli law. Fischer Behar Chen Well Orion & Co. billed us $133,000
in the year ended December 31, 2006, $60,750 in the three-month transition period ended March 31, 2007 and $107,510 in the year ended March 31, 2008 for legal services.

Arcadian Networks, Inc.On March 31, 2006, we entered into an equipment purchase agreement with ANI. Under this agreement, we
sold certain of our wireless solutions to ANI over a 10-year term. During the year ended December 31, 2006, the three-month transition period ended March 31, 2007 and the
year ended March 31, 2008, we recognized revenue of approximately $6,721,000; $161,000 and 4,561,000 from the sale of our solutions. to ANI. During the year ended December 31, 2006, we
also received the first exclusivity payment of $4,000,000 contemplated by the agreement.

On
March 19, 2008, we entered into a lease for rental of test equipment with ANI following ANI's establishing a business presence in Airport City, Israel. The lease term is
180 days at $8,000 per month. During the year ended March 31, 2008, we were reimbursed by a subsidiary of ANI for general and administrative and research and development expenses of
$52,000.

Mr. Gilo,
our chairman of the board of directors, is also the former chairman of the board of directors of ANI and the sole member of the limited liability company that is the
general partner of a major stockholder of ANI.

In
August 2006, Clal Industries and Investments, Ltd. ("Clal") invested $20,000,000 in ANI. Avraham Fischer, a director of our company, is co-chief executive officer
and a director of Clal. Mr. Fischer does not have a direct equity interest in Clal, however, he is an officer, director and a shareholder of Ganden Holdings Ltd., which is part of the
controlling group of IDB Holdings Ltd. Mr. Fischer is deputy chairman of IDB Holdings which holds a majority ownership interest in Clal.

Goldman Sachs Investment Partners Master Fund, LP ("Goldman").Goldman owns more than 10% of our outstanding common stock. In the
year ended March 31, 2006 and three-month transition period ended March 31, 2007, we paid to an entity affiliated with Goldman $1,037,000 and $709,000, respectively, of interest for
outstanding debt under the $10,000,000 2006 Note and the $7,500,000 2006 Note issued in the 2006 Financing. In the year ended March 31, 2008, we paid Goldman $1,472,000 of interest for
outstanding debt under the 2007 Goldman Note issued in the 2007 Financing. An entity affiliated with Goldman is also a significant stockholder of ANI.

Margaret A. Bellville.Ms. Bellville, a director of our company, provided consulting services to us in her individual capacity. In
the year ended March 31, 2008 and the three-month transition period ended

64

---



March 31,
2007, Ms. Bellville received $14,000 and $6,000, respectively. In addition, Ms. Bellville is a partner in CarterBaldwin, an executive search firm that has assisted us in
the search for and placement of executives and members of our board of directors. In the year ended December 31, 2006, the three-month transition period ended March 31, 2007 and the year
ended March 31, 2008, we were billed $149,000; $84,000 and $372,000, respectively, for these executive searches and placements. Our relationship with CarterBaldwin began early in 2006, prior to
Ms. Bellville joining our board of directors.

James A. Chiddix.We entered into a consulting agreement with James A. Chiddix, vice chairman of our board of directors, in 2007, which we
amended in February 2008. The amendment reduces the fees payable to Mr. Chiddix from $15,000 to $7,500 per month. In the three-month transition period ended March 31, 2007 and the year
ended March 31, 2008, we paid $5,000 and $165,000, respectively, to Mr. Chiddix for consulting services.

Indemnification Arrangements.We have entered into indemnification agreements with our directors and executive officers containing
provisions that may require us, among other things, to indemnify our directors and executive officers against various liabilities that may arise by virtue of their status or service as directors and
executive officers, and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.

Item 14.    Principal Accountant Fees and Services

The following table presents information regarding the fees billed by PricewaterhouseCoopers International Limited and affiliated entities ("PWC") to us for the
years ended December 31, 2006 and March 31, 2008.

Type of Fees

Fiscal Year Ended
December 31, 2006

Fiscal Year Ended
March 31, 2008Audit Fees

$
195,000

$
335,000Tax Fees

$
76,529

$
149,000All Other Fees

$


$
113,000Total

$
271,529

$
597,000


Audit Fees.This category includes services provided in connection with the audit of our consolidated
financial statements, the review of our quarterly consolidated financial statements and other services that are normally provided in connection with our statutory and regulatory filings.

Tax Fees.This category includes professional services rendered by PWC for tax compliance, tax advice
and tax planning, including the preparation and review of tax returns and the provision of incidental tax advice.

All Other Fees.This category includes products and services, other than those reported under the
above items, including products and services related to compliance with the Sarbanes-Oxley Act of 2002.

65

---



PART IV

Item 15.    Exhibits and Financial Statement Schedules



The
financial statements filed as a part of this report are identified in the Index to our fiscal 2008 annual Consolidated Financial Statements.



No
financial statement schedules are required to be filed.



The
information required by this item is set forth on the exhibit index which follows the signature page of this Annual Report on Form 10-K.

66

---





SIGNATURES

Pursuant to the requirements of Section 13 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.

| |  | VYYO INC.
| |  | ---------
| |  | By:      

Date:
June 30, 2008

Pursuant
to the requirements of 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.

|Signature                                           |  | Title                                                                                  |  | Date         
|--------------------------------------------------- |  | -------------------------------------------------------------------------------------- |  | -------------
|                                                    |  |                                                                                        |  |              
|/s/WAYNE H. DAVISWayne H. Davis                     |  | Chief Executive Officer (Principal Executive Officer)                                  |  | June 30, 2008
|/s/ROBERT K. MILLSRobert K. Mills                   |  | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |  | June 30, 2008
|/s/MARGARET A. BELLVILLEMargaret A. Bellville       |  | Director                                                                               |  | June 30, 2008
|/s/RONN BENATOFFRonn Benatoff                       |  | Director                                                                               |  | June 30, 2008
|/s/LEWIS S. BROADLewis S. Broad                     |  | Director                                                                               |  | June 30, 2008
|/s/JAMES A. CHIDDIXJames A. Chiddix                 |  | Director                                                                               |  | June 30, 2008
|/s/AVRAHAM FISCHERAvraham Fischer                   |  | Director                                                                               |  | June 30, 2008
|/s/DAVIDI GILODavidi Gilo                           |  | Director                                                                               |  | June 30, 2008
|/s/SAMUEL L. KAPLANSamuel L. Kaplan                 |  | Director                                                                               |  | June 30, 2008
|/s/BENITA FITZGERALD MOSLEYBenita Fitzgerald Mosley |  | Director                                                                               |  | June 30, 2008
|/s/ALAN L. ZIMMERMANAlan L. Zimmerman               |  | Director                                                                               |  | June 30, 2008

67

---



Vyyo Inc.
2008 ANNUAL REPORT

CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS

|                                                                                                                                                                             |  | Page
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Registered Public Accounting Firm                                                                                                                      |  | F-2 
|Consolidated Balance Sheets as of March 31, 2008, March 31, 2007 and December 31, 2006                                                                                       |  | F-3 
|Consolidated Statements of Operations for the years ended March 31, 2008 and December 31, 2006 and the three-month transition period ended March 31, 2007                    |  | F-4 
|Consolidated Statements of Changes in Capital Deficiency for the years ended March 31, 2008 and December 31, 2006 and the three-month transition period ended March 31, 2007 |  | F-5 
|Consolidated Statements of Cash Flows for the year ended March 31, 2008, December 31, 2006, and the three-month transition period ended March 31, 2007                       |  | F-6 
|Notes to Consolidated Financial Statements                                                                                                                                   |  | F-7 

F-1

---





|LOGO |  | Kesselman & KesselmanCertified Public Accountants (Isr.)
Trade Tower, 25 Hamered Street
Tel Aviv 68125 Israel
P.O. Box 452 Tel Aviv 61003 Israel
Telephone +972-3-7954555
Facsimile +972-3-7954556
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
Vyyo Inc.

We
have audited the consolidated balance sheets of Vyyo Inc. (the "Company") and its subsidiaries as of March 31, 2008, March 31, 2007 and December 31, 2006
and the related consolidated statements of operations, capital deficiency and cash flows for the years ended March 31, 2008 and December 31, 2006
and the three-month transition period ended March 31, 2007. These financial statements are the responsibility of the Company's Board of Directors and management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2008, March 31,
2007 and December 31, 2006 and the results of its operations, changes in capital deficiency and its cash flows for the years ended March 31, 2008 and December 31, 2006 and the
three-month transition period ended March 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1a to the financial statements, the
Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 1a. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

|Tel-Aviv, Israel
June 30, 2008 |  | /s/ Kesselman & Kesselman CPAs (Isr.)
A member of PricewaterhouseCoopers International Limited
|------------------------------ |  | ----------------------------------------------------------------------------------------------

F-2

---





Vyyo Inc.        Consolidated Balance Sheets        (In thousands of U.S. $, except share data)

|                                            |                                                                                                                                                                                                                              | March 31,
2008            |        | March 31,
2007 |         | December 31,
2006 |         
|------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ------ | -------------- | ------- | ----------------- | --------
|ASSETS                                      |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|Current Assets                              |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|                                            | Cash and cash equivalents                                                                                                                                                                                                    |                           | $      | 5,303          |         | $                 | 24,134  
|                                            | Short-term investments                                                                                                                                                                                                       |                           |        | 718            |         |                   | 7,020   
|                                            | Restricted cash                                                                                                                                                                                                              |                           |        | 5,000          |         |                   |        
|                                            | Accounts receivable trade, net:                                                                                                                                                                                              |                           |        |                |         |                   |         
|                                            |                                                                                                                                                                                                                              | Related party             |        |                |        |                   |         
|                                            |                                                                                                                                                                                                                              | Other                     |        |                | 553     |                   |         
|                                            | Inventory, net                                                                                                                                                                                                               |                           |        | 2,001          |         |                   | 2,320   
|                                            | Other                                                                                                                                                                                                                        |                           |        | 1,208          |         |                   | 923     
|                                            |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|                                            |                                                                                                                                                                                                                              | Total Current Assets      |        |                | 14,783  |                   |         
|Long-Term Assets                            |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|                                            | Restricted cash                                                                                                                                                                                                              |                           |        |               |         |                   | 5,000   
|                                            | Property and equipment, net                                                                                                                                                                                                  |                           |        | 913            |         |                   | 1,662   
|                                            | Employee rights upon retirement funded                                                                                                                                                                                       |                           |        |               |         |                   | 1,221   
|                                            | Debt issuance costs, net                                                                                                                                                                                                     |                           |        | 120            |         |                   | 150     
|                                            |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|                                            |                                                                                                                                                                                                                              | TOTAL ASSETS              |        | $              | 15,816  |                   | $       
|                                            |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|LIABILITIES NET OF CAPITAL DEFICIENCY       |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|Current Liabilities                         |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|                                            | Accounts payable                                                                                                                                                                                                             |                           | $      | 632            |         | $                 | 1,349   
|                                            | Accrued restructuring charges                                                                                                                                                                                                |                           |        | 1,282          |         |                   |        
|                                            | Accrued liabilities                                                                                                                                                                                                          |                           |        | 4,954          |         |                   | 8,140   
|                                            | Deferred revenues, related party                                                                                                                                                                                             |                           |        | 400            |         |                   | 400     
|                                            | Promissory note                                                                                                                                                                                                              |                           |        | 6,500          |         |                   | 5,401   
|                                            |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|                                            |                                                                                                                                                                                                                              | Total Current Liabilities |        |                | 13,768  |                   |         
|                                            |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|Long-Term Liabilities                       |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|                                            | Promissory note                                                                                                                                                                                                              |                           |        |               |         |                   |        
|                                            | $7,500,000 2006 Note                                                                                                                                                                                                         |                           |        |               |         |                   |        
|                                            | $10,000,000 2006 Note                                                                                                                                                                                                        |                           |        | 35,000         |         |                   | 35,000  
|                                            | Deferred revenues, related party                                                                                                                                                                                             |                           |        | 2,946          |         |                   | 3,279   
|                                            | Liability for employee rights upon retirement                                                                                                                                                                                |                           |        | 300            |         |                   | 2,345   
|                                            |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|Commitments and Contingent Liabilities      |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|                                            |                                                                                                                                                                                                                              | Total Liabilities         |        |                | 52,014  |                   |         
|                                            |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|Capital Deficiency                          |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|                                            | Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued                                                                                                                                                  |                           |        |               |         |                   |        
|                                            | Common stock, $0.0001 par value and paid in capital; 50,000,000 shares authorized, 18,700,012; 18,316,231 and 18,114,031 shares issued and outstanding at March 31, 2008; March 31, 2007 and December 31, 2006,
respectively |                           |        | 269,356        |         |                   | 262,600 
|                                            | Accumulated other comprehensive loss                                                                                                                                                                                         |                           |        |               |         |                   | (1      
|                                            | Accumulated deficit                                                                                                                                                                                                          |                           |        | (305,554       | )       |                   | (275,615
|                                            |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|                                            |                                                                                                                                                                                                                              | Total Capital Deficiency  |        |                | (36,198 | )                 |         
|                                            |                                                                                                                                                                                                                              |                           |        |                |         |                   |         
|TOTAL LIABILITIES NET OF CAPITAL DEFICIENCY |                                                                                                                                                                                                                              | $                         | 15,816 |                | $       | 42,898            |         
|                                            |                                                                                                                                                                                                                              |                           |        |                |         |                   |         

