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<SEC-DOCUMENT>0001362310-08-002592.txt : 20080509
<SEC-HEADER>0001362310-08-002592.hdr.sgml : 20080509
<ACCEPTANCE-DATETIME>20080508202200
ACCESSION NUMBER:		0001362310-08-002592
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20080331
FILED AS OF DATE:		20080509
DATE AS OF CHANGE:		20080508

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CEVA  INC
		CENTRAL INDEX KEY:			0001173489
		STANDARD INDUSTRIAL CLASSIFICATION:	SEMICONDUCTORS & RELATED DEVICES [3674]
		IRS NUMBER:				770556376
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-49842
		FILM NUMBER:		08815701

	BUSINESS ADDRESS:	
		STREET 1:		2033 GATEWAY PLACE, SUITE 150
		CITY:			SAN JOSE
		STATE:			CA
		ZIP:			95110-1002
		BUSINESS PHONE:		4085142900

	MAIL ADDRESS:	
		STREET 1:		2033 GATEWAY PLACE, SUITE 150
		CITY:			SAN JOSE
		STATE:			CA
		ZIP:			95110-1002

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PARTHUSCEVA INC
		DATE OF NAME CHANGE:	20021101

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CEVA INC
		DATE OF NAME CHANGE:	20020515
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>c73242e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 10pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, DC 20549<BR>
<DIV align="center"><DIV style="font-size: 10pt; margin-top: 20pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 10pt"><B>FORM 10-Q</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>(Mark One)</B>

</DIV>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 10pt">
    <TD width="7%"></TD>
    <TD width="5%"></TD>
    <TD width="88%"></TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 12%"><B><B>For the quarterly period ended: March&nbsp;31, 2008</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>OR</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 10pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 12%"><B><B>For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to </B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Commission file number: 000-49842</B><BR>
<DIV align="center"><DIV style="font-size: 10pt; margin-top: 20pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 10pt"><B>CEVA, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>(Exact Name of Registrant as Specified in Its Charter)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>77-0556376</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>(State or Other Jurisdiction of Incorporation or Organization)</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>(I.R.S. Employer Identification No.)</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>2033 Gateway Place, Suite&nbsp;150, San Jose, California</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>95110-1002</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>(Address of Principal Executive Offices)</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>(Zip Code)</B></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>(408)&nbsp;514-2900<BR>
(Registrant&#146;s Telephone Number, Including Area Code)</B><BR>
<DIV align="center"><DIV style="font-size: 10pt; margin-top: 20pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Indicate by check mark whether the registrant: (1)&nbsp;has filed all reports to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days. Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148;
in Rule 12b-2 of the Exchange Act. (Check one):
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 10pt">
<TR style="font-size: 10pt">
    <TD width="25%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left" valign="top">Large accelerated filer <FONT face="Wingdings">&#111;</FONT></TD>
    <TD nowrap align="center" valign="top">Accelerated filer <FONT face="Wingdings">&#254;</FONT></TD>
    <TD nowrap align="center">Non-accelerated filer &nbsp; <FONT face="Wingdings">&#111;</FONT><BR>
(Do not check if a smaller reporting company)</TD>
    <TD align="right" nowrap>Smaller reporting company <FONT face="Wingdings">&#111;</FONT></TD>
</TR>
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of
the Exchange Act). <BR>Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Indicate the number of shares outstanding of each of the issuer&#146;s classes of common stock as
of the latest practicable date: 20,133,417 shares of common stock, $0.001 par value, as of May&nbsp;1,
2008.
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>






<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">PART I. FINANCIAL INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Item&nbsp;1. Interim Condensed Consolidated Balance Sheets at March&nbsp;31, 2008 and December&nbsp;31, 2007</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#103">Interim Condensed Consolidated Statements of Operations (unaudited)&nbsp;for the three months
ended March&nbsp;31, 2008 and 2007</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#104">Interim Condensed Consolidated Statements of Changes in Stockholders&#146; Equity (unaudited)
for the three months ended March&nbsp;31, 2008 and 2007</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#105">Interim Condensed Consolidated Statements of Cash Flows (unaudited)&nbsp;for the three months
ended March&nbsp;31, 2008 and 2007</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">Notes to the Interim Condensed Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">Item&nbsp;3. Quantitative and Qualitative Disclosures about Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Item&nbsp;4. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">PART II. OTHER INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">Item&nbsp;1. Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">Item&nbsp;1A. Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">Item&nbsp;6. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">SIGNATURES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73242exv10w29.htm">Exhibit 10.29</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73242exv31w1.htm">Exhibit 31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73242exv31w2.htm">Exhibit 31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73242exv32.htm">Exhibit 32</A></FONT></TD></TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">



<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">This Quarterly Report contains forward-looking statements that
involve risks and uncertainties, as well as assumptions that if
they materialize or prove incorrect, could cause the results of
CEVA to differ materially from those expressed or implied by such
forward-looking statements and assumptions. All statements other
than statements of historical fact are statements that could be
deemed forward-looking statements. Forward-looking statements are
generally written in the future tense and/or are preceded by words
such as &#147;will,&#148; &#147;may,&#148; &#147;should,&#148; &#147;could,&#148; &#147;expect,&#148; &#147;suggest,&#148;
&#147;believe,&#148; &#147;anticipate,&#148; &#147;intend,&#148; &#147;plan,&#148; or other similar words.
Forward-looking statements include the following:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Our belief that given the complexity of applications for DSPs, there is increasingly an industry shift away from the
traditional approach of licensing standalone DSPs, and towards licensing highly integrated application platforms
incorporating all the necessary hardware and software for their target applications;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Our belief that the industry is indicating a continued demand for highly integrated, licensable application platforms
incorporating DSP cores and all the necessary hardware and software and that the growth in the demand for these
platforms will drive demand for our technology and that we are well positioned to take full advantage of these major
industry shifts;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Our belief that the penetration of ultra-low-cost handsets in rural sites could generate future growth for our business;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Our belief that our future solutions will provide the desired flexibility needed for the always-connected Internet trend;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Our belief that our introduction of additional technologies such as advanced DSP cores for the fourth generation
handset, and high definition audio or video will contribute to our growth in future periods;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Our belief that the devaluation of the US. dollar as compared to the Israeli NIS and Euro will result in an increase in
our overall expenses for 2008; and</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Our anticipation that our current cash on hand, short term deposits and marketable securities, along with cash from
operations, will provide sufficient capital to fund our operations for at least the next 12&nbsp;months.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Forward-looking statements are not guarantees of future performance and involve risks and
uncertainties. The forward-looking statements contained in this report are based on information
that is currently available to us and expectations and assumptions that we deem reasonable at the
time the statements were made. We do not undertake any obligation to update any forward-looking
statements in this report or in any of our other communications, except as required by law. All
such forward-looking statements should be read as of the time the statements were made and with the
recognition that these forward-looking statements may not be complete or accurate at a later date.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Many factors may cause actual results to differ materially from those expressed or implied by
the forward-looking statements contained in this report. These factors include, but are not
limited to, market acceptance of third-party semiconductor IP, our OEM relationships and
competition, as well as those risks described in Part&nbsp;II &#151; Item&nbsp;1A &#151; &#147;Risk Factors&#148; of this Form
10-Q.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART I. FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;1. FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt"><B>U.S. dollars in thousands, except share and per share data</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Audited</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">52,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">40,697</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short term bank deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,548</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade receivables (net of allowance for doubtful accounts
of $751 at March&nbsp;31, 2008 and $868 at December&nbsp;31, 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,502</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">861</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment in other company, net (see Note 4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,233</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,391</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,266</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Severance pay fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,091</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">455</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,626</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,498</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">138,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">128,989</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">455</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses and other payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,452</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">727</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,954</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long term liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued severance pay</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,506</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,647</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common Stock:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">$0.001 par value: 60,000,000 shares authorized;
20,126,940 and 20,033,897 shares issued and
outstanding at March&nbsp;31, 2008 and December&nbsp;31,
2007, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid in-capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,772</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,900</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35,411</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,388</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">138,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">128,989</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt">The accompanying notes are an integral part of the interim condensed consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 0pt"><B>U.S. dollars in thousands, except per share data</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Licensing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Royalties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,726</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,007</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,719</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales and marketing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,246</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reorganization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,543</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,144</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(824</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financial income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">824</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before taxes on income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxes on income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted net income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average number of shares of Common Stock
used in computation of net income per share (in
thousands):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,420</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,420</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt">The accompanying notes are an integral part of the interim condensed consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS&#146; EQUITY (unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt"><B>U.S. dollars in thousands, except share data</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>comprehensive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>stockholders&#146;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Three months ended March 31, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>income (loss)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>deficit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>equity</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of January&nbsp;1, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,033,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">149,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(35,411</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">114,388</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">578</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized gain from
available-for-sale securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized loss from hedging activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Common Stock upon exercise
of employee stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;(*</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Common Stock under
employee stock purchase plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;(*</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">507</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of March&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,126,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">150,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(29,900</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">121,054</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>comprehensive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>stockholders&#146;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Three months ended March 31, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>loss</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>deficit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>equity</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of January&nbsp;1, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,330,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">142,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(36,702</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">106,143</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">472</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized loss from available-for-sale securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Common Stock upon exercise of employee
stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;(*</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Common Stock under employee stock purchase
plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;(*</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">438</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of March&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,467,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">143,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(36,702</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">107,270</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(*)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Amount less than $1.</DIV></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt">The accompanying notes are an integral part of the interim condensed consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>U.S. dollars in thousands</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments required to reconcile net income to net cash (used in) provided by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Equity-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">472</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain from sale of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued interest on short term bank deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(86</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(38</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized foreign exchange loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on realization of investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,865</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Trading marketable securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,535</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in operating assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase in trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,502</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(242</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase in other current assets and prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(208</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(380</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase in deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(409</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase in trade payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Decrease in deferred revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Decrease in accrued expenses and other payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,519</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(98</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase in taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase (decrease)&nbsp;in accrued severance pay, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash (used in) provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,626</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,477</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(126</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(481</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment in available-for-sale marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,422</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,467</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from available-for-sale marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Transaction cost related to the GPS divestment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from realization of investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,984</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from issuance of Common Stock upon exercise of employee stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from issuance of Common Stock under employee stock purchase plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">438</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate movements on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(791</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at the beginning of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,968</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at the end of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">52,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,177</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt">The accompanying notes are an integral part of the interim condensed consolidated financial statements.
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS &#151; CONTINUED</B></U>

