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

Overview

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Critical Accounting Policies

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

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

Revenue Recognition

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

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

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

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

Impairment of Long-Lived Assets and Intangible Assets

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

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

Employee Stock-Based Compensation

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

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

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

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

Inventory

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

Short-Term Investments

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

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

Fair Value of Financial Instruments

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

Debt Issuance Costs

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

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

Extinguishment of Debt

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

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

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

Recent Accounting Pronouncements

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

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

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

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

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

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

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

Results of Operations

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

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

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

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

                                       Year Ended          Three-Month Transition
                                ------------------------        Period Ended
                                March 31,   December 31,         March 31,
                                  2008          2006                2007
                                ---------   ------------   ----------------------
   Customer A (related party)          59 %           84 %                     26 %
   Customer B                          39 %           13 %                     72 %

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

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

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