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

F-3

---





Vyyo Inc.        Consolidated Statements of Operations        (In thousands of U.S. $, except per share data)

|                                  |                                               | Year Ended               |         | Three-Month
Transition
Period Ended
March 31,
2007 |       
|--------------------------------- | --------------------------------------------- | ------------------------ | ------- | -------------------------------------------------- | ------
|
|REVENUES                          |                                               |                          |         |                                                    |       
|                                  | Revenues                                      |                          | $       | 3,106                                              |       
|                                  | Revenues, related party                       |                          |         | 4,561                                              |       
|                                  |                                               |                          |         |                                                    |       
|                                  |                                               | Total Revenues           |         |                                                    | 7,667 
|                                  |                                               |                          |         |                                                    |       
|COST OF REVENUES                  |                                               |                          |         |                                                    |       
|                                  | Cost of products sold                         |                          |         | 3,230                                              |       
|                                  | Cost of products sold, related party          |                          |         | 3,853                                              |       
|                                  | Write-down of inventory                       |                          |         | 1,250                                              |       
|                                  | Insurance reimbursement for damaged inventory |                          |         | (101                                               | )     
|                                  |                                               |                          |         |                                                    |       
|                                  |                                               | Total Cost of Revenues   |         |                                                    | 8,232 
|                                  |                                               |                          |         |                                                    |       
|GROSS PROFIT(LOSS)                |                                               |                          | (565    | )                                                  |       
|                                  |                                               |                          |         |                                                    |       
|OPERATING EXPENSES (INCOME)       |                                               |                          |         |                                                    |       
|                                  | Research and development                      |                          |         | 10,776                                             |       
|                                  | Sales and marketing                           |                          |         | 7,941                                              |       
|                                  | General and administrative, net               |                          |         | 9,306                                              |       
|                                  | Restructuring and impairments                 |                          |         | 2,356                                              |       
|                                  |                                               |                          |         |                                                    |       
|                                  |                                               | Total Operating Expenses |         |                                                    | 30,379
|                                  |                                               |                          |         |                                                    |       
|OPERATING LOSS                    |                                               |                          | (30,944 | )                                                  |       
|FINANCIAL INCOME                  |                                               |                          | 971     |                                                    |       
|FINANCIAL EXPENSES                |                                               |                          | (3,000  | )                                                  |       
|                                  |                                               |                          |         |                                                    |       
|LOSS BEFORE INCOME TAXES          |                                               |                          | (32,973 | )                                                  |       
|INCOME TAXES                      |                                               |                          | 3,034   |                                                    |       
|                                  |                                               |                          |         |                                                    |       
|LOSS FROM CONTINUING OPERATIONS   |                                               |                          | (29,939 | )                                                  |       
|DISCONTINUED OPERATIONS           |                                               |                          |        |                                                    |       
|                                  |                                               |                          |         |                                                    |       
|LOSS FOR THE PERIOD               |                                               | $                        | (29,939 | )                                                  | $     
|                                  |                                               |                          |         |                                                    |       
|LOSS PER SHARE                    |                                               |                          |         |                                                    |       
|Basic and diluted:                |                                               |                          |         |                                                    |       
|                                  | Continuing operations                         |                          | $       | (1.62                                              | )     
|                                  |                                               |                          |         |                                                    |       
|                                  |                                               | $                        | (1.62   | )                                                  | $     
|                                  |                                               |                          |         |                                                    |       
|WEIGHTED AVERAGE NUMBER OF SHARES |                                               |                          |         |                                                    |       
|                                  | Basic and diluted                             |                          |         | 18,516                                             |       
|                                  |                                               |                          |         |                                                    |       

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

F-4

---





Vyyo Inc.        Consolidated Statements of Changes in Stockholders' Equity (Capital Deficiency)        (In thousands of U.S. $, except share data)

|                                                                           |                                                                  | Number
of shares |   | Amount and
additional
paid in
capital |         | Notes
receivable
from
stockholders |   | Accumulated
other
comprehensive
income (loss) |   | Accumulated
deficit |    | Total
stockholders'
equity
(capital
deficiency) |  
|-------------------------------------------------------------------------- | ---------------------------------------------------------------- | ---------------- | - | ------------------------------------- | ------- | ---------------------------------- | - | --------------------------------------------- | - | ------------------- | -- | ----------------------------------------------- | -
|BALANCE AT JANUARY 1, 2006                                                 |                                                                  | 15,721,334       |   | $                                     | 243,314 |                                    | $ | (19                                           | ) |                     |   |                                                 | $
|Loss                                                                       |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|Other comprehensive loss:                                                  |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|                                                                           | Unrealized loss on investments net                               |                  |   |                                       |         |                                    |   |                                               |   |                     |    | (3                                              | )
|                                                                           | Reclassification of realized gain included in net loss           |                  |   |                                       |         |                                    |   |                                               |   |                     |    | (42                                             | )
|                                                                           | Other-than-temporary impairment in available-for-sale securities |                  |   |                                       |         |                                    |   |                                               |   |                     |    | 42                                              |  
|                                                                           |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|Comprehensive loss                                                         |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|                                                                           |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|Issuance of common stock upon exercise of options                          |                                                                  | 743,530          |   |                                       | 2,615   |                                    |   |                                               |   |                     |    |                                                 |  
|Issuance of common stock to Goldman, Sachs & Co.                           |                                                                  | 1,353,365        |   |                                       | *7,601  |                                    |   |                                               |   |                     |    |                                                 |  
|Issuance of warrants to Goldman, Sachs & Co.                               |                                                                  |                  |   |                                       | **1,656 |                                    |   |                                               |   |                     |    |                                                 |  
|Issuance of common stock upon exercise of warrants by Goldman, Sachs & Co. |                                                                  | 298,617          |   |                                       | *30     |                                    |   |                                               |   |                     |    |                                                 |  
|Issuance of warrants to financial advisor                                  |                                                                  |                  |   |                                       | *367    |                                    |   |                                               |   |                     |    |                                                 |  
|Issuance of common stock upon exercise of warrants by financial advisor    |                                                                  | 2,185            |   |                                       | (      | )                                  |   |                                               |   |                     |    |                                                 |  
|Stock-based compensation expense                                           |                                                                  |                  |   |                                       | 5,402   |                                    |   |                                               |   |                     |    |                                                 |  
|Cancellation of shares                                                     |                                                                  | (5,000           | ) |                                       | (19     | )                                  |   | 19                                            |   |                     |    |                                                 |  
|                                                                           |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|BALANCE AT DECEMBER 31, 2006                                               |                                                                  | 18,114,031       |   | $                                     | 260,966 |                                    |   |                                              |   | $                   | (3 | )                                               | $
|Loss                                                                       |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|Other comprehensive loss:                                                  |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|Unrealized gain on investments net                                         |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     | 2  |                                                 |  
|                                                                           |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|Comprehensive loss                                                         |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|                                                                           |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|Issuance of common stock upon exercise of options                          |                                                                  | 202,200          |   |                                       | 748     |                                    |   |                                               |   |                     |    |                                                 |  
|Stock-based compensation expense                                           |                                                                  |                  |   |                                       | 886     |                                    |   |                                               |   |                     |    |                                                 |  
|                                                                           |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|BALANCE AT MARCH 31, 2007 (Transition Period)                              |                                                                  | 18,316,231       |   | $                                     | 262,600 |                                    |   |                                              |   | $                   | (1 | )                                               | $
|Loss                                                                       |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|Other comprehensive loss:                                                  |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|Unrealized gain on investments net                                         |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     | 1  |                                                 |  
|                                                                           |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|Comprehensive loss                                                         |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|                                                                           |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|Issuance of common stock upon exercise of options                          |                                                                  | 383,781          |   |                                       | 1,653   |                                    |   |                                               |   |                     |    |                                                 |  
|Stock-based compensation expense                                           |                                                                  |                  |   |                                       | 5,103   |                                    |   |                                               |   |                     |    |                                                 |  
|                                                                           |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  
|BALANCE AT MARCH 31, 2008                                                  |                                                                  | 18,700,012       |   | $                                     | 269,356 |                                    |   |                                              |   |                     |   |                                                 | $
|                                                                           |                                                                  |                  |   |                                       |         |                                    |   |                                               |   |                     |    |                                                 |  

---

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

F-5

---





Vyyo Inc.        Consolidated Statements of Cash Flows        (In thousands of U.S. $)

|                                                                       |                                                                                                                        | Year Ended |         | Three-Month
Transition
Period Ended
March 31,
2007 |  
|---------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | ---------- | ------- | -------------------------------------------------- | -
|
|CASH FLOWS FROM OPERATING ACTIVITIES                                   |                                                                                                                        |            |         |                                                    |  
|Loss                                                                   |                                                                                                                        | $          | (29,939 | )                                                  | $
|Adjustments to reconcile loss to net cash used in operating activities |                                                                                                                        |            |         |                                                    |  
|                                                                       | Income and expenses not involving cash flows                                                                           |            |         |                                                    |  
|                                                                       | Depreciation                                                                                                           |            |         | 817                                                |  
|                                                                       | Amortization                                                                                                           |            |         | 222                                                |  
|                                                                       | Accretion and amortization of financing instruments, net                                                               |            |         | 1,129                                              |  
|                                                                       | Write-down of inventories and non-cancelable purchase commitments                                                      |            |         | 1,250                                              |  
|                                                                       | Stock-based compensation, net                                                                                          |            |         | 5,103                                              |  
|                                                                       | Capital gain on sale of property and equipment                                                                         |            |         | (22                                                | )
|Decrease (increase) in assets and liabilities                          |                                                                                                                        |            |         |                                                    |  
|                                                                       | Accounts receivable, related party                                                                                     |            |         |                                                   |  
|                                                                       | Accounts receivable, other                                                                                             |            |         | (85                                                | )
|                                                                       | Other current assets                                                                                                   |            |         | (285                                               | )
|                                                                       | Inventory                                                                                                              |            |         | (931                                               | )
|                                                                       | Accounts payable                                                                                                       |            |         | (717                                               | )
|                                                                       | Accrued liabilities                                                                                                    |            |         | (3,683                                             | )
|                                                                       | Accrued restructuring charges                                                                                          |            |         | 1,282                                              |  
|                                                                       | Deferred revenues, related party                                                                                       |            |         | (333                                               | )
|                                                                       | Liability for employee rights upon retirement                                                                          |            |         | 112                                                |  
|                                                                       |                                                                                                                        |            |         |                                                    |  
|Net cash used in operating activities                                  |                                                                                                                        |            | (26,080 | )                                                  |  
|                                                                       |                                                                                                                        |            |         |                                                    |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                   |                                                                                                                        |            |         |                                                    |  
|                                                                       | Purchase of property and equipment                                                                                     |            |         | (440                                               | )
|                                                                       | Proceeds from sale of property and equipment                                                                           |            |         | 89                                                 |  
|                                                                       | Purchase of short-term investments                                                                                     |            |         | (21,581                                            | )
|                                                                       | Proceeds from sales and maturities of short-term investments                                                           |            |         | 27,884                                             |  
|                                                                       | Contributions to severance pay funds                                                                                   |            |         | (206                                               | )
|                                                                       |                                                                                                                        |            |         |                                                    |  
|Net cash provided by (used in) investing activities                    |                                                                                                                        |            | 5,746   |                                                    |  
|                                                                       |                                                                                                                        |            |         |                                                    |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                   |                                                                                                                        |            |         |                                                    |  
|                                                                       | Proceeds from exercise of stock options                                                                                |            |         | 1,653                                              |  
|                                                                       | Proceeds from issuance of common stock, $7,500,000 2006 Note, $10,000,000 2006 Note and warrants, net of issuance cost |            |         |                                                   |  
|                                                                       | Proceeds from issuance of 2007 Goldman Note                                                                            |            |         | (150                                               | )
|                                                                       | Payments of $7,500,000 2006 Note and $10,000,000 2006 Note                                                             |            |         |                                                   |  
|                                                                       |                                                                                                                        |            |         |                                                    |  
|Net cash provided by financing activities                              |                                                                                                                        |            | 1,503   |                                                    |  
|                                                                       |                                                                                                                        |            |         |                                                    |  
|Increase (decrease) in cash and cash equivalents                       |                                                                                                                        |            | (18,831 | )                                                  |  
|Cash and cash equivalents at beginning of period                       |                                                                                                                        |            | 24,134  |                                                    |  
|                                                                       |                                                                                                                        |            |         |                                                    |  
|Cash and cash equivalents at end of period                             |                                                                                                                        | $          | 5,303   |                                                    | $
|                                                                       |                                                                                                                        |            |         |                                                    |  
|Non-Cash Investing and Financing Activities                            |                                                                                                                        |            |         |                                                    |  
|Purchase of property and equipment                                     |                                                                                                                        |            |        |                                                    | $
|                                                                       |                                                                                                                        |            |         |                                                    |  
|Cancellation of shares                                                 |                                                                                                                        |            |        |                                                    | $
|                                                                       |                                                                                                                        |            |         |                                                    |  
|Supplemental Disclosure of Cash Flow Information                       |                                                                                                                        |            |         |                                                    |  
|Cash paid for taxes                                                    |                                                                                                                        | $          | 23      |                                                    | $
|                                                                       |                                                                                                                        |            |         |                                                    |  
|Cash paid for interest                                                 |                                                                                                                        | $          | 1,473   |                                                    | $
|                                                                       |                                                                                                                        |            |         |                                                    |  

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

F-6

---





Vyyo Inc.        Notes to Consolidated Financial Statements

1. General; Significant Accounting Policies

1a. General

Organization

Vyyo Inc. and its wholly-owned subsidiaries (the "Company") provide extended bandwidth solutions for cable system operators. The Company's
UltraBand® spectrum overlay technology expands cable operators' typical hybrid-fiber coax ("HFC") network capacity in the "last mile" by up to two times in the downstream and up to four
times in the upstream. The Company's results also include operations of Xtend Networks Ltd., an Israeli company, and its wholly-owned, United States-based subsidiary, Xtend Networks Inc.
(collectively, "Xtend"). Vyyo Inc. was incorporated in Delaware in 1996.