</DIV>

<DIV align="justify" style="font-size: 10pt"><B>(U.S. dollars in thousands, except share and per share amounts)</B></DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 1: BUSINESS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The financial information in this quarterly report includes the results of CEVA, Inc. and its
subsidiaries (the &#147;Company&#148; or &#147;CEVA&#148;).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">CEVA licenses a family of programmable DSP cores, DSP-based subsystems and
application-specific platforms, including video, audio, Voice over Internet Protocol (VoIP),
Bluetooth, and Serial ATA (SATA).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">CEVA&#146;s technology is licensed to leading electronics companies in the form of intellectual
property (IP). These electronic companies manufacture, market and sell application-specific
integrated circuits (&#147;ASICs&#148;) and application-specific standard products (&#147;ASSPs&#148;) based on CEVA&#146;s
technology to original equipment manufacturer (OEM)&nbsp;companies for incorporation into a wide variety
of end products. CEVA&#146;s IP is primarily deployed in high volume markets, including handsets (e.g.
cellular baseband, ultra-low-cost phones, multimedia phones, smart phones and Bluetooth), portable
multimedia (e.g. portable video players, MobileTVs, personal navigation devices and MP3/MP4
players), home entertainment (e.g. DVD/HD DVD/Blu-ray players, game consoles, set-top boxes and
Digital TVs), storage (e.g. hard disk drives and Solid Storage Devices (SSD)) and telecommunication
devices (e.g. residential gateways, femto cells, VoIP phones and network infrastructure).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 2: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial information and with
the instructions to Form 10-Q and Article&nbsp;10 of Regulation&nbsp;S-X. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (including non-recurring
adjustments attributable to reorganization and severance and impairment) considered necessary for a
fair presentation have been included. Operating results for the three months ended March&nbsp;31, 2008
are not necessarily indicative of the results that may be expected for the year ending December&nbsp;31,
2008. For further information, reference is made to the consolidated financial statements and
footnotes thereto included in the Company&#146;s Annual Report on Form 10-K for the year ended December
31, 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The interim condensed consolidated financial statements incorporate the financial statements
of the Company and all of its subsidiaries. All significant intercompany balances and transactions
have been eliminated on consolidation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The significant accounting policies applied in the annual consolidated financial statements of
the Company as of December&nbsp;31, 2007, contained in the Company&#146;s Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March&nbsp;14, 2008, have been applied consistently in
these unaudited interim condensed consolidated financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In September&nbsp;2006, the Financial Accounting Standards Board (&#147;FASB&#148;) issued Statement of
Financial Accounting Standard (&#147;SFAS&#148;) No.&nbsp;157 &#147;Fair Value Measurements&#148; (&#147;SFAS No.&nbsp;157&#148;). SFAS
No.&nbsp;157 defines fair value, establishes a framework for measuring fair value and expands disclosure
of fair value measurements. SFAS No.&nbsp;157 applies to other accounting pronouncements that require or
permit fair value measurements and accordingly, does not require any new fair value measurements.
The provisions of SFAS No.&nbsp;157 were adopted by the Company on January&nbsp;1, 2008 for financial assets
and liabilities, and will be adopted by the Company on January&nbsp;1, 2009 for non-financial assets and
liabilities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">SFAS No.&nbsp;157 establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value
hierarchy under SFAS No.&nbsp;157 are described below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Level 1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Unadjusted quoted prices in active markets that are accessible on
the measurement date for identical, unrestricted assets or
liabilities;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Level 2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Quoted prices in markets that are not active, or inputs that are
observable, either directly or indirectly, for substantially the
full term of the asset or liability; and</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Level 3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable
(supported by little or no market activity).</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS &#151; CONTINUED</B></U><BR><B>
(U.S. dollars in thousands, except share and per share amounts)</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The table below sets forth the Company&#146;s financial assets measured at fair value by level
within the fair value hierarchy. As required by SFAS No.&nbsp;157, assets and liabilities are classified
in their entirety based on the lowest level of input that is significant to the fair value
measurement.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>March 31, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Level I</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Level II</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Level III</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Derivative assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 4: INVESTMENT IN OTHER COMPANY, NET</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On June&nbsp;23, 2006, the Company divested its GPS technology and associated business to GloNav
Inc. (&#147;GloNav&#148;) in return for an equity ownership of 19.9% in GloNav on a fully diluted basis.
CEVA&#146;s valuation of its equity investment in GloNav was $5,984 based on an independent expert&#146;s
valuation in consideration of the assets and cash contributed to GloNav. The determination of the
amount of reduction recorded for goodwill and intangible assets for the GPS technology and business
was calculated in accordance with paragraph 39 in SFAS No.&nbsp;142 &#147;Goodwill and Other Intangible
Assets&#148; in consideration of the fair value of the GPS technology and business purchased by GloNav
and the fair value of the Company, both based on an independent valuation. The investment in
GloNav was recorded as an &#147;investment in other company, net&#148; on the consolidated balance sheet as
of December&nbsp;31, 2007 and stated at cost given that the Company&#146;s equity investment in GloNav
represented less than 20% of GloNav&#146;s voting stock and in consideration of the guidance provided in
Accounting Principles Board Opinion No.&nbsp;18 &#147;The Equity Method of Accounting for Investments in
Common Stock,&#148; the Company did not have the ability to exercise significant influence over
operating and financial policies of GloNav. Since GloNav was a highly leveraged entity, and
received additional funding to continue its operations, the gain resulting from the divestment of
the GPS technology and associated business in the total amount of $1,751 was deferred and presented
in the consolidated balance sheet as of December&nbsp;31, 2007 as a deduction from &#147;investment in other
company.&#148;
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment in other company, net:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment in other company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,984</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,751</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total investment in other company, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,233</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In January&nbsp;2008, the Company divested its equity investment in GloNav following GloNav&#146;s
acquisition by NXP Semiconductors for an initial cash payment of $85,000, plus up to an additional
$25,000 in cash payable to all of GloNav&#146;s stockholders contingent upon GloNav reaching certain
revenue and product development milestones within the two years after the acquisition. In February
2008, the Company received its portion of the initial cash payment, less 10% which is being held in
escrow to satisfy indemnification claims and less its portion of certain fees and expenses incurred
in connection with the transaction. After the deductions, the Company&#146;s portion of the initial
cash payment totaled $14,561. In March&nbsp;2008, the Company received an additional payment of $537 in
connection with GloNav&#146;s achievement of its first product development milestone. In total, the
Company received $15,098 in the first quarter of 2008. In the first quarter of 2008, the Company
recorded a capital gain of $10,865 from the divestment of its equity investment in GloNav
(including the deferred gain of $1,751 resulting from the recognition of the deferred gain, as
detailed above), and a tax expense of $3,105 related to such capital gain.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 5: GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">a.&nbsp;Summary information about geographic areas:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company manages its business on the basis of one industry segment: the licensing of
intellectual property to semiconductor companies and electronic equipment manufacturers (see Note 1
for a brief description of the Company&#146;s business).
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS &#151; CONTINUED</B></U><BR><B>
(U.S. dollars in thousands, except share and per share amounts)</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following is a summary of operations within geographic areas:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues based on customer location:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe and Middle East</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asia Pacific</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,631</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,726</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Within the Europe and Middle East region, the Company derived approximately 76% of total
revenues in that region from two countries during the first quarter of 2008. Within the Asian
Pacific region, the Company derived approximately 40% of total revenues in that region from one
country and approximately 63% of total revenues in that region from two countries during the first
quarter of 2008 and 2007, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">b.&nbsp;Major customer data as a percentage of total revenues:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table sets forth the customers that represented 10% or more of the Company&#146;s net
revenue in each of the periods set forth below.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Customer A</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">29</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(*</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Customer B</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Customer C</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(*</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">23</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(*)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Less than 10%</DIV></TD>
</TR>

</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 6: NET INCOME PER SHARE OF COMMON STOCK</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Basic net income per share is computed based on the weighted average number of shares of
common stock outstanding during each period. Diluted net income per share is computed based on the
weighted average number of shares of common stock outstanding during each period, plus potential
dilutive shares of common stock considered outstanding during the period, in accordance with
Statement of Financial Accounting Standard No.&nbsp;128, &#147;Earnings Per Share.&#148;
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Numerator:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Numerator for basic and diluted net income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Denominator:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator for basic net income per share
Weighted-average number of shares of Common Stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,420</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of employee stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,420</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The weighted average number of shares related to the outstanding options excluded from the
calculation of diluted net income per share since their effect was anti-dilutive was 641,207 for
the three months ended March&nbsp;31, 2008, and 4,432,002 for the corresponding period of 2007.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS &#151; CONTINUED</B></U><BR><B>
(U.S. dollars in thousands, except share and per share amounts)</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 7: COMMON STOCK AND STOCK-BASED COMPENSATION PLANS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the first quarter of 2008, the Company granted options to purchase 524,500 shares of
common stock, at an exercise price of $8.45 per share, and the Company issued 93,043 shares of
common stock under its stock option and purchase plans for an aggregate consideration of $623.
Options totaling 22,708 shares with a weighted average exercise price of $8.47 were forfeited or
expired in the first quarter of 2008, primarily reflecting departures of employees and expiration
of options which were granted in 2001. Options to purchase 4,075,397 shares of common stock were
outstanding at March&nbsp;31, 2008. During the comparable period of 2007, the Company granted options
to purchase 565,500 shares of common stock, at an exercise price of $7.22 per share, and the
Company issued 136,969 shares of common stock under its stock option and purchase plans for an
aggregate consideration of $658. Options totaling 168,474 shares with a weighted average exercise
price of $9.55 were forfeited or expired in the first quarter of 2007, primarily reflecting
departures of employees and expiration of options which were granted in 2000. Options to purchase
4,613,093 shares of common stock were outstanding at March&nbsp;31, 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A summary of options granted to purchase the Company&#146;s common stock under the Company&#146;s stock
option plans is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 0px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Aggregate</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>average exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Intrinsic Value</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Term</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>($000)</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at the beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,588,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,510</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">524,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,065</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Forfeited or expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,708</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at the end of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,075,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">744,167</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested or expected to vest as of March&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,843,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">709,661</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable as of March&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,223,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">370,047</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Effective January&nbsp;1, 2006, the Company adopted the provisions of Statement of Financial
Accounting Standard No.&nbsp;123R, &#147;Share-Based Payment&#148; (&#147;SFAS 123(R)&#148;), which requires the Company to
measure all employee stock-based compensation awards using a fair value method and record the
related expense in the financial statements. The Company used the Black-Scholes option pricing
model through December&nbsp;31, 2006 and the Monte-Carlo simulation model for options granted
thereafter.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table shows the total stock-based compensation charge included in the condensed
consolidated statement of operations:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales and marketing expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">472</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS &#151; CONTINUED</B></U><BR><B>
(U.S. dollars in thousands, except share and per share amounts)</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Under SFAS 123(R), the share-based compensation charge has been determined as if the Company
had accounted for its employee stock options under the fair value method of SFAS 123(R). The fair
value for these options was estimated on the date of grant using the Monte-Carlo simulation model
for options granted with the following assumptions:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>March 31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">37%-46</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">35%-46</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">2%-3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected forfeiture (employees)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected forfeiture (management)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contractual term of up to</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">7 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">7 Years</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Suboptimal exercise multiple (employees)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Suboptimal exercise multiple (management)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value for rights to purchase shares of common stock under the Company&#146;s employee
share purchase plan was estimated on the date of grant using the same assumptions set forth above
for the three months ended March&nbsp;31, 2008 and 2007, except the expected life, which was assumed to
be six to 24&nbsp;months, and except the expected volatility, which was assumed to be in a range of
40%-55% and 33%-42% for the three months ended March&nbsp;31, 2008 and 2007, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As at March&nbsp;31, 2008 and 2007, there were balances of $2,378 and $1,880, respectively, of
unrecognized compensation expense related to unvested awards. The impact of stock-based
compensation expense on basic and diluted net income per share for both the three months ended
March&nbsp;31, 2008 and 2007 was $0.02 per share.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 8: REORGANIZATION</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On January&nbsp;18, 2008, the Company signed an assignment agreement with the Harcourt landlord for
the surrender and termination of the Harcourt lease in Dublin, Ireland. The Company paid $5,833
for the termination of the lease and related termination costs, consisting primarily of legal and
professional fees, during the first quarter of 2008. The Company also successfully managed in the
first quarter of 2008 to terminate part of its lease obligation in another office in Ireland, where
the Company had unused space. In total, the Company recorded in the first quarter of 2008 $3,537
for the above lease terminations as an additional reorganization expense. As a result of the above
lease terminations, the Company has no under-utilized building operating lease obligations as of
March&nbsp;31, 2008.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The major components of the restructuring and other charges are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Under-utilized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">building</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Legal and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">operating lease</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">professional fees</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">obligations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">and other(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,374</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charge, net (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,537</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash outlays</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,733</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,833</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of March&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The net charge includes a reversal of a provision made in a prior year.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The legal, professional and other fees were related to the under-utilized building.</DIV></TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">





