F-1 1 v198147_jp-f1.htm VintageFilings,LLC

As filed with the Securities and Exchange Commission on October 19, 2010

Registration No. 333-      

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

Form F-1

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933



 

SODASTREAM INTERNATIONAL LTD.

(Exact Name of Registrant as Specified in Its Charter)

N/A

(Translation of Registrant’s Name into English)

   
Israel   3630   Not Applicable
(State or Other Jurisdiction
of Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

Daniel Birnbaum
Chief Executive Officer
SodaStream International Ltd.
Gilboa Street, Airport City,
Ben Gurion Airport 70100, Israel
+972 (3) 976-2301

(Address, Including ZIP Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)



 

SodaStream USA, Inc.
One Mall Drive
Cherry Hill, NJ 08002
1-800-763-2258

(Name, Address, Including ZIP Code, and Telephone Number,
Including Area Code, of Agent for Service)



 

Copies to:

     
Brian B. Margolis
Stuart R. Goldfarb
Orrick, Herrington & Sutcliffe LLP
51 West 52nd Street
New York, NY 10019
Tel: 212-506-5000
Fax: 212-506-5151
  Chaim Y. Friedland
Benjamin J. Waltuch
Gornitzky & Co.
45 Rothschild Blvd.
Tel Aviv 65784 Israel
Tel: +972-3-710-9191
Fax: +972-3-560-6555
  Colin Diamond
Joshua Kiernan
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036
Tel: 212-819-8754
Fax: 212-354-8113
  Barry Levenfeld
Shiri Shaham
Yigal Arnon & Co.
22 Rivlin Street
Jerusalem 91000 Israel
Tel: +972-2-623-9220
Fax: +972-2-623-9236


 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

       
Title of Each Class of Securities To Be Registered   Amount to be
Registered(1)
  Proposed
Maximum
Offering Price
Per Share(2)
  Proposed
Maximum
Aggregate
Offering Price(2)
  Amount of
Registration Fee
Ordinary Shares, par value NIS 0.645     5,447,368     $ 20.00     $ 108,947,360     $ 7,768  
(1) Includes 710,526 shares which may be sold pursuant to the underwriters’ over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) under the Securities Act.


 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 


 
 

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to completion, dated October 19, 2010

Preliminary prospectus

4,736,842 shares

[GRAPHIC MISSING]

Ordinary Shares

This is an initial public offering of ordinary shares of SodaStream International Ltd. Prior to this offering, there has been no public market for our ordinary shares. We are offering 4,736,842 ordinary shares. The initial public offering price of our ordinary shares is expected to be between $18.00 and $20.00 per share.

We have applied to list our ordinary shares on the Nasdaq Global Market under the symbol “SODA”.

Investing in our ordinary shares involves a high degree of risk. See “Risk factors” beginning on page 13.

   
  Per share   Total
Initial public offering price   $            $         
Underwriting discounts and commissions   $            $         
Proceeds to SodaStream, before expenses   $            $         

The underwriters have an option to purchase a maximum of 710,526 additional ordinary shares from us, at the public offering price, less the underwriting discounts and commissions, to cover over-allotment of shares, if any. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.

Neither the Securities and Exchange Commission nor any state or foreign securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the ordinary shares to purchasers on       , 2010.

 
J.P. Morgan   Deutsche Bank Securities

   
William Blair & Company   Oppenheimer & Co.   Stifel Nicolaus Weisel

Roth Capital Partners

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Neither we nor any of the underwriters have authorized anyone to provide information different from that contained in this prospectus and any free writing prospectus prepared by or on our behalf. When you make a decision about whether to invest in our ordinary shares, you should not rely upon any information other than the information in this prospectus and any free writing prospectus prepared by or on our behalf. Neither the delivery of this prospectus nor the sale of our ordinary shares means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or solicitation of an offer to buy these ordinary shares in any circumstances under which the offer or solicitation is unlawful.

Unless we indicate otherwise, U.S. Dollar translations of Euro amounts presented in this prospectus are translated at the rate of €1.00 = $1.3601, the noon buying rate for Euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on September 30, 2010.

We obtained the industry, market and competitive position data in this prospectus from our own internal estimates and research as well as from industry and general publications and research, surveys and studies conducted by third parties. The third-party studies were conducted by Ciao Surveys GmbH, Intervjubolaget Imri AB, Ipsos Tambor, s.r.o., Panels Limited Ltd. and Spinach Ltd., each of which has filed a consent to be named in this prospectus. These third parties surveyed approximately 500 people each in certain of our smaller markets and approximately 1,000 people each in certain of our larger markets.

Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal company research is reliable and the market definitions are appropriate, neither such research nor these definitions have been verified by any independent source.

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Prospectus summary

This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before deciding to invest in our ordinary shares. You should read the entire prospectus carefully including “Risk Factors” and our consolidated financial statements and notes to those consolidated financial statements before making an investment decision.

SodaStream

SodaStream manufactures home beverage carbonation systems, which enable consumers to easily transform ordinary tap water instantly into carbonated soft drinks and sparkling water. We believe our soda makers offer a highly differentiated and innovative solution to consumers of bottled and canned carbonated soft drinks and sparkling water. Our products are environmentally friendly, cost-effective, promote health and wellness, and are customizable and fun to use. In addition, our products offer convenience by eliminating the need to carry bottles home from the supermarket, to store bottles at home or to regularly dispose of empty bottles. Educating consumers of these benefits is a key element of our strategy to build awareness, particularly as we expand into new markets. We believe that we are the world’s leading manufacturer of home beverage carbonation systems. Such belief is based on consumer surveys we commissioned that show SodaStream has the largest market share in each of a dozen of the largest markets in which we operate and the lack of a competing home beverage carbonation system in the significant majority of other markets around the world, including the United States. We estimate, based on consumer surveys and sales of CO2 refills, that there are currently approximately 4 million consumers who create a carbonated beverage using our system at least once every two weeks, whom we refer to as active consumers, with many of the largest carbonated soft drink and sparkling water markets still remaining virtually untapped.

We develop, manufacture and sell soda makers and exchangeable carbon-dioxide (CO2) cylinders, as well as consumables, consisting of CO2 refills, reusable carbonation bottles and flavors to add to the carbonated water. We currently sell our products through more than 35,000 retail stores in 39 countries, including 24 countries that we have entered since the beginning of 2007. We distribute our products directly in 12 countries and indirectly through local distributors in our remaining markets. Our products are sold under the SodaStream® brand name in most countries, and under the Soda-Club® brand name or select other brand names in certain other countries. While our distribution strategy is customized for each market, we generally employ a multi-channel distribution approach that is designed to raise awareness and establish positioning of our product offerings, first in specialty retail and direct marketing channels and then in larger food, drug and mass retailers.

We have an attractive “razor/razor blade” business model, which is designed to increase sales of soda makers and exchangeable CO2 cylinders (the “razors”), as well as to generate recurring sales of higher-margin consumables, consisting of CO2 refills, carbonation bottles and flavors (the “razor blades”). A more detailed description of each of our products appears below:

•   Soda makers.  Our soda makers are free-standing, lightweight and compact, have a stylish design and do not require electricity. Consumers initially purchase a “starter kit,” consisting of a soda maker, one or two carbonation bottles together with hermetically-sealing bottle caps and, in some markets, samples of a variety of flavors. The starter kit also includes an exchangeable CO2 cylinder which can produce between 30 and 130 liters of carbonated beverages depending on the size. Such systems are typically sold in the United States at prices ranging from $79 for a basic plastic model that uses a plastic carbonation bottle, to $199 for the higher-end Penguin model that has stainless steel components and utilizes glass carbonation bottles.

•   CO2 refills.  We provide beverage-grade CO2 refills through authorized retailers that participate in our cylinder exchange program. Consumers typically exchange their empty cylinders at retail stores or through online orders for full cylinders and pay only the price of the CO2. Empty

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cylinders are then delivered to a filling plant where they are inspected, cleaned and refilled for distribution. We estimate that our active consumers purchase, on average, two to three CO2 refills per year. Our business model includes expanding the number of locations in each market where we sell our products and where consumers can exchange their empty CO2 cylinders for full cylinders. Consumers in the United States typically pay either $14.99 for a 60-liter CO2 refill or $24.99 for a 110-liter CO2 refill.

•   Flavors.  We offer a wide variety of more than 100 flavors. Several of our flavors, such as our cola flavors, are available in both regular and diet versions, and have similar taste profiles to many popular carbonated soft drinks. We are expanding the variety of natural and “enhanced” flavors, including fruit, energy and isotonic blends, to satisfy evolving consumer tastes. As part of our focus on healthier beverages, we do not use high-fructose corn syrup in our flavors and we offer certain of our diet versions with Splenda®, and without aspartame and saccharin. We also address local tastes with flavors designed for individual markets, including Root Beer (United States), Irn Brew and Vimto (United Kingdom), Ginger Beer (South Africa), Must (Scandinavia) and Chinotto (Italy). We also offer special “limited edition” flavors for holidays and seasonal campaigns. Consumers in the United States typically pay $4.99 for a 500 ml bottle of one of our flavors, which usually produces 12 liters of carbonated soft drinks.

•   Carbonation bottles.  We manufacture our own reusable carbonation bottles, which are the only bottles intended for use with our machines. In addition to the bottle(s) that come with the starter kit, many consumers purchase additional carbonation bottles in order to be able to have several bottles of carbonated soft drinks or sparkling water on hand at once. All of our carbonation bottles come with a hermetically-sealing silicon bottle cap, which maintains the carbonation level at a higher level than that achieved by regular bottle caps. Our plastic carbonation bottles are manufactured without Bisphenol A (and are thus referred to as BPA-free), and are reusable for several years. Our glass carbonation bottles are reusable indefinitely. Therefore, our carbonation bottles are significantly better for the environment than traditional single-use bottled or canned carbonated beverages and water bottles. Consumers in the United States typically pay $14.99 for two additional plastic carbonation bottles or for one additional glass carbonation bottle.

Many potential consumers are unfamiliar with the idea of making carbonated drinks at home. We challenge those consumers to re-think the way they obtain carbonated drinks by educating them about the benefits of our products. This consumer education is done through direct advertising, promotional activity, public relations campaigns and activities, and in-store demonstrations at the point of sale. We use both traditional and digital media in these efforts, as well as direct-response marketing. We continuously test and apply marketing tools to improve consumer retention, including subscription programs, newsletters, warranties, trade-in promotions and various other programs to keep consumers engaged.

From 2007 through 2009, our revenues grew at a compound annual growth rate of 10.5% from €86.0 million to €105.0 million. We incurred a loss of €1.6 million in 2007 and had net income of €530,000 and €7.1 million in 2008 and 2009, respectively. Our revenues increased by €22.9 million, or 49.9%, to €68.7 million in the six months ended June 30, 2010 from €45.8 million in the six months ended June 30, 2009. Our net income increased by €3.7 million to €4.2 million in the six months ended June 30, 2010 from €472,000 in the six months ended June 30, 2009. Similarly, from 2007 through 2009, our revenues from soda makers and exchangeable CO2 cylinders grew from €27.2 million to €39.1 million, while our revenues from sales of consumables grew from €52.0 million to €59.3 million. Our revenues from soda makers and exchangeable CO2 cylinders grew from €13.5 million in the six months ended June 30, 2009 to €28.0 million in the six months ended June 30, 2010, while our revenues from sales of consumables grew from €27.8 million in the six months ended June 30, 2009 to €36.3 million in the six months ended June 30, 2010. Although we are only in the early stages of our United States marketing investment plan, we have more than tripled our sales in this market from $4.4 million in 2007 to $14.5 million in 2009. Our revenues

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in the United States increased by $5.0 million, or 88.6%, to $10.7 million in the six months ended June 30, 2010 from $5.7 million in the six months ended June 30, 2009. Between 2007 and 2009, we further penetrated key existing markets, including France and Italy, where we previously had minimal presence.

Market overview and opportunity

We believe the greatest opportunity for SodaStream is to become an attractive alternative in the very large global carbonated beverage category, where many products currently sold are packaged in disposable bottles and cans. Our initial and primary focus is on off-premise consumption (defined as beverages consumed at home), although we view the out-of-home market (such as offices, hotels and foodservice) as an opportunity for future expansion.

According to Datamonitor, the global off-premise soft drink and global sparkling water industries generated approximately $206 billion and $27 billion, respectively, in retail sales in 2008. The United States led most other markets with annual per capita off-premise carbonated soft drink consumption of 118 liters in 2009, representing an aggregate of $39 billion in sales.

We believe that demand for our products will continue to benefit from several long-term trends in global consumer behavior. These trends include (1) the “green” movement and the popularity of products perceived to be better for the environment, (2) the increasing importance of value and savings in consumer’s lifestyle and purchase decisions, and (3) increasing demand for food and beverage products that promote health and wellness.

For consumers who wish to create their own sparkling water, there are currently very limited alternatives to our products, such as soda siphons or at-home carbonated water delivery, which we believe do not offer consumers the same range of benefits or ease of use as our home beverage carbonation systems. There are a limited number of other home beverage carbonation systems available in certain markets. Those companies that do offer home carbonation devices do not offer the full range of products that we offer (such as CO2 refills, glass carbonation bottles and an extensive range of flavors).

Our business strengths

We believe the following business strengths position us well to grow our business:

•   Clear and compelling consumer benefits.  Our products provide an innovative alternative to packaged carbonated beverages and are consistent with long-term trends in consumer behavior. Our products are:

º Environmentally friendly.  Use of our products, which include reusable carbonation bottles, reduces the number of plastic bottles and cans used by consumers.

º Convenient.  Our products eliminate the need to carry bottles home from the supermarket, store bottles at home and dispose of the empty bottles.

º Cost effective.  Our sparkling water and carbonated soft drinks provide savings of up to 70% for sparkling water and of up to 30% for carbonated soft drinks compared to purchasing bottled sparkling water or bottled or canned carbonated soft drinks, in each case as compared to standard retail prices.

º Promoting health and wellness.  Among other benefits, our flavors contain two-thirds less sugar, carbohydrates and calories than leading soft drink brands, and one-third less caffeine than popular carbonated soft drinks, thereby promoting a healthier alternative to traditional carbonated soft drinks.

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º Customizable, fun and easy to use.  Our products enable consumers to customize beverages at home in a creative way that is a fun and exciting for members of the family of all ages.

•   Established presence in certain markets.  We currently sell our products through more than 35,000 stores in 39 countries. We believe, based on our familiarity with the retail and distribution channels in the markets in which we operate, that we hold the leading market share position in each of the markets in which we compete.

•   Recurring revenues.  Our business model is to increase the installed base of soda makers, in order to generate ongoing demand for higher-margin CO2 refills, carbonation bottles and flavors. As a result, over time, this change in sales mix generally has a positive impact on our operating margins. In mature markets, we typically target an overall operating margin in excess of 25%.