Since
the acquisition of Xtend in 2004, the Company had operated in two segments: the cable solutions segment and the wireless solutions segment. Beginning in 2007, the Company announced
that its primary focus and dedication of resources was in its cable solutions segment. In July 2007, the Company implemented a cost reduction program that reduced its workforce, including workforce in
its wireless solutions segment. In the three months ended March 31, 2008, the Company simplified its structure by further streamlining its corporate organization and reducing operating costs to
better address market needs and revenue opportunities in the cable market. As part of this restructure plan, the Company ceased the marketing and support efforts for its wireless solutions segment in
March 2008, and it has no current wireless operations. However, the Company still has limited involvement with this business as discussed in note 4.

Change in Fiscal Year End

Effective December 3, 2007, the Company changed its fiscal year end from December 31 to March 31. Reference to a particular fiscal year means
the period beginning April 1 and ending March 31 of the stated year.

Liquidity and Capital Resources

The Company's consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has experienced a significant loss from operations since its incorporation. For the year
ended March 31, 2008, the Company incurred a net loss of $29,939,000 and had an accumulated deficit of $305,554,000. Additionally, the Company has current liabilities of approximately
$13,800,000 and current assets of approximately $14,800,000. The Company also has substantial long-term liabilities of $38,300,000. These matters raise substantial doubt about the ability
of the Company to continue as a going concern. The Company's ability to continue as a going concern will depend upon its ability to raise additional capital or attain profitable operations. In
addition, the Company continues to seek to expand its revenue base by adding new customers. Failure to secure additional capital or to expand its revenue base to achieve profitability, would likely
result in the Company depleting its available funds and not being able to pay its obligations when they become due. The accompanying 2008 fiscal annual Consolidated Financial Statements do not include
any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result if the Company is unable to
continue as a going concern.

F-7

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

The
Company received $4,500,000 of additional cash on June 13, 2008 from a financing of $41,000,000, which included $38,000,000 from Goldman and $3,000,000 from Syntek. The
remaining $36,500,000 were used to payoff existing debt and interest. The cash available for general corporate purposes from the financing was approximately $4,000,000 after interest payments and debt
issuance costs. Management currently expects this cash to fund the Company through September 2008. The Company intends to seek additional debt or equity financing. There is no assurance that the
Company will be able to secure additional funding. If the Company is unable to secure additional funding, the Company will not be able to continue as a going concern.

2008 Restructuring Plan

In January 2008, the Company began to implement a significant restructuring plan intended to enhance its competitive position and lower its overall cost
structure. Key initiatives of the restructure plan included termination of approximately 100 employees, (out of 122 employees), including research and development, sales and administrative employees,
the closing and consolidation of facilities and the write-down of certain assets.

The
Company completed its restructuring plan in June 2008. The charges associated with the restructuring plan include $222,000 of asset impairments and $2,102,000 related to workforce
reduction. These charges were recorded as restructuring charges among operating expenses. The following table summarizes the status of the restructuring provision:

|                      |       | Accrual balance
at March 31,
2007 |   | Restructuring
expenses |       | Write Off |   | Payment |      | Accrual balance
at March 31,
2008
|--------------------- | ----- | --------------------------------- | - | ---------------------- | ----- | --------- | - | ------- | ---- | ---------------------------------
|
|Cost relating to:     |       |                                   |   |                        |       |           |   |         |      |                                  
|Workforce reduction   |       |                                  |   | $                      | 2,102 |           |   |        |      | $                                
|Fixed asset write-off |       |                                  |   |                        | 222   |           | $ | (222    | )    |                                  
|Other expenses        |       |                                  |   |                        | 32    |           |   |        |      |                                  
|                      |       |                                   |   |                        |       |           |   |         |      |                                  
|                      | Total |                                   |  |                        | $     | 2,356     |   | $       | (222 | )                                
|                      |       |                                   |   |                        |       |           |   |         |      |                                  

As
of March 31, 2008, approximately 70 employees had left the Company under the restructuring plan. The remaining provision will be primarily utilized during fiscal 2008, as
severance payments, some of which are paid on a monthly basis, are completed.

2007 Cost Reduction Program

On July 23, 2007, the Company implemented a cost reduction program that reduced its workforce by approximately 16% (when compared to the workforce levels
as of June 30, 2007). The Company recorded approximately $400,000 in a one-time cash severance payment and related expenses. This cost reduction did not require the termination of
any contractual obligations or require the Company to incur other material associated costs.

Notice of De-listing

The Company's shares of common stock were de-listed from The Nasdaq Global Market effective April 21, 2008 due to our failure to maintain
minimum capitalization requirements in accordance with

F-8

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

Nasdaq
Marketplace Rules. Since that time, the Company's common stock has been quoted on the OTC Bulletin Board and, currently, the Pink Sheets. Securities traded in
over-the-counter markets are, for the most part, thinly traded and generally are not subject to the level of regulation imposed on securities listed or traded on Nasdaq or
other national securities exchanges. As a result, an investor may find it difficult to dispose of the Company's common stock or to obtain accurate quotations as to its price.

Periodic Reporting

On April 24, 2008, the Company filed Form 15 certifying that its common stock was held by 300 or fewer record holders as of the beginning of the
fiscal year. This action suspended the Company's reporting obligations under the Securities Exchange Act of 1934. The Company does not intend to continue to file periodic reports on
Forms 8-K, 10-Q and 10-K.

Financings

On June 13, 2008, the Company closed a financing of $38,000,000 from Goldman and a financing of $3,000,000 from Syntek. See note 17.

On
March 28, 2007, the Company closed the private placement (the "2007 Financing") of a convertible note with Goldman, Sachs & Co. (an affiliate of Goldman) in
exchange for $35,000,000 (the "2007 Goldman Note"), which included $17,500,000 of new funding and $17,500,000 of which the Company used to pay off the $10,000,000 10% Convertible Note (the
"$10,000,000 2006 Note") and $7,500,000 9.5% Senior Secured Note (the "$7,500,000 2006 Note") issued to Goldman, Sachs & Co. in March 2006 as described below. The 2007 Financing resulted
in net proceeds to the Company of approximately $17,350,000. See note 10.

Risk Factors and Concentrations

The Company is subject to various risks in the cable market, including dependence on key customers and key individuals, competition from substitute products and
larger companies and the continued development and marketing of its solutions.

Financial
instruments that subject the Company to credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments and accounts receivable.
The Company invests cash equivalents and short-term investments through high-quality financial institutions. The Company's sales are concentrated among a small numbers of
customers. The Company performs ongoing credit evaluations of its customers and provides reserves for estimated credit losses based on the

F-9

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

circumstances
of a specific debt for which collection may be doubtful. The allowance for doubtful accounts as of March 31, 2008, March 31, 2007 and December 31, 2006 is as
follows:

Year Ended
March 31,
2008

Three-Month
Transition
Period Ended
March 31,
2007

Year Ended
December 31,
2006(In thousands of U.S. $)Balance at beginning of the period

$
200,000

$
200,000

$
200,000Deductions from reserves


(200,000
)




Balance at end of the period




$
200,000

$
200,000


A
relatively small number of customers account for a large percentage of the Company's revenues. The Company expects that it will continue to depend on a limited number of customers for
a substantial portion of its revenues in future periods. The loss of a major customer could seriously harm the Company's ability to sustain revenue levels, which would seriously harm operating
results.

The
Company currently has relationships with a limited number of manufacturing suppliers. These relationships may be terminated by either party with little or no notice. If the
manufacturers are unable or unwilling to continue manufacturing the Company's solutions in required volumes, the Company would have to identify qualified alternative suppliers, which would result in
delays causing results of operations to suffer. The Company's limited experience with these manufacturers and lack of visibility as to the manufacturing capabilities of these manufacturers if the
Company's volume requirements significantly increase, does not provide it with a reliable basis on which to project its ability to meet delivery schedules, yield targets or costs. If the Company is
required to find alternative manufacturing sources, it may not be able to satisfy its production requirements at acceptable prices and on a timely basis, if at all. Any significant interruption in
supply would affect the allocation of systems to customers, which in turn could seriously harm the Company's business.

1b. Significant Accounting Policies

Accounting Principles

The Company has prepared the consolidated financial statements in accordance with generally accepted accounting principles in the United States
("US GAAP").

Use of Estimates in the Preparation of Financial Statements

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

On
an on-going basis, management evaluates its estimates, judgments and assumptions. Management bases its estimates, judgments and assumptions on historical experience and on
various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are
not readily

F-10

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

apparent
from other sources. Actual results could differ from these estimates, judgments and assumptions.

Foreign Currency Transactions

The United States dollar is the functional currency for the Company and all of its subsidiaries and all of its sales are made in United States dollars. In
addition, a substantial portion of the costs of the Company's foreign subsidiaries are incurred in United States dollars. Since the United States dollar is the primary currency in the economic
environment in which the Company and its foreign subsidiaries operate, monetary accounts maintained in currencies other than the United States dollar (principally cash and liabilities) are remeasured
into United States dollars using the representative foreign exchange rate at the balance sheet date. Operational accounts and nonmonetary balance sheet accounts are measured and recorded at the rate
in effect at the date of the transaction. The effects of foreign currency remeasurement are reported in current operations in the Statements of Operations as part of "Financial Income" and "Financial
Expense."

Principles of Consolidation

The Company's fiscal 2008 annual Consolidated Financial Statements include the accounts of Vyyo Inc. and its wholly-owned subsidiaries. All material
inter-company balances and transactions have been eliminated in consolidation.

Investments in Marketable Securities

The Company has designated its investments in debt securities as available-for-sale pursuant to Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Available-for-sale securities are carried at fair value, which is
determined based upon the quoted market prices of the securities, with unrealized gains and losses reported in "Accumulated other comprehensive loss," in the Balance Sheets, a component of
stockholders' equity (capital deficiency), until realized. Realized gains and losses and declines in value judged to be other-than-temporary on
available-for-sale securities are included in the Statements of Operations as part of "Financial Expenses." The Company views its available-for-sale
portfolio as available for use in its current operations. Accordingly, the Company has classified all investments as short-term in the Balance Sheets under "Short-term
investments," even though the stated maturity date may be one year or more from the current balance sheet date.

The
Company recognizes an impairment charge when the decline in the fair values of these investments below their cost basis is deemed to be other-than-temporary.
The Company considers various factors in determining whether to recognize an impairment charge, including the length of time and the extent to which the fair value has been below the cost basis, the
current financial condition of the investee and the Company's intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. The
Company recognized an other-than-temporary impairment in its available-for-sale securities of $0, $0 and $42,0000 for the year ended March 31,
2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively. The Company recognized realized gains of $0, $0, and $42,000 for the year
ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively

F-11

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

Cash Equivalents

Cash equivalents are short-term, highly-liquid investments and deposits that have original maturities of three months or less at time of investment
and that are readily convertible to cash.

Inventory

Inventories are stated at the lower of cost or market, computed using the moving average basis and include material and labor. The Company regularly monitors
inventory quantities on hand and records a provision for excess and obsolete inventories based primarily on its forecast of future product demand and production requirements. Although the Company
makes every effort to ensure the accuracy of its forecasts of future product demand, any significant unanticipated changes in demand or technological developments would significantly impact the value
of the inventory and the reported operating results. If actual market conditions are less favorable than the Company's assumptions, additional provisions may be required. The Company's estimates of
future product demand may prove to be inaccurate, in which case the Company may have understated or overstated the provision required for excess and obsolete inventory. In the future, if the inventory
is determined to be overvalued, the Company would be required to recognize such costs in its cost of sales at the time of such determination. If the Company's inventory is determined to be
undervalued, the Company may have overstated its cost of sales in previous periods and would be required to recognize additional operating income only when the undervalued inventory was sold.

The
Company adopted the provisions of FASB Statement No. 151, "Inventory Costs," as of January 1, 2006, which did not have a material effect on its financial statements.
This statement requires that abnormal idle facility expenses be recognized as current-period charges, and that allocation of fixed production overhead costs to inventory be based on normal capacity of
the production facility.

Fair Value of Financial Instruments

The fair value of the financial instruments included in the Company's working capital approximates carrying value.

Debt Issuance Costs

Costs incurred in the issuance of the 2007 Goldman Note in the 2007 Financing consisted of payments to legal advisors in the year ended December 31, 2007.
Costs incurred in the issuance of the $10,000,000 2006 Note and $7,500,000 2006 Note included warrants to purchase shares of the Company's common stock issued to the Company's financial advisor and
cash payments made to legal and financial advisors in the year ended December 31, 2006. In the year ended December 31, 2006, the Company determined the fair value of the warrants based
on the Black-Scholes option-pricing model. Issuance costs are deferred and amortized as a component of interest expense over the period from issuance through the first redemption date.