<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS &#151; CONTINUED</B></U><BR><B>
(U.S. dollars in thousands, except share and per share amounts)</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 9: DERIVATIVES AND HEDGING ACTIVITIES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Statement of Financial Accounting Standard No.&nbsp;133 &#147;Accounting for Derivative Instruments and
Hedging Activities&#148; (&#147;SFAS No.&nbsp;133&#148;), as amended, requires the Company to recognize all derivatives
on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives are either offset against the
change in fair value of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative&#146;s change in fair value is immediately recognized in earnings.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">To protect against the increase in value of forecasted foreign currency cash flow resulting
from salaries paid in New Israeli Shekels (&#147;NIS&#148;) and in Euro during the year, the Company
instituted in the second quarter of 2007, a foreign currency cash flow hedging program. The Company
currently is using the hedging program with respect to the NIS and hedges portions of the
anticipated payroll of its Israeli employees denominated in NIS for a period of one to twelve
months with forward and put option contracts.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of March&nbsp;31, 2008, the Company recorded comprehensive income of $9 from its forward and put
option contracts in respect to anticipated payroll of its Israeli employees expected in 2008. Such
amounts will be recorded in the condensed consolidated statements of operations in the second
quarter of 2008.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company recognized a net gain of $146 during the first quarter of 2008, related to forward
and put option contracts.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 10: RECENTLY ISSUED ACCOUNTING STANDARDS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In March&nbsp;2008, the FASB issued SFAS No.&nbsp;161, &#147;Disclosures about Derivative Instruments and
Hedging Activities &#151; An Amendment of FASB Statement No.&nbsp;133&#148; (&#147;SFAS No.&nbsp;161&#148;). This standard
applies to derivative instruments, nonderivative instruments that are designated and qualify as
hedging instruments and related hedged items accounted for under SFAS No.&nbsp;133. SFAS No.&nbsp;161 does
not change the accounting for derivatives and hedging activities but requires enhanced disclosures
concerning the effect on the financial statements from their use. SFAS No.&nbsp;161 is effective for
financial statements issued for fiscal years and interim periods beginning after November&nbsp;15, 2008.
The Company is currently evaluating the impact of the adoption of the enhanced disclosures
requirements of SFAS No.&nbsp;161 and does not expect the adoption to have a material impact on its
consolidated financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;141 (revised 2007), &#147;Business Combinations&#148; (&#147;SFAS
141R&#148;) which replaces SFAS No.&nbsp;141, &#147;Business Combinations.&#148; SFAS 141R establishes principles and
requirements for recognizing and measuring identifiable assets and goodwill acquired, liabilities
assumed and any noncontrolling interest in a business combination at their fair value on the
acquisition date. SFAS 141R alters the treatment of acquisition-related costs, business
combinations achieved in stages (referred to as a step acquisition), the treatment of gains from a
bargain purchase, the recognition of contingencies in business combinations, the treatment of
in-process research and development in a business combination, as well as the treatment of
recognizable deferred tax benefits. SFAS 141R is effective for business combinations closed in
fiscal years beginning after December&nbsp;15, 2008. Early adoption is prohibited. The Company&#146;s
consolidated financial statements will be impacted by SFAS 141R only in relation to future business
combination activities.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><I>You should read the following discussion together with the unaudited financial statements and
related notes appearing elsewhere in this quarterly report. This discussion contains
forward-looking statements that involve risks and uncertainties. Any or all of our forward-looking
statements in this quarterly report may turn out to be wrong. These forward-looking statements can
be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties.
We undertake no obligation to publicly update any forward-looking statements, whether as a result
of new information, future events or otherwise. Factors which could cause actual results to differ
materially include those set forth under in Part&nbsp;II &#151; Item&nbsp;1A &#151; &#147;Risk Factors,&#148; as well as those
discussed elsewhere in this quarterly report. See &#147;Forward-Looking Statements.&#148;</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>BUSINESS OVERVIEW</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The financial information presented in this quarterly report includes the results of CEVA,
Inc. and its subsidiaries. CEVA is the leading licensor of DSP cores. Our technologies are widely
licensed and power some of the world&#146;s leading handset and consumer electronics semiconductor
companies. In 2007, our licensees shipped over 227&nbsp;million CEVA-powered chipsets, an increase of
19% over 2006 shipments of 190&nbsp;million chipsets. In 2007, analyst firm Gartner Inc. reported
CEVA&#146;s share of the licensable DSP market at 53%.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our revenue mix contains IP licensing fees, per unit and prepaid royalties and other revenues.
Prepaid royalties are recognized under the licensing revenue line. Other revenues include
revenues from support, training and sale of development systems. We have built a strong customer
base which relies on our technology to deploy their silicon solutions. We license our technology
as intellectual property (IP)&nbsp;to semiconductor companies who manufacture, market and sell DSP
application-specific integrated circuits (&#147;ASICs&#148;) and application-specific standard products
(&#147;ASSPs&#148;) based on CEVA technologies to systems original equipment manufacturer (OEM)&nbsp;companies for
incorporation into a wide variety of end products. Our IP is primarily deployed in high volume
markets, including handsets (e.g. ultra-low-cost phones, multimedia phones and smart phones),
portable multimedia (e.g. portable video players, MobileTVs, personal navigation devices and
MP3/MP4 players), home entertainment (e.g. DVD/HD DVD/Blu-ray players, game consoles, set-top boxes
and Digital TVs), storage (e.g. hard disk drives and Solid Storage Devices (SSD)) and
telecommunication devices (e.g. residential gateways, femto cells, VoIP phones and network
infrastructure).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Given the technological complexity of DSP-based applications, there are increased requirements
to supplement the basic DSP core IP with additional technologies in the form of integrated
application-specific hardware and software peripherals. Therefore, we believe there is an industry
shift towards licensing DSP technology from third party IP providers as opposed to developing it
in-house, due to the design cycle time constantly shortening and the cost of ownership and
maintenance of such architectures.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In order to grow our business by capitalizing on this industry shift, we introduced in the
last few years the MobileMedia and CEVA-Audio product lines aimed at the growing video and audio
penetration into handset devices, CEVA-VoP for the growing use of VoIP in broadband networks and
wireless phones, CEVA-Bluetooth for handset, headset and mobile devices and CEVA-SATA for the
growing market for Solid State Drives (SSD). Also, in recognition of the need for high
performance, scalable architectures for emerging applications such as fourth generation cellular
(also referred to as WiMax or LTE) and High Definition Video, we introduced a new DSP architecture,
the CEVA-X DSP with three new cores CEVA-X1620, CEVA-X1622 and CEVA-X1641. We believe that the
growing demand for highly integrated, licensable application platforms incorporating DSP cores and
the necessary hardware and software for their target applications will drive demand for our
technology.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">However, our business operates in a highly competitive environment. Competition has
historically increased pricing pressures for our products and decreased our average selling prices.
In order to penetrate new markets and maintain our market share with our existing products, we may
need to offer our products in the future at lower prices which may result in lower profits. Our
future growth is dependent not only on the continued success of our existing products but also the
successful introduction of new products. Moreover, we must continue to monitor and control our
operating costs and to maintain our current level of gross margin in order to offset future
declines in average selling prices. In addition, since our products are incorporated into end
products of our OEM customers, our business is very dependent on our OEM customers&#146; ability to
achieve market acceptance of their end products in consumer electronic markets, which are similarly
very competitive.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The ever-changing nature of the market also challenges our continued business growth
potential. For example, the success of our video products are highly dependent on the market
adoption of new services and products, such as Internet Video, high resolution streaming video, the
migration from audio players to Personal Multimedia Players (PMP), as well the migration to digital
TVs and set-top boxes with high definition audio. In addition, our business may be affected by
market conditions in developing markets, such as China and India specifically, where the
penetration of ultra-low-cost (ULC)&nbsp;handsets in rural sites could generate future growth potential
for our business. Moreover, our royalty revenues currently are primarily generated from sales of
chipsets used in handsets
and home entertainment equipment. As a result, a decline or change in growth rate in these
markets or market share of our customers in those markets would adversely affect our financial
condition and operating results.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In view of the current market trends, our planned future products are targeted at next
generation cellular and multimedia devices. We believe that our future solutions will provide the
desired flexibility needed for the always-connected Internet trend. We also believe that our
introduction of additional technologies, such as advanced DSP cores for the fourth generation
handset, and high definition audio and video, will contribute to our growth in future periods.
However, our ability to introduce new products and expand into new markets may not occur and may
require us to substantially increase our operating expenses. As a result, our past operating
results should not be relied upon as an indication of future performance. We further cannot
provide any assurances that our planned features will achieve market acceptance, and allow us to
maintain our market share or provide for our future growth.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>RESULTS OF OPERATIONS</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><I>Total Revenues</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Total revenues increased 30% to $10.1&nbsp;million for the first quarter of 2008 from $7.7&nbsp;million
for the comparable quarter of 2007. The increase in total revenues reflected higher licensing
revenues of our different technology product lines, higher royalty revenue, which in the first
quarter of 2008 represented an all-time record high for royalty revenue, and higher other revenues.
The five largest customers accounted for 62% of total revenues for the first quarter of 2008, as
compared to 51% for the comparable quarter of 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Two customers accounted 29% and 12% of revenues for the first quarter of 2008, as compared to
one customer that accounted for 23% of revenues for the first quarter of 2007. Because of the
nature of our license agreements and the associated large initial payments due, the identity of
major customers generally varies from quarter to quarter and we do not believe that we are
materially dependent on any one specific customer or any specific small number of licensees.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We generate our revenues from licensing our IP, which in certain circumstances is modified to
customer-specific requirements. Revenues from license fees that involve customization of our IP to
customer specifications are recognized in accordance with Statement of Position (&#147;SOP&#148;) 81-1,
&#147;Accounting for Performance of Construction-Type and Certain Production-Type Contracts.&#148; We
account for all of our other IP license revenues and related services in accordance with SOP 97-2,
&#147;Software Revenue Recognition,&#148; as amended.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We generate royalties from our licensing activities in two manners: royalties paid by our
customers during the period in which they ship units of chipsets incorporating our technology,
which we refer to as per unit royalties, and royalties which are paid in a lump sum and in advance
to cover a fixed number of future unit shipments, which we refer to as prepaid royalties. In
either case, these royalties are non-refundable payments and are recognized when payment becomes
due, provided no future obligation exists. Prepaid royalties are recognized under our licensing
revenue line and accounted for 12% and 20% of total revenue for the first quarter of 2008 and 2007,
respectively. Only royalty revenue from customers who are paying as they ship units of chipsets
incorporating our technology is recognized in our royalty revenue line. These per unit royalties
are invoiced and recognized on a quarterly basis in arrears as we receive quarterly shipment
reports from our licensees.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><I>Licensing Revenues</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Licensing revenues for the first quarter of 2008 was $5.1&nbsp;million, an increase of 10% from
$4.6&nbsp;million for the first quarter of 2007. The increase in licensing revenues for the first
quarter of 2008, as compared to the corresponding period of 2007, reflects higher revenues from our
CEVA-X IP DSP core and BlueTooth IP, partially offset by lower revenues from our CEVA-Teaklite DSP
family and SATA IP.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Licensing revenues accounted for 51% of our total revenues for the first quarter of 2008,
compared to 60% for the first quarter of 2007. During the first quarter of 2008, we signed ten new
license agreements. Eight agreements were for CEVA DSP cores and platforms, and two agreements
were for CEVA SATA technology. Target applications for customer deployment are 3G smart phones,
cellular femtocells, portable multimedia players and solid state drive (SSD)&nbsp;devices.
Geographically, three of the ten deals signed were in the U.S., six were in Europe and one was in
the Asia Pacific region.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; margin-left: 1%"><I>Royalty Revenues</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Royalty revenues for the first quarter of 2008 was $3.7&nbsp;million, an increase of 91% from $2.0
million for the first quarter of 2007 and 23% sequentially higher than the fourth quarter of 2007.
Royalty revenues for the first quarter of 2008 represented an all time record high for royalty
revenues and a third quarterly sequential growth in our royalty revenues. Royalty revenues
accounted for 37% of our total revenues for the first quarter of 2008, as compared to 25% for the
first quarter of 2007. The increase in royalty revenues for the first quarter of 2008, as compared
to the corresponding period of 2007, reflects increased shipments and market share expansion in 3G
and 2G handset markets. This increase resulted from the introduction of new products utilizing our
technology, as
well as an increase in unit shipments of customers&#146; products incorporating our IP, offset by a
decrease of the average royalty rate per unit. Our per unit and prepaid royalty customers reported
aggregate sales of 86&nbsp;million units incorporating our technology for the first quarter of 2008,
compared to 41&nbsp;million units for the comparable period of 2007. Five largest customers paying per
unit royalty accounted for 80% of total royalty revenues for the first quarter of 2008, as compared
to 71% for the comparable period of 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">We had 27 customers shipping units incorporating our technology during the first quarter of
2008, compared to 25 customers during the first quarter of 2007. As of March&nbsp;31, 2008, we had 20
per unit royalty customers and 7 prepaid royalty customers, as compared to 18 per unit royalty
customers and 7 prepaid royalty customers as of March&nbsp;31, 2007.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; margin-left: 1%"><I>Other Revenues</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Other revenues for the first quarter of 2008 were $1.2&nbsp;million, an increase of 10% from $1.1
million for the first quarter of 2007. The increase in other revenues for the first quarter of
2008, compared to the first quarter of 2007, reflects mainly higher support revenues, offset by
lesser sales of development systems. Other revenues accounted for 12% of our total revenues for the
first quarter of 2008, as compared to 15% for the first quarter of 2007. Other revenues include
support and training for licensees and sale of development systems.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; margin-left: 1%"><B><I>Geographic Revenue Analysis</I></B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 8pt">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>First Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>First Quarter</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14"><B>(in millions, except percentages)</B></TD>
    <TD>&nbsp;</TD>
</TR>