•   Strong value proposition for our retailers.  We believe that retailers derive significant new sales opportunities and other benefits from featuring our eye-catching and innovative products in their stores. Retailers also benefit from the repeat foot traffic and the revenue stream generated by sales of our consumables.

•   Ongoing product innovation.  We offer a broad range of soda makers, ranging from a basic plastic model that uses a plastic carbonation bottle to our high-end Penguin model that uses a glass carbonation bottle and has a stainless steel finish, in order to meet the needs of consumers at various price points. We are continuously evaluating and improving our product offerings.

•   Operational expertise and global infrastructure.  Our business requires a significant amount of manufacturing and logistical expertise. Our experience with our retailer exchange program, our proprietary manufacturing capabilities and our ability to meet the regulations of several foreign governing bodies and maintain a global network of regulatory compliance, including self-regulated status with several of those organizations, gives us an advantage relative to other market participants or potential new entrants.

•   Highly experienced management team.  We are led by a proven and experienced management team. Our Chief Executive Officer, Daniel Birnbaum, brings significant experience in the consumer sector and has held management positions at Nike, Procter & Gamble and Pillsbury. Our Chief Financial Officer, Daniel Erdreich, previously served as the CFO of two publicly-traded companies. The other members of our senior management team also have significant experience in the consumer products sector, and have previously held positions at major consumer products companies, including Campbell Soup Company, Groupe SEB, Kraft, McDonald’s and Nike.

Our strategy

Our principal strategies are (1) to grow our installed base through new purchases of our products and (2) to maintain consumer loyalty and “users for life.” Our long-term goal is to convert as many carbonated beverage consumers to our products as possible throughout the world. As such, as we grow our company, we measure our success by the level of household penetration our products achieve. Based on consumer surveys we commissioned, we believe that our average household penetration in established markets has generally been in the range of 5% to 15%. Our highest penetration is in Sweden, where we estimate, based on those same surveys, that we have achieved household penetration of approximately 20%.

Expand our installed base of customers

As we strive to bring our products to a greater number of households worldwide, we intend to focus on the key elements that we believe will drive new purchases and grow our installed base, which include the following:

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•   Increased awareness of our products and their compelling consumer benefits.  Educating consumers on the numerous benefits of our products is a vital component of our strategy to grow our installed base and our revenues. As such, we employ a variety of conventional and specialized marketing activities, many of which are designed to challenge the consumer to rethink the habit of using disposable bottles.

•   Growth of retail distribution.  Increased retail distribution is an essential element in delivering our products to potential consumers. We believe that the United States market will be particularly receptive to our products, because its carbonated beverage market size and per capita consumption are among the highest in the world. In addition, in several of our markets, our relationships with retailers are only in the early stages of development, and we intend to grow these relationships to significantly expand our retail distribution in those markets.

•   Introduction of new soda maker products.  We maintain an active product development department, devising new products that offer improved aesthetics and lifestyle appeals as well as improved functionality. Since 2007, we have introduced several new and more up-scale models of soda makers, some of which use glass or dishwasher-safe plastic carbonation bottles.

Promote consumer retention (“Users for Life”)

Acquiring the new user is only the beginning of the relationship with our consumer. Repeat users are key to driving both the sustainability and the profitability of our business. In fact, in most mature markets, sales of our higher-margin consumables typically approach or exceed sales of our soda makers. We attempt to promote consumer retention by taking the following steps:

•   Increasing availability of consumables.  We will continue to invest in the expansion of our consumables business (primarily CO2 refills and flavors). We believe that widespread availability and easy access to consumables are key to consumer retention and loyalty, and therefore are working to enhance our already strong CO2 refill exchange program.

•   Introducing exciting new flavors.  We continue to introduce additional flavors to expand our sales in existing markets. We currently offer more than 100 flavors, including diet and all-natural versions, which can also be mixed to meet consumer preferences.

•   Employing creative and effective consumer marketing.  We believe that our best ambassadors are our own users. We have therefore established ongoing consumer marketing programs to keep our installed base not only engaged but also encouraged and motivated to educate their friends through word-of-mouth. These programs include subscription programs, newsletters, warranties, trade-in promotions, referral programs and various other programs.

Risk factors

Investing in our ordinary shares involves risks. You should carefully consider the risks described in “Risk Factors” before making a decision to invest in our ordinary shares. If any of these risks actually occurs, our business, financial condition or results of operations would likely be materially adversely affected. In such case, the trading price of our ordinary shares would likely decline, and you may lose all or part of your investment. The following is a summary of some of the principal risks we face:

•   We may not be successful in our efforts to expand in target markets such as the United States, which will require substantial investment to build awareness and develop an installed base of users.

•   We may not be successful in developing or maintaining relationships with retailers for the sale of our home beverage carbonation systems and the exchange of our empty CO2 cylinders in the markets we are targeting for growth.

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•   We may not be successful in developing and implementing operating infrastructure to effectively support our growth, including increased manufacturing capacity.

•   Our ability to grow depends on successful implementation of marketing campaigns and media spending and on the continued demand for our product offerings.

•   Our functional currency is the Euro and we are subject to fluctuations in currency exchange rates and may not have adequately hedged against them.

•   Our inability to protect our intellectual property rights could reduce the value of our products or permit competitors to more easily compete with us.

•   We have been found to have a dominant position in certain markets and have been held in certain markets to be unable to prevent third parties from refilling our exchangeable CO2 cylinders.

•   Our headquarters and the majority of our employees are located in Israel and our principal manufacturing facility is located east of Jerusalem in the West Bank, thereby subjecting us to the risk of political and economic pressures.

Recent Developments

Management has prepared estimates of our revenues in good faith based upon our internal reporting for the three months ended September 30, 2010. The estimates represent the most current information available to management. Such estimates have not been subject to our normal quarterly financial closing processes and interim condensed financial statement preparation. As a result, our actual financial results could be different from these estimates, and those differences could be material. Our consolidated interim condensed financial statements for the three months ended September 30, 2010 are not expected to be reported and filed with the Securities and Exchange Commission until after this offering is completed.

Based on these management estimates, we expect that our revenue growth for the three months ended September 30, 2010 as compared to the three months ended September 30, 2009 will be substantially consistent with our revenue growth achieved in the first half of the 2010 fiscal year as compared to the first half of the 2009 fiscal year. The substantial majority of this revenue growth is attributable to increased sales in Western Europe and the United States.

We believe that the foregoing information about our revenues, even when unaccompanied by information regarding our operating and net income that is not yet available, is important to an investor’s understanding of our performance and is a meaningful indicator for assessing our operating performance, because it demonstrates the successful implementation of our sales strategy in both our mature markets and in our newest markets, especially the United States.

The final financial results for the three months ended September 30, 2010 may be different from the preliminary estimates we are providing above due to the completion of the quarterly close and review procedures, final adjustments and other developments that may arise between now and the time the financial results for this period are finalized. However, as of this date, we have not identified any unusual or unique events or trends that occurred during that period which might materially affect our results of operations or financial position.

Corporate information

Our principal executive offices are located at Gilboa Street, Airport City, Ben Gurion Airport 70100, Israel and our telephone number is +972 (3) 976-2301. Our website address is www.sodastream.com. The

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information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus or the registration statement of which it forms a part.

On March 11, 2010, we changed our corporate name from Soda-Club Holdings Ltd. to SodaStream International Ltd.

Throughout this prospectus, we refer to various trademarks, service marks and trade names that we use in our business. SodaStream® and Soda-Club® are some of our registered trademarks. Fizz ChipTM is one of our trademarks. We also have a number of other registered trademarks, service marks and pending applications relating to our products. Other trademarks and service marks appearing in this prospectus are the property of their respective holders.

In this prospectus, the terms “SodaStream,” “we,” “us,” “our” and “the company” refer to SodaStream International Ltd. and its consolidated subsidiaries.

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The offering

Ordinary shares offered by us    
    4,736,842 shares
Ordinary shares to be outstanding after this offering    
    17,673,465 shares
Use of proceeds    
    We estimate that we will receive net proceeds, after deducting the underwriting discount and estimated offering expenses, of $81.6 million from the sale by us of ordinary shares in this offering, based on an assumed public offering price of $19.00 per share, the midpoint of the initial public offering price range set forth on the cover page of this prospectus. We intend to use the net proceeds of this offering:
    •   to repay approximately €24.4 million ($33.2 million) principal amount of indebtedness owed to financial institutions outstanding as of the date of this prospectus; and
    •   to repay approximately €1.4 million ($1.9 million) of additional indebtedness owed to our shareholders as of the date of this prospectus;
    •   to pay for various costs associated with the construction or purchase of an additional manufacturing facility in or near one of our existing markets, amounting to approximately €25.0 million ($34.0 million);
    •   to pay a one-time termination fee in the amount of €1.75 million ($2.4 million) to Fortissimo Capital Fund GP, L.P. (“Fortissimo Capital”) in consideration for terminating our Management Services Agreement with them upon the completion of this offering; and
    •   the balance for working capital and for other general corporate purposes.
    In addition, we may use all or a portion of the net proceeds to acquire or invest in complementary companies, products or technologies, although we currently do not have any acquisitions or investments planned.
Risk factors    
    See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares.
Proposed Nasdaq Global Market symbol    
    “SODA”

The number of ordinary shares to be outstanding after this offering excludes 2,195,838 ordinary shares reserved for issuance under our equity incentive plans, of which, as of June 30, 2010, options to purchase 1,145,838 shares had been granted at a weighted-average exercise price of €2.54 ($3.45) per share. In addition, effective upon the closing of this offering, we intend to grant to our Chief Executive Officer options to purchase 210,000 ordinary shares with an exercise price equal to the initial offering price.

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Unless otherwise indicated, this prospectus:

•   reflects the conversion of all our outstanding preferred shares into 4,511,365 ordinary shares, which will automatically occur immediately prior to the closing of this offering;

•   reflects the conversion of €10.7 million of loans into 6,667,838 ordinary shares, which will occur immediately prior to the closing of this offering;

•   does not reflect the exercise of a warrant for 12,146 ordinary shares on a cashless basis at an exercise price of $6.45 per share, which will occur immediately following the closing of this offering;

•   assumes an initial public offering price of $19.00 per ordinary share, the midpoint of the initial public offering price range, set forth on the cover page of this prospectus;

•   assumes no exercise of the underwriters’ option to purchase up to an additional 710,526 ordinary shares from us to cover overallotments; and

•   gives effect to a 1-for-6.45 reverse share split effected on October 6, 2010.

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Summary consolidated financial and other data

The following table sets forth our summary consolidated financial and other data. You should read the following summary consolidated financial and other data in conjunction with “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Historical results are not indicative of the results to be expected in the future. Our financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board.

The consolidated statements of operations data for each of the years in the three-year period ended December 31, 2009 and the consolidated balance sheet data as of December 31, 2009 are derived from our audited consolidated financial statements appearing elsewhere in this prospectus. The consolidated statements of operations data for the six months ended June 30, 2009 and June 30, 2010 and the consolidated balance sheet data as of June 30, 2010 are derived from our unaudited consolidated financial statements appearing elsewhere in this prospectus. The information presented below under the caption “Other Financial and Operating Data” contains information that is not derived from our financial statements.

In this prospectus, references to “Euros” or “€” are to the Euro, the official currency of the European Union, and references to “U.S. Dollars,” “$” or “dollars” are to United States dollars. The following tables also contain translations of Euro amounts into U.S. Dollars for amounts presented for the year ended and as of December 31, 2009 and for the six months ended June 30, 2010. These translations are solely for the convenience of the reader and were calculated at the rate of €1.00 = $1.3601, the noon buying rate for Euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on September 30, 2010. You should not assume that, on that or on any other date, one could have converted these amounts of Euros into dollars at that or any other exchange rate.

             
(in thousands, except per share and share amounts)   Year Ended December 31,   Six Months Ended June 30,
  2007   2008   2009   2009   2009   2010   2010
Consolidated statements of operations data:
                                                              
Revenues   85,983     99,949     105,023     $ 142,842     45,809     68,676     $ 93,406  
Cost of revenues     39,745       45,213       46,593       63,371       20,458       32,886       44,728  
Gross profit     46,238       54,736       58,430       79,471       25,351       35,790       48,678  
Operating expenses:
                                                              
Sales and marketing     31,449       32,184       34,692       47,185       16,497       23,943       32,565  
General and administrative     13,769       12,675       13,134       17,863       6,733       7,804       10,614  
Other (income), net     (25 )      (19 )      (95 )      (129 )      (58 )      (61 )      (83 ) 
Total operating expenses     45,193       44,840       47,731       64,919       23,172       31,686       43,096  
Operating income     1,045       9,896       10,699       14,552       2,179       4,104       5,582  
Interest expense, net     2,195       2,742       2,022       2,750       1,220       804       1,094  
Other financial expenses (income), net     134       1,654       (248 )      (337 )      (327 )      (1,474 )      (2,005 ) 
Total financial expense (income), net     2,329       4,396       1,774       2,413       893       (670 )      (911 ) 
Income (loss) before income tax     (1,284 )      5,500       8,925       12,139       1,286       4,774       6,493  
Income taxes     306       4,970       1,793       2,439       814       602       819  
Net income (loss)   (1,590 )    530     7,132     $ 9,700     472     4,172     $ 5,674  

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(in thousands, except per share and share amounts)   Year Ended December 31,   Six Months Ended June 30,
  2007   2008   2009   2009   2009   2010   2010
Net income (loss) per ordinary share:
                                                              
Basic   (0.29 )    0.09     1.14     $ 1.55     0.08     0.67     $ 0.91  
Diluted   (0.29 )    0.07     0.57     $ 0.78     0.05     0.33     $ 0.45  
Shares used in computing net income (loss) per ordinary share:
                                                              
Basic     5,466,901       5,850,228       6,259,393       6,259,393       6,259,393       6,259,446       6,259,446  
Diluted     5,466,901       9,629,991       13,206,403       13,206,403       12,725,454       13,503,145       13,503,145  
Pro forma net income (loss) per ordinary share:(1)
                                                              
Basic                  0.65     $ 0.88              0.38     $ 0.52  
Diluted                       0.41     $ 0.56              0.24     $ 0.32  
Shares used in computing pro forma net income (loss) per ordinary share:(1)
                                                              
Basic                       10,996,238       10,996,238                10,996,288       10,996,288  
Diluted                       18,332,563       18,332,563                18,619,916       18,619,916  

             
(in thousands)   Year Ended December 31,   Six Months Ended June 30,
  2007   2008   2009   2009   2009   2010   2010
Other financial and operating data:
                                                              
Total number of soda makers sold (unaudited)     730       877       1,057       N/A       387       761       N/A  
Total number of CO2 refills sold (unaudited)*     7,364       7,496       8,166       N/A       3,907       4,622       N/A  
EBITDA(2)   2,744     10,218     12,588     $ 17,121     3,379     6,586     $ 8,958  

* The CO2 refills are sold in exchangeable CO2 cylinders of different sizes. For the purpose of comparison, we have adjusted the number of CO2 refills to be equivalent to one “standard” 60-liter cylinder size.