Extinguishment of Debt

In the 2007 Financing, the Company repaid the $10,000,000 2006 Note and the $7,500,000 2006 Note. The Company accounted for this repayment as "extinguishment of
debt" under Emerging Issues

F-12

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

Task
Force ("EITF") 96-19, "Debtor's Accounting for a Modification or Exchange of Debt Instruments" ("EITF 96-19"). The Company initially recorded the 2007 Goldman Note
at its estimated fair value, and used that amount to determine the debt extinguishment loss of $3,263,000 resulting from recognition of $2,231,000 in unamortized accretion and $1,032,000 in
unamortized issuance expenses related to the $10,000,000 2006 Note and the $7,500,000 Note.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided using the
straight-line method over the estimated useful lives of the assets.

Leasehold
improvements are amortized over the shorter of the lease term or the estimated useful life of the related asset.

Impairment of Long-Lived Assets and Intangible Assets

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), requires that long-lived
assets, including finite intangible assets to be held and used or disposed of by an entity, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be recoverable. Under SFAS 144, if the sum of the expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the
carrying amount, the Company would recognize an impairment loss and would write down the assets to their estimated fair values. See "2008 Restructuring Plan" in note 1a.

Revenue Recognition

Substantially all of our revenues are from sales of the Company's solutions. As of March 31, 2008, the Company's revenues from services were not
significant. The Company's solutions are off-the-shelf products, sold "as is," without further adjustment or installation. When establishing a relationship with a new customer,
the Company also may sell these solutions together as a package, in which case the Company typically ships solutions at the same time to the customer.

The
Company records revenues from sales of products when (a) persuasive evidence of an arrangement exists; (b) delivery has occurred and customer acceptance requirements
have been met, if any, and the Company has no additional obligations; (c) the price is fixed or determinable; and (d) collection of payment is reasonably assured. The Company's standard
sales terms generally do not include customer acceptance provisions. However, if there is a right of return, customer acceptance provision or there is uncertainty about customer acceptance, the
Company defers the associated revenue until it has evidence of customer acceptance.

EITF
No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF 00-21"), addresses when and how an arrangement involving multiple
deliverables should be divided into separate units of accounting. The Company's multiple deliverables arrangements are those arrangements with new customers in which the Company sells its products
together as a package. Because the Company delivers these off-the-shelf products at the same time, the four revenue recognition criteria discussed above are met.

F-13

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

The
Company recognizes revenues related to the exclusivity provisions contained in the equipment purchase agreement with Arcadian Networks, Inc. described in note 4 on a
straight line basis, over the 10-year term of that agreement.

Product Warranty

The Company provides for product warranty costs when it recognizes revenue from sales of its products. The provision is calculated as a percentage of sales based
on historical experience.

Research and Development Costs

Research and development costs are expensed as incurred and consist primarily of personnel, facilities, equipment and supplies for research and development
activities. Grants received from the Office of the Chief Scientist at the Ministry of Industry and Trade in Israel and other research foundations are deducted from research and development expenses as
the related costs are incurred or as the related milestone is met.

Loss Per Share of Common Stock

Basic and diluted loss per share are calculated and presented in accordance with SFAS No. 128 "Earnings Per Share" ("SFAS 128") for all years
presented. All outstanding stock options and shares of restricted stock have been excluded from the calculation of diluted loss per share because all such securities are not dilutive for the presented
years. The total number of shares of common stock related to outstanding options, the $10,000,000 2006 Note, warrants issued in connection with the 2006 Financing and restricted stock excluded from
the calculations of diluted loss per share were 11,101,084, 10,118,466 and 7,065,009 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the
year ended December 31, 2006, respectively.

Comprehensive Income (Loss)

SFAS No. 130, "Reporting Comprehensive Income" ("SFAS 130"), establishes standards for the reporting and presentation of comprehensive income, its
components and accumulated balances in a full set of general purpose financial statements. The Company's components of comprehensive income (loss), in addition to the loss for the year, include net
unrealized gains or losses on investments classified as available for sale.

Employee Stock-Based Compensation

Effective January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), "Share-based Payment" ("SFAS 123(R)"). SFAS 123(R)
requires that awards classified as equity awards be accounted for using the grant-date fair value method. The fair value of stock options is determined based on the number of shares
granted and the price of the Company's common stock, and determined based on the Black-Scholes, Monte Carlo and the binomial option-pricing models, net of estimated forfeitures. The Company estimates
forfeitures based on historical experience and anticipated future conditions.
The Company uses the Monte Carlo valuation model only for stock options granted to executives in 2005, 2006 and repriced in 2008 where vesting is subject to specific stock price performance.

F-14

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

The
Company recognizes compensation cost for options granted with service conditions that have graded vesting schedules using the graded vesting attribution method.

The
Company adopted the modified prospective transition method permitted by SFAS 123(R). Under this transition method, the Company implemented SFAS 123(R) as of the first
quarter of 2006 with no restatement of prior periods. The valuation provisions of SFAS 123(R) apply to new awards and to awards modified, repurchased or cancelled after January 1, 2006.
Additionally, the Company recognizes compensation cost over the remaining service period for the portion of awards for which the requisite service has not been rendered using the
grant-date fair value of those awards as calculated for pro forma disclosure purposes under SFAS 123 "Accounting for Stock-Based Compensation."

The
Company accounts for equity instruments issued to third party service providers (non-employees) in accordance with the fair value of the instruments based on an
option-pricing model, pursuant to the guidance in EITF 96-18 "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling
Goods or Services." The Company revalues the fair value of the options granted over the related service periods and recognizes the value over the vesting period using the Black-Scholes model.

The
fair value of each stock option granted during the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended
December 31, 2006 respectively, was estimated at the grant date using different valuation models such as Black-Scholes, Monte Carlo (for stock options whose vesting is based on market
conditions, granted in 2005, 2006 and repriced in 2008) and the binomial option-pricing models, using the following assumptions:

|                                         |                                      | Year Ended |             | Three-Month
Transition
Period Ended
March 31,
2007
|---------------------------------------- | ------------------------------------ | ---------- | ----------- | --------------------------------------------------
|
|Black-Scholes model assumptions:         |                                      |            |             |                                                   
|                                         | Risk-free interest rates ranges      |            | 2.46%-5.03% |                                                   
|                                         | Weighted-average expected life       |            | 4.11-9.89   |                                                   
|                                         | Volatility ranges                    |            | 0.62-0.86   |                                                   
|                                         | Dividend yields                      |            |            |                                                   
|Monte Carlo valuation model assumptions: |                                      |            |             |                                                   
|                                         | Risk-free interest rates ranges      |            | 1.65%-3.22% |                                                   
|                                         | Weighted-average expected life range |            | 2.04-7.94   |                                                   
|                                         | Volatility ranges                    |            | 64.77-81.41 |                                                   
|                                         | Dividend yields                      |            |            |                                                   
|Binomial valuation model assumptions:    |                                      |            |             |                                                   
|                                         | Risk-free interest rates ranges      |            | 1.66%-5.10% |                                                   
|                                         | Weighted-average expected life range |            | 0.59-8.64   |                                                   
|                                         | Volatility ranges                    |            | 0.26-0.99   |                                                   
|                                         | Dividend yields                      |            |            |                                                   

The
expected volatility is based on the historical volatility of the Company's stock. The risk-free interest rate assumption is based on observed interest rates appropriate
for the expected term of the respective stock option grant. The expected term is based on the Company's history of stock option

F-15

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

exercises.
The dividend yield assumption reflects the expected dividend. Pre-vesting forfeiture rates were estimated based on pre-vesting forfeiture experience.

The
Company accounts for equity instruments issued to third party service providers (non-employees) in accordance with the fair value based on an option-pricing model,
pursuant to the guidance in EITF 96-18 "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services."
The fair value of the options granted is revalued over the related service periods and recognized over the vesting period.

Taxes on Income

Deferred income taxes are determined utilizing the asset and liability method, based on the estimated future differences between the financial accounting and tax
basis of assets and liabilities under the applicable tax laws. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the
assets will not be realized. See also note 13.

Taxes
that would apply in the event of disposal of investment in a subsidiary have not been taken into account when computing deferred taxes, as if the Company intended to hold this
investment and has not realized it.

As
of January 1, 2007, the Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement
No. 109" ("FIN 48") which clarifies the accounting for uncertainty in income taxes recognized in the Company's consolidated financial statements. FIN 48 requires that a position
taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e., a likelihood of more than 50%) that the position would be
sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.
Upon adoption, the Company did not have any material unrecognized tax benefits. As of March 31, 2008, the Company does not have any material unrecognized tax benefits.

The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as components of interest expense and other expense, respectively, in arriving at pretax
income. The
Company did not have any interest and penalties accrued upon the adoption of FIN 48, and, as of March 31, 2008, the Company does not have any interest and penalties accrued related to
unrecognized tax benefits.

A
summary of open tax years by major jurisdiction is presented below:

Jurisdiction:

Years:Israel

2004-2007United States

2005-2007


According
to federal statute, the Company's United States tax returns for the years ended December 31, 2005, 2006 and 2007 remain open to examination by the Internal Revenue
Service. Most state taxing authorities follow the federal statute of three years.

F-16

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

Reclassifications

Certain comparative figures have been reclassified to conform to the current year presentation.

Recent Accounting Pronouncements

In March 2008, FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement
No. 133" ("SFAS 161"). SFAS 161 requires enhanced disclosures regarding derivatives and hedging activities, including: (a) the manner in which a company uses derivative
instruments; (b) the manner in which derivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities;"
and (c) the effect of derivative instruments and related hedged items on a company's financial position, financial performance and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is evaluating the impact, if any, that adoption of SFAS 161 will have on its
financial statements.

In
December 2007, the SEC issued Staff Accounting Bulletin No. 110 ("SAB 110"), relating to the use of a "simplified" method in developing an estimate of the expected term
of "plain vanilla" share options. SAB 107 previously allowed the use of the simplified method until December 31, 2007. SAB 110 permits the extension, under certain circumstances,
of the use of the simplified method beyond December 31, 2007. The Company believes that the adoption of SAB 110 will not have a material impact on its consolidated financial statements.

In
December 2007, FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141(R)"), which changes the accounting for business combinations. Under
SFAS 141(R), an acquirer will be required to recognize all of the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited
exceptions. SFAS 141(R) will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141(R) will impact the Company
in the event of any future acquisition.

In
December 2007, FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statementsan amendment of Accounting Research Bulletin
No. 51" ("SFAS 160"). SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.
SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. The Company does not believe that SFAS 160 will have a material impact on its consolidated
financial statements.

In
February 2007, FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits companies to choose to
measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159
will be effective for the Company during the fiscal year ending March 31, 2009. The Company is currently evaluating the impact that adoption of SFAS 159 would have on its consolidated
financial statements.

In
September 2006, FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework and gives guidance
regarding the methods used

F-17

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

1. General; Significant Accounting Policies (Continued)

for
measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Subsequent to the issuance of SFAS 157, FASB issued FASB Staff Positions 157-1, "Application of FASB Statement No. 157
to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13"
("FSP 157-1") and FSP 157-2 "Effective Date of FASB Statement No. 157" ("FSP 157-2"). FSP 157-1 excludes, in certain
circumstances, SFAS 13 and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under Statement 13 from the provision
of SFAS 157. FSP 157-2 delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually),to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company is
currently assessing the impact that SFAS 157 will have on its consolidated financial statements.

2. Short-Term Investments

The fair value of available-for-sale securities are as follows:

March 31,
2008

March 31,
2007

December 31,
2006Due in one year or less including money market(In thousands of U.S. $)Corporate debts securities and municipal securities




$
6,677

$
10,930Bank deposits

$
718


343


342$
718

$
7,020

$
11,272


The
Company recognizes an impairment charge when the decline in the fair values of these investments below their cost basis is deemed to be other-than-temporary. The Company considers
various factors in determining whether to recognize an impairment charge, including the length of time and the extent to which the fair value has been below the cost basis, the current financial
condition of the investee and the Company's intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. The Company recognized an
other-than-temporary impairment in its available-for-sale securities of $0, $0 and $42,0000 for the year ended March 31, 2008, the three-month transition period ended
March 31, 2007 and the year ended December 31, 2006, respectively. The Company recognized realized gains (losses) of $0, $0 and $42,000

F-18

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

2. Short-Term Investments (Continued)

for
the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively.

|                                                   |  | March 31, 2008 |     | March 31, 2007 |   | December 31, 2006
|-------------------------------------------------- |  | -------------- | --- | -------------- | - | -----------------
|
|
|Corporate debt securities and municipal securities |  |                |    |                |   |                 
|Bank deposits                                      |  | $              | 718 |                | $ |                 
|                                                   |  |                |     |                |   |                  
|                                                   |  | $              | 718 |                | $ |                 
|                                                   |  |                |     |                |   |                  

3. Inventory

In accordance with its inventory evaluation policy and procedures, the Company recognized inventory and purchase commitment write-downs of $1,250,000, $0 and
$514,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively. The Company took these
write-downs to account of excess inventory resulting from a slower than expected sales cycle and the Company's increased focus on providing solutions to cable customers while ceasing sales efforts to
wireless customers. The purchase commitment provision results from the Company's contractual obligation to order or build inventory in advance of anticipated sales.

The
Company charged the write-down to cost of revenues. Revenues in the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and
the year ended December 31, 2006 did not include any inventory previously written-down to $0. During the year ended December 31, 2006, the Company received reimbursement of
$901,000 from its insurance company for inventory damaged in a flood in its Israeli facilities. For the year ended December 31, 2006, $710,000 of this reimbursement was recorded against "Cost
of Revenues" and $191,000 as part of "General and administrative, net."