 <TR><TD>&nbsp;</TD></TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>13</I></TD>
    <TD nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>21</I></TD>
    <TD nowrap><I>%</I></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe and Middle East</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>61</I></TD>
    <TD nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>32</I></TD>
    <TD nowrap><I>%</I></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asia Pacific</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>26</I></TD>
    <TD nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><I>47</I></TD>
    <TD nowrap><I>%</I></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Within the Europe and Middle East region, we derived approximately 76% of total revenues in
that region from two countries during the first quarter of 2008. Within the Asian Pacific region,
we derived approximately 40% of total revenues in that region from one country and approximately
63% of total revenues in that region from two countries during the first quarter of 2008 and 2007,
respectively. Due to the nature of our license agreements and the associated potential large
individual contract amounts, the geographic split of revenues both in absolute and percentage terms
generally varies from quarter to quarter.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; margin-left: 1%"><B><I>Investment in Other Company, Net</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">On June&nbsp;23, 2006, we divested our GPS technology and associated business to a U.S.-based
company, GloNav Inc. (&#147;GloNav&#148;) (for more information see Note 4 to the attached Notes to Condensed
Consolidated Financial Statement for the quarter ended March&nbsp;31, 2008).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">In January&nbsp;2008, we divested our equity investment in GloNav following GloNav&#146;s acquisition by
NXP Semiconductors for an initial cash payment of $85&nbsp;million, plus up to an additional $25&nbsp;million
in cash payable to all of GloNav&#146;s stockholders, contingent upon GloNav reaching certain revenue
and product development milestones within two years of the acquisition. In February&nbsp;2008, we
received our portion of the initial cash payment, less 10% which is being held in escrow to satisfy
indemnification claims and less our portion of certain fees and expenses incurred in connection
with the transaction. After the deductions, our initial cash payment totaled $14.6&nbsp;million. In
March&nbsp;2008, we received an additional payment of $0.5&nbsp;million in connection with GloNav&#146;s
achievement of its first product development milestone. In total, we received $15.1&nbsp;million in the
first quarter of 2008. In the first quarter of 2008, we recorded a capital gain of $10.9&nbsp;million
from the divestment of our equity investment in GloNav (including the deferred gain of $1.75
million from the recognition of the deferred gain resulting from the divestment of the GPS
technology and associated business to GloNav in June&nbsp;2006, as detailed in Note 4 to the attached
Notes to Condensed Consolidated Financial Statement for the quarter ended March&nbsp;31, 2008), and a
tax expense of $3,105,000 related to such capital gains.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; margin-left: 1%"><I>Cost of Revenues</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Cost of revenues was $1.2&nbsp;million for the first quarter of 2008, as compared to $1.0&nbsp;million
for the comparable period of 2007. The increase for the first quarter of 2008 principally reflects
the execution of a larger number of license agreements with engineering customization requirements
which lowered the gross margins for those license agreements during the first quarter of 2008, as
compared to the corresponding period in 2007, as well as higher salary costs due to the recruitment
of additional employees for our support team. Cost of revenues accounted for 12% of total revenues
for the first quarter of 2008, as compared to 13% for the first quarter of 2007. Included in cost
of revenues for the first quarter of 2008 and 2007 was a non-cash stock compensation charge of
$28,000 and $18,000, respectively, following the adoption of SFAS 123(R) on January&nbsp;1, 2006.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><I>Gross Margin</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Gross margin for the first quarter of 2008 was 88%, as compared to 87% for the first quarter
of 2007. The increase in the dollar amount and percentage of gross margin for the first quarter of
2008, as compared to the corresponding period in 2007, principally reflects the revenue mix during
the first quarter of 2008 with higher royalty revenue which has higher gross margin, partially
offset by the execution of a greater number of license agreements with engineering customization
requirements during the first quarter of 2008 which lowered the gross margin for those agreements,
as well as higher salary costs for the first quarter of 2008 due to the recruitment of additional
employees for our support team.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><I>Operating Expenses</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Total operating expenses increased to $12.0&nbsp;million for the first quarter of 2008 from $7.5
million for the first quarter of 2007. The increase in total operating expenses for the first
quarter of 2008 principally reflects a restructuring expense in the amount of $3.5&nbsp;million, mainly
as a result of the termination of the Harcourt property lease in Dublin, Ireland during the first
quarter of 2008, as well as higher salary cost, higher currency devaluation cost as a result of the
devaluation of the U.S. dollar against the Euro and the Israeli NIS, higher professional services
costs and higher non-cash equity-based compensation expenses, partially offset by an increase in
research grants received from the Israeli government.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><I>Research and Development Expenses, Net</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our research and development expenses increased to $5.1&nbsp;million for the first quarter of 2008
from $4.7&nbsp;million for the first quarter of 2007. The net increase for the first quarter of 2008
primarily reflects higher salary cost and higher currency devaluation cost as a result of the
devaluation of the U.S. dollar against the Euro and the Israeli NIS, partially offset by an
increase in research grants received from the Israeli government. Included in research and
development expenses for the first quarter of 2008 and 2007 was a non-cash equity-based
compensation charge of $267,000 and $196,000, respectively, following the adoption of SFAS 123(R)
on January&nbsp;1, 2006. Research and development expenses as a percentage of total revenues were 51%
and 61% for the first quarter of 2008 and 2007, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The number of research and development personnel was 130 at March&nbsp;31, 2008, as compared to 134
at March&nbsp;31, 2007.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><I>Sales and Marketing Expenses</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our sales and marketing expenses increased to $1.8&nbsp;million for the first quarter of 2008 from
$1.6&nbsp;million for the first quarter of 2007. The increase for the first quarter of 2008 primarily
reflects higher salary and commission costs as well as higher marketing activities, mainly
associated with our attendance at the 3GSM annual wireless conference in Barcelona, Spain.
Included in sales and marketing expenses for the first quarter of 2008 and 2007 was a non-cash
equity-based compensation charge of $95,000 and $82,000, respectively, following the adoption of
SFAS 123(R) on January&nbsp;1, 2006. Sales and marketing expenses as a percentage of total revenues
were 18% and 20% for the first quarter of 2008 and 2007, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The total number of sales and marketing personnel was 18 at March&nbsp;31, 2008, as compared to 20
at March&nbsp;31, 2007.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><I>General and Administrative Expenses</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our general and administrative expenses increased to $1.6&nbsp;million for the first quarter of
2008 from $1.2&nbsp;million for the first quarter of 2007. The increase for the first quarter of 2008
primarily reflects higher salary and professional services costs. Included in general and
administrative expenses for the first quarter of 2008 and 2007 was a non-cash equity-based
compensation charge of $188,000 and $176,000, respectively, following the adoption of SFAS 123(R)
on January&nbsp;1, 2006. General and administrative expenses as a percentage of total revenues were 16%
for the first quarters of 2008 and 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The number of general and administrative personnel was 24 at March&nbsp;31, 2008, as compared to 26
at March&nbsp;31, 2007.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><I>Amortization of Other Intangibles</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our amortization charge decreased to $21,000 for the first quarter of 2008 from $42,000 for
the first quarter of 2007. The amount of other intangible assets was $32,000 at March&nbsp;31, 2008 and
$53,000 at March&nbsp;31, 2007.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><I>Reorganization</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On January&nbsp;18, 2008, we signed an assignment agreement with the Harcourt landlord for the
surrender and termination of the Harcourt lease in Dublin, Ireland. We paid $5,833,000 for the
termination of the lease and related termination costs, consisting primarily of legal and
professional fees, in the first quarter of 2008. We also successfully managed during the first
quarter of 2008 to terminate part of our lease obligation in another office in Ireland, where we
had unused space. In total, we recorded in the first quarter
of 2008 $3.5&nbsp;million for the above lease terminations as an additional reorganization expense.
As a result of the above lease terminations, we have no under-utilized building operating lease
obligations as of March&nbsp;31, 2008.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><B><I>Financial Income, Net (in millions)</I></B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>First Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>First Quarter</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financial income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B><I>of which:</I></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income and gains from marketable
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.84</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign exchange loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.02</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Financial income, net, consists of interest earned on investments, gains from marketable
securities and foreign exchange movements. The increase in interest earned during the first
quarter of 2008, as compared to the corresponding period of 2007, reflects higher combined cash and
marketable securities balances held, offset by lower interest rates.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We review our monthly expected non-US dollar denominated expenditure and look to hold
equivalent non-U.S. dollar cash balances to mitigate currency fluctuations, and this resulted in a
foreign exchange loss of $140,000 and $17,000 for the first quarter of 2008 and 2007, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><B><I>Other Income (in millions)</I></B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>First Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>First Quarter</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on realization of investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We recorded a capital gain of $10.87&nbsp;million for the first quarter of 2008 from the divestment
of our investment in GloNav Inc. to NXP Semiconductors.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 1%"><B><I>Provision for Income Taxes</I></B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The provision for income taxes during the first quarter of 2008 and 2007 reflects income
earned domestically and in certain foreign jurisdictions. In the first quarter of 2008, we also
recorded tax expenses of $3.1&nbsp;million related to capital gains from the divestment of our equity
investment in GloNav to NXP Semiconductors, as well as an income tax benefit of $0.3&nbsp;million
related to domestically deferred tax assets such as accrued expenses, deferred revenue and
depreciation. The benefit of the deferred tax is expected to be realized in the future. We have
significant operations in Israel and the Republic of Ireland, and a substantial portion of our
taxable income is generated there. Currently, our Israeli and Irish subsidiaries are taxed at
rates substantially lower than U.S. tax rates.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Irish operating subsidiary currently qualifies for a 10% tax rate, which under current
legislation will remain in force until December&nbsp;31, 2010. The Israeli operating subsidiary&#146;s
production facilities have been granted &#147;Approved Enterprise&#148; or &#147;Benefited Enterprise&#148; status
under Israeli law in connection with seven separate investment plans. Accordingly, income from an
&#147;Approved Enterprise&#148; or &#147;Benefited Enterprise&#148; is tax-exempt for a period of two or four years and
is subject to a reduced corporate tax rate of 10% to 25% (based on percentage of foreign ownership)
for an additional period of six or eight years. The tax benefit under the first three plans has
expired and is subject to corporate tax of 27% for the first quarter of 2008. Certain expenditures
pursuant to Israeli law are permitted to be recognized as a tax deduction over a three year period,
which has resulted in higher deferred tax asset for the first quarter of 2008.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>LIQUIDITY AND CAPITAL RESOURCES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of March&nbsp;31, 2008, we had approximately $52.5&nbsp;million in cash and cash equivalents and
$33.0&nbsp;million in deposits and marketable securities, totaling $85.5&nbsp;million, as compared to $76.4
million at December&nbsp;31, 2007. During the first quarter of 2008, we invested $5.4&nbsp;million of our
cash in corporate bonds and securities with maturities up to 24&nbsp;months. In addition, corporate
bonds and securities and U.S. government and agency securities were sold or redeemed for cash
amounting to $8.2&nbsp;million. These instruments are classified as marketable securities. The
purchase and sale or redemption of trading marketable securities are considered part of operating
cash flow, whereas the purchase and sale or redemption of available-for-sale marketable securities
are considered part of investing cash flow. In accordance with Statement of Financial Accounting
Standard No.&nbsp;115 &#147;Accounting for Certain Investments in Debt and Equity Securities,&#148;
available-for-sale securities are stated at fair value, with unrealized gains and losses reported
in accumulated other comprehensive income (loss), a separate component of stockholders&#146; equity, net
of taxes. Realized gains and
losses on sales of investments, as determined on a specific identification basis, are included
in the condensed consolidated statement of operations. Trading securities are held for resale in
anticipation of short-term market movements. Under SFAS No.&nbsp;115, marketable securities classified
as trading securities are stated at the quoted market prices at each balance sheet date. Gains and
losses (realized and unrealized) related to trading securities, as well as interest on such
securities, are included as financial income or expenses as appropriate. Deposits are short-term
bank deposits with maturities of more than three months but less than one year. The deposits are
in U.S. dollars and are presented at their cost, including accrued interest, and purchases and
sales are considered part of cash flows from investing activities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Net cash used in operating activities during the first quarter of 2008 was $6.6&nbsp;million,
compared to $4.5&nbsp;million of net cash provided by operating activities for the comparable period of
2007. Included in the operating cash outflow for the first quarter of 2008 was an amount of
$5,833,000 in connection with reorganization, mainly as a result of the termination of the Harcourt
lease. Included in the operating cash inflow for the first quarter of 2007 was net proceeds of $4.5
million from marketable securities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Cash flows from operating activities may vary significantly from quarter to quarter depending
on the timing of our receipts and payments. Our ongoing cash outflows from operating activities
principally relate to payroll-related costs and obligations under our property leases and design
tool licenses. Our primary sources of cash inflows are receipts from our accounts receivable and
interest earned from our cash and marketable securities holdings. The timing of receipts of
accounts receivable from customers is based upon the completion of agreed milestones or agreed
dates as set out in the contracts.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Net cash provided by investing activities for the first quarter of 2008 was $17.8&nbsp;million,
compared to $6.0&nbsp;million of net cash used in investing activities for the first quarter of 2007.
We had a cash outflow of $5.4&nbsp;million and a cash inflow of $8.2&nbsp;million in respect of investments
in marketable securities during the first quarter of 2008. We had a cash outflow of $5.5&nbsp;million in
respect of investments in marketable securities during the first quarter of 2007. Capital
equipment purchases of computer hardware and software used in engineering development, furniture
and fixtures amounted to approximately $126,000 for the first quarter of 2008, compared to $481,000
for the comparable period in 2007. Capital expenditure for the first quarter of 2007 mainly was
associated with tester equipment for the SATA product line. We had a cash inflow of $15.1&nbsp;million
from the divestment of our equity investment in GloNav to NXP Semiconductors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Net cash provided by financing activities during the first quarter of 2008 and 2007 was $0.6
and $0.7&nbsp;million, respectively, and reflects proceeds from the issuance of shares upon exercise of
employee stock options and issuance of shares under our employee stock purchase plan.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We believe that our current cash on hand and marketable securities, along with cash from
operations, will provide sufficient capital to fund our operations for at least the next 12&nbsp;months.
We cannot assure you, however, that the underlying assumed levels of revenues and expenses will
prove to be accurate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In addition, as part of our business strategy, we occasionally evaluate potential acquisitions
of businesses, products and technologies. Accordingly, a portion of our available cash may be used
at any time for the acquisition of complementary products or businesses. Such potential
transactions may require substantial capital resources, which may require us to seek additional
debt or equity financing. We cannot assure you that we will be able to successfully identify
suitable acquisition candidates, complete acquisitions, integrate acquired businesses into our
current operations, or expand into new markets. Furthermore, we cannot assure you that additional
financing will be available to us in any required time frame and on commercially reasonable terms,
if at all. See &#147;Risk Factors&#151;We may seek to expand our business through acquisitions that could
result in diversion of resources and extra expenses.&#148; for more detailed information.
</DIV>