       
  As of June 30, 2010
(in thousands)   Actual   Pro Forma As Adjusted(3)
Consolidated balance sheet data:
                                   
Cash and cash equivalents   4,111     $ 5,591     15,048     $ 20,466  
Working capital(4)     13,626       18,533       13,626       18,533  
Total assets     99,654       135,539       135,591       184,417  
Loans and borrowings (including short-term obligations)     20,931       28,469              
Shareholders’ loans     11,947       16,249              
Total liabilities     79,309       107,868       46,431       63,151  
Total equity     20,345       27,671       89,160       121,266  

(1) Pro forma net income reflects the reduction in interest expenses attributable to the conversion of €10.7 million of loans plus the accrued interest thereon into ordinary shares, which will automatically occur immediately prior to the closing of this offering. Shares used in computing pro forma net income reflects the issuance of (i) 4,511,365 ordinary shares upon the conversion of our outstanding preferred shares and (ii) 6,667,838 ordinary shares upon the conversion of such outstanding indebtedness, each of which will occur immediately prior to the closing of this offering. For additional information on the conversion of our preferred shares, see note 12A to our consolidated financial statements included elsewhere in this prospectus.

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(2) EBITDA is a non-IFRS measure and is defined as earnings before interest expense, taxes, depreciation and amortization. We present EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company. EBITDA should not be considered in isolation or as a substitute for operating income or other statement of operations items prepared in accordance with IFRS as a measure of our performance. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this prospectus, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.

             
  Year Ended December 31,   Six Months Ended June 30,
(in thousands)   2007   2008   2009   2009   2009   2010   2010
Reconciliation of net income (loss) to EBITDA
                                                              
Net income (loss)   (1,590 )    530     7,132     $ 9,700     472     4,172     $ 5,674  
Interest expense, net     2,195       2,742       2,022       2,750       1,220       804       1,094  
Income taxes     306       4,970       1,793       2,439       814       602       819  
Depreciation and amortization     1,833       1,976       1,641       2,232       873       1,008       1,371  
EBITDA   2,744     10,218     12,588     $ 17,121     3,379     6,586     $ 8,958  

(3) Pro forma as adjusted amounts give effect to the issuance and sale of 4,736,842 ordinary shares by us in this offering at an assumed initial public offering price of $19.00 per ordinary share, the midpoint of the initial public offering price range set forth on the cover page of this prospectus, after deducting the underwriting discount and estimated offering expenses payable by us, and the application of the net proceeds therefrom. See “Use of Proceeds” and “Capitalization.”

(4) Working capital is defined as (i) total current assets excluding cash and cash equivalents, minus (ii) total current liabilities excluding loans and borrowings, and shareholders’ loans.

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Risk factors

This offering and an investment in our ordinary shares involve a high degree of risk. You should consider carefully the risks described below, together with the financial and other information contained in this prospectus, before you decide to buy our ordinary shares. If any of the following risks actually occurs, our business, financial condition and results of operations would suffer. In this case, the trading price of our ordinary shares would likely decline and you might lose all or part of your investment.

Risks related to our business and industry

A key element of our strategy is to expand in target markets, such as the United States, which will require substantial investment to build product and brand awareness and develop an installed base of users, and our failure to do so would have a material adverse effect on our future growth and prospects.

A key element of our strategy is to grow our business by expanding sales of our soda makers, CO2 refills and other related consumables in certain existing markets that we believe have high growth potential in which we currently have a limited presence and in select new markets. In particular, we intend to focus our growth efforts on the United States, the world’s largest market for carbonated beverages and our most important target market. Our success will depend, in large part, upon consumer acceptance and adoption of our products. Consumer tastes and preferences differ in the markets into which we are expanding as compared to those in which we already sell a significant amount of products. We will face several challenges in achieving consumer acceptance and adoption of our home beverage carbonation systems in those markets, including consumers’ desire to carbonate beverages at home rather than purchasing carbonated beverages and consumers’ willingness to exchange empty CO2 cylinders for filled CO2 cylinders. The United States differs from most European markets because of the higher propensity in the United States to consume carbonated beverages rather than sparking water. This will require us to market our products differently than we have in our key European markets. There can be no assurance that we will meet any of these challenges in the existing or new markets we are targeting and the failure to do so would adversely affect our growth in a particular market and may adversely affect our strategy, future growth and prospects.

We may not be successful in continuing to develop or maintain our presence in retail networks for the sale of our home beverage carbonation systems and the exchange of our empty CO2 cylinders in the markets we are targeting for growth, which could have a material adverse effect on our future growth and prospects.

Our growth both in existing markets and in new markets depends significantly on our ability to develop or maintain our presence in retail networks, as retailers are the primary channel through which consumers initially purchase our home beverage carbonation system and the primary channel through which our consumables are sold. Our ability to successfully expand in the markets that we are targeting for growth depends, in large part, on whether we are able to establish relationships with strong retailers in those markets for the sale of our home beverage carbonation systems and the exchange of our empty CO2 cylinders. Establishing relationships with retailers may prove more difficult in the United States, our key market for growth, than in our other markets, as retailers in the United States may be more likely to be resistant to establishing the reverse logistics needed for consumers to return empty CO2 cylinders and exchange them for filled ones. There can be no assurance that we will be successful in establishing relationships with large retailers in the markets we are targeting for growth, particularly the United States, or that if successful, we will do so in a time frame consistent with our projections or that will enable us to achieve significant sales. Our failure to establish and maintain such relationships will adversely affect our ability to grow in a particular market and may adversely affect our future growth and prospects.

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Our ability to grow our business successfully depends on whether we can develop and implement production and operating infrastructure, including increased manufacturing capacity, to effectively support our growth.

We are targeting certain markets for growth in which we currently have limited or no presence, including the United States. Achieving and successfully managing growth in these markets will require that we develop and implement production and operating infrastructure including, among other things, infrastructure for product development and for manufacturing our products, information technology and financial control systems. In addition, we will need to continue to develop the infrastructure for consumers to conveniently exchange empty CO2 cylinders for filled ones, whether through retail outlets or otherwise. The development and implementation of this infrastructure will require significant additional investment as our business grows and becomes increasingly complex in these markets. Our future results will depend on management’s ability to successfully implement these initiatives on a larger scale, particularly in the United States. Failure to do so could negatively impact our efforts to increase our sales in these markets and have a material adverse effect on our future growth and prospects.

Our future success also requires that we have adequate capacity in our manufacturing facilities to manufacture sufficient products to support our current level of sales and the anticipated increased levels that may result from our growth plans. We intend to expand the use of subcontractors for certain components, as needed to meet expected demand. We believe that the capacity of our current manufacturing facilities and subcontractors is sufficient to meet anticipated demand for our products through 2012.

In addition, we currently intend to increase our manufacturing capabilities for future needs by constructing or purchasing an additional manufacturing facility in or near one of our existing markets, which will require us to secure additional real estate, hire additional employees and obtain additional financing. Construction of a new manufacturing facility involves risks, including the risk of cost overruns and unexpected delays. Appropriate locations or financing for the purchase or lease of such additional real estate, as well as a sufficient pool of employees, may not be available at reasonable costs or at all. If we choose to purchase an existing manufacturing facility and modify it for our manufacturing needs, we may incur similar cost overruns and unexpected delays. In addition, our projected cost to construct or purchase such a facility might be lower than the actual cost.

Any interruption of operations at our existing manufacturing facilities or our failure to secure additional manufacturing capacity when necessary in the future could result in an interruption in the supply of our products to our customers, thereby impeding our growth plans.

Our marketing campaigns and media spending might not result in increased sales or generate the levels of product and brand name awareness we desire.

Our products are ultimately sold to consumers and, therefore, our future growth depends in large part on our ability to create awareness of our product and our brand name. To create and maintain this awareness, we intend to engage in extensive advertising and promotional campaigns in certain key markets that we believe have significant growth potential. Our future growth and profitability will depend in part on the effectiveness and efficiency of these campaigns and our media spending, including our ability to:

•   raise awareness of our home beverage carbonation system and brand name;

•   determine the appropriate creative message and media mix for future expenditures;

•   create and tailor specific advertisements and promotion campaigns for each country in which we distribute; and

•   effectively manage advertising costs, including creative and media costs, to maintain acceptable costs per sale and operating margins.

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We intend to allocate a significant portion of our media spending on marketing campaigns targeted at the United States, our largest market for future growth. These campaigns will require significant financial resources and may require additional funds depending on the results they generate.

There can be no assurance that our marketing campaigns will result in increased revenues or increased product or brand awareness, and we may not be able to increase our sales at the same rate as we increase our advertising expenditures, any of which could have a material adverse effect on our business and results of operations.

We may be unable to maintain our customer base in markets where we have an established presence due to changes in consumer preference, perception and spending habits.

Our long-term revenue growth and profitability depend upon our ability to apply our business model of selling soda makers to new consumers and our consumables, particularly our CO2 refills and flavors, to consumers who already own our soda makers. Since we derive our highest profit margins from our consumables, the continued use of our systems by, and the repeat sales of our consumables to, consumers who have already purchased our home beverage carbonation systems is important to our business. In markets where we have an established presence, we face the challenge of maintaining this customer base due to changes in consumer preference, perception and habits, as well as the introduction of competing products, any of which may cause our consumers to stop using our systems or to use them less frequently. In order to maintain the use of our systems by our consumers, we will need to navigate quickly and respond accordingly to such changes, including through creative initiatives such as new product offerings and special promotions. Our failure to adequately respond to changes in consumer behavior could result in a reduction in the size of our customer base, which would have a material adverse effect on our business and results of operations.

We rely on exclusive arrangements for the distribution of our home beverage carbonation systems and consumables in each of the markets in which we use third party distributors.

We distribute our home beverage carbonation systems and consumables through exclusive relationships with third party distributors in 26 countries, representing 30% of our revenues in 2009. Our distribution agreements are generally exclusive agreements for a given territory with a five year term and option of renewal; however, our contracts contain performance criteria to maintain exclusivity. If any distributor fails to meet its distribution targets, we may attempt to terminate our distribution agreement with that distributor. We may not be successful in terminating our distribution agreements with our distributors and even if we are successful, we may have to pay statutory compensation to such distributors or fines, and we may experience a delay in retaining new distributors. Because we rely on third party distributors, we have less control than when we distribute directly and can be adversely impacted by the actions of our distributors. For example, in 2009, we experienced a decrease in revenues from Western Europe primarily because our distributor in the Nordics experienced significant financial difficulty as a result of the recession in that market as well as certain inventory management issues relating to consumables, which have since been resolved. Furthermore, our distributors also undertake to manage the reverse logistics needed for our end-user consumers to return empty CO2 cylinders and exchange them for filled CO2 cylinders. In the event that any of our distributors does not successfully manage those reverse logistics, it will make it more difficult for our end-user consumers to obtain replacement CO2 cylinders, which will negatively affect their attitude towards us and our revenues in that market. Any disruption in our distribution network could have a negative effect on our ability to sell our products and maintain our customer base, which would in turn materially and adversely affect our business and results of operations.

We may be unable to compete effectively with other companies which offer, or may offer in the future, competing products.

We face competition in several of our markets from manufacturers of one or more of the components of our home beverage carbonation systems, including the soda makers, exchangeable CO2 cylinders, carbonation bottles and flavors. We anticipate that our success may attract additional competition, both from other manufacturers of home beverage carbonation systems and consumables and the

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manufacturers of carbonated beverages. The entry of new competitors into our market or the acquisition of our existing competitors by companies with substantial resources could result in further increased competition and harm our business. Increased competition from new competitors may result in price reductions, reduced gross margins and loss of market share, any of which could have a material adverse effect on our business and results of operations.

In addition, we compete with suppliers of CO2 who seek to refill our exchangeable CO2 cylinders and other exchangeable CO2 cylinders compatible for use with our systems. For a variety of reasons, including safety and public health, through various contractual arrangements, we generally require customers to refill their CO2 cylinders through authorized refillers. These arrangements have not always been effective in the past and there can be no assurance that they will be effective in the future in deterring unauthorized refilling by our competitors. Additionally, third parties have offered in the past, and may offer in the future, CO2 cylinders and flavors compatible for use in our home beverage carbonation systems. Such sales of consumables by competitors may result in lost sales opportunities for us, decrease our market share and could cause negative publicity if these products cause damage when used with our products.

We also face competition from manufacturers who sell counterfeit reproductions of our soda makers. Although we monitor and attempt to take action against such manufacturers where possible, there can be no assurance that we will be successful in deterring competitors from manufacturing and selling counterfeit reproductions of our products. These actions may result in lost sales opportunities and harm to our reputation due to the lower quality of these counterfeit products compared to our products. The risk of counterfeiting may increase with the expansion of our business and increased recognition of our brand name.

Finally, we face competition from companies that sell sparkling water and carbonated soft drinks. A number of these competitors are substantially larger than we are and have significantly greater financial, sales and marketing, manufacturing and other resources than are available to us, as well as established brands and greater brand awareness. These competitors may use their resources and scale to respond more rapidly than us to competitive pressures and changes in consumer preferences by introducing new products, reducing prices or increasing promotional activities.

If any component of our home beverage carbonation systems is misused, the system may fail and cause personal injury or property damage. We may be subject to product liability claims as a result of any such failure, which will likely increase our costs and adversely affect our business and reputation.

Although we include explicit instructions for the operation of our home beverage carbonation systems and have placed safety warnings on all of our products, consumers may misuse our products, including by:

•   washing our non-dishwasher safe carbonation bottles in the dishwasher or otherwise exposing them to severe heat, which could cause the bottle to crack;

•   carbonating substances other than water with our soda maker, which could cause the soda maker to fail and possibly cause damage to the other components of our home beverage carbonation system; and

•   subjecting our exchangeable CO2 cylinders to pressure beyond their measured stress resistance, which could cause the cylinder to burst.

The misuse of any of the components of our home beverage carbonating systems may cause personal injury and damage to property. In addition, while we have safety approvals from local authorities for our products, these approvals are predicated upon the exclusive use of our proprietary components with our system. Any unauthorized use of our home beverage carbonation system, including by using third party consumables with our system, could lead to failure or malfunction of the system which in turn could cause

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personal injury or property damage. Potential personal injury and property damage may also result from the deterioration of the quality or contamination of the materials used in our systems, including the tap water used in the soda maker.