Inventory
was comprised of the following:

March 31,
2008

March 31,
2007

December 31,
2006(In thousands of U.S. $)Raw materials




$
421

$
395Work in process





455


445Finished goods

$
2,001


1,444


1,522$
2,001

$
2,320

$
2,362


For
information on the Company's policy regarding the write-down of inventory, see note 1.

4. Agreement with Arcadian Networks, Inc.Related Party

On March 31, 2006, the Company entered into an Equipment Purchase Agreement (the "ANI Agreement") with Arcadian Networks, Inc. ("ANI"). Davidi Gilo,
the Company's chairman of the board

F-19

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

4. Agreement with Arcadian Networks, Inc.Related Party (Continued)

of
directors and former chief executive officer, is also the chairman of the board of directors of ANI and the sole member of the limited liability company that is the general partner of a major
stockholder of ANI. Avraham Fischer, a director of the Company, is co-chief executive officer and a director of Clal Industries and Investments, Ltd., which invested $20,000,000 in
ANI in August 2006. Goldman, Sachs & Co., an affiliate of a major stockholder in the Company and holder of the 2008 Goldman Note, is a stockholder of ANI.

Pursuant
to the ANI Agreement, the Company sold certain of its wireless solutions and services to ANI over a 10-year term. The ANI Agreement fixes the product prices for the
first two years, after which time prices are subject to adjustment according to the amount of product purchased by ANI compared to specified forecasted purchase amounts.

The
ANI Agreement provided that the Company would distribute its products to ANI on an exclusive basis in the United States, Canada and the Gulf of Mexico to identified markets if:
(a) ANI made two non-refundable payments of $4,000,000 during each of the first two years of the ANI Agreement; (b) ANI met specified annual minimum product purchase amounts;
and (c) ANI's outstanding balances were below specified amounts. The Company received an initial purchase order for $10,000,000 on March 31, 2006 (related to products to be purchased in
the first year of the ANI Agreement) and the first exclusivity payment of $4,000,000 on April 3, 2006, which satisfied ANI's requirements for exclusivity in the first year of the ANI Agreement.
As of March 31, 2008, the Company does not expect to receive the second $4,000,000 exclusivity payment. In March 2008, the Company ceased operations related to its wireless business, including
the termination of all employees dedicated to that business. The Company has entered into a leasing agreement with ANI for the rental of test equipment related to wireless solutions. Notwithstanding
this leasing agreement, the Company continues to own all of our intellectual property, including patents and patent applications, related to its wireless solutions. The ANI Agreement was not
terminated; therefore the Company continues to have limited involvement in the wireless business.

The
Company recognized revenue of $4,561,000, $161,000 and $6,721,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year
ended December 31, 2006, respectively, under the ANI Agreement. The revenue included income related to the exclusivity payment of $400,000, $100,000 and $300,000 respectively, and product
maintenance of $306,000, $61,000 and $103,000 for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006,
respectively. The Company will recognize the exclusivity payments from ANI over the 10-year term of the ANI Agreement.

As
of March 31, 2008, ANI did not have an outstanding accounts receivable balance. The Company had deferred revenues from sales to ANI of $3,346,000 of which $400,000 is
classified as "Current Liabilities" and $2,946,000 is classified as "Long-Term Liabilities" on the Balance Sheets. During the year ended March 31, 2008, a subsidiary of ANI reimbursed the
Company $52,000 for general and administrative and research and development expenses.

5. Restricted Cash

As security for the 2005 Syntek Note, the Company delivered a $5,000,000 irrevocable letter of credit. In connection with this letter of credit, the Company
deposited $5,000,000 with the Israeli Bank and
agreed to restrictions on withdrawal of this amount until the letter of credit is cancelled. See note 7. On April 14, 2008, Syntek drew upon the letter of credit for payment of the
$5,000,000.

F-20

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

6. Property and Equipment, net

Property and equipment consist of the following:

Estimated
useful life

March 31,
2008

March 31,
2007

December 31,
2006(In thousands of U.S. $)Cost:Machinery and equipment

2-5 years

$
2,090

$
4,005

$
3,989Computers

2-3 years


1,255


2,987


2,805Furniture, fixtures and leasehold improvements

2-6 years


801


1,225


1,217Vehicles

7 years





30


564,146


8,247


8,067Accumulated depreciation and amortization




(3,233
)

(6,585
)

(6,391
)Property and equipment, net



$
913

$
1,662

$
1,676


Depreciation
and amortization expenses were $1,039,000 ($222,000 of which related to amortization in connection with the 2008 restructuring plan), $218,000, and $850,000 for the year
ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively.

7. 2005 Syntek Note

On June 30, 2004, the Company acquired all of the outstanding shares of Xtend, an Israeli privately-held company that was a development stage
company at the time. As part of the purchase, the Company delivered a promissory note in the principal amount of $6,500,000 originally payable on March 31, 2007. The Company accounted for the
original promissory note as contingent consideration since it was payable only if the Company was unable to meet certain key provisions. These key provisions were amended on December 16, 2005
as follows (the "2005 Syntek Note"):



F-21

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

7. 2005 Syntek Note (Continued)



As
security for the 2005 Syntek Note, the Company delivered a $5,000,000 irrevocable letter of credit, and deposited $5,000,000 with a bank and agreed to restrictions on withdrawal until
the letter of credit is cancelled. The letter of credit would have been cancelled if, for 45 consecutive trading days, all of the following conditions exist: (a) the weighted average trading
price of the Company's common stock was equal to or higher than $18.00 per share; (b) the average daily trading volume of the Company's common stock was higher than 150,000 shares per day; and
(c) the holder was lawfully able to sell publicly in one transaction or in a series of transactions, during such 45 consecutive trading days, all of its shares of the Company's common stock
without registration under the Securities Act of 1933, as amended.

The
Company determined that, as of the time of the amendment of the 2005 Syntek Note in December 2005 and immediately prior to its amendment, the contingency had been resolved and
therefore the Company recorded $6,500,000 as additional consideration paid in the Xtend acquisition. This resulted in an increase to the intangible assets acquired. Following an impairment test
performed on the intangible assets, the assets were immediately impaired. In addition, the Company estimated the fair value of the amended 2005 Syntek Note at $3,967,000 and recorded this amount in
the Balance Sheets as a long-term liability under "Promissory note."

The
Company recorded $2,533,000, the difference between the value of the amended 2005 Syntek Note and the original promissory note, as "Gain Resulting from Amendment to Promissory Note"
in the Consolidated Statements of Operations for the year ended December 31, 2005. In addition, the Company concluded that the contingent non-payment/cancellation feature that
exists in the 2005 Syntek Note met the criteria in paragraph 12 of SFAS 133 and was considered an embedded derivative instrument. Accordingly, the contingent non-payment
feature is subject to the accounting requirements of SFAS 133 whereby the contingent non-payment feature will be recorded at fair value at each reporting period with the adjustment
to its fair value recorded in the Statements of Operations as "Financial Expenses." The Company has elected to present the embedded derivative on a combined basis with the 2005 Syntek Note due to the
legal right of offset between the two features of the note. The Company recorded expenses of approximately $1,099,000, $323,000 and $1,111,000 for the year ended March 31, 2008, the three-month
transition period ended March 31, 2007 and the year ended December 31, 2006, respectively, resulting from the adjustment of the embedded derivative to its fair value.

F-22

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

7. 2005 Syntek Note (Continued)

As
of March 31, 2008, the Company did not satisfy any cancellation feature described and the amended 2005 Syntek Note of $6,500,000 was recorded in the Balance Sheets as "Current
Liabilities" and became due and payable on such date.

Subsequent
to the year ending March 31, 2008, Syntek drew upon the letter of credit for $5,000,000 which decreased the outstanding principal on the 2005 Syntek Note to $1,500,000.
The Company, by not redeeming the note on March 31, 2008, was in default and began accruing interest on the note. On June 13, 2008, the Company refinanced the remaining balance of the
2005 Syntek Note and paid the accrued interest. See note 17 for a description of the 2008 Financing.

8. Accrued Liabilities

Accrued liabilities consist of the following:

|                                         |  | March 31,
2008 |       | March 31,
2007 |   | December 31,
2006
|---------------------------------------- |  | -------------- | ----- | -------------- | - | -----------------
|
|Withholding tax*                         |  | $              | 535   |                | $ | 3,577            
|Compensation and benefits                |  |                | 1,700 |                |   | 2,185            
|Royalties                                |  |                | 963   |                |   | 950              
|Professional fees                        |  |                | 390   |                |   | 322              
|Deferred rent                            |  |                | 311   |                |   | 361              
|Interest payable to Goldman, Sachs & Co. |  |                | 292   |                |   | 14               
|Warranty**                               |  |                | 166   |                |   | 57               
|Deferred revenues                        |  |                | 49    |                |   | 70               
|Other                                    |  |                | 548   |                |   | 604              
|                                         |  |                |       |                |   |                  
|                                         |  | $              | 4,954 |                | $ | 8,140            
|                                         |  |                |       |                |   |                  

---

F-23

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

8. Accrued Liabilities (Continued)

March 31,
2008

March 31,
2007

December 31,
2006(In thousands of U.S. $)Balance at beginning of period

$
57

$
66

$
104Usage of warranty


(19
)




(59
)Product warranty issued for new sales


229


23


177Changes in accrual in respect of warranty periods ending


(101
)

(32
)

(156
)Balance at end the of period

$
166

$
57

$
66


9. Liability for Employee Rights upon Retirement

Israel.Israeli labor laws and agreements require severance payments upon dismissal of an employee or
upon termination of employment in other circumstances. The severance pay liability of the Company's Israeli subsidiaries, which reflects the undiscounted amount of the liability as if it were payable
at each balance sheet date, is calculated based upon length of service and the latest monthly salary (one month's salary for each year worked). The Company's liability for severance pay required by
Israeli law is covered by deposits with financial institutions and by accrual. The accrued severance pay liability is presented as a long-term liability and a short-term
liability within "Accrued liabilities." The amounts funded are presented separately as "Employee rights upon retirement funded." For certain Israeli employees, the Company's liability is covered
mainly by regular contributions to defined contribution plans which are not reflected in the balance sheets, since they are not under the Company's control and management.

United States.The Company's liability for severance pay includes severance for certain United States
employees of $583,000, $666,000 and $516,000 as of March 31, 2008, March 31, 2007 and December 31, 2006, respectively. As of March 31, 2008, severance pay liability
included $300,000 for Mr. Gilo, the Company's chairman of the board of directors and former chief executive officer.

The
amounts paid related to severance and severance expenses were:

Year Month Ended

Three-Month
Transition
Period Ended
March 31,
2007March 31,
2008

December 31,
2006(In thousands of U.S. $)Amounts paid and contributed related to severance

$
1,016

$
1,037

$
129Severance expenses

$
846

$
1,451

$
310


The
Company expects that payments relating to future benefits payable to employees upon retirement at normal retirement age in the next 10 years will not be material to the
Company's business or results of operation. These payments are determined based on recent salary rates and do not include amounts that might be paid to employees who retire before their normal
retirement age or

F-24

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

9. Liability for Employee Rights upon Retirement (Continued)

who
retire after 2018. For information regarding severance expenses for the 2008 restructuring plan, see note 1a.

10. Financing



For a description of the financing completed on June 13, 2008 resulting in new funding to the Company of $4,500,000, see note 17.



On March 28, 2007, the Company issued the 2007 Goldman Note ($35,000,000 principal; 5% annual interest), initially convertible into 3,500,000 shares of the
Company's common stock to Goldman, Sachs & Co., of which $17,500,000 was used to pay off in full the Company's outstanding $10,000,000 2006 Note and $7,500,000 2006 Note delivered in the
2006 Financing.

The
2007 Goldman Note is convertible at the holder's option into shares of the Company's common stock at a conversion price of $10.00 per share, provided, that in no event may the holder
own of record more than 14.8% of the outstanding shares of the Company's common stock. In the event of a Fundamental Transaction (as defined in the 2007 Goldman Note to include sales of the Company's
assets and certain business combination transactions) the holder may, at its option, require the Company to redeem all or any portion of the 2007 Goldman Note at a price equal to 101% of the principal
amount, plus all accrued and unpaid interest, if any, and, subject to specified conditions, may be entitled to a cash "make-whole" premium, calculated in accordance with the terms of the
2007 Goldman Note.

Under
the Amended and Restated Registration Rights Agreement executed in connection with the 2007 Goldman Note, the Company is required to file a registration statement on
Form S-3 registering the resale of the shares issuable upon conversion of the 2007 Goldman Note for an initial two-year period, subject to extension under specified
circumstances.

The
Company accounted for the issuance of the 2007 Goldman Note (and the resulting repayment of the $10,000,000 2006 Note and the $7,500,000 2006 Note) as extinguishment of debt under
EITF 96-19. As a result of the extinguishment of these notes, the Company recorded $3,263,000 in the Statements of Operations as "Financial Expenses" consisting of $2,231,000 of
unamortized accretion and $1,032,000 of unamortized issuance expenses.

In
accordance with the provisions of EITF 96-19, the Company recorded the 2007 Goldman Note at its fair value, which is estimated at $35,000,000. The 2007 Financing
resulted in estimated net proceeds to the Company of approximately $17,350,000, following payoff in full of the $10,000,000 2006 Note and the $7,500,000 2006 Note and payment of issuance expenses of
approximately $150,000.