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</DIV>



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<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A majority of our revenues and a portion of our expenses are transacted in U.S. dollars, and
our assets and liabilities together with our cash holdings are predominately denominated in U.S.
dollars. However, the majority of our expenses are denominated in currencies other than the U.S.
dollar, principally the Euro and the Israeli NIS. Increases in the volatility of the exchange
rates of the Euro and the NIS versus the U.S. dollar could have an adverse effect on the expenses
and liabilities that we incur when remeasured into U.S. dollars. We review our monthly expected
non-U.S. dollar denominated expenditure and look to hold equivalent non-U.S. dollar cash balances
to mitigate currency fluctuations, and this has resulted in a foreign exchange loss of $140,000 and
$17,000 during the first quarter of 2008 and 2007, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As a result of currency fluctuations and the remeasurement of non-U.S. dollars denominated
expenditures to U.S. dollars for financial reporting purposes, we may experience fluctuations in
our operating results on an annual and quarterly basis going forward. To protect against the
increase in value of forecasted foreign currency cash flow resulting from salaries paid in Israeli
NIS and Euro during the year, we instituted in the second quarter of 2007, a foreign currency cash
flow hedging program. We currently are using the hedging program with respect to the NIS and hedge
portions of the anticipated payroll for our Israeli employees denominated in NIS for a period of
one to twelve months with forward and put option contracts. As of March&nbsp;31, 2008, we recorded
comprehensive income of $9,000 from our forward contracts in respect to anticipated payroll for our
Israeli employees expected in 2008. Such amounts will be recorded in earnings in the second
quarter of 2008. We recognized a net gain of $146,000 during the first quarter ended March&nbsp;31,
2008, related to forward contracts and put options. However, hedging transactions may not
successfully mitigate losses caused by currency fluctuations. We expect to continue to experience
the effect of exchange rate and currency fluctuations on an annual and quarterly basis. We believe
the devaluation of the U.S. dollar as compared to the Israeli NIS and Euro will result in an
increase in our overall expenses for 2008.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We invest our cash in high grade certificates of deposits, U.S. government and agency
securities and corporate bonds. Cash held by foreign subsidiaries is generally held in short-term
deposits denominated in the local currency.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Interest income and gains from marketable securities were $948,000 and $841,000 for the first
quarter of 2008 and 2007, respectively. The increase in interest and gains from marketable
securities earned in the first quarter of 2008 from the comparable period of 2007 reflects a higher
combined cash and marketable securities balances held, offset by lower interest rates.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are exposed primarily to fluctuations in the level of U.S. and EMU (European Monetary
Union) interest rates. To the extent that interest rates rise, fixed interest investments may be
adversely impacted, whereas a decline in interest rates may decrease the anticipated interest
income for variable rate investments.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are exposed to financial market risks, including changes in interest rates. We typically
do not attempt to reduce or eliminate our market exposures on our investment securities because the
majority of our investments are short-term. We currently do not have any derivative instruments
but may put them in place in the future.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of our investment portfolio or related income would not be significantly
impacted by either a 100 basis point increase or decrease in interest rates due mainly to the
short-term nature of our investment portfolio. All the potential changes noted above are based on
sensitivity analysis performed on our balances as of March&nbsp;31, 2008.
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;4. CONTROLS AND PROCEDURES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of the end of the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and procedures. Based
on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">There has been no change in our internal control over financial reporting that occurred during
our most recent fiscal quarter that has materially affected or is reasonably likely to materially
affect our internal control over financial reporting.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="110"></A>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>PART II. OTHER INFORMATION</B>
</DIV>
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;1. LEGAL PROCEEDINGS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On October&nbsp;30, 2007, we commenced proceedings against u-blox AG (&#147;u-blox&#148;) in the Court of
Commerce of the Canton of Zurich, Switzerland, following u-blox&#146;s refusal to allow us to complete a
routine royalty audit of its books and records in accordance with the terms of the license
agreement, and u-blox&#146;s subsequent refusal to provide information and discuss issues relating to
u-blox&#146;s reporting and other activities. Pursuant to these proceedings, we asked the Court to
compel u-blox to provide information to enable the royalty audit to be completed and to require
u-blox to pay royalties and/or damages in relation to any underreporting, underpayment and/or
misuse of the technology rights licensed to them. On March&nbsp;3, 2008, u-blox&#146;s lawyers filed their
statement of
defense and requested that the Court reject our claims. A Court hearing is set for July&nbsp;11,
2008 during which each party will present its case to the presiding judges. At this point, we
cannot assess the amount of the recovery, if any.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Except for the above referenced legal proceeding, the Company is not party to any litigation
or other legal proceedings that the Company believes could reasonably be expected to have a
material effect on the Company&#146;s business, results of operations and financial condition.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;1A. RISK FACTORS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><I>This </I><I>Form 10-Q</I><I> contains forward-looking statements concerning our future products, expenses,
revenue, liquidity and cash needs as well as our plans and strategies. These forward-looking
statements are based on current expectations and we assume no obligation to update this
information. Numerous factors could cause our actual results to differ significantly from the
results described in these forward-looking statements, including the following risk factors.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">There are no material changes to the Risk Factors described under the title &#147;Factors That May
Affect Future Performance&#148; in our Annual Report on Form 10-K for the fiscal year ended December&nbsp;31,
2007 other than (1)&nbsp;changes to the Risk Factor below entitled &#147;Our quarterly operating results
fluctuate from quarter to quarter due to a variety of factors, including our lengthy sales cycle,
and may not be a meaningful indicator of future performance;&#148; (2)&nbsp;changes to the Risk Factor below
entitled &#147;We rely significantly on revenue derived from a limited number of customers;&#148; (3)&nbsp;changes
to the Risk Factor below entitled &#147;We are exposed to fluctuations in currency exchange rates;&#148; (4)
changes to the Risk Factor below entitled &#147;Because we have significant international operations, we
may be subject to political, economic and other conditions relating to our international operations
that could increase our operating expenses and disrupt our revenues and business;&#148; and (5)&nbsp;changes
to the Risk Factor below entitled &#147;The Israeli tax benefits that we currently receive and the
government programs in which we participate require us to meet certain conditions and may be
terminated or reduced in the future, which could increase our tax expenses.&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>The markets in which we operate are highly competitive, and as a result we could experience a loss
of sales, lower prices and lower revenue.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The markets for the products in which our technology is incorporated are highly competitive;
for example, semiconductor customers may choose to adopt a multi-chip, off-the-shelf chip solution
versus licensing or using highly-integrated chips that embed our technologies. Aggressive
competition could result in substantial declines in the prices that we are able to charge for our
intellectual property. Many of our competitors are large companies that have significantly greater
financial and other resources than we have. The following factors may have a significant impact on
our competitiveness:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">microprocessor IP providers, such as ARC, ARM, MIPS Technologies and Tensilica, are
offering DSP extensions to their IP;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">SATA IP market is highly standardized with several vendors offering similar products,
leading to pricing pressures for both licensing and royalty revenue;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">our video solution is software-based and competes with hardware implementation offered
by companies such as Hantro (being acquired by On2) and other software solutions offered
by Chips &#038; Media (acquired by MIPS Technologies), Hantro, Imagination Technologies and
Tensilica;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">ARC is offering a licensing model based on royalty payments specifically for Chinese
customers that waive initial licensee fees; and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">lower license fees and overall erosion of average selling prices of our IP.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In addition, we may face increased competition from smaller, niche semiconductor design
companies in the future. Some of our customers also may decide to satisfy their needs through
in-house design. We compete on the basis of processor performance, overall system cost, power
consumption, flexibility, reliability, software availability, design cycle time, ease of
implementation, customer support, name recognition, reputation and financial strength. Our
inability to compete effectively on these bases could have a material adverse effect on our
business, results of operations and financial condition.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Our quarterly operating results fluctuate from quarter to quarter due to a variety of factors,
including our lengthy sales cycle, and may not be a meaningful indicator of future performance.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In some quarters our operating results could be below the expectations of securities analysts
and investors, which could cause our stock price to fall. Factors that may affect our quarterly
results of operations in the future include, among other things:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the timing of the introduction of new or enhanced technologies by us and our
competitors, as well as the market acceptance of such technologies;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the timing and volume of orders and production by our customers, as well as
fluctuations in royalty revenues resulting from fluctuations in unit shipments by our
licensees and shifts by our customers from prepaid royalty arrangements to per unit
royalty arrangements;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the mix of revenues among licensing revenues, per unit and prepaid royalties and
service revenues;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">our lengthy sales cycle and specifically in the third quarter of any fiscal year during
which summer vacations slow down decision-making processes of our customers in executing
contracts;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the gain or loss of significant licensees, partly due to our dependence on a limited
number of customers generating a significant amount of quarterly revenues;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">any delay in execution of any anticipated licensing arrangement during a particular
quarter;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">delays in the commercialization of end products that incorporate our technology;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">currency fluctuations of the Euro and Israeli NIS versus the U.S. dollar;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">increased operating expenses and gross margin fluctuations associated with the
introduction of new or enhanced technologies;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">changes in our pricing policies and those of our competitors; and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">restructuring, asset impairment and related charges, as well as other accounting
changes or adjustments.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Each of the above factors is difficult to forecast and could harm our business, financial
condition and results of operations. Also, we license our technology to OEM customers for
incorporation into their end products for consumer markets, including wireless and consumer
electronics products. The royalties we generate are reported by our customers and invoiced by us
one quarter in arrears. As a result, our royalty revenues are affected by seasonal buying patterns
of consumer products sold by our OEM customers that incorporate our technology and the market
acceptance of such ends products supplied by our OEM customers. The fourth quarter in any given
year is usually the strongest quarter for sales by our OEM customers in the consumer markets, and
thus, the first quarter in any given year is usually the strongest quarter for royalty revenues as
our royalties are reported and invoiced one quarter in arrears. By contrast, the second quarter in
any given year is usually the weakest quarter for us in relation to royalty revenues.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>We rely significantly on revenue derived from a limited number of customers.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We expect that a limited number of customers, varying in identity from period-to-period, will
account for a substantial portion of our revenues in any period. One customer accounted for 29%
and another customer accounted for 12% of our total revenues for the first quarter of 2008.
Moreover, license agreements for our DSP cores have not historically provided for substantial
ongoing license payments. Significant portions of our anticipated future revenue, therefore, will
likely depend upon our success in attracting new customers or expanding our relationships with
existing customers. Our ability to succeed in these efforts will depend on a variety of factors,
including the performance, quality, breadth and depth of our current and future products, as well
as our sales and marketing skills. In addition, some of our licensees may decide to satisfy their
needs through in-house design and production. Our failure to obtain future customer licenses would
impede our future revenue growth and could materially harm our business.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>We depend on market acceptance of third-party semiconductor intellectual property.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The semiconductor intellectual property (SIP)&nbsp;industry is a relatively new and emerging trend.