Our product liability insurance for personal injury and damage to property may not be sufficient or available to cover any successful product liability claim, or similar claims, against us, which could materially adversely impact our financial condition. Whether or not a claim against us would be successful, defense of the claim may be costly and the existence of any claim may adversely impact our reputation, financial condition or results of operations.

Our inability to protect our intellectual property rights could reduce the value of our products or permit competitors to more easily compete with us and have a material adverse effect on our business, brand, financial condition and results of operations.

While we make efforts to develop and protect our intellectual property, the validity, enforceability and commercial value of our intellectual property rights may be reduced or eliminated by the discovery of prior inventions by third parties, the discovery of similar marks previously used by third parties, non-use or non-enforcement by us, the successful independent development by third parties of the same or similar confidential or proprietary innovations or changes in the supply or distribution chains that render our rights obsolete. We have been in the past and may in the future be subject to opposition proceedings with respect to applications for registrations of our intellectual property, including but not limited to our marks. As we rely in part on brand names and trademark protection to enforce our intellectual property rights, barriers to our registration of our brand names and trademarks in various countries may restrict our ability to promote and maintain a cohesive brand throughout our key markets.

Our ability to compete effectively depends, in part, on our ability to maintain the proprietary nature of our technologies, which include the ability to obtain, protect and enforce patents and trade secrets and other know how relating to our technology. Our current patent portfolio is limited and certain patents of ours that cover significant aspects of our products will expire in the near future, including a patent for the aerating device present in most of our soda makers, which expires in 2011. Although we hold additional utility patents and design registrations and patents (as well as applications for such) that may protect certain aspects of our products for an extended period, there can be no assurance that pending United States or foreign applications will be approved in a timely manner or at all, or that such registrations will effectively protect our intellectual property. There can be no assurance that we will develop patentable intellectual property in the future, and we may choose not to pursue patents or other protection for innovations that subsequently turn out to be important.

To protect our know-how and trade secrets, we have implemented a system in most jurisdictions by which we require certain of our employees to enter into employment contracts, which include clauses requiring such employees to acknowledge our ownership of all inventions and intellectual property rights they develop in the course of their employment and to agree not to disclose our confidential information. Agreements with certain of our employees also typically contain provisions restricting employment with our competitors for a certain period after they stop working for us. Not all employees have executed such employment agreements, and certain of these restrictions may be of no or little enforceability under applicable law. We also typically include non-compete and confidentiality provisions, as well as provisions acknowledging our ownership of all intellectual property rights, in our distributor and supplier agreements. These provisions may not be adequate or enforceable, and despite our efforts, our know-how and trade secrets could be disclosed to third parties, or third parties could independently develop the same or similar information or technology, which could cause us to lose any competitive advantage resulting from such know-how or trade secrets.

From time to time, we may discover that third parties are infringing or otherwise violating our intellectual property rights. For example, we are aware of third party uses of our trademarks and designs, and there may be other third parties using trademarks or names similar to ours of whom we are unaware. Monitoring unauthorized use of intellectual property is difficult and protecting our intellectual property

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rights could be costly and time consuming. The monitoring and protection of our intellectual property rights may become more difficult, costly and time consuming as we expand into new markets, particularly in those markets, such as China, in which legal protection of intellectual property rights is less robust than in the markets in which we currently operate. We are prepared to protect our intellectual property rights vigorously; however, our patent portfolio is limited in certain markets and, as such, we may be unable to institute effective legal action against third parties engaged in copying of our machines and components.

In November 2009, we filed a lawsuit in the District Court of Stockholm, Sweden, against a competitor, Vikingsoda AB, which had been refilling our exchangeable CO2 cylinders without our authorization. In the suit, we alleged that Vikingsoda had infringed our intellectual property rights by removing our trademarks from our exchangeable CO2 cylinders and affixing their trademarks to those cylinders. Vikingsoda has filed a complaint with the Swedish Competition Authority against us and our Scandinavian distributor, as more fully described below. The Stockholm Court of Appeal recently held that a preliminary injunction issued by the District Court of Stockholm, which enjoined Vikingsoda from refilling our exchangeable CO2 cylinders, cannot be enforced pending further notice, allowing Vikingsoda to refill our exchangeable CO2 cylinders.

There can also be no assurance that we will prevail in any intellectual property infringement litigation we institute to protect our intellectual property rights given the complex technical issues and inherent uncertainties in litigation. Such litigation may be time consuming, expensive, and may distract our management from running the day-to-day operations of our business. If we are unable to successfully defend our intellectual property rights, we could experience a material adverse effect on our business, brand, financial condition and results of operations. There can be no assurance that our intellectual property rights can be successfully asserted or will not be invalidated, circumvented or challenged. In addition, there can be no assurance that these protections will be adequate to deter the use of our intellectual property rights by third parties or to deter the development of products with features based upon, or otherwise similar to, our products.

We may be subject to claims by third parties asserting that our products and other intellectual property rights infringe, or may infringe, their proprietary rights.

We have in the past been, and may in the future be, subject to claims by third parties asserting misappropriation, or that our products and other intellectual property rights infringe, or may infringe, or otherwise violate their proprietary rights. Any such claims, regardless of merit, could result in litigation, which could result in expenses, divert the attention of management, cause significant delays and materially disrupt the conduct of our business. As a consequence of such claims, we could be required to pay a damage award, develop non-infringing products, enter into royalty-bearing licensing agreements, stop selling our products or re-brand our products. Litigation is inherently uncertain and any adverse decision could result in a loss of our proprietary rights, subject us to liabilities, require us to seek licenses from others, which may not be available on reasonable terms, if at all, and otherwise negatively affect our business. In the event of a successful claim of infringement against us or our failure or inability to develop non-infringing technology or license the infringed or similar technology, our business, financial condition and results of operations could be materially adversely affected.

We have been found to have a dominant position in certain markets. Antitrust and competition laws may place limits on our ability to engage in practices that would be permissible by smaller competitors.

Retaining business from refilling our exchangeable CO2 cylinders is important to the long-term success of our business and our future growth. For safety, public health and other reasons, we retain through contractual means the ownership of the exchangeable CO2 cylinders included in our home beverage carbonation systems, whether sold with the system or as a separate component, and prohibit the refilling of the exchangeable CO2 cylinders by third parties not authorized by us. Our agreements with retailers contain an acknowledgement that we retain title to the exchangeable CO2 cylinders. In addition, the packaging in which the cylinders are distributed, as well as the cylinders themselves, bear notices advising consumers that we retain title to the cylinders and that their use of the cylinders is under license.

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The German Federal Court of Justice, the highest German court, recently upheld a decision by the German Federal Cartel Office that preventing third parties from refilling our exchangeable CO2 cylinders constituted an abuse of a dominant position in violation of EU and German competition law and requiring us to permit our cylinders to be refilled by or exchanged with third parties.

In addition, in late 2009, Vikingsoda AB, a refiller of our exchangeable CO2 cylinders in Sweden, has filed a complaint with the Swedish Competition Authority against us and our Scandinavian distributor, alleging that we abused a dominant market position. The Swedish Competition Authority is currently investigating our practices and has issued a preliminary opinion that preventing third parties from refilling our exchangeable CO2 cylinders may constitute an abuse of a dominant position.

Further, the Swedish Competition Authority submitted this preliminary opinion to the Stockholm Court of Appeal, requesting that the Swedish courts consider the Swedish Competition Authority’s preliminary opinion in evaluating our claim that Vikingsoda had infringed our intellectual property rights by removing our trademarks from our exchangeable CO2 cylinders and affixing their trademarks to those cylinders. The Stockholm Court of Appeal recently held that a preliminary injunction issued by the District Court of Stockholm, which enjoined Vikingsoda from refilling our exchangeable CO2 cylinders, cannot be enforced pending further notice.

If we are found to have abused a dominant position, the District Court of Stockholm may impose an administrative fine on us not exceeding 10% of our annual revenues and the Swedish Competition Authority may require us to terminate the abusive conduct under penalty of a fine. We continue to cooperate with the Swedish Competition Authority.

Although neither the decision of the German Federal Court of Justice nor the preliminary opinion of the Swedish Competition Authority is binding on courts in other jurisdictions, either or both could be cited as precedent in other antitrust or competition law proceedings. There can be no assurance that a court of law in any other jurisdiction will determine that we have not violated applicable competition or antitrust laws. For example, there can be no assurance that a court in any of the jurisdictions in which we operate will uphold our refilling restrictions or ownership rights over the exchangeable CO2 cylinders or find that the cylinder refilling restrictions we impose on unauthorized third parties do not violate applicable competition or antitrust laws. Our failure to successfully enforce our ownership rights to our exchangeable CO2 cylinders or to prevent unauthorized third parties from refilling our exchangeable CO2 cylinders could have a material adverse effect on our business and results of operations.

As a multinational corporation, our operations are subject to additional risks.

With sales in 39 countries, our operations are subject to risks inherent in multinational operations, including:

•   fluctuations in exchange rates;

•   unpredictability of foreign currency exchange controls;

•   compliance with a variety of local regulations and laws;

•   changes in tax laws and the interpretation of those laws; and

•   difficulties enforcing intellectual property and contractual rights in certain jurisdictions.

In addition, certain jurisdictions could impose tariffs, quotas, trade barriers and other similar restrictions on our sales. Moreover, our business operations could be interrupted and negatively affected by economic changes, geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war, and other economic or political uncertainties. All of these risks could result in increased costs or decreased revenues, either of which could adversely affect our profitability.

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We are subject to fluctuations in currency exchange rates and may not have adequately hedged against them.

We conduct business in multiple countries, which exposes us to fluctuations in currency exchange rates between the Euro (our reporting currency) and certain other currencies in which we conduct business. Fluctuations of the U.S. Dollar and the NIS against the Euro are the most significant to us because most of our revenues are denominated in Euros, while most of our cost of revenues and operating expenses are denominated in Euros, U.S. Dollars and NIS. Although we currently engage in hedging transactions to minimize our currency risk, future currency exchange rate fluctuations that we have not adequately hedged could adversely affect our profitability. We are also exposed to credit risk if counterparties to our derivative instruments are unable to meet their obligations.

Fluctuations in our business caused by seasonality or unusual weather conditions could cause fluctuations in our quarterly results of operations and volatility in the market price of our ordinary shares.

Our business experiences seasonal fluctuations because demand for soft drinks is highest in the summer months, while in colder months, consumers tend to drink fewer carbonated beverages. As a result, we ordinarily experience a decline in sales of all of our products during the winter months, other than in December, when we experience an increase in sales as a result of the holidays. In addition, our business is sensitive to unusual weather conditions — for example, if temperatures during the winter are colder than average, we will experience decreased revenues.

Because of the seasonality and sensitivity to unusual weather conditions of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. The impact on sales volume and operating results due to the timing and extent of these factors can significantly impact our business. For these reasons, our quarterly operating results should not be relied on as indications of our future performance. These fluctuations may also cause volatility in the market price of our ordinary shares.

We may have exposure to greater than anticipated tax liabilities.

We have endeavored to structure our activities in a manner so as to minimize our and our subsidiaries’ aggregate tax liabilities. However, we have operations in various taxing jurisdictions, and there is a risk that our tax liabilities in one or more jurisdictions could be more than reported in respect of prior taxable periods and more than anticipated in respect of future taxable periods. In this regard, the amount of income taxes that we pay in future taxable periods could be higher if earnings are lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates.

In addition, we have entered into transfer pricing arrangements that establish transfer prices for our inter-company operations. However, our transfer pricing procedures are not binding on the applicable taxing authorities. No official authority in any country has made a binding determination as to whether or not we are operating in compliance with its transfer pricing laws. Accordingly, taxing authorities in any of the countries in which we operate could challenge our transfer prices and require us to adjust them to reallocate our income and potentially to pay additional taxes for past tax periods. For example, following a recent audit, the tax authorities in Germany issued a finding that the amount of royalties we recognized on our CO2 refills are not in compliance with that jurisdiction’s transfer pricing guidelines and issued a tax assessment of approximately €8.2 million, of which €5.6 million is directly in respect of these royalties for the period from 2003 to 2005. While we have appealed this assessment and are not bound to comply with the assessment during the pendency of this appeal, our appeal may not be successful and we may be required to pay some or the entire amount assessed. In addition, during the pendency of our appeal, we may be required to place a deposit or a guaranty with the tax authorities to cover a portion of or the entire assessed amount, which may have a material adverse affect on our available cash and credit lines. Moreover, in the event that our appeal is unsuccessful, further assessments for tax periods after 2005

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could be forthcoming and would likely affect our tax liability on a going-forward basis. We are unable to assess the likelihood that the existing finding of non-compliance in the jurisdiction in which we are having this dispute may lead the taxing authorities of other countries to more closely scrutinize our transfer pricing or issue adverse tax assessments.

The issue of the validity of our transfer pricing procedures will become of greater importance as we continue our expansion in markets in which we currently have a limited presence and attempt to penetrate new markets. In particular, the tax authorities in the United States, our most important expansion market, have increased their focus on transfer pricing procedures generally, which could result in a greater likelihood of a challenge to our transfer prices and the risk that we will be required to adjust them and reallocate our income, which could result in a higher effective tax rate than that to which we are currently subject. Any change to the allocation of our income as a result of review by taxing authorities could have a negative effect on our profitability.

In addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment and there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, our ultimate tax liability may differ from the amounts recorded in our financial statements and may materially adversely affect our financial results in the period or periods for which such determination is made. We have created reserves with respect to such tax liabilities where we believe it to be appropriate. However, there can be no assurance that our ultimate tax liability will not exceed the reserves we have created.

Our products are subject to extensive governmental regulation in the markets in which we operate.

Our products are subject to extensive governmental regulation in the markets in which we operate. Among the regulations we must comply with are those governing the manufacturing and transportation of our exchangeable CO2 cylinders. In the United States, our most significant target market, and in certain other markets in which we currently operate or may in the future operate, our exchangeable CO2 cylinders are considered hazardous materials due to the CO2 inside and the applicable regulations consequently restrict our ability to ship our exchangeable CO2 cylinders by air and also place significant restrictions on their land transportation, which results in additional costs. There can be no assurance that we will comply with all applicable laws and regulations to which we and our products are subject. If we fail to comply, we may be subject to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material adverse effect on our business, results of operations and reputation.

The flavors we manufacture and distribute are also subject to numerous health and safety laws regulating the manufacture and distribution of food products. Our inability to plan and develop effective procedures to address these laws and regulations, and the need to comply with new or revised laws or regulations, or new interpretations or enforcement of existing laws and regulations, may affect our ability to reach our manufacturing and distribution targets, having an overall material adverse effect on our sales and profitability.