In March 2006, the Company closed the private placement of $25,000,000 of common stock, the $10,000,000 2006 Note, the $7,500,000 2006 Note and warrants to
purchase common stock to Goldman, Sachs & Co. In the 2006 Financing, the Company issued (a) 1,353,365 shares of common stock, (b) the $10,000,000 2006 Note ($10,000,000;
10% annual interest), (c) the $7,500,000 2006 Note ($7,500,000

F-25

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

10. Financing (Continued)

principal;
9.5% annual interest), and (d) warrants to purchase 298,617 shares of common stock. The transaction resulted in estimated net proceeds to the Company of approximately $23,400,000.

The
Company allocated the proceeds received in the 2006 Financing to the different instruments based on the relative fair value of each instrument as follows:

Face value

Relative fair
value1,353,365 shares of common stock

$
7,500,000

$
8,260,000$10,000,000 2006 Note


10,000,000


10,111,000$7,500,000 2006 Note


7,500,000


4,830,000Warrants to purchase 298,617 shares of common stock for $0.10 per share





1,799,000Total gross proceeds received in 2006 Financing

$
25,000,000

$
25,000,000


The
estimated issuance costs of the 2006 Financing were approximately $1,993,000 including (a) a $1,210,000 payment and issuance of warrants to purchase 79,559 shares of the
Company's common stock, at exercise prices ranging from $0.10 to $10.00 (at an estimated fair value of $366,000), to the Company's financial advisor and (b) approximately $417,000 for legal and
other professional fees and costs. Of these estimated issuance costs, $806,000 and $385,000 were allocated to the $10,000,000 2006 Note and the $7,500,000 2006 Note, respectively. These costs were
amortized based on the effective interest amortization method through the five-year term until maturity of the notes and recorded as interest expense, based on the effective interest
method of amortization. The issuance costs described above were allocated to the different instruments based on their relative fair values.

As
noted above, the Company repaid in full the $10,000,000 2006 Note and the $7,500,000 2006 Note with proceeds from the 2007 Financing, and the unamortized accretion and unamortized
issuance expenses were extinguished at that time.

Following
the 2006 Financing, Goldman, Sachs & Co. became a related party. See note 15.

11. Commitments and Contingent Liabilities

Operating Leases

The Company leases its facilities and automobiles under cancelable and non-cancelable operating lease agreements. The Company leases its United States
facilities in Georgia and Colorado and its Israeli facilities in Airport City near Tel Aviv. During March 2008, the Company was released from a lease obligation of approximately 25,500 square foot of
its Israeli facilities, which originally ran until April 2011.

F-26

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

11. Commitments and Contingent Liabilities (Continued)

The
future minimum rental payments on a fiscal year basis under the operating leases are as follows:

March 31, 2008(In thousands of U.S. $)2009

$
7182010


6902011


6482012


256$
2,312
*




Rental
expenses under all operating leases were $2,403,000, $495,000 and $2,087,000 for the year ended March 31, 2008, the three-month transition period ended March 31,
2007 and the year ended December 31, 2006, respectively.

Purchase Obligations

As of March 31, 2008, the Company had purchase obligations of $2,425,000 which may become payable to the Company's suppliers at various times in the year
ended March 31, 2009 and beyond.

Research Grants

The Office of the Chief Scientist in the Israeli Ministry of Industry and Trade (the "Chief Scientist").The Company's
Israeli subsidiaries have obtained grants from the Chief Scientist of $2,800,000. The technology developed under these grants may not be transferred to any person without the consent of the Chief
Scientist. The grants are repayable to the Chief Scientist generally at the rate of 3% to 5% of the sales of the products developed, up to 100% of the grant received.

Binational Industrial Research and Development Foundation (the "BIRD Foundation").The Company has participated in programs
sponsored by the BIRD Foundation, which funds joint US-Israeli teams in the development of technology products. The Company has received BIRD Foundation grants of $1,700,000 for various
projects. Grants received from the BIRD Foundation must be paid back at the rate of 2.5% to 5% of revenues from the projects funded, up to a maximum amount equal to 150% of the grants received.

As
of March 31, 2008, the Company repaid or accrued $1,400,000 of these grants. The maximum amount of contingent liability in respect of future royalties is $4,000,000 as of
March 31, 2008. The royalty expenses for the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, were
$100,000, $8,000 and $10,000, respectively.

2005 Syntek Note

As part of the Xtend acquisition, the Company issued the 2005 Syntek Note in the principal amount of $6,500,000, which was secured by the $5,000,000 letter of
credit. Subsequent to the year

F-27

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

11. Commitments and Contingent Liabilities (Continued)

ended
March 31, 2008, Syntek drew upon the letter of credit for $5,000,000 which resulted in an outstanding balance of $1,500,000. See note 7 and note 17.

Guarantees

As of March 31, 2008, the Company issued guarantees of $410,000 which have been pledged by investments in banks and related to lease agreements.

12. Stockholders' Equity

Common Stock Reserved for Issuance

As of March 31, 2008, the Company reserved 349,874 shares of common stock for issuance upon exercise of options and issuance of shares of restricted stock
reserved under the Company's stock-based compensation plans.

Issuance of Common Stock under the Financing Agreement

On March 23, 2006, in connection with the 2006 Financing, the Company issued 1,353,365 shares of common stock. See also note 10.

Warrants

On March 23, 2006 in connection with the 2006 Financing, the Company issued warrants to purchase 298,617 shares of common stock at an exercise price of
$0.10 per share. Goldman, Sachs & Co. exercised these warrants on March 24, 2006. In addition, the Company issued to its financial advisors warrants to purchase 79,559 shares of
the Company's common stock, at exercise prices ranging from $0.10 to $10.00 (at an estimated fair value of $367,000). In December 2006, 2,240 of these warrants were exercised in a cashless exercise in
which the Company issued 2,185 shares of common stock and returned 55 shares of common stock (which initially had been reserved for issuance) to its reserve of common stock authorized for issuance. A
summary of warrants for the year ended March 31, 2008 (in thousands of United States dollars, except per share data):

A
summary of warrants for the year ended March 31, 2008:

Number
outstanding
(in thousands)

Weighted average
exercise price
in dollars

Weighted average
fair value
in dollarsWarrants:Granted

378

$
1.47

$
5.35Exercised during 2006

(301
)
$
0.10Balance at March 31, 2008

77

$
6.83


Stock Option Plans

The Company has the following stock option plans: the 1999 Employee and Consultant Equity Incentive Plan and the Fourth Amended and Restated 2000 Employee and
Consultant Equity Incentive Plan (the "2000 Plan"). The Company's 1996 Equity Incentive Plan expired by its terms as of

F-28

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stockholders' Equity (Continued)

February 3,
2006. The Company currently makes grants only from the 2000 Plan, which permits the grant of incentive stock options ("ISOs") to employees, nonstatutory stock options to employees,
directors and consultants and stock options which comply with Israeli law if granted to persons who are subject to Israel income tax. The 2000 Plan also provides for the awards of restricted stock and
stock bonuses.

In
2004, the Company's Board of Directors approved an amendment to the terms of the 2000 Plan to comply with Israeli tax legislation that became effective in January 2003.

ISOs
must have an exercise price equal to the fair value of the common stock on the grant date as determined by the Board of Directors. The period within which the option may be
exercised is determined at the time of grant, but may not be longer than 10 years. The number of shares reserved under the 2000 Plan is subject to automatic annual increases on the first day of
each fiscal year, equal to the lesser of 1,500,000 shares or 10% of the number of outstanding shares on the last day of the immediately preceding year.

In
March 2005, the Company granted its chairman of the board of directors and former chief executive officer and certain other employees 630,000 options to purchase shares of its common
stock for $7.50 to $10.50 per share. The options vest and become exercisable if the closing price of the Company's common stock is at or above specified prices for 10 trading days out of any 30
consecutive trading days, so long as the optionee remains an employee of or consultant to the Company on the 10th day of the period. The options expire five years after the grant date, or, if
earlier, 90 days after the optionee is no longer an employee of or consultant to the Company. In the year ended March 31, 2008, the three-month transition period ended March 31,
2007 and the year ended December 31, 2006 the Company recorded expenses of $422,000, $117,000 and $475,000, respectively, related to these stock options, including the expenses related to the
repricing program as describe below.

On
March 21, 2007, the Company granted its new chief executive officer a stock option to purchase 600,000 shares of the Company's common stock subject to standard vesting for new
employees: 25% vest at the one year anniversary of the grant with the remaining vesting in equal monthly installments for the next 36 months. The exercise price of the stock options is $6.31,
the closing price of the Company's common stock on March 21, 2007. All of these options were included under the Company's repricing program as described below.

On
March 4, 2008, the Company approved a repricing program for the outstanding options that it had previously granted to all of its current employees, including executive officers
and its chairman and vice chairman of the board of directors. The exercise price of options, all of which had been previously granted pursuant to the Company's Fourth Amended and Restated 2000
Employee and Consultant Equity Incentive Plan were repriced to $1.40 per share. All other terms of the options, including vesting schedules, term and expiration dates, remain unchanged as a result of
the repricing.

The
repriced options had originally been issued with $3.35 to $8.43 per share option exercise prices, which prices reflected the then current market prices of the Company's common stock
on the dates of the original grants. As a result of the repricing, the Company recorded $600,000 as stock-based compensation expenses.

On
March 5, 2008, the Company granted its chief executive officer 336,000 and other executive officers 560,000 options to purchase shares of its common stock for $1.37 per share.
The options shall vest and become exercisable upon achievement of certain business milestones.

F-29

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stockholders' Equity (Continued)

Grant of Stock Options to Davidi Gilo

On February 10, 2006, the Company's Compensation Committee granted Mr. Gilo options to purchase 900,000 shares of the Company's common stock. These
options vest as follows:



These
options, which all outstanding, were included under the Company's repricing program as described above. The price targets of these options however were not reset to a lower stock
price.

Including
the expenses related to the repricing program, the Company recorded stock-based compensation expenses of $57,000, $0 and $750,000 for the year ended March 31, 2008, the
three-month transition period ended March 31, 2007 and the year ended December 31, 2006, respectively, related to the 300,000 options granted to Mr. Gilo that vested upon the
closing of the 2006 Financing. The Company also recorded stock-based compensation expenses of $234,000, $62,000 and $199,000 for the year ended March 31, 2008, the three-month transition period
ended March 31, 2007 and the year ended December 31, 2006, in connection with the 600,000 stock options granted to Mr. Gilo which vest based
on the closing price of the Company's common stock. These stock-based compensation expenses were determined based on the Monte Carlo valuation method. Of the aggregate 2,075,000 repriced options of
Mr. Gilo, 1,000,000 options have vested.

Restricted Stock

Recipients of shares of restricted stock are entitled to cash dividends, to the extent paid, and to vote their shares throughout the period of restriction. The
value of the shares is the market price on the date of grant. Compensation was amortized ratably over the vesting period. Compensation expenses must be recognized for shares of restricted stock
subject to designated performance criteria if the performance criteria are being attained or it is probable that they will be attained.

In
July 2004, the Company granted a former Xtend employee 146,000 shares of restricted stock, of which 71,000 shares have vested. The remaining 75,000 shares were subject to vesting
based on designated performance criteria which were not obtained. In the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year
December 31, 2006, the Company did not record compensation expenses since it did not achieve the performance conditions related to the remaining restricted stock.

A
summary of stock option plans, shares of restricted stock and related information, under all of the Company's equity incentive plans for the years ended March 31, 2008 and
December 31, 2006 and

F-30

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stockholders' Equity (Continued)

the
three-month transition period ended March 31, 2007 are as follows (in thousands of U.S. $, except per share data):

|                             |  | Options/Shares
available for
Grants |   | Number
outstanding |   | Weighted average
exercise price |      | Weighted average
fair value
|---------------------------- |  | ----------------------------------- | - | ------------------ | - | ------------------------------- | ---- | ---------------------------
|Balance at December 31, 2005 |  | 830                                 |   | 5,585              |   | $                               | 5.35 |                            
|Authorized                   |  | 1,000                               |   |                   |   |                                 |     |                            
|Grant*                       |  | (2,075                              | ) | 2,075              |   |                                 | 5.26 |                            
|Exercised                    |  |                                    |   | (753               | ) |                                 | 3.47 |                            
|Cancelled                    |  | 844                                 |   | (844               | ) |                                 | 6.37 |                            
|Expired plan                 |  | (40                                 | ) |                   |   |                                 |     |                            
|                             |  |                                     |   |                    |   |                                 |      |                            
|Balance at December 31, 2006 |  | 559                                 |   | 6,063              |   | $                               | 5.41 |                            
|Authorized                   |  | 1,000                               |   |                   |   |                                 |     |                            
|Grant*                       |  | (1,130                              | ) | 1,130              |   |                                 | 5.86 |                            
|Exercised                    |  |                                    |   | (278               | ) |                                 | 4.82 |                            
|Cancelled                    |  | 299                                 |   | (299               | ) |                                 | 6.53 |                            
|                             |  |                                     |   |                    |   |                                 |      |                            
|Balance at March 31, 2007    |  | 728                                 |   | 6,616              |   | $                               | 5.46 |                            
|Authorized                   |  | 1,000                               |   |                   |   |                                 |     |                            
|Grant*, **                   |  | (6,836                              | ) | 6,836              |   |                                 | 2.47 |                            
|Exercised                    |  |                                    |   | (298               | ) |                                 | 3.56 |                            
|Cancelled**                  |  | 5,458                               |   | (5,458             | ) |                                 | 5.83 |                            
|                             |  |                                     |   |                    |   |                                 |      |                            
|Balance at March 31, 2008    |  | 350                                 |   | 7,696              |   | $                               | 2.61 |                            
|                             |  |                                     |   |                    |   |                                 |      |                            

---

F-31

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stockholders' Equity (Continued)

Stock Option Plans Details

The following table summarizes information concerning outstanding and exercisable options under stock option plans as of March 31, 2008:

|             |  | Options outstanding |  | Options exercisable
|------------ |  | ------------------- |  | -------------------
|
|
|Fixed Plans: |  |                     |  |                    
|0.10         |  | 53                  |  | $                  
|0.99-1.40    |  | 5,437               |  |                    
|2.27-3.40    |  | 436                 |  |                    
|3.92-5.86    |  | 751                 |  |                    
|6.22-9.00    |  | 983                 |  |                    
|9.60-10.50   |  | 36                  |  |                    
|             |  |                     |  |                    
|             |  | 7,696               |  | $                  
|             |  |                     |  |                    

The
number of options exercisable as of March 31, 2008, March 31, 2007 and December 31, 2006 was 3,559,000, 3,005,000 and 3,111,000, respectively.