Our future growth will depend on the level of market acceptance of our third-party licensable
intellectual property model, the variety of intellectual property offerings available on the
market, and a shift in customer preference away from the traditional approach of licensing
standalone DSPs, and towards licensing highly-integrated application platforms incorporating all
the necessary hardware and software for their target applications. These trends that will enable
our growth are largely beyond our control. Semiconductor customers may choose to adopt a
multi-chip, off-the-shelf chip solution versus licensing or using highly-integrated chips that
embed our technologies. Semiconductor customers also may decide to design programmable DSP core
products in-house rather than license them from us. If the market shifts do not materialize or
third-party SIP does not achieve market acceptance, our business, results of operations and
financial condition could be materially harmed.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Because our IP solutions are components of end products, if semiconductor companies and electronic
equipment manufacturers do not incorporate our solutions into their end products or if the end
products of our customers do not achieve market acceptance, we may not be able to generate adequate
sales of our products.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We do not sell our IP solutions directly to end-users; we license our technology primarily to
semiconductor companies and electronic equipment manufacturers, who then incorporate our technology
into the products they sell. As a result, we rely on our customers to incorporate our technology
into their end products at the design stage. Once a company incorporates a competitor&#146;s technology
into its end product, it becomes significantly more difficult for us to sell our technology to that
company because changing suppliers involves significant cost, time, effort and risk for the
company. As a result, we may incur significant expenditures on the development of a new technology
without any assurance that our existing or potential customers will select our technology for
incorporation into their own product and without this &#147;design win,&#148; it becomes significantly
difficult to sell our IP solutions. Moreover, even after a customer agrees to incorporate our
technology into its end products, the design cycle is long and may be delayed due to factors beyond
our control, which may result in the end product incorporating our technology not reaching the
market until long after the initial &#147;design win&#148; with such customer. From initial product
design-in to volume production, many factors could impact the timing and/or amount of sales
actually realized from the design-in. These factors include, but are not limited to, changes in
the competitive position of our technology, our customers&#146; financial stability, and our ability to
ship products according to our customers&#146; schedule.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Further, because we do not control the business practices of our customers, we do not
influence the degree to which they promote our technology or set the prices at which they sell
products incorporating our technology. We cannot assure you that our customers will devote
satisfactory efforts to promote our IP solutions. In addition, our unit royalties from licenses
are dependent upon the success of our customers in introducing products incorporating our
technology and the success of those products in the marketplace. The primary customers for our
products are semiconductor design and manufacturing companies, system OEMs and electronic equipment
manufacturers, particularly in the telecommunications field. These industries are highly cyclical
and have been subject to significant economic downturns at various times, particularly in recent
periods. These downturns are characterized by production overcapacity and reduced revenues, which
at times may encourage semiconductor companies or electronic product manufacturers to reduce their
expenditure on our technology. If we do not retain our current customers and continue to attract
new customers, our business may be harmed.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>We depend on a limited number of key personnel who would be difficult to replace.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our success depends to a significant extent upon certain of our key employees and senior
management, the loss of which could materially harm our business. Competition for skilled
employees in our field is intense. We cannot assure you that in the future we will be successful
in attracting and retaining the required personnel
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>The sales cycle for our IP solutions is lengthy, which makes forecasting of our customer orders and
revenues difficult.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The sales cycle for our IP solutions is lengthy, often lasting three to nine months. Our
customers generally conduct significant technical evaluations, including customer trials, of our
technology as well as competing technologies prior to making a purchasing decision. In addition,
purchasing decisions also may be delayed because of a customer&#146;s internal budget approval process.
Because of the lengthy sales cycle, our dependence on a limited number of customers to generate a
significant amount of revenues and the size of customer orders, if orders forecasted for a specific
customer for a particular period do not occur in that period, our revenues and operating results
for that particular quarter could suffer. Moreover, a portion of our expenses related to an
anticipated order is fixed and difficult to reduce or change, which may further impact our
operating results for a particular period.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>We may dispose of or discontinue existing product lines and technology developments, which may
adversely impact our future results.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On an ongoing basis, we evaluate our various product offerings and technology developments in
order to determine whether any should be discontinued or, to the extent possible, divested. For
example, in connection with our reorganization and restructuring plans in 2003 and 2005, we ceased
manufacturing of our hard IP products and certain non-strategic technology areas. In June&nbsp;2006, we
divested our GPS technology and related business. We cannot guarantee that we have correctly
forecasted, or will correctly forecast in the future, the right product lines and technology
developments to dispose or discontinue or that our decision to dispose of or discontinue various
investments, products lines and technology developments is prudent if market conditions change. In
addition, there are no assurances that the discontinuance of various product lines will reduce our
operating expenses or will not cause us to incur material charges associated with such decision.
Furthermore, the discontinuance of existing product lines entails various risks, including the risk
that we will not be able to find a purchaser for a product line or the purchase price obtained will
not be equal to at least the book value of the net assets for the product line. Other risks
include managing the expectations of, and maintaining good relations with, our customers who
previously purchased products from our disposed or discontinued product lines, which could prevent
us from selling other products to them in the future. We may also incur other significant
liabilities and costs associated with our disposal or discontinuance of product lines, including
employee severance costs and excess facilities costs.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Because our IP solutions are complex, the detection of errors in our products may be delayed, and
if we deliver products with defects, our credibility will be harmed, the sales and market
acceptance of our products may decrease and product liability claims may be made against us.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our IP solutions are complex and may contain errors, defects and bugs when introduced. If we
deliver products with errors, defects or bugs, our credibility and the market acceptance and sales
of our products could be significantly harmed. Furthermore, the nature of our products may also
delay the detection of any such error or defect. If our products contain errors, defects and bugs,
then we may be required to expend significant capital and resources to alleviate these problems.
This could result in the diversion of technical and other resources from our other development
efforts. Any actual or perceived problems or delays may also adversely affect our ability to
attract or retain customers. Furthermore, the existence of any defects, errors or failure in our
products could lead to product liability claims or lawsuits against us or against our customers. A
successful product liability claim could result in
substantial cost and divert management&#146;s attention and resources, which would have a negative
impact on our financial condition and results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Our operating results may fluctuate significantly due to the cyclicality of the semiconductor
industry or global economy slowdown, which could adversely affect the market price of our stock.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our primary operations are in the semiconductor industry, which is cyclical and subject to
rapid technological change and evolving industry standards. From time to time, the semiconductor
industry has experienced significant downturns such as the one we experienced during the 2000 and
2001 periods. These downturns are characterized by diminished product demand, excess customer
inventories, accelerated erosion of prices and excess production capacity. These factors could
cause substantial fluctuations in our revenues and in our results of operations. The downturn we
experienced during the 2000 and 2001 periods was, and future downturns in the semiconductor
industry may be, severe and prolonged. Also the slow recovery from the downturn during the 2000
and 2001 periods and the failure of this industry to fully recover in any future downturn could
seriously impact our revenue and harm our business, financial condition and results of operations.
The semiconductor industry also periodically experiences increased demand and production capacity
constraints, which may affect our ability to ship products in future periods. Furthermore, U.S. or
global economic downturns, such as the one that certain economic analysts say U.S. is experiencing
in 2008, may adversely impact the semiconductor industry or cause a downturn of the industry. Our
financial results may vary significantly as a result of the general conditions in the semiconductor
industry, or general economic conditions that adversely impact the semiconductor industry, which
could cause our stock price to decline.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Our success will depend on our ability to successfully manage our geographically dispersed
operations.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Most of our employees are located in Israel and Ireland. Accordingly, our ability to compete
successfully will depend in part on the ability of a limited number of key executives located in
geographically dispersed offices to integrate management, address the needs of our customers and
respond to changes in our markets. If we are unable to effectively manage and integrate our remote
operations, our business may be materially harmed.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Our operations in Israel may be adversely affected by instability in the Middle East region.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">One of our principal research and development facilities is located in, and our executive
officers and some of our directors are residents of, Israel. Although substantially all of our
sales currently are being made to customers outside Israel, we are nonetheless directly influenced
by the political, economic and military conditions affecting Israel. Any major hostilities
involving Israel could significantly harm our business, operating results and financial condition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In addition, certain of our officers and employees are currently obligated to perform annual
reserve duty in the Israel Defense Forces and are subject to being called to active military duty
at any time. Although we have operated effectively under these requirements since our inception,
we cannot predict the effect of these obligations on the company in the future. Our operations
could be disrupted by the absence, for a significant period, of one or more of our key officers or
key employees due to military service.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Our research and development expenses may increase if the grants we currently receive from the
Israeli and Irish governments are reduced or withheld.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We currently receive research grants from programs of the Chief Scientist of Israel and under
the funding programs of Enterprise Ireland and Invest Northern Ireland. To be eligible for these
grants, we must meet certain development conditions and comply with periodic reporting obligations.
Although we have met such conditions in the past, should we fail to meet such conditions in the
future our research grants may be repayable, reduced or withheld. The repayment or reduction of
such research grants may increase our research and development expenses which in turn may reduce
our operating income.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>We are exposed to fluctuations in currency exchange rates.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A significant portion of our business is conducted outside the United States. Although most
of our revenue is transacted in U.S. Dollars, we may be exposed to currency exchange fluctuations
in the future as business practices evolve and we are forced to transact business in local
currencies. Moreover, the bulk of our expenses in Israel and Europe are paid in Israeli currency
(NIS)&nbsp;and Euro, which subjects us to the risks of foreign currency fluctuations. Our primary
expenses paid in NIS and Euro are employee salaries. Increases in the volatility of the exchange
rates of the Euro and the NIS versus the U.S. dollar could have an adverse effect on the expenses
and liabilities that we incur in Euro and NIS when remeasured into U.S. dollars for financial
reporting purposes. For example, the devaluation of the U.S. dollar against the Euro and NIS
during the past year had a margin impact on increasing our operating expenses for the year 2007
which was offset by other cost saving measures. During the second quarter of 2007, we instituted a
foreign cash flow hedging program to minimize the effects of currency fluctuations. However,
hedging transactions may not successfully mitigate losses caused by currency fluctuations, and our
hedging positions may be partial or may not exist at all in the future. We review our monthly
expected non-U.S. dollar denominated expenditure and look to hold equivalent non-U.S. dollar cash
balances to mitigate currency fluctuations. This approach has resulted in a foreign exchange loss
of $140,000 and $17,000 for the first quarter of 2008 and 2007, respectively. We expect to
continue to experience the effect of exchange rate currency fluctuations on
annual and quarterly basis. Also, due to the devaluation of the U.S. dollar as compared to
the NIS and the Euro, we believe our overall expenses will increase in 2008.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Because we have significant international operations, we may be subject to political, economic and