Furthermore, new government laws and regulations may be introduced in the future that could result in additional compliance costs, seizures, confiscations, recalls or monetary fines, any of which could prevent or inhibit the development, distribution and sale of our products. Recently, the Finance Committee of the United States Senate, as well as several state and local governmental authorities in the United States, have considered enacting a tax on sugar-sweetened beverages, including carbonated soft drinks. If such a tax were enacted and if it were to apply to our flavors, the sales and consumption of our non-diet flavors might decrease and thereby have a material adverse impact on our sales and profitability.

An increase in the cost or shortage of supply of the raw materials for our products could have a material adverse effect on our business and results of operations.

We use certain raw materials to produce our soda makers, exchangeable CO2 cylinders and consumables. The most important of these materials are aluminum, brass, CO2, certain plastics and sugar. These

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materials represent a significant portion of our cost of goods sold. The availability and cost of such raw materials have fluctuated in the past and may fluctuate in the future widely due to movements in currency exchange rates, government policy and regulation, crop failures or shortages, weather conditions or other unforeseen circumstances. To the extent that any of the foregoing or other unknown factors increase the prices or limits the supply of such materials and we are unable to increase our prices or adequately hedge against such changes in a manner that offsets such changes, our business and results of operations could be materially and adversely affected.

Disruption of our supply chain could adversely affect our business.

Damage or disruption to our manufacturing or distribution capabilities due to the financial and/or operational instability of key suppliers, distributors, warehousing and transportation providers, or brokers, or other reasons could impair our ability to manufacture or sell our products. To the extent we are unable to retain alternative sources of supply, or cannot financially mitigate the impact of such events, such as by identifying an alternative supplier in a timely and cost-effective manner, or to effectively manage such events if they occur, there could be a material adverse effect on our sales and profitability, and additional resources could be required to restore our supply chain.

A majority of our products is currently produced at one location that could experience business interruptions, which could result in our inability to produce certain of our products for some period of time, which would have a material adverse effect on our business and results of operations.

We currently produce the majority of our products, including certain key components, at a single manufacturing facility. A natural disaster or other unanticipated catastrophic events, including power interruptions, water shortage, storms, fires, earthquakes, terrorist attacks and wars, could significantly impair our ability to manufacture our products at that facility and operate our business. Our facility and certain equipment located in this facility would be difficult to replace and could require substantial replacement lead-time. Catastrophic events could also destroy any inventory located in this facility. The occurrence of such an event could lead to a halt in production, which would materially and adversely affect our business and results of operations.

We are subject to certain safety risks in our manufacturing facilities.

Our business involves complex manufacturing processes and hazardous materials that can be dangerous to our employees. Although we employ safety procedures in the design and operation of our facilities, there is a risk that an accident or death could occur in one of our facilities. Any accident could result in manufacturing delays, which could harm our business and our results of operations. The potential liability resulting from any such accident or death, to the extent not covered by insurance, and any negative publicity associated therewith could harm our business, reputation, financial condition or results of operations.

Because a portion of our manufacturing takes place in China through third party manufacturers, a significant disruption in the operation of those manufacturers or political unrest in China could materially adversely affect our business, financial condition and results of operations.

We manufacture some of the components of our home beverage carbonation systems through third parties in China. Any disruption in production or inability of our manufacturers in China to produce adequate quantities to meet our needs, whether as a result of a natural disaster or other causes, could impair our ability to operate our business on a day-to-day basis and to meet the growing demand for our products. Furthermore, since these manufacturers are located in China, we are exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies of the Chinese government, political unrest or unstable economic conditions in China. Any of these matters could materially and adversely affect our business and results of operations.

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Higher energy costs and other factors affecting the cost of producing, transporting and distributing our products could adversely affect our financial results.

Rising fuel, freight and energy costs have in the past and may in the future have an adverse impact on the cost of our operations, including the manufacture, transportation, and distribution of products. Fuel costs may fluctuate due to a number of factors outside our control, including government policy and regulation and weather conditions. Additionally, we may be unable to maintain favorable arrangements with respect to the costs of transporting products, which could result in increased expenses and negatively affect operations. If we are unable to hedge against such increases or raise the prices of our products to offset the changes, our results of operations could be materially and adversely affected.

If our distributors or retailers return a large number of empty exchangeable CO2 cylinders without exchanging them for full ones, we would incur costs with no corresponding revenue.

We retain the ownership of the exchangeable CO2 cylinders included in our home beverage carbonation systems through contractual means and collect a deposit from distributors and retailers. The amount of the deposit varies from country to country and also changes over time as market conditions vary in a particular country. In addition, in some countries, including certain major markets in Northern and Western Europe, consumers have paid an advance rental fee when they purchased their first exchangeable CO2 cylinder. A portion of this fee may be refundable when an empty exchangeable CO2 cylinder is returned and not exchanged for a full one. To date, returns of exchangeable CO2 cylinders from our distributors, retailers and consumers have been negligible. However, if distributors, retailers or consumers in any one or more of the markets in which we operate return a large number of cylinders without exchanging them for full ones, we may be required to pay out a large amount of cash to refund a portion of the rental fee or the deposit, which could have a material adverse effect on our financial condition and profitability.

Adverse conditions in the global economy could negatively impact our customers’ demand for our products.

Consumer purchases of discretionary items tend to decline during recessionary periods, when disposable income is lower, and may impact sales of our products. As a result of the global recession, consumers may have less money for discretionary purchases as a result of job losses, foreclosures, bankruptcies, reduced access to credit, and sharply falling home prices, among other things. A prolonged economic downturn or recession in any of the countries in which we conduct significant business or in any of the markets we are targeting for expansion, including the United States, may cause significant readjustments in both the volume and mix of our product sales, which could materially and adversely affect our business and results of operations.

We depend on the expertise of key personnel. If these individuals leave without replacements, our operations could suffer.

Our Chief Executive Officer, Daniel Birnbaum, and certain other members of our senior management were retained in 2007 following our acquisition by Fortissimo Capital. Given their extensive knowledge of the home beverage carbonation industry and the limited number of direct competitors in that industry, we believe that it would be difficult to find replacements should any of them leave. Our inability to find suitable replacements for any of the members of our senior management team, particularly Mr. Birnbaum, would adversely impair our ability to implement our business strategy and could have a material adverse effect on our business and results of operations.

We may need to raise additional capital in the future and may be unable to do so on acceptable terms.

Based on current expectations, we believe that the proceeds from this offering will be sufficient to finance our strategic plans, including our expansion in markets in which we currently have a limited presence and penetration into certain new markets, for the foreseeable future. However, in the future, we may require additional capital in order to finance even further expansion or possible acquisitions. Our ability to satisfy

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our future capital needs, if any, will depend upon the costs of such financing and the availability of attractive terms for additional financing. The recent global financial crisis has made it more difficult in general for companies to finance their capital expenditure requirements. We may be unable to obtain requisite financing or such financing may not be available on terms that are acceptable to us. The incurrence of additional debt would result in increased debt service obligations resulting in further operating and financing covenants that might restrict our ability to pay dividends to our shareholders. If we were to issue equity to meet our financing needs, it would dilute the holdings of our existing shareholders. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

We are in the process of determining whether our existing internal controls over financial reporting systems are compliant with Section 404 of the Sarbanes-Oxley Act, which may divert internal resources and will take a significant amount of time and effort to complete.

We will be required to comply with the internal control, evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act in our Annual Report on Form 20-F for the year ending December 31, 2011. We are in the process of determining whether our existing internal controls over financial reporting systems are compliant with Section 404. This process may divert internal resources and will take a significant amount of time and effort to complete. Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. As a result, we may experience higher than anticipated operating expenses, as well as higher independent auditor fees during and after the implementation of these changes. If we are unable to implement any of the required changes to our internal control over financial reporting effectively or efficiently, it could adversely affect our operations, financial reporting and results of operations and could result in an adverse opinion on internal controls from our independent auditors.

Risks related to our location in Israel

As our principal manufacturing facility is located in disputed territory, rising political tensions and negative publicity may negatively impact demand for our products or require us to relocate our manufacturing activities to other locations, either of which may adversely affect our business.

Our principal manufacturing facility is located in Mishor Adumim, an area in the West Bank that is the subject of dispute between Israel and the Palestinian Authority. Mishor Adumim is currently under Israeli jurisdiction and authority. There has recently been negative publicity, primarily in Western Europe, against companies with facilities in the West Bank. A number of political groups have called for consumer boycotts of Israeli products originating in the West Bank, including our products. Though we manufacture certain of our products in other locations, this may not persuade such political groups sufficiently to end their call to boycott our products. In addition, the Palestinian Authority has adopted legislation that may prohibit or restrict Palestinians from working for Israeli companies located in the West Bank. For these reasons, we may in the future be required to transfer a significant portion of our manufacturing activities to a location outside of the West Bank, which may divert the attention of management, require the expenditure of significant capital resources and limit certain of the tax benefits for which we are currently eligible. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

We conduct operations in Israel and, therefore, political, economic and military instability in Israel may adversely affect our business.

We are incorporated under Israeli law, and our principal offices and a significant portion of our manufacturing facilities are located in Israel. Accordingly, political, economic and military conditions in Israel directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. A state of hostility, varying in degree and intensity, has caused security and economic problems in Israel. Although Israel has entered into peace treaties with Egypt and Jordan, and various agreements with the Palestinian Authority, there has been a

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marked increase in violence, civil unrest and hostility, including armed clashes, between the State of Israel and the Palestinians, since September 2000. The establishment in 2006 of a government in the Gaza Strip by representatives of the Hamas militant group has created heightened unrest and uncertainty in the region. In mid-2006, Israel engaged in an armed conflict with Hezbollah, a Shiite Islamist militia group based in Lebanon, and in June 2007, there was an escalation in violence in the Gaza Strip. From December 2008 through January 2009, Israel engaged in an armed conflict with Hamas, which involved missile strikes against civilian targets in various parts of Israel and negatively affected business conditions in Israel. Continued hostilities between Israel and its neighbors and any future armed conflict, terrorist activity or political instability in the region could adversely affect our operations in Israel and adversely affect the market price of our ordinary shares. Further escalation of tensions or violence might result in a significant downturn in the economic or financial condition of Israel, which could have a material adverse effect on our operations in Israel and our business.

In addition, several countries restrict doing business with Israel. The State of Israel and Israeli companies have been and are today subjected to economic boycotts. The interruption or curtailment of trade between Israel and its present trading partners could adversely affect our business, financial condition and results of operations.

Our operations could be disrupted as a result of the obligation of certain of our personnel in Israel to perform military service.

Generally, all male adult citizens and permanent residents of Israel under the age of 42 (or older, for citizens who hold certain positions in the Israeli armed forces reserves) are, unless exempt, obligated to perform military reserve duty annually. Additionally, all Israeli residents of this age may be called to active duty at any time under emergency circumstances. Many of our officers and employees are currently obligated to perform annual reserve duty. In response to increased tension and hostilities in the region, there have been, at times, call-ups of military reservists, and it is possible that there will be additional call-ups in the future. Our operations could be disrupted by the absence of one or more of our executive officers or key employees for a significant period due to military service. Such disruption could have a material adverse effect on our business and results of operations.

The tax benefits that are available to us require us to continue to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes.

One of our subsidiaries received investment grants and is eligible for tax benefits under the Israeli Law for the Encouragement of Capital Investments, 5719-1959, referred to as the Investment Law, and the Israeli Law for the Encouragement of Industry (Taxes), 5729-1969. This subsidiary has been granted six separate encouragement of investment programs, of which one is currently active and one program has been approved under the amendment to this law but it has not yet received tax benefits from this program. To remain eligible for these tax benefits, this subsidiary must continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended, and the criteria set forth in the specific certificate of approval. If this subsidiary does not meet these requirements, the tax benefits would be canceled and it could be required to refund any tax benefits and investment grants that it received in the past. Further, in the future these tax benefits may be reduced or discontinued.

Effective April 1, 2005, the Investment Law was amended. Under the amended Investment Law, the criteria for new investments qualified to receive tax benefits were revised. In the future, we may not be eligible to receive additional tax benefits under this law. The termination or reduction of these tax benefits would increase our tax liability, which would reduce our profits. Additionally, if we increase our activities outside of Israel through acquisitions, for example, our expanded activities might not be eligible for inclusion in future Israeli tax benefit programs. See “Taxation and Government Programs — Israeli Tax Considerations and Government Programs — Law for the Encouragement of Capital Investments, 5719-1959.”

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It may be difficult to enforce the judgment of a United States court against us, our officers and directors and the Israeli experts named in this prospectus in Israel or the United States, or to assert United States securities laws claims in Israel or serve process on our officers and directors and these experts.

We are incorporated in Israel. The majority of our executive officers and directors and the Israeli experts named in this prospectus are not residents of the United States, and the majority of our assets and the assets of these persons are located outside the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a judgment of a United States court based upon the civil liability provisions of the United States federal securities laws against us or any of these persons in a United States or Israeli court, or to effect service of process upon these persons in the United States. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to United States securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of United States securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not United States law is applicable to the claim. If United States law is found to be applicable, the content of applicable United States law must be proven as a fact by expert witnesses, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a United States or foreign court. See “Enforceability of Civil Liabilities.”

Your rights and responsibilities as our shareholder will be governed by Israeli law which may differ in some respects from the rights and responsibilities of shareholders of United States corporations.

Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in United States-based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith towards the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s authorized share capital, a merger and approval of related party transactions that require shareholder approval. In addition, a shareholder who knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness towards the company. However, Israeli law does not define the substance of this duty of fairness. See “Management — Fiduciary Duties and Approval of Specified Related Party Transactions under Israeli Law — Duties of Shareholders.” Because Israeli corporate law underwent extensive revisions approximately ten years ago, the parameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of United States corporations.

As a foreign private issuer whose shares are listed on the Nasdaq Global Market, we may in the future elect to follow certain home country corporate governance practices instead of certain Nasdaq requirements.

As a foreign private issuer whose shares will be listed on the Nasdaq Global Market, we are permitted to follow certain home country corporate governance practices instead of certain requirements of the Marketplace Rules of the Nasdaq Global Market, or the Nasdaq Marketplace Rules. We may in the future elect to follow Israeli corporate governance practices with regard to, among other things, the composition of our board of directors, compensation of officers, director nomination procedures and quorum requirements at shareholders’ meetings. In addition, we may elect to follow Israeli corporate governance practices instead of the Nasdaq requirements to obtain shareholder approval for certain dilutive events (such as for the establishment or amendment of certain equity-based compensation plans, issuances that will result in a change of control of the company, certain transactions other than a public offering

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involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company). Accordingly, our shareholders may not be afforded the same protection as provided under Nasdaq’s corporate governance rules. Following our home country governance practices as opposed to the requirements that would otherwise apply to a United States company listed on the Nasdaq Global Market may provide less protection than is accorded to investors of domestic issuers. See “Management — Corporate Governance Practices.”