The
aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the Company's stock price of $0.41 as of March 31, 2008, less
the weighted average exercise price per range. This presents the total amount receivable by the option holders exercised their options as of that date. The total number of
in-the-money options exercisable as of March 31, 2008 was 52,500.

The
total intrinsic value of options exercised during the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended
December 31, 2006 was $691,000, $589,000 and 2,394,000 respectively.

Expenses
related to stock-based compensation are included in the following line items in the Statements of Operations:

Year Ended

Three-Month
Transition
Period Ended
March 31,
2007March 31,
2008

December 31,
2006(In thousands of U.S. $)Cost of products sold

$
32

$
83

$
18Research and development

$
440

$
820

$
130Selling and marketing

$
1,768

$
1,543

$
291General and administrative

$
2,863

$
2,956

$
447


F-32

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

13. Income Taxes

U.S. Income Taxes

Due to the Company's loss provision, there is no federal or material state income tax expense. Foreign withholding taxes of ($3,034,000), $250,000 and $802,000
have been provided and recorded in provision for income tax expenses for the year ended March 31, 2008, the three-month transition period March 31, 2007 and the year ended
December 31, 2006 and, respectively.

The
tax provision for income taxes differs from the amounts computed by applying the combined rate of statutory federal income tax and state tax of approximately 40% to income before
income taxes. The source and tax effects of the differences are as follows:

Year Ended

Three-Month
Transition
Period Ended
March 31,
2007March 31,
2008

December 31,
2006Current:Federal








State








Foreign

$
(3,034
)
$
802

$
250Total Current

$
(3,034
)
$
802

$
250Deferred:Federal








State








Foreign








Total deferred








Total

$
(3,034
)
$
802

$
250At statutory rate

$
(11,210
)
$
(9,759
)
$
(3,668
)State taxes


(1,912
)

(1,665
)

(626
)Net operating losses not recognized


12,727


10,405


2,752Non-deductible expenses related to debt restructuring








1,334Promissory note





442


129Non-deductible stock compensation


362


390


71Foreign withholding taxes


(3,034
)

802


250Other


33


187


8Total*

$
(3,034
)
$
802

$
250




As
of March 31, 2008, the Company had United States federal net operating loss carryforwards of approximately $94,148,000 which will expire between 2011 through 2028 and state net
operating losses of approximately $75,046,000 which will expire between 2008 through 2018. The utilization of net operating loss carryforwards may be subject to substantial annual limitations if there
has been a significant "change in ownership." Such a "change in ownership,"' as described in Section 382 of the

F-33

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

13. Income Taxes (Continued)

Internal
Revenue Code, may substantially limit the Company's utilization of these net operating loss carryforwards.

Israeli Income Taxes

As of March 31, 2008, the Company's Israeli subsidiaries have net operating loss carryforwards of approximately $110,000,000. The Israeli loss
carryforwards have no expiration date.

The
Company's Israeli subsidiaries have been granted "approved enterprise"" status for several investment programs. These programs entitle these subsidiaries to tax exemption periods,
ranging from two to six years, on undistributed earnings commencing in the year in which taxable income is attained as well as a reduced corporate tax rate of 10% to 25% (as opposed to the usual
Israeli corporate tax rate of 27% for 2008) for the remaining term of the program on the program's proportionate share of income.

Since
the subsidiaries do not have taxable income, the tax benefits periods have not yet commenced. The subsidiaries losses are expected to offset certain future earnings of the
subsidiaries during the tax-exempt period; therefore, the utilization of the net operating losses will generate no tax benefits. Accordingly deferred tax assets from such losses have not
been included in the financial statements. Entitlement to the above benefits is conditional upon the subsidiaries fulfilling the conditions stipulated by the law, regulations published thereunder and
the instruments of approval for the specific investments in approved enterprises.

One
of the Company's subsidiaries is taxed at the regular Israeli corporate tax rate. Following a series of changes in Israeli tax rates, the corporate tax rates are as follows: 2006:
31%, 2007: 29%, 2008: 27%, 2009: 26% and for 2010 and thereafter: 25%.

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows:

March 31,
2008

March 31,
2007

December 31,
2006(In thousands of U.S. $)Deferred tax assets:U.S. net operating loss carryforwards

$
36,389

$
22,813

$
21,076Foreign net operating loss carryforwards


27,500


24,250


24,000Capital loss carryforward


6,166


6,166


6,166Other


124


124


150Depreciation


(129
)

(149
)

76Reserves & Accruals


6,483


4,008


3,64476,533


57,212


55,112Valuation allowance


(76,533
)

(57,212
)

(55,112
)Net deferred tax assets











F-34

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

13. Income Taxes (Continued)

The
valuation allowance increased by $19,322,000, $2,100,000 and $7,314,000 for the year ended March 31, 2008, the three-month transition ended March 31, 2007, and the year
ended December 31, 2006, respectively. Approximately $1,337,000 of the valuation allowance is attributable to stock option deductions, the benefit of which will be credited to equity if and
when realized.

FASB
Statement No. 109, "Accounting for Income Taxes," requires the recognition of deferred tax assets if realization of such assets is more likely than not based upon the weight
of available evidence, which includes historical operating performance and the reported cumulative net losses in all prior years. The Company has provided a full valuation allowance against net
deferred tax assets as the future realization of the tax benefit is not sufficiently assured.

Loss
before income taxes is composed of the following components for the:

Year Ended,

Three-Month
Transition
Period Ended
March 31,
2007March 31,
2008

December 31,
2006(In thousands of U.S. $)Losses before taxes in United States

$
42,329

$
14,577

$
7,600Losses (income) before taxes from continuing operations of Israeli subsidiaries


(9,356
)

14,125


3,189Total loss before taxes

$
32,973

$
28,702

$
10,789


14. Financial Income (Expenses), Net

Financial income (expenses), net is comprised of the following:

Year Ended

Three-Month
Transition
Period Ended
March 31,
2007March 31,
2008

December 31,
2006(In thousands of U.S. $)Interest income


971

$
1,214

$
244Foreign exchange differences


(97
)

(73
)

(4
)Other


(23
)

(40
)

5Interest expenses for related party*


(1,751
)

(1,322
)

(438
)Accretion of 2005 Syntek Note Discount**


(1,099
)

(1,111
)

(323
)Accretion of 2007 Goldman Note and $10,000,0000 2006 Note and $7,500,000 2006 Note*


(30
)

(359
)

(3,392
)$
(2,029
)
$
(1,691
)
$
(3,918
)




F-35

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)



15. Related Parties

Transactions with Mr. Gilo

During the year ended December 31, 2006, the Company (a) reimbursed entities related to Mr. Gilo, for general and administrative expenses,
net of $43,000; (b) a related party, an entity controlled by Mr. Gilo, for general and administrative expenses of $58,000; and (c) recorded various general and administrative
expenses in connection with several charters of an aircraft for business travel purposes, provided by an unaffiliated third party management company, of $27,000. The aircraft used in providing these
services is leased by the same related party controlled by Mr. Gilo.

The
Company incurred no such expenses during the year ended March 31, 2008 and the three-month transition period ended March 31, 2007.

Other Related Party Transactions

During the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, the
Company paid legal and professional fees of $108,000, $61,000 and $133,000, respectively, for various professional and consulting services provided by a legal consulting firm under the control of
Avraham Fisher, a stockholder and director of the Company. In addition, Mr. Fisher has a relationship with ANI as described in note 4.

With
respect to the amendment of the Syntek Promissory Note payable to a stockholder, see notes 5 and 7.

With
respect to the equipment purchase agreement with ANI, see note 4. During the year ended March 31, 2008, the Company was reimbursed by a subsidiary of ANI for general
and administrative and research and development expenses of $52,000.

With
respect to the $10,000,000 2006 Note, the $7,500,000 2006 Note and the 2007 Goldman Note, see note 10. During the year ended March 31, 2008 and the three-month
transition period ended March 31, 2007, the Company recorded interest expenses of $1,751,000 and $438,000, respectively related to the notes delivered in the 2007 financing. During the twelve
months ended December 31, 2006 the Company recorded interest expenses of $1,322,000 related to the notes delivered in the 2006 financing.

During
the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, the Company recorded consulting
fees and expenses of $372,000, $84,000 and $150,000, respectively, related to professional and consulting services provided by an executive search firm in which Margaret A. Bellville, a director of
the Company, is a partner (in the year ended December 31, 2006, $63,000 of the listed expenses relate to a period before the director became a related party). This director also had a personal
consulting agreement with the Company which expired in October 2007. In the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended
December 31, 2006, Ms. Bellville received $14,000, $6,000 and $0, respectively.

During
the year ended March 31, 2008, the three-month transition period ended March 31, 2007 and the year ended December 31, 2006, the Company recorded consulting
fees and expenses of $165,000 and $5,000 and $0, respectively, related to professional and consulting services provided by James A. Chiddix, vice chairman of the Company's board of directors.

F-36

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

15. Related Parties (Continued)

Amounts
due to or from related parties are as follows:

March 31,
2008

March 31,
2007

December 31,
2006(In thousands of U.S. $)Accounts receivable







$
991Current assets

$
69

$
3

$
3Debt issuance costs, net

$
120

$
150

$
1,074Accounts payable

$
5

$
2

$
25Accrued liabilities

$
317

$
44

$
362Deferred revenues (Current liabilities)

$
400

$
400

$
400Deferred revenues (Long-term liabilities)

$
2,946

$
3,279

$
3,395$7,500,000 2006 Note







$
5,085$10,000,000 2006 Note

$
35,000

$
35,000

$
10,097


16. Operating Segments and Geographic Information

Historically, the Company operated in two reportable operating segments which were strategic businesses differentiated by the nature of their products, activities
and customers. As part of the Company's restructure plan, the Company ceased the marketing and support efforts for its wireless solutions segment in March 2008, and it has no current wireless
operations. However, the Company still has limited involvement with this business as discussed in note 4.

The
cable solutions business enables MSOs and other customers to operate private HFC networks for communications to customers. The cable solutions segment represents the results of
Xtend's operations, which were consolidated with the Company's operations beginning July 1, 2004, and provides infrastructure solutions that expand the bandwidth of cable television lines.
During 2006, the Company began to focus substantially all of its efforts and internal resources on its cable solutions segment. The wireless solutions segment ceased sales and support efforts in March
2008. The Company no longer has any wireless operations.

The
measurement of losses and assets of the reportable segments is based on the same accounting principles applied in the consolidated financial statements. Segment losses reflect the
loss from operations of the segment and do not include interest income (expenses), net, since this interest income (expenses) is not allocated to the segments.

F-37

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

16. Operating Segments and Geographic Information (Continued)

Financial
data relating to reportable operating segments is as follows:

Year Ended

Three-Month
Transition
Period Ended
March 31,
2007March 31,
2008

December 31,
2006(In thousands of U.S. $)Revenues from sales to unaffiliated customers from continuing operations in Cable Solutions and Wireless SolutionsCable Solutions:United States

$
2,988

$
1,084

$
462Rest of the world


59





$
3,047

$
1,084

$
462Wireless Solutions:United States, related party


4,561


6,721

$
161United States





148


Rest of the world


59


47


4,620


6,916


161Consolidated revenue

$
7,667

$
8,000

$
623Operating loss from continuing operations:Cable Solutions


(22,951
)

(15,386
)

(5,605
)Wireless Solutions


(7,993
)

(11,625
)

(1,266
)Total consolidated operating loss from continuing operations


(30,944
)

(27,011
)

(6,871
)Gain resulting from amendment toFinancial income


971


1,214


244Financial expenses


(3,000
)

(2,905
)

(4,162
)Income taxes


3,034


(802
)

(250
)Loss from continuing operations

$
(29,939
)
$
(29,504
)
$
(11,039
)


The
following provides information on the Company's assets:

March 31,
2008

March 31,
2007

December 31,
2006(In thousands of U.S. $)Cash, cash equivalents and short-term investments

$
6,021

$
31,154

$
18,688Restricted cash


5,000


5,000


5,000Debt issuance costs, net


120


150


1,074Cable Solutions


4,434


3,370


3,139Wireless Solutions


241


3,224


4,248$
15,816

$
42,898

$
32,149


F-38

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

16. Operating Segments and Geographic Information (Continued)

|
|

Year Ended

Three-Month
Transition
Period Ended
March 31,
2007March 31,
2008

December 31,
2006(In thousands of U.S. $)Expenditures for long-lived assets:Cable Solutions

$
308

$
845

$
148Wireless Solutions


52


96


58$
360

$
941

$
206Depreciation and amortization expenses:Cable Solutions

$
763

$
552

$
158Wireless Solutions


276


298


60$
1,039

$
850

$
218


The
following is a summary of operations within geographic areas, classified by the Company's country of domicile and by foreign countries:

Year EndedThree-Month Transition
Period Ended
March 31,
2007March 31,
2008

December 31,
2006(In thousands of U.S. $)Cable Solutions:United States

$
2,988

$
1,084

$
462Rest of the world


59





$
3,047

$
1,084

$
462Revenues from sales to unaffiliated customers from continuing operations in Cable Solutions and Wireless Solutions segments:United States, related party

$
4,561

$
6,721

$
161United States





148


Rest of the world


59


47


$
4,620

$
6,916

$
161$
7,667

$
8,000

$
623


|
|

March 31,
2008

March 31,
2007

December 31,
2006(In thousands of U.S. $)Property and equipment, netIsrael

$
422

$
1,020

$
1,008United States


491


642


668$
913

$
1,662

$
1,676


F-39

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

16. Operating Segments and Geographic Information (Continued)

Sales
to major customers in the cable solutions and wireless solutions segments out of total revenues are as follows:

Year EndedMarch 31,
2008

December 31,
2006

Three-Month Transition
Period Ended March 31,
2007Customer A (related party)

59
%
84
%
26
%Customer B

39
%
13
%
72
%


Sales
to customer A were of the Company's wireless solutions. Customer B is an MSO.