other conditions relating to our international operations that could increase our operating
expenses and disrupt our revenues and business.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Approximately 87% of our total revenues for the first quarter of 2008 were derived from
customers located outside of the United States. We expect that international customers will
continue to account for a significant portion of our revenue for the foreseeable future. As a
result, the occurrence of any negative international political, economic or geographic events could
result in significant revenue shortfalls. These shortfalls could cause our business, financial
condition and results of operations to be harmed. Some of the risks of doing business
internationally include:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">unexpected changes in regulatory requirements;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">fluctuations in the exchange rate for the U.S. dollar;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">imposition of tariffs and other barriers and restrictions;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">burdens of complying with a variety of foreign laws;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">political and economic instability; and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">changes in diplomatic and trade relationships.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>If we are unable to meet the changing needs of our end-users or to address evolving market demands,
our business may be harmed.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The markets for programmable DSP cores and application IP are characterized by rapidly
changing technology, emerging markets and new and developing end-user needs, and requiring
significant expenditure for research and development. We cannot assure you that we will be able to
introduce systems and solutions that reflect prevailing industry standards on a timely basis, meet
the specific technical requirements of our end-users or avoid significant losses due to rapid
decreases in market prices of our products, and our failure to do so may seriously harm our
business. For example, we have already licensed our multimedia solutions; however, this technology
has not yet been deployed by our licensees for their end markets and may be subject to further
modifications to address evolving market demands.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>We may seek to expand our business through acquisitions that could result in diversion of resources
and extra expenses.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We may pursue acquisitions of businesses, products and technologies, or establish joint
venture arrangements in the future that could expand our business. We are unable to predict
whether or when any other prospective acquisition will be completed. The process of negotiating
potential acquisitions or joint ventures, as well as the integration of acquired or jointly
developed businesses, technologies or products may be prolonged due to unforeseen difficulties and
may require a disproportionate amount of our resources and management&#146;s attention. We cannot
assure you that we will be able to successfully identify suitable acquisition candidates, complete
acquisitions or integrate acquired businesses or joint ventures with our operations. If we were to
make any acquisitions or enter into a joint venture, we may not receive the intended benefits of
the acquisition or joint venture or such an acquisition or joint venture may not achieve comparable
levels of revenues, profitability or productivity as our existing business or otherwise perform as
expected. The occurrence of any of these events could harm our business, financial condition or
results of operations. Future acquisitions or joint venture may require substantial capital
resources, which may require us to seek additional debt or equity financing.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Future acquisitions or joint venture by us could result in the following, any of which could
seriously harm our results of operations or the price of our stock:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">issuance of equity securities that would dilute our current stockholders&#146;
percentages of ownership;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">large one-time write-offs;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">incurrence of debt and contingent liabilities;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">difficulties in the assimilation and integration of operations, personnel,
technologies, products and information systems of the acquired companies;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">diversion of management&#146;s attention from other business concerns;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">contractual disputes;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">risks of entering geographic and business markets in which we have no or only
limited prior experience; and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">potential loss of key employees of acquired organizations.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>We may not be able to adequately protect our intellectual property.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our success and ability to compete depend in large part upon the protection of our proprietary
technologies. We rely on a combination of patent, copyright, trademark, trade secret, mask work
and other intellectual property rights, confidentiality procedures and licensing arrangements to
establish and protect our proprietary rights. These agreements and measures may not be sufficient
to protect our technology from third-party infringement or to protect us from the claims of others.
As a result, we face risks associated with our patent position, including the potential need to
engage in significant legal proceedings to enforce our patents, the possibility that the validity
or enforceability of our patents may be denied, the possibility that third parties will be able to
compete against us without infringing our patents and the possibility that our products may
infringe patent rights of third parties.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our trade names or trademarks may be registered or utilized by third parties in countries
other than those in which we have registered them, impairing our ability to enter and compete in
these markets. If we were forced to change any of our brand names, we could lose a significant
amount of our brand identity.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Our business will suffer if we are sued for infringement of the intellectual property rights of
third parties or if we cannot obtain licenses to these rights on commercially acceptable terms.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are subject to the risk of adverse claims and litigation alleging infringement of the
intellectual property rights of others. There are a large number of patents held by others,
including our competitors, pertaining to the broad areas in which we are active. We have not, and
cannot reasonably, investigate all such patents. From time to time, we have become aware of
patents in our technology areas and have sought legal counsel regarding the validity of such
patents and their impact on how we operate our business, and we will continue to seek such counsel
when appropriate in the future. Infringement claims may require us to enter into license
arrangements or result in protracted and costly litigation, regardless of the merits of these
claims. Any necessary licenses may not be available or, if available, may not be obtainable on
commercially reasonable terms. If we cannot obtain necessary licenses on commercially reasonable
terms, we may be forced to stop licensing our technology, and our business would be seriously
harmed.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Our business depends on our customers and their suppliers obtaining required complementary
components.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Some of the raw materials, components and subassemblies included in the products manufactured
by our OEM customers are obtained from a limited group of suppliers. Supply disruptions, shortages
or termination of any of these sources could have an adverse effect on our business and results of
operations due to the delay or discontinuance of orders for products containing our IP, especially
our DSP cores, until those necessary components are available.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>The future growth of our business depends in part on our ability to license to system OEMs and
small-to-medium-sized semiconductor companies directly and to expand our sales geographically.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Historically, a substantial portion of our licensing revenues has been derived in any given
period from a relatively small number of licensees. Because of the substantial license fees we
charge, our customers tend to be large semiconductor companies or vertically integrated system
OEMs. Part of our current growth strategy is to broaden the adoption of our products by small and
mid-size companies by offering different versions of our products targeted at these companies. If
we are unable to develop and market effectively our intellectual property through these models, our
revenues will continue to be dependent on a smaller number of licensees and a less geographically
dispersed pattern of licensees, which could materially harm our business and results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>The Israeli tax benefits that we currently receive and the government programs in which we
participate require us to meet certain conditions and may be terminated or reduced in the future,
which could increase our tax expenses.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We enjoy certain tax benefits in Israel, particularly as a result of the &#147;Approved Enterprise&#148;
and the &#147;Benefited Enterprise&#148; status of our facilities and programs. To maintain our eligibility
for these tax benefits, we must continue to meet certain conditions, relating principally to
adherence to the investment program filed with the Investment Center of the Israeli Ministry of
Industry and Trade and to periodic reporting obligations. Should we fail to meet such conditions
in the future, however, these benefits would be cancelled and we would be subject to corporate tax
in Israel at the standard corporate rate of 27% (in 2008) and could be required to refund tax
benefits already received. In addition, we cannot assure you that these tax benefits will be
continued in the future at their current levels or otherwise. The tax benefits under our current
investment programs are scheduled to gradually expire. The termination or reduction of certain
programs and tax benefits (particularly benefits available to us as a result of the &#147;Approved
Enterprise&#148; and the &#147;Benefited Enterprise&#148; status of our facilities and programs) or a requirement
to refund tax benefits already received may seriously harm our business, operating results and
financial condition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Our corporate tax rate may increase, which could adversely impact our cash flow, financial
condition and results of operations.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have significant operations in Israel and the Republic of Ireland and a substantial portion
of our taxable income historically has been generated there. Currently, some of our Israeli and
Irish subsidiaries are taxed at rates substantially lower than the U.S. tax rates. Although there
is no current expectation of any changes to Israeli and Irish tax laws, if our Israeli and Irish
subsidiaries were no longer to qualify for these lower tax rates or if the applicable tax laws were
rescinded or changed, our operating results could be materially adversely affected. In addition,
because our Israeli and Irish operations are owned by subsidiaries of our U.S. parent corporation,
distributions to the U.S. parent corporation, and in certain circumstances undistributed income of
the subsidiaries, may be subject to U.S. taxes. Moreover, if U.S. or other authorities were to
change applicable tax laws or successfully challenge the manner in which our subsidiaries&#146; profits
are currently recognized, our overall tax expenses could increase, and our business, cash flow,
financial condition and results of operations could be materially adversely affected.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;6. EXHIBITS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>No.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.29</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Assignment of Leasehold Interest, dated January&nbsp;18, 2008, by and between CEVA Ireland Limited and Ivor Fitzpatrick.</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rule&nbsp;13a-14(a)/15d-14(a) Certification of Chief Executive Officer</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rule&nbsp;13a-14(a)/15d-14(a) Certification of Chief Financial Officer</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;32</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;1350 Certification of Chief Executive Officer and Chief Financial Officer</DIV></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SIGNATURES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">CEVA, INC.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:  May 9, 2008&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ GIDEON WERTHEIZER
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Gideon Wertheizer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer<BR>
(principal executive officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: May 9, 2008&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ YANIV ARIELI
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Yaniv Arieli&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="left">Chief Financial Officer<BR>
(principal financial officer and principal accounting officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>EXHIBIT INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>No.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.29</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Assignment of Leasehold Interest, dated January&nbsp;18, 2008, by and between CEVA Ireland Limited and Ivor Fitzpatrick.</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rule&nbsp;13a-14(a)/15d-14(a) Certification of Chief Executive Officer</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rule&nbsp;13a-14(a)/15d-14(a) Certification of Chief Financial Officer</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;32</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;1350 Certification of Chief Executive Officer and Chief Financial Officer</DIV></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.29
<SEQUENCE>2
<FILENAME>c73242exv10w29.htm
<DESCRIPTION>EXHIBIT 10.29
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><b>Exhibit&nbsp;10.29</b>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>DATED 18</B><SUP style="font-size: 85%; vertical-align: text-top"><B>TH</B></SUP> <B>DAY OF JANUARY 2008</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>(1)&nbsp;CEVA IRELAND LIMITED</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>(2)&nbsp;IVOR FITZPATRICK</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><DIV align="center"><DIV style="font-size: 10pt; margin-top: 20pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>ASSIGNMENT OF LEASEHOLD INTEREST BY A COMPANY<BR>
OF<BR>
32-34, HARCOURT STREET, DUBLIN 2</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><DIV align="center"><DIV style="font-size: 10pt; margin-top: 20pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt">MATHESON ORMSBY PRENTICE<BR>
70 Sir John Rogerson&#146;s Quay<BR>
Dublin 2<BR>
Ireland