In addition, as a foreign private issuer, we will be exempt from the rules and regulations under the United States Securities Exchange Act of 1934, as amended, or the Exchange Act, related to the furnishing and content of proxy statements, and our officers, directors, and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file annual, quarterly and current reports and financial statements with the Securities and Exchange Commission as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act.

Provisions of our articles of association and of Israeli law may delay, prevent or make undesirable an acquisition of all or a significant portion of our shares or assets.

Our articles of association contain certain provisions that may delay or prevent a change of control. These provisions include a classified board of directors and the requirement of a supermajority vote of our shareholders to amend certain provisions of our articles of association. In addition, Israeli corporate law regulates acquisitions of shares through tender offers and mergers, requires special approvals for transactions involving significant shareholders and regulates other matters that may be relevant to these types of transactions. Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as United States tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no actual disposition of the shares has occurred. See “Description of Share Capital — Acquisitions under Israeli Law.” These provisions of Israeli law could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares.

Risks related to this offering

There is no public market for our ordinary shares and we expect that the price of our ordinary shares will fluctuate substantially.

Prior to this offering, there has been no public market for our ordinary shares. An active public trading market may not develop after the completion of this offering or, if developed, may not be sustained. Fluctuations in the market price of our ordinary shares may be exaggerated if the trading volume of our ordinary shares is too low. The lack of a trading market may result in the loss of research coverage by any one or more of the securities analysts that may cover our company in the future. Moreover, we cannot assure you that any securities analyst will initiate or maintain research coverage of us and our ordinary shares. The price of the ordinary shares sold in this offering will not necessarily reflect the market price of our ordinary shares after this offering. The market price for our ordinary shares after this offering will be affected by a number of factors, some of which are beyond our control, including, without limitation:

•   an increase or decrease in our revenue;

•   quarterly variations in our results of operations or in our competitors’ results of operations;

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•   announcements or introductions of new products by us or competitors;

•   the recruitment or departure of key personnel;

•   regulatory developments;

•   changes in earnings’ estimates, investors’ perceptions or recommendations by securities analysts or our failure to achieve analysts’ earning estimates;

•   developments in our industry; and

•   general market conditions and political and other factors unrelated to our operating performance or the operating performance of our competitors.

These factors may materially and adversely affect the market price of our ordinary shares and result in significant price fluctuations.

A total of 12,395,570 or 70.1% of our outstanding ordinary shares following this offering are restricted from immediate resale, but may be sold into the market in the near future. This could cause the market price of our ordinary shares to drop significantly.

Following this offering, we will have 17,673,465 ordinary shares outstanding. This includes the 4,736,842 ordinary shares we are selling in this offering, which may be resold in the public market immediately after this offering.

We expect that the remaining 12,936,623 ordinary shares, representing 73.2% of our total outstanding ordinary shares following this offering, will become available for resale in the public market as shown in the chart below. Our directors and executive officers, and the holders of substantially all of our outstanding shares, have signed lock-up agreements for a period of 180 days following the date of this prospectus, subject to extension in the case of an earnings release or material news or a material event relating to us. J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. may, in their sole discretion and without notice, release all or any portion of the ordinary shares subject to lock-up agreements. As restrictions on resale end, the market price of our ordinary shares could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our ordinary shares or other securities.

 
Number of Shares
and % of Total Outstanding
  Date Available for Sale Into Public Market
541,053 shares or 3.1%   On the date of this prospectus
9,390 shares or 0.1%   Up to and including 180 days after the date of this prospectus
12,386,180 shares or 70.1%   More than 180 days after the date of this prospectus, of which 11,454,211, or 64.8%, are subject to volume, manner of sale and other limitations under Rule 144

After 180 days following this offering, subject to the lock-up agreements described above, holders of      of our ordinary shares will be entitled to request that we register their shares for resale and certain other shareholders have the right to include their shares in any such registration statement or in a registration statement for any public offering we undertake in the future.

After this offering, we also intend to include in a Registration Statement on Form S-8 all of the ordinary shares that we may issue under our share option plans. Once the Form S-8 becomes effective, these ordinary shares may be freely sold in the public market upon issuance, subject to the lock-up agreements described above. The registration or sale of any of these ordinary shares could cause the market price of our ordinary shares to drop significantly.

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Our United States shareholders may suffer adverse tax consequences if we are characterized as a Passive Foreign Investment Company.

Generally, if for any taxable year 75% or more of our gross income is passive income, or at least 50% of our assets are held for the production of, or produce, passive income, we would be characterized as a passive foreign investment company for United States federal income tax purposes. To determine if at least 50% of our assets are held for the production of, or produce, passive income, we may use the market capitalization method for certain periods. Under the market capitalization method, the total asset value of a company would be considered to equal the fair market value of its outstanding shares plus outstanding indebtedness on a relevant testing date. Because the market price of our ordinary shares is likely to fluctuate after this offering and may be volatile, and the market price may affect the determination of whether we will be considered a passive foreign investment company, there can be no assurance that we will not be considered a passive foreign investment company for any taxable year. If we are characterized as a passive foreign investment company, our United States shareholders may suffer adverse tax consequences, including having gains realized on the sale of our ordinary shares treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are United States holders, and having interest charges apply to distributions by us and the proceeds of share sales. See “Taxation and Government Programs.”

You will experience immediate and substantial dilution in the net tangible book value of the ordinary shares you purchase in this offering.

The initial public offering price of our ordinary shares substantially exceeds the net tangible book value per share of our ordinary shares immediately after this offering. Therefore, based on the initial public offering price of $19.00 per share (the midpoint of the initial public offering price range set forth on the cover page of this prospectus), if you purchase our ordinary shares in this offering, you will suffer, immediate dilution of €9.65, or $13.12, per share (or €9.31, or $12.66, per share if the underwriters exercise their option to purchase additional ordinary shares), as compared to our pro forma as adjusted net tangible book value as of June 30, 2010. As a result of this dilution, investors purchasing ordinary shares from us in this offering will have contributed 75.6% of the total consideration paid by our shareholders to date but will own only 26.8% of our equity. If outstanding options to purchase our ordinary shares are exercised in the future, you will experience additional dilution.

We do not expect to pay any dividends for the foreseeable future. Investors in this offering may never obtain a return on their investment.

You should not rely on an investment in our ordinary shares to provide dividend income. We do not anticipate that we will pay any dividends to holders of our ordinary shares in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations. In addition, our ability to pay dividends is currently limited by the terms of our credit facilities, and any future credit facility may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our ordinary shares. Accordingly, investors must rely on sales of their ordinary shares after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our ordinary shares.

Our management will have broad discretion over the use of proceeds from this offering and may not obtain a favorable return on the use of these proceeds.

Our management will have broad discretion in determining how to spend the net proceeds from this offering and may use the proceeds in a manner that our shareholders may not deem desirable. We currently intend to use the net proceeds of this offering to repay certain indebtedness, to pay for various costs associated with the construction or purchase of an additional manufacturing facility, and to pay a one-time termination fee to Fortissimo Capital for terminating our Management Services Agreement with them, with the balance being used for working capital and other general corporate purposes. In addition, we may use all or a portion of the net proceeds to acquire or invest in complementary companies, products or technologies, although we currently do not have any acquisitions or investments planned. We

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will have broad discretion in the way that we use the balance of the net proceeds of this offering. We cannot assure you that these uses or any other use of the balance of the net proceeds of this offering will yield favorable returns or results.

The ownership of our ordinary shares will continue to be highly concentrated, and your interests may conflict with the interests of our existing shareholders.

Our executive officers, directors and director nominees and their affiliates, together with our current significant shareholders, will beneficially own approximately 48.3% of our outstanding ordinary shares upon completion of this offering. Moreover, our largest shareholder, Fortissimo Capital, will beneficially own approximately 31.7% of our outstanding ordinary shares upon completion of this offering. In addition, individual partners of this shareholder serve on our board of directors. Accordingly, this shareholder will exercise a controlling influence on us and will continue to be able to significantly influence the outcome of corporate actions requiring shareholder approval, including the election of directors, amending our articles of association, raising future capital, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transaction. This shareholder could delay or prevent a change of control of our company, even if such a change of control would benefit our other shareholders. The significant concentration of share ownership may adversely affect the market price of our ordinary shares due to investors’ perception that conflicts of interest may exist or arise.

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Special note regarding forward-looking statements
and industry data

This prospectus contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, potential market opportunities and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts, “projects,” “should,” “would” or similar expressions that convey uncertainty of future events or outcomes and the negatives of those terms. These statements include, but are not limited to, statements regarding:

•   our planned expansion into, and the acceptance of our products in, the United States;

•   our ability to re-introduce and increase our presence in Western European countries;

•   our ability to educate retailers and consumers about the benefits of our products;

•   the marketing techniques that we intend to use for expansion into new markets;

•   the estimated cost of constructing or purchasing, and the timing of completion of, an additional manufacturing facility;

•   our ability to help retailers understand and successfully manage our cylinder exchange program;

•   our intention to build up our distribution locations, particularly in high foot traffic locations;

•   our intention to increase the number of stores in each market where we sell our products;

•   our intention to increase the number of locations in each market where consumers can exchange their empty CO2 cylinders;

•   our intention to expand our refilling capabilities;

•   our belief that demand for sparkling water will increase in the future;

•   our belief that the sale of soda makers will increase the sale of consumables;

•   our ability to increase our installed base of soda makers in order to generate ongoing demand for consumables;

•   future product developments and our plans for the SodaStream Inside program including our plans to license our proprietary carbonating technology to third parties;

•   the timing of the release of our new Fizz ChipTM;

•   plans to have partnership programs with municipal authorities and public water providers;

•   our intent to enter new markets in collaboration with distributors;

•   our ability to continue to lower production costs and increase gross margins;

•   our continued investment in the expansion of our consumable business;

•   our ability to introduce additional flavors in order to expand sales in existing markets;

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•   our belief that raw materials for our products will be readily available;

•   our belief that additional or alternative facilities will be readily available if necessary;

•   our belief that our liability insurance will provide sufficient protection;

•   our belief that our capital expenditure requirements and liquidity needs will be met; and

•   our intended uses of the proceeds from this offering.

The forward-looking statements contained in this prospectus reflect our views as of the date of this prospectus about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

All of the forward-looking statements we have included in this prospectus are based on information available to us on the date of this prospectus. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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Exchange rate information

In this prospectus, for convenience only, we have translated the Euro amounts reflected in our financial statements as of and for the year ended December 31, 2009 into U.S. Dollars at the rate of €1.00 = $1.3601, the noon buying rate for Euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on September 30, 2010. You should not assume that, on that or on any other date, one could have converted these amounts of Euros into dollars at that or any other exchange rate.

The following table sets forth, for each period indicated, the low and high exchange rates for Euros expressed in U.S. Dollars, the exchange rate at the end of such period and the average of such exchange rates on the last day of each month during such period, based on the noon buying rate in the City of New York for cable transfers in Euros as certified for customs purposes by the Federal Reserve Bank of New York. The source of the exchange rate is: (i) with respect to any period ending on or prior to December 31, 2008, the Federal Reserve Bank of New York, and (ii) with respect to any period ending on or after January 1, 2009, the H.10 statistical release of the Federal Reserve Board. The exchange rates set forth below demonstrate trends in exchange rates, but the actual exchange rates used throughout this prospectus may vary.

             
  Year Ended December 31,   Six Months Ended June 30,
  2005   2006   2007   2008   2009   2009   2010
High     1.3476       1.3327       1.4862       1.6010       1.5100       1.4270       1.4536  
Low     1.1667       1.1860       1.2904       1.2446       1.2547       1.2547       1.1959  
Period End     1.1842       1.3197       1.4603       1.3919       1.4332       1.4020       1.2291  
Average Rate     1.2400       1.2661       1.3797       1.4695       1.3955       1.3353       1.3170  

The following table sets forth, for each of the last six months, the low and high exchange rates for Euros expressed in U.S. Dollars and the exchange rate at the end of the month based on the noon buying rate as described above. The source of the exchange rate is the H.10 statistical release of the Federal Reserve Board.

           
  Last Six Months
  April   May   June   July   August   September
High     1.3666       1.3183       1.2385       1.3069       1.3282       1.3638  
Low     1.3130       1.2224       1.1959       1.2464       1.2652       1.2708  
End of Month     1.3302       1.2369       1.2291       1.3069       1.2704       1.3601  

On September 30, 2010, the noon buying rate for Euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, was €1.00 = $1.3601.

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Use of proceeds

We estimate that our net proceeds from this offering will be approximately $81.6 million, or approximately $94.2 million if the underwriters exercise in full their option to purchase additional ordinary shares, based upon an assumed initial public offering price of $19.00 per share (the midpoint of the initial public offering price range set forth on the cover page of this prospectus), after deducting the underwriting discount and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed public offering price would increase (decrease) the net proceeds we receive from this offering by $4.4 million.

We intend to use the net proceeds of this offering:

•   to repay approximately €24.4 million ($33.2 million) principal amount of indebtedness owed to financial institutions outstanding as of the date of this prospectus; and

•   to repay approximately €1.4 million ($1.9 million) of additional indebtedness owed to our shareholders as of the date of this prospectus;

•   to pay for various costs associated with the construction or purchase of an additional manufacturing facility in or near one of our existing markets, amounting to approximately €25.0 million ($34.0 million);

•   to pay a one-time termination fee in the amount of €1.75 million ($2.4 million) to Fortissimo Capital in consideration for terminating our Management Services Agreement with them upon the completion of this offering; and

•   the balance for working capital and for other general corporate purposes.

In addition, we may use all or a portion of the net proceeds to acquire or invest in complementary companies, products or technologies, although we currently do not have any acquisitions or investments planned.

The indebtedness to be repaid consists of the following:

•   Approximately €10.0 million ($13.6 million) will be used to repay debt outstanding as of the date of this prospectus under our existing revolving credit lines. As of June 30, 2010, approximately €8.0 million ($10.9 million) was outstanding under these existing revolving credit facilities. Our revolving credit facilities are generally provided for one year and renewed on various dates ranging from January to July. Our revolving credit lines bear annual interest of between Libor plus 2.3% and Libor plus 5.0%. As of June 30, 2010, the weighted average interest rate on our revolving credit facilities was 4.6%.

•   Approximately €14.3 million ($19.4 million) will be used to repay debt outstanding as of the date of this prospectus under existing bank loans and approximately €100,000 ($136,000) will be used to repay financing lease liabilities. As of June 30, 2010, €12.8 million ($17.4 million) was outstanding under bank loans and €100,000 ($136,000) was outstanding under financing lease liabilities. Our Euro loans bear annual interest of between Libor plus 2.0% and Libor plus 3.9%. Our U.S. Dollar loans bear annual interest of Libor plus 1.5%. Our New Israeli Shekel loans bear annual interest of Prime plus 2.0%. Our finance leases bear annual interest of Prime plus 2.25%. As of June 30, 2010, the weighted average interest rate on our bank loans was 4.5% and the weighted average interest rate on our finance leases was 5.2%. Principal is generally payable in quarterly installments ranging from €28,000 ($38,000) per quarter increasing to €156,000 ($212,000) per quarter through December 31, 2010. The final payment of the outstanding principal balance is due in March 2015.

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•   Approximately €1.4 million ($1.9 million) will be used to repay debt outstanding as of the date of this prospectus under existing non-convertible shareholder loans. Pursuant to our shareholders agreement, these loans bear no interest and are to be repaid in twelve quarterly installments after two consecutive years in which our EBITDA exceeds €10.0 million. Our EBITDA for 2008 and 2009 exceeded €10.0 million and, therefore, we started to repay these loans beginning in March 2010. Our board of directors has decided to accelerate repayment of these loans following the consummation of this offering.

We will have broad discretion in the way that we use the balance of the net proceeds of this offering not used to repay indebtedness. Pending use of the net proceeds, we intend to invest the net proceeds in interest-bearing, investment-grade instruments with maturities of less than one year or deposit the net proceeds in bank accounts.

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Dividend policy

Historically, we have generally not distributed our net income as dividends to our shareholders but rather re-invested such income in our business. We currently intend to retain all future earnings to finance our operations and to expand our business. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including future earnings, capital requirements, the provisions of applicable Israeli law, financial condition and future prospects and other factors our board of directors may deem relevant.

Under Israeli law, we may only declare and pay an annual dividend if, upon the reasonable determination of our board of directors, the distribution will not prevent us from being able to meet the terms of our existing and contingent obligations as they become due. Under Israeli law, the amount distributed is further limited to the greater of retained earnings or earnings generated over the two most recent fiscal years. In the event that we do not meet the retained earnings criteria, as defined in the Israeli Companies Law, we may seek the approval of the applicable Israeli court in order to distribute a dividend. The court may approve our request if it is convinced that there is no reasonable concern that the payment of a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due. See “Description of Share Capital — Dividend and Liquidation Rights.”

The payment of dividends may be subject to Israeli withholding taxes. See “Taxation and Government Programs — Israeli Tax Considerations and Government Programs — Taxation of our Shareholders — Taxation of Non-Israeli Shareholders on Receipt of Dividends.”

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Capitalization

The following table sets forth our capitalization as of June 30, 2010, as follows:

•   on an actual basis;

•   on a pro forma basis to reflect (1) the automatic conversion of all of our outstanding preferred shares into 4,511,365 ordinary shares immediately prior to the closing of this offering, (2) the conversion of €10.7 million of loans into 6,667,838 ordinary shares, which will occur immediately prior to the closing of this offering, and (3) the amendment and restatement of our articles of association as of the closing date of this offering; and

•   on a pro forma as adjusted basis to give further effect to our issuance and sale of ordinary shares in this offering at an assumed initial public offering price of $19.00 per share, the midpoint of the initial public offering price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discount and estimated offering expenses payable by us, and the application of the net proceeds therefrom.

You should read this information in conjunction with our consolidated financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.

     
  As of June 30, 2010
(in thousands)   Actual   Pro Forma   Pro Forma
As Adjusted
Loans and borrowings   20,931     20,931      
Shareholders’ loans     11,947       1,382        
Ordinary shares, par value NIS 0.645 per share; 54,000,000 shares authorized, 1,757,419 shares issued and outstanding, actual; 54,000,000 shares authorized, pro forma and pro forma as adjusted; 12,936,623 shares issued and outstanding, pro forma; 17,673,465 shares issued and outstanding, pro forma as adjusted     199       1,627       2,269  
Series A1 and Series A2 Preferred Shares, par value NIS 0.10 per share; 80,000,000 shares authorized; 29,098,301 shares issued and outstanding, actual; no shares authorized and no shares issued or outstanding, pro forma and pro forma as adjusted     524              
Share premium     11,733       21,114       80,471  
Translation reserve     (734 )      (734 )      (734 ) 
Retained earnings     8,623       7,153       7,153  
Total shareholders’ equity     20,345       29,160       89,160  
Total capitalization   53,223     51,473     89,160  

A $1.00 increase (decrease) in the assumed initial public offering price of $19.00 per share (the midpoint of the initial public offering price range set forth on the cover page of this prospectus) would increase (decrease) the pro forma as adjusted amount of each of share premium, total shareholders’ equity and total capitalization by approximately $4.4 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us.

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Dilution

If you invest in our ordinary shares in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the net tangible book value per ordinary share after this offering. Our pro forma net tangible book value as of June 30, 2010 was €16.4 million, corresponding to a net tangible book value of €1.27, or $1.73, per ordinary share (using the noon buying rate for Euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on September 30, 2010 of €1.00 = $1.3601). Pro forma net tangible book value per share represents our total tangible assets reduced by the amount of our total liabilities, divided by the total number of ordinary shares outstanding after giving effect to the automatic conversion of all of our outstanding preferred shares upon the closing of this offering.

After giving effect to the sale of ordinary shares that we are offering at an assumed initial public offering price of $19.00 per share (the midpoint of the initial public offering price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2010 would have been approximately €76.4 million, or approximately €4.32, or $5.88, per ordinary share. This amount represents an immediate increase in pro forma net tangible book value of €3.05, or $4.15, per ordinary share to our existing shareholders and an immediate dilution in pro forma as adjusted net tangible book value of approximately €9.65, or $13.12, per ordinary share to new investors purchasing ordinary shares in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for an ordinary share. The following table illustrates this dilution:

       
    $     $
Assumed initial public offering price per share                       13.97       19.00  
Pro forma net tangible book value per share as of June 30, 2010(1)     1.27       1.73                    
Increase per share attributable to this offering(1)     3.05       4.15              
Pro forma as adjusted net tangible book value per share after this offering(1)                 4.32       5.88  
Dilution per share to new investors(1)                 9.65       13.12  

(1) Translated for convenience only using the noon buying rate for Euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on September 30, 2010 of €1.00 = $1.3601.

A $1.00 increase (decrease) in the assumed initial public offering price of $19.00 per share, which is the midpoint of the initial public offering price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, cash equivalents and short-term investments, additional paid-in capital, total shareholders’ equity and total capitalization by approximately €3.2 million, or $4.4 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional ordinary shares in full in this offering, the pro forma as adjusted net tangible book value after the offering would be €4.66, or $6.34, per share, the increase in pro forma net tangible book value per share to existing shareholders would be €3.39, or $4.61, and the dilution per share to new investors would be €9.31, or $12.66, per share, in each case assuming an initial public offering price of $19.00 per share, which is the midpoint of the initial public offering price range set forth on the cover page of this prospectus.

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The following table summarizes, as of June 30, 2010, the differences between the number of shares purchased from us, the total consideration paid to us in cash and the average price per share that existing shareholders and new investors paid. The calculation below is based on an assumed initial public offering price of $19.00 per share (the midpoint of the initial public offering price range set forth on the cover page of this prospectus) before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

         
  Shares Purchased   Total Consideration   Average Price
Per Share
               (in thousands)
     Number   Percent   Amount   Percent
Existing shareholders     12,936,623       73.2 %    $ 28,987       24.4 %    $ 2.24  
New investors     4,736,842       26.8 %    $ 90,000       75.6 %    $ 19.00  
Total     17,673,465       100.0 %    $ 118,987       100.0 %       

The foregoing tables and calculations exclude 2,195,838 ordinary shares reserved for issuance under our equity incentive plans, of which, as of June 30, 2010, options to purchase 1,145,838 shares have been granted at a weighted-average exercise price of €2.54 ($3.45) per share.

To the extent any of these outstanding options is exercised, there will be further dilution to new investors. To the extent all of such outstanding options had been exercised as of June 30, 2010, the pro forma as adjusted net tangible book value per share after this offering would be €4.21, or $5.73, and total dilution per share to new investors would be €9.76, or $13.27.

If the underwriters exercise their over-allotment option in full:

•   the percentage of ordinary shares held by existing shareholders will decrease to approximately 70.4% of the total number of our ordinary shares outstanding after this offering; and

•   the number of shares held by new investors will increase to 5,447,368, or approximately
29.6% of the total number of our ordinary shares outstanding after this offering.

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Selected consolidated financial and other data

You should read the following selected consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus.

The following table sets forth our selected consolidated financial and other data. You should read the following selected consolidated financial and other data in conjunction with “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Historical results are not indicative of the results to be expected in the future. Our financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board.

The consolidated statements of operations data for each of the years in the three-year period ended December 31, 2009 and the consolidated balance sheet data as of December 31, 2008 and December 31, 2009 are derived from our audited consolidated financial statements appearing elsewhere in this prospectus. The consolidated balance sheet data as of December 31, 2007 is derived from our audited consolidated financial statements that are not included in this prospectus. The consolidated statements of operations data for the six months ended June 30, 2009 and June 30, 2010 and the consolidated balance sheet data as of June 30, 2010 are derived from our unaudited consolidated financial statements appearing elsewhere in this prospectus. Selected consolidated financial information as of December 31, 2005 and 2006 and for the years ended December 31, 2005 and 2006 has been omitted because such information could not be provided without unreasonable effort or expense. The information presented below under the caption “Other Financial and Operating Data” contains information that is not derived from our financial statements.

In this prospectus, references to “Euros” or “€” are to the Euro, the official currency of the European Union, and references to “U.S. Dollars,” “$” or “dollars” are to United States dollars. The following tables also contain translations of Euro amounts into U.S. Dollars for amounts presented for the year ended and as of December 31, 2009 and for the six months ended June 30, 2010. These translations are solely for the convenience of the reader and were calculated at the rate of €1.00 = US$1.3601, the noon buying rate for Euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on September 30, 2010. You should not assume that, on that or on any other date, one could have converted these amounts of Euros into dollars at that or any other exchange rate.

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(in thousands, except per share and share amounts)   Year Ended December 31,   Six Months Ended June 30,
  2007   2008   2009   2009   2009   2010   2010
Consolidated statements of operations data:
                                                              
Revenues   85,983     99,949     105,023     $ 142,842     45,809     68,676     $ 93,406  
Cost of revenues     39,745       45,213       46,593       63,371       20,458       32,886       44,728  
Gross profit     46,238       54,736       58,430       79,471       25,351       35,790       48,678  
Operating expenses:
                                                              
Sales and marketing     31,449       32,184       34,692       47,185       16,497       23,943       32,565  
General and administrative     13,769       12,675       13,134       17,863       6,733       7,804       10,614  
Other (income), net     (25 )      (19 )      (95 )      (129 )      (58 )      (61 )      (83 ) 
Total operating expenses     45,193       44,840       47,731       64,919       23,172       31,686       43,096  
Operating income     1,045       9,896       10,699       14,552       2,179       4,104       5,582  
Interest expense, net     2,195       2,742       2,022       2,750       1,220       804       1,094  
Other financial expenses (income), net     134       1,654       (248 )      (337 )      (327 )      (1,474 )      (2,005 ) 
Total financial expense (income), net     2,329       4,396       1,774       2,413       893       (670 )      (911 ) 
Income (loss) before income tax     (1,284 )      5,500       8,925       12,139       1,286       4,774       6,493  
Income taxes     306       4,970       1,793       2,439       814       602       819  
Net income (loss)   (1,590 )    530     7,132     $ 9,700     472     4,172     $ 5,674  
Net income (loss) per ordinary share:
                                                              
Basic   (0.29 )    0.09     1.14     $ 1.55     0.08     0.67     $ 0.91  
Diluted   (0.29 )    0.07     0.57     $ 0.78     0.05     0.33     $ 0.45  
Shares used in computing net income (loss) per ordinary share:
                                                              
Basic     5,466,901       5,850,228       6,259,393       6,259,393       6,259,393       6,259,446       6,259,446  
Diluted     5,466,901       9,629,991       13,206,403       13,206,403       12,725,454       13,503,145       13,503,145  
Pro forma net income (loss) per ordinary share:(1)
                                                              
Basic               0.65     $ 0.88           0.38     $ 0.52  
Diluted               0.41     $ 0.56           0.24     $ 0.32  
Shares used in computing pro forma net income (loss) per ordinary share:(1)
                                                              
Basic                 10,996,238       10,996,238             10,996,288       10,996,288  
Diluted                 18,332,563       18,332,563             18,619,916       18,619,916  

             
  Year Ended December 31,   Six Months Ended June 30,
(in thousands)   2007   2008   2009   2009   2009   2010   2010
 
Other financial and operating data:
                                                              
Total number of soda makers sold (unaudited)     730       877       1,057       N/A       387       761       N/A  
Total number of CO2 refills sold (unaudited) *     7,364       7,496       8,166       N/A       3,907       4,622       N/A  
EBITDA(2)   2,744     10,218     12,588     $ 17,121     3,379     6,586     $ 8,958  

* The CO2 refills are sold in exchangeable CO2 cylinders of different sizes. For the purpose of comparison, we have adjusted the number of CO2 refills to be equivalent to one “standard” 60-liter cylinder size.

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  As of December 31,   As of June 30,
(in thousands)   2007   2008   2009   2009   2010   2010
Consolidated balance sheet data:
                                            
Cash and cash equivalents   1,928     4,349     4,185     $ 5,692     4,111     $ 5,591  
Working capital(3)     8,610       7,415       5,086       6,917       13,626       18,533  
Total assets     61,664       68,682       77,695       105,673       99,654       135,539  
Loans and borrowings (including short-term obligations)     23,398       18,329       12,754       17,347       20,931       28,469  
Shareholders’ loans     6,330       11,564       11,793       16,039       11,947       16,249  
Total liabilities     53,301       59,372       61,039       83,019       79,309       107,868  
Total equity     8,364       9,310       16,656       22,654       20,345       27,671  

(1) Pro forma net income reflects the reduction in interest expenses attributable to the conversion of €10.7 million of loans plus the accrued interest thereon into ordinary shares, which will automatically occur immediately prior to the closing of this offering. Shares used in computing pro forma net income reflects the issuance of (i) 4,511,365 ordinary shares upon the conversion of our outstanding preferred shares and (ii) 6,667,838 ordinary shares upon the conversion of such outstanding indebtedness, each of which will occur immediately prior to the closing of this offering. For additional information on the conversion of our preferred shares, see note 12A to our consolidated financial statements included elsewhere in this prospectus.

(2) EBITDA is a non-IFRS measure and is defined as earnings before interest expense, taxes, depreciation and amortization. We present EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company. EBITDA should not be considered in isolation or as a substitute for operating income or other statement of operations items prepared in accordance with IFRS as a measure of our performance. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this prospectus, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.

             
  Year Ended December 31,   Six Months Ended June 30,
(in thousands)   2007   2008   2009   2009   2009   2010   2010
Reconciliation of net income (loss) to EBITDA
                                                              
Net income (loss)   (1,590 )    530     7,132     $ 9,700     472     4,172     $ 5,674  
Interest expense, net     2,195       2,742       2,022       2,750       1,220       804       1,094  
Income taxes     306       4,970       1,793       2,439       814       602       819  
Depreciation and amortization     1,833       1,976       1,641       2,232       873       1,008       1,371  
EBITDA   2,744     10,218     12,588     $ 17,121     3,379     6,586     $ 8,958  

(3) Working capital is defined as (i) total current assets excluding cash and cash equivalents, minus (ii) total current liabilities excluding loans and borrowings, and shareholders’ loans.

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Management’s discussion and analysis
of financial condition and results of operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Summary

SodaStream manufactures home beverage carbonation systems, which enable consumers to easily transform ordinary tap water instantly into carbonated soft drinks and sparkling water. We develop, manufacture and sell soda makers and exchangeable carbon-dioxide (CO2) cylinders, as well as consumables, consisting of CO2 refills, reusable carbonation bottles and flavors to add to the carbonated water.

We currently sell our products through more than 35,000 retail stores in 39 countries, including 24 new countries that we have entered since the beginning of 2007. We distribute our products directly in 12 countries and indirectly through local distributors in our remaining markets. Our products are sold under the SodaStream® brand name in most countries, and under the Soda-Club® brand name or select other brand names in certain other countries. While our distribution strategy is customized for each market, we generally employ a multi-channel distribution approach that is designed to raise awareness and establish positioning of our product offerings, first in specialty retail and direct marketing channels and then in larger food, drug and mass retailers.

We have an attractive “razor/razor blade” business model, which is designed to increase sales of soda makers (the razor); and to generate recurring sales of higher-margin consumables, consisting of CO2 refills, carbonation bottles and flavors (collectively, the razor blades). As sales of our soda makers increase, we expect that the subsequent sales of related consumables will result in increased gross profits due to the higher gross margin associated with our consumables. However, in order to further develop our user base, we plan to continue to focus on increasing our soda maker sales and expect soda maker sales to continue to be a growing component of our overall revenues. We therefore do not foresee a material overall increase in gross margin over the next few years.

Our revenues grew from €86.0 million in 2007 to €105.0 million in 2009, and from €45.8 million in the six months ended June 30, 2009 to €68.7 million in the six months ended June 30, 2010. We believe that this growth in revenues has been driven by our heightened focus on promoting soda maker sales in both existing markets and new markets to increase our installed base, in particular in Western Europe, but also in North America and Asia-Pacific. The growth of our installed base has in turn resulted in an increase in revenues from sales of consumables.

Our strategy is to expand our active installed base, by further penetrating existing markets and by entering new markets. We intend to continue initiating select marketing activities, including aggressive public relations campaigns, in-store demonstrations, direct response TV advertising (infomercials), point-of-sale advertising, and regional and national media advertising campaigns in order to both inform consumers of our product offerings and test the effectiveness of various demand-creation vehicles. A key part of our strategy is to grow our revenues in the United States, which we believe can become one of our largest markets within a number of years. We also plan on accelerating our efforts and devoting resources to increase our active user base in other markets, in particular in Germany, France and Italy.

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Key measures of our performance

Revenues

Our revenues consist primarily of sales of soda makers and recurring sales of higher-margin consumables, including CO2 refills, carbonation bottles and flavors. We derive revenues from the sale of goods to our customers, who may be consumers, retail partners or distributors, depending on the sales channel through which the goods are sold. The majority of our product distribution to our ultimate customers is through retail stores. Our distribution retail coverage includes many of the leading chain stores in the markets in which we operate. In some markets, such as the United States, we also distribute our soda makers and consumables directly to consumers through telephone service centers or the Internet.

We record revenues from sales of these items at the gross sales price, net of returns, trade discounts, rebates and provisions for estimated returns of exchangeable CO2 cylinders. We recognize revenues when the significant risks and rewards of ownership have been transferred to the buyer, collection of payment is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured accurately.

The following tables present our revenues, by product type for the periods presented, as well as such revenues by product type as a percentage of total revenues:

         
  Year Ended December 31,   Six Months Ended June 30,
(in thousands)   2007   2008   2009   2009   2010
     Revenues
Soda makers and exchangeable CO2 cylinders   27,202     31,406     39,091     13,495     28,033  
Consumables     51,963       59,768       59,329       27,779       36,271  
Other(1)     6,818       8,775       6,603       4,535       4,372  
Total   85,983     99,949     105,023     45,809     68,676  

         
  Year Ended December 31,   Six Months Ended June 30,
     2007   2008   2009   2009   2010
     As a Percentage of Revenues
Soda makers and exchangeable CO2 cylinders     31.7 %      31.4 %      37.2 %      29.5 %      40.8 % 
Consumables     60.4       59.8       56.5       60.6       52.8  
Other(1)     7.9       8.8       6.3       9.9       6.4  
Total     100.0 %      100.0 %      100.0 %      100.0 %      100.0 % 

(1) Other consists primarily of sales of Brita-branded products in Israel.

We believe that the number of soda makers and CO2 refills sold during each period is an important indicator of the expansion rate of our business. The number of soda maker units sold is indicative of the growth of our user base and the number of CO2 refills sold is indicative of consumables sales to our active user base. The number of soda maker units that we sold in 2009 increased by 44.8% compared to 2007 and the number of CO2 refills increased by 10.9%. The number of soda maker units that we sold during the six months ended June 30, 2010 increased by 96.6% compared to the six months ended June 30, 2009 and the number of CO2 refills that we sold increased by 18.3% over the same period. We estimate, based on consumer surveys and sales of CO2 refills, that there are currently approximately 4 million consumers who create a carbonated beverage using our system at least once every two weeks, whom we refer to as active consumers, with many of the largest carbonated soft drink and sparkling water markets still remaining virtually untapped.

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We believe that the sale of every soda maker can have a compounding effect because every sale increases the potential demand for our consumables, which consist of CO2 refills, flavors and carbonation bottles, over time. Each soda maker that is sold comes with a filled exchangeable CO2 cylinder, which is recorded in the revenues category above referred to as “soda makers and exchangeable CO2 cylinders.” A consumer would not typically need to purchase a CO2 refill, which is recorded in the sales category above referred to as “consumables,” for several months. Consequently, our general historical experience is that the initial growth in consumables after we enter a new market is slower than growth in soda makers sales, but that the sale of consumables increases correspondingly once have we have established an active user base. This results in a lag between the growth in soda maker sales and growth in the sales of consumables. As an illustration of these trends, for the year ended December 31, 2008, the year ended December 31, 2009, and the six months ended June 30, 2010 (in each case, as compared to the prior comparable period), the annual growth in the volume of soda makers sold was 20%, 20% and 97%, respectively. The increase in CO2 refills for those periods was 2%, 9% and 18%, respectively. The change in sales of flavors for those periods was an increase of 21%, a decrease of 13% and an increase of 64%, respectively. The increase in sales of carbonation bottles for those periods was 19%, 9% and 57%, respectively. The growth in revenues from the sale of consumables for the six months ended June 30, 2010 reflects the growth in soda maker sales during previous periods.

While we anticipate that this trend will continue, a variety of factors, including consumer retention rates, the growth of our reverse logistics network, weather and competition could affect our results in the future. For example, the sales of consumables was depressed in 2009 as a result of a freeze on orders for flavors during the six months ended June 30, 2009 placed by our distributor in the Nordics, who experienced significant financial difficulty as a result of the global recession and material over-stocking of flavors in the previous year. Both of those issues have since been resolved.

In most of the markets in which our products are sold, we operate through local distributors. Distributors are required to meet annual purchase targets defined as monetary amounts for the first or second year of the distribution contract, as well as defined growth targets for each of the subsequent years until the end of the contract (usually 5 years). In addition, annual and semi-annual discussions with distributors often include more specific volume targets per product type. Distributors that do not meet the defined purchase targets stated in the contract (the annual purchase targets) can be terminated by notice during the first quarter following the year in which they failed to achieve the target. The termination takes effect six months after the notice is given.

Cost of revenues and gross margin

Our cost of revenues consists primarily of raw materials and components, as well as production and production-related labor, freight costs and other direct and indirect production costs. We require certain raw materials to manufacture our soda makers, exchangeable CO2 cylinders, carbonation bottles and flavors, including, in particular, aluminum, plastics, flavoring essences, brass, sugar, CO2, sweeteners and fruit concentrate. In addition, cost of sales includes the cost of delivery from the production site to the distribution warehouse. When we sell products to our third-party distributors, they usually collect their orders from our warehouses and bear the cost of delivery. We have opened regional refilling stations and plan to open additional regional refilling stations in new markets to lower the freight costs of filling exchangeable CO2 cylinders.

Gross profit and gross margin are influenced by each of the following factors:

•   The gross margins of our consumables are typically higher than the gross margin of our soda makers. We have found that as markets mature, sales of our consumables become a larger portion of our total revenues, thus increasing overall gross margins.

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•   The gross margin on sales in markets where we distribute directly is generally higher than markets in which we use external distributors, due to the elimination of the external distributor’s margin. In many markets, our expansion strategy is to work with third party distributors who we believe will have a better ability to increase revenues in their market than we could if we distributed our products directly. However, in several of our key markets targeted for expansion, including the United States, we intend to distribute directly, and thus we believe our gross margins will be positively impacted as the portion of our revenues from these markets increases.

•   Our cost of revenues, and therefore our gross profit, is impacted by several factors, including the commodity prices of aluminum, plastics, flavoring essences, brass, sugar, CO2, sweeteners and fruit concentrates; production labor costs; and fuel prices, which affect our freight costs.

•   The majority of our purchases of raw materials and parts is denominated in U.S. Dollars and the majority of our labor costs is denominated in New Israeli Shekels (“NIS”). Currently, the majority of our sales are denominated in Euros. As a result, the higher the Euro/U.S. Dollar and the Euro/NIS exchange rates are, the higher our gross margin will be. In the coming years, we expect our sales in the United States to exceed our U.S. Dollar costs and, thereby, reverse our Euro/U.S. Dollar currency exposure. We regularly purchase currency hedging options and enter into forward contracts to hedge against the weakening of the Euro against the U.S. Dollar or the NIS. Such transactions are mostly unrelated to specific operating transactions and therefore included in financial income and expenses.

•   Increases in our prices have positively impacted our gross margin in each of the past two years. In the coming years, we do not expect that any further price increases will materially impact our gross margins.

•   We continuously seek to reduce the cost of production, through engineering and purchasing optimization, without compromising the quality of our products. The success of such cost reduction activities in the past has resulted in lower production costs and improved gross margins. We expect these activities and related cost savings to continue.

•   If our overall revenues grow, certain manufacturing costs, which are fixed in nature — such as the cost of production management and engineering employees — will constitute a smaller percentage of our overall cost of sales and will positively affect our gross margin.

Operating expenses

Our sales and marketing expenses consist primarily of wages, salaries and other employee remuneration to our marketing, selling, distribution and other sales-support employees; advertising and promotions expenses; warehousing and distribution costs; commissions; and bad debts. Our warehousing and distribution expenses principally consist of the cost of delivering our products to our customers’ premises (home, office, warehouse or other as the case may be). The distribution of our products and the collection of the exchangeable CO2 cylinders for refill often involve freight costs and require logistical planning and execution. In some countries, and in particular in the United States, we sell our products directly to our consumers’ homes. In these cases, we bear high distribution expenses for a small volume of deliveries and the collection of the empty exchangeable CO2 cylinders. In many cases, we are able to pass some delivery costs on to consumers. In the United States, we have significantly reduced such costs by arranging for delivery through regional service providers.

Our advertising and promotion expenses consist primarily of media adverting costs, trade and consumer marketing expenses and public relation expenses. As we intend to invest in increasing our active customer installed base, particularly in the United States, we expect sales and marketing expenses in general, and advertising expenses in particular, to increase in both absolute and percentage terms.

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Our general and administrative expenses consist primarily of wages, salaries and other employee benefits for our managerial and administrative personnel, rental fees, and building maintenance communications and support costs as well as professional advisors. As we expand our installed base of active consumers, primarily in our direct sales markets and in particular in the United States, we expect our administrative expenses to increase. We also expect an increase in our administrative expenses as a result of the additional costs related to this offering and our subsequent status as a public reporting company.

Since our acquisition by Fortissimo Capital, we have undertaken several business realignment initiatives. Associated with these initiatives have been certain selling, marketing and administrative expenses, such as severance expenses related to the termination of personnel following the closing of some of the European headquarters that were managing certain of our direct distribution operations in Europe (this was part of the change in our expansion strategy from operating directly in new markets to opening new markets with external third party distributors), combining the management and administration of some of our markets under one unit, shifting some of our in-house activities to outsourcing, and shifting local support functions to central management by our group headquarters. We currently have no ongoing business realignment initiatives.

Other income, net consists primarily of rental income, capital gains and losses and customs refunds.

Financial expenses, net, consists primarily of (i) borrowing costs, (ii) foreign currency exchange income and expenses, and (iii) gains and losses on derivative instruments. These expenses are offset against interest income on our cash balances and gains and losses on derivative instruments. We expect financial income to increase as we invest the proceeds of this offering in cash, cash equivalents and marketable securities pending their application to grow our business.

Corporate taxes

The regular corporate tax rate in Israel in 2010 is 25%. The Israeli corporate tax rate for the 2008 tax year was 27% and for the 2009 tax year was 26%. The Israeli corporate tax rate is expected to decline to 18% by the year 2016. Non-Israeli subsidiaries are taxed according to the tax laws in their respective country of organization. Certain of our subsidiaries benefit from tax incentives such as reduced tax rates ranging from 0% to 10%. In previous years, we have received specific tax rulings in certain countries allowing for reduced tax rates, which have subsequently expired. We are currently in the process of attempting to obtain extensions for these tax rulings.

One of our Israeli subsidiaries received “Approved Enterprise” status under the Israeli Law for the Encouragement of Capital Investments — 1959. This subsidiary was certified for six approved investment programs under this law. Its currently active program provides for an exemption from taxable income generated from assets which were approved under this program for a ten-year period beginning with the first year in which taxable income was generated by these assets. Its ten-year benefit period, with respect to this program, will expire in 2011. The rate of the exempt income is calculated based on the increase in the subsidiary’s revenues, during each benefit year, in comparison with base revenue, which, in its case, is approximately €36