17. Subsequent Events



The Company previously delivered a $5,000,000 letter of credit in connection with the 2005 Syntek Note. The amount of this letter of credit was reflected as
"Restricted cash" on the Company's Balance Sheets. In accordance with the terms of the 2005 Syntek Note, on April 14, 2008, Syntek drew upon the letter of credit for payment of the $5,000,000.
See note 5 and note 7 for a description of the restricted cash and the 2005 Syntek Note.



On June 13, 2008, the Company received $4,500,000 of new funding after closing a financing of $41,000,000, which included $38,000,000 from Goldman and
$3,000,000 from Syntek (the "2008 Financing"). In the 2008 Financing, the Company delivered to Goldman a $38,000,000 20% Senior Secured Convertible Note, payable on December 13, 2008 (the "2008
Goldman Note"), $35,000,000 of which the Company used to payoff the outstanding 2007 Goldman Note. The Company also delivered to Syntek a $3,000,000 20% Senior Secured Convertible Note, payable on
December 13, 2008 (the "2008 Syntek Note"), $1,500,000 of which the Company used to payoff the 2005 Syntek Note. Following these payoffs, the Company's net proceeds were approximately
$4,400,000. Concurrent with the 2008 Financing, the Company paid approximately $400,000 to Goldman and Syntek for accrued interest on the 2007 Goldman Note and the 2005 Syntek Note which resulted in
approximately $4,000,000 of cash available for general corporate purposes. The Company's obligations under the 2008 Notes are guarantied by certain of its subsidiaries and secured by a security
interest in substantially all of its assets of those of its subsidiaries.

The
2008 Notes are convertible into shares of the Company's common stock as follows: (a) at the holder's option, if there occurs a Qualified Equity Investment (as defined in the
2008 Notes), at a price per share equal to the price per share paid for Equity Securities (as defined in the 2008 Notes) in such Qualified Equity Investment by investors unaffiliated with the Company;
(b) at the holder's option, if there occurs a Non-Qualified Equity Investment (as defined in the 2008 Notes), at a price per share equal to 90% of the price per share paid for
Equity Securities (as defined in the 2008 Notes) in such Non-Qualified Equity Investment by investors unaffiliated with the Company; and (c) at the holder's option at any time at an
initial conversion price of $5 per share. In addition, a pro rata portion of the 2008 Syntek Note in the ratio of 35:1.5 will be automatically converted into shares of the Company's

F-40

---



Vyyo Inc.

Notes to Consolidated Financial Statements (Continued)

17. Subsequent Events (Continued)

common
stock upon the conversion of all or any portion of the 2008 Goldman Note pursuant to the Qualified Equity Investment option or the Non-Qualified Equity Investment option.

In
the event of a Fundamental Transaction (as defined in the 2008 Notes to include sales of the Company's assets and certain business combination transactions), the holder may, at its
option, require the Company to redeem all or any portion of the 2008 Notes at a price equal to 101% of the principal amount, plus all accrued and unpaid interest, if any, and subject to specified
conditions, may be entitled to a cash "make-whole" premium, calculated in accordance with the terms of the 2008 Notes. In addition, a pro rata portion of the 2008 Syntek Note in the ratio
of 1/2:1 will be automatically redeemed upon the redemption of all or any portion of the 2008 Goldman Note pursuant to the Fundamental Transaction option.

Under
the Amended and Restated Registration Rights Agreement executed in connection with the 2008 Notes, at any time after June 1, 2010, the Company must register and offer
publicly all or any part of its securities owned by Goldman or Syntek if Goldman or Syntek demands such a registration and offer, subject to certain conditions. In addition, Goldman and Syntek have
"piggyback" registration rights to include any of the Company's securities owned by them in a registered offering of our securities, subject to certain conditions.

F-41

---



INDEX TO EXHIBITS

|Exhibit Number |  | Exhibit Title                                                                                                                                                                                                                                                                                                       
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Share Exchange Agreement dated as of June 30, 2004 by and among the Registrant, Xtend Cable Solutions Inc., Xtend Networks Ltd., and Shareholders of Xtend Networks Ltd. Previously filed as an exhibit
to the Registrant's Current Report on Form 8-K filed on July 15, 2004, and incorporated herein by reference.
|3.1            |  | Fifth Amended and Restated Certificate of Incorporation. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, and incorporated herein by reference.                                                                                               
|3.2            |  | Amended and Restated Bylaws. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on November 20, 2007, and incorporated herein by reference.                                                                                                                                        
|4.1            |  | Reference is made to Exhibits 3.1, 3.2, 10.23, 10.30, 10.31, 10.32, 10.33, 10.36, 10.37, 10.39, 10.40, 10.41, 10.42, 10.43 and 10.45                                                                                                                                                                                
|10.1*          |  | Form of Indemnification Agreement. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, and incorporated herein by reference.                                                                                                                     
|10.2*          |  | Fourth Amended and Restated 2000 Employee and Consultant Equity Incentive Plan. Previously filed as an appendix to the Registrant's Schedule 14A for its annual meeting of stockholders held on May 10, 2007, and incorporated herein by
reference.                                                                 
|10.3*          |  | Employment Agreement with Davidi Gilo, dated as of February 10, 2006. Previously filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2005, and incorporated herein by reference.                                                                                     
|10.4*          |  | Amended and Restated Employment Agreement with Davidi Gilo, effective as of April 5, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on April 11, 2007, and incorporated herein by
reference.                                                                             
|10.5*          |  | Amended and Restated Employment Agreement with Davidi Gilo, effective as of February 1, 2008.                                                                                                                                                                                                                       
|10.6*          |  | Employment Agreement with Wayne H. Davis, dated as of March 21, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 26, 2007, and incorporated herein by reference.                                                                                                  
|10.7*          |  | Employment Agreement of Robert K. Mills, effective as of August 1, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on July 17, 2007, and incorporated herein by reference.                                                                                                
|10.8*          |  | Employment Agreement of David Feldman, effective as of July 15, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on July 5, 2007, and incorporated herein by reference.                                                                                                    
|10.9*          |  | Employment Agreement of Tashia L. Rivard, effective as of September 1, 2007. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, and incorporated herein by
reference.                                                                       
|10.10*         |  | Employment Agreement of Walter J. Ungerer, effective as of September 1, 2007. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, and incorporated herein by
reference.                                                                      
|10.11*         |  | Offer Letter of Avner Kol, effective as of November 1, 2005. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference.                                                                                       

---



|10.12* |  | Separation Agreement and Release of Avner Kol, effective as of March 14, 2008.                                                                                                                                                                                                  
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13* |  | Consulting Agreement of Avner Kol.                                                                                                                                                                                                                                              
|10.14* |  | Separation Agreement and Release of Arik Levi, effective as of April 8, 2008.                                                                                                                                                                                                   
|10.15* |  | Consulting Agreement with James A. Chiddix, dated as of March 21, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 26, 2007, and incorporated herein by reference.                                                            
|10.16* |  | Amended and Restated Consulting Agreement with James A. Chiddix, effective February 1, 2008. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on February 4, 2008, and incorporated herein by
reference.                                     
|10.17* |  | Consulting Agreement with Margaret A. Bellville, dated as of November 13, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on November 16, 2006, and incorporated herein by reference.                                                 
|10.18* |  | Separation Agreement and Release of Michael Corwin, effective as of January 27, 2006. Previously filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2005, and incorporated herein by
reference.                                 
|10.19* |  | Separation Agreement and Release of Andrew Fradkin, effective as of February 25, 2006. Previously filed as an exhibit to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2005, and incorporated herein by
reference.                                
|10.20* |  | Separation Agreement and Release of Amir Hochbaum, effective as of March 8, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 9, 2007, and incorporated herein by reference.                                                   
|10.21* |  | Separation Agreement and Release of Gil Brosh, effective as of March 22, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 23, 2007, and incorporated herein by reference.                                                     
|10.22  |  | Indemnification Agreement among the Registrant and certain selling stockholders in connection with the September 2000 offering.                                                                                                                                                 
|10.23  |  | Amended Promissory Note made on December 16, 2005 to Syntek Capital AG. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on July 15, 2004, and incorporated herein by reference.                                                             
|10.24  |  | Office lease, dated November 4, 2004, by and between Vyyo Ltd. and Airport City Ltd. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on February 4, 2005, and incorporated herein by
reference.                                             
|10.25  |  | Office lease, dated November 2004, by and between Xtend Networks Inc. and Airport City Ltd. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on February 4, 2005, and incorporated herein by
reference.                                      
|10.26  |  | Lease Agreement dated December 2004, by and between Corners Realty Corporation and Xtend Networks Inc. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on January 21, 2005, and incorporated herein by
reference.                           
|10.27  |  | First Amendment to Lease, dated July 17, 2006, by and between I&G Peachtree Corners, L.L.C. and Xtend Networks Inc. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
 2006, and incorporated herein by reference.

---



|10.28   |  | Guaranty of the Registrant, dated as of July 17, 2006. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference.                                                          
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.29   |  | Agreement between the Registrant and Vyyo Ltd., effective as of June 29, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on July 6, 2007, and incorporated herein by reference.                                                   
|10.30   |  | Securities Purchase Agreement between the Registrant and Goldman, Sachs & Co., dated as of March 18, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 20, 2006, and
incorporated herein by reference.                     
|10.31   |  | Form of $10,000,000 10% Convertible Note of Vyyo Inc. payable to Goldman, Sachs & Co. issued March 22, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 20, 2006, and
incorporated herein by reference.                   
|10.32   |  | Form of $7,500,000 9.5% Senior Secured Note of Vyyo Inc. payable to Goldman, Sachs & Co. issued March 22, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 20, 2006,
and incorporated herein by reference.                
|10.33   |  | Guaranty and Security Agreement between the Registrant and Goldman, Sachs & Co., dated as of March 22, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 20, 2006, and
incorporated herein by reference.                   
|10.34   |  | Registration Rights Agreement between the Registrant and Goldman, Sachs & Co., dated as of March 22, 2006. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 20, 2006, and
incorporated herein by reference.                     
|10.35** |  | Equipment Purchase Agreement between the Registrant and Arcadian Networks, Inc., dated March 31, 2006. Previously filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, and
incorporated herein by reference.         
|10.36   |  | Securities Purchase Agreement between the Registrant and Goldman, Sachs & Co., dated as of March 28, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 28, 2007, and
incorporated herein by reference.                     
|10.37   |  | Form of $35,000,000 5% Convertible Note of the Registrant payable to Goldman, Sachs & Co. issued March 28, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 28, 2007, and
incorporated herein by reference.               
|10.38   |  | Amended and Restated Registration Rights Agreement between the Registrant and Goldman, Sachs & Co., dated as of March 28, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on
March 28, 2007, and incorporated herein by reference.
|10.39   |  | Form of Amended and Restated Senior Secured Note, dated as of March 28, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 28, 2007, and incorporated herein by reference.                                                  
|10.40   |  | Form of Amended and Restated Convertible Note, dated as of March 27, 2007. Previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed on March 28, 2007, and incorporated herein by reference.                                                     
|10.41   |  | Securities Purchase Agreement between the Registrant, Goldman Sachs Investment Partners Master Fund, L.P. and Syntek Capital AG dated as of June 13, 2008.                                                                                                                  
|10.42   |  | Form of $38,000,000 20% Senior Secured Convertible Note of the Registrant payable to Goldman Sachs Investment Partners Master Fund, L.P. issued June 13, 2008.                                                                                                              

---



|10.43 |  | Form of $3,000,000 20% Senior Secured Convertible Note of the Registrant payable to Syntek Capital AG issued June 13, 2008.                                                          
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.44 |  | Amended and Restated Registration Rights Agreement between the Registrant, Goldman Sachs Investment Partners Master Fund, L.P. and Syntek Capital AG, dated as of June 13, 2008.     
|10.45 |  | Guaranty and Security Agreement between the Registrant, Goldman Sachs Investment Partners Master Fund, L.P. and Syntek Capital AG, dated as of June 13, 2008.                        
|14.1  |  | Code of Conduct and Ethics. Previously filed as Exhibit 14 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.
|21.1  |  | Subsidiaries of the Registrant.                                                                                                                                                      
|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.                                                                                  
|32.1  |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                      

---

---



QuickLinks