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt">TEL &#043; 353 1 232 2000<BR>
FAX &#043; 353 1 232 3333<BR>
15764508.1

</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>THIS ASSIGNMENT </B>is made on 18th day of January&nbsp;2008
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>BETWEEN</B>

</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>CEVA IRELAND LIMITED (FORMERLY PARTHUSCEVA IRELAND LIMITED) </B>a Limited Liability Company,
company registration number 317331, having its registered office at 8-11, Lower Baggot Street,
Dublin 2 (the &#147;Assignor&#148; which expression where the context so admits or requires shall
include its successors and assigns)</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>AND</B>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>IVOR FITZPATRICK </B>Solicitor of 44/45, St. Stephens Green, Dublin 2 (the &#147;Assignee&#148; which
expression where the context so admits or requires shall include his executors administrators
heirs and assigns)</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>WHEREAS:</B>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">By Lease (the &#147;Lease&#148;) made 8 November&nbsp;1996 between (1)&nbsp;Veton Properties Limited and (2)
Silicon Systems Design Limited, the premises (the &#147;Premises&#148;) described in the Schedule hereto
were demised unto the said Silicon Systems Design Limited for a term of 25&nbsp;years from 8
November&nbsp;1996 subject to the initial yearly rent of IR&#163;300,000.00 (EUR<font face="times new roman,times">&#128;</font>380,921.42) subject
to review as therein and to the covenants on the part of the lessee and conditions therein
contained.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">By Deed of Assignment dated 16 May&nbsp;2003 between (1)&nbsp;Silicon Systems Design Limited and (2)
the Assignor (under its then name of Parthusceva Ireland Limited) the premises was assigned to
the Assignor for the residue of the term of years granted by the Lease subject to the said
yearly rent thereby reserved and to the covenants on the part of the lessee and conditions
therein contained.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">C.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">By Certificate of Incorporation on Change of name dated 14 January&nbsp;2004 Parthusceva Ireland
became known as Ceva Ireland Limited</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">D.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Assignor has agreed and is desirous of assigning all its estate and interest in the
Premises to the Assignee and the Assignor has agreed to pay to the Assignee the sum of
<font face="times new roman,times">&#128;</font>3,887,735 and the Assignee has agreed to assume all of the obligations and covenants on
the lessee&#146;s part contained in the Lease.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>NOW THIS ASSIGNMENT WITNESSETH:</B>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">That in consideration of the Assignee assuming responsibility for all the obligations,
liabilities, covenants and rights of the Assignor pursuant to the Lease from the date of these
presents and in return for the payment by the Assignor to the Assignee of the sum of
<font face="times new roman,times">&#128;</font>3,887,735 (the receipt of which the Assignee hereby acknowledges) the Assignor as
beneficial owner <B>HEREBY GRANTS AND ASSIGNS </B>unto the Assignee the Premises <B>TO HOLD </B>the same
unto and to the use of the Assignee for all the residue unexpired of the said term of years
demised by the Lease <B>SUBJECT TO </B>the said rent thereby reserved and subject to the covenants on
the part of the lessee and conditions therein contained.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Assignee hereby covenants with the Assignor to pay the rent reserved by the Lease and to
observe and perform the covenants on the part of the lessee and conditions in the Lease
contained and to indemnify and keep indemnified the Assignee against all actions costs claims
and demands arising out of the non-payment of the said rent or any part thereof or the breach
non-observance or non-performance of the said covenants and conditions or any of them.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>IT IS HEREBY CERTIFIED:</B>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">That this is an instrument to which the provisions of Section&nbsp;29 of the Stamp Duties
Consolidation Act, 1999 do not apply.</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">That the provisions of Section&nbsp;29 of the Companies Act, 1990 do not apply to this instrument.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>IN WITNESS WHEREOF </B>the parties have hereunto caused their seals to be affixed hereto the day
and year first herein written.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SCHEDULE</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>ALL THAT AND THOSE </B>the premises demised by the Lease and therein described as <B>&#147;ALL THAT AND THOSE</B>
the property comprised in Folio 2304F County Dublin as more particularly known as the Lands and
Premises known as 32/34, Harcourt Street in the City of Dublin&#148;.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>PRESENT </B>when the Common Seal
of <B>THE ASSIGNOR</B>
was affixed hereto:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Fergal Shanahan
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Fergal Shanahan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Director</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ceva Ireland Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Layla Bates
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Layla Bates
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Company Secretary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ceva Ireland Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>PRESENT </B>when the Common Seal
of <B>THE ASSIGNEE</B>
was affixed hereto:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Vicky Pigor
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Vicky Pigor
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Solicitor</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dublin 2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Ivor Fitzpatrick
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Ivor Fitzpatrick
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>OCTOBER PROPERTY HOLDINGS LIMITED </B>as the person now entitled to the Lessor&#146;s interest in the Lease
in accordance with the alienation provisions contained in the Lease hereby endorses its consent to
the Assignment of the Premises by CEVA Ireland Limited to Ivor Fitzpatrick in the manner herein
provided and hereby releases CEVA Ireland Limited from its obligations, covenants and liabilities
contained in the Lease whether past present or future with effect from the date hereof.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>PRESENT </B>when the Common Seal of
<B>OCTOBER PROPERTY HOLDINGS LIMITED</B>
was affixed hereto:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Ivor Fitzpatrick
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Ivor Fitzpatrick
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Director</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">October Property Holdings Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Paddy McKillen
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Paddy McKillen
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Director</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">October Property Holdings Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>DATED 18</B><SUP style="font-size: 85%; vertical-align: text-top"><B>TH</B></SUP> <B>DAY OF JANUARY 2008</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>(1)&nbsp;CEVA IRELAND LIMITED</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>(2)&nbsp;IVOR FITZPATRICK</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><DIV align="center"><DIV style="font-size: 10pt; margin-top: 20pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>ASSIGNMENT OF LEASEHOLD INTEREST<BR>
BY A COMPANY<BR>
OF<BR>
32-24, HARCOURT STREET, DUBLIN 2</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><DIV align="center"><DIV style="font-size: 10pt; margin-top: 20pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt">MATHESON ORMSBY PRENTICE<BR>
70 Sir John Rogerson&#146;s Quay<BR>
Dublin 2<BR>
Ireland

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt">TEL &#043; 353 1 232 2000<BR>
FAX &#043; 353 1 232 3333<BR>
15764508.1

</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>c73242exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">



<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>EXHIBIT 31.1</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO<BR>
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">I, Gideon Wertheizer, certify that:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">I have reviewed this Quarterly Report on Form 10-Q of CEVA, Inc. (the &#147;Company&#148;);</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Designed such disclosure
controls and procedures,
or caused such disclosure
controls and procedures to
be designed under our
supervision, to ensure
that material information
relating to the
registrant, including its
consolidated subsidiaries,
is made known to us by
others within those
entities, particularly
during the period in which
this report is being
prepared;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Designed such internal
control over financial
reporting, or caused such
internal control over
financial reporting to be
designed under our
supervision, 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;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Evaluated the
effectiveness of the
registrant&#146;s disclosure
controls and procedures
and presented in this
report our conclusions
about the effectiveness of
the disclosure controls
and procedures, as of the
end of the period covered
by this report based on
such evaluation; and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Disclosed in this report
any change in the
registrant&#146;s internal
control over financial
reporting that occurred
during the registrant&#146;s
most recent fiscal quarter
(the registrant&#146;s fourth
fiscal quarter in the case
of an annual report) that
has materially affected,
or is reasonably likely to
materially affect, the
registrant&#146;s internal
control over financial
reporting; and</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and
the audit committee of the registrant&#146;s board of directors (or persons performing the
equivalent functions):</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">All significant
deficiencies and material
weaknesses in the design
or operation of internal
control over financial
reporting which are
reasonably likely to
adversely affect the
registrant&#146;s ability to
record, process, summarize
and report financial
information; and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Any fraud, whether or not
material, that involves
management or other
employees who have a
significant role in the
registrant&#146;s internal
control over financial
reporting.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Date: May&nbsp;9, 2008
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%"></TD>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="35%"></TD>
    <TD width="15%"></TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                  /s/ GIDEON WERTHEIZER
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Gideon Wertheizer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>4
<FILENAME>c73242exv31w2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>EXHIBIT 31.2<BR>
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO<BR>
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">I, Yaniv Arieli, certify that:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">I have reviewed this Quarterly Report on Form 10-Q of CEVA, Inc. (the &#147;Company&#148;);</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Designed such disclosure
controls and procedures,
or caused such disclosure
controls and procedures to
be designed under our
supervision, to ensure
that material information
relating to the
registrant, including its
consolidated subsidiaries,
is made known to us by
others within those
entities, particularly
during the period in which
this report is being
prepared;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Designed such internal
control over financial
reporting, or caused such
internal control over
financial reporting to be
designed under our
supervision, 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;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Evaluated the
effectiveness of the
registrant&#146;s disclosure
controls and procedures
and presented in this
report our conclusions
about the effectiveness of
the disclosure controls
and procedures, as of the
end of the period covered
by this report based on
such evaluation; and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Disclosed in this report
any change in the
registrant&#146;s internal
control over financial
reporting that occurred
during the registrant&#146;s
most recent fiscal quarter
(the registrant&#146;s fourth
fiscal quarter in the case
of an annual report) that
has materially affected,
or is reasonably likely to
materially affect, the
registrant&#146;s internal
control over financial
reporting; and</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and
the audit committee of the registrant&#146;s board of directors (or persons performing the
equivalent functions):</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">All significant
deficiencies and material
weaknesses in the design
or operation of internal
control over financial
reporting which are
reasonably likely to
adversely affect the
registrant&#146;s ability to
record, process, summarize
and report financial
information; and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Any fraud, whether or not
material, that involves
management or other
employees who have a
significant role in the
registrant&#146;s internal
control over financial
reporting.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Date: May&nbsp;9, 2008
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%"></TD>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="35%"></TD>
    <TD width="15%"></TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                                           /s/ YANIV ARIELI
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Yaniv Arieli&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>5
<FILENAME>c73242exv32.htm
<DESCRIPTION>EXHIBIT 32
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;32</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>CERTIFICATION</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>PURSUANT TO 18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with the quarterly report on Form 10-Q of CEVA, Inc. (the &#147;Company&#148;) for the
quarter ended March&nbsp;31, 2008, as filed with the Securities and Exchange Commission on the date
hereof (the &#147;Report&#148;), the undersigned, Gideon Wertheizer, Chief Executive Officer of the Company,
and Yaniv Arieli, Chief Financial Officer of the Company, each hereby certifies, that:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(1)&nbsp;The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(2)&nbsp;The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">This certification will not be deemed &#147;filed&#148; for purposes of Section&nbsp;18 of the Securities
Exchange Act of 1934, or otherwise subject to the liability of that section. This certification
will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that the Company specifically
incorporates it by reference.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Date: May&nbsp;9, 2008
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%"></TD>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="35%"></TD>
    <TD width="15%"></TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                  /s/    GIDEON WERTHEIZER
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Gideon Wertheizer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%"></TD>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="35%"></TD>
    <TD width="15%"></TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                  /s/ YANIV ARIELI
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Yaniv Arieli&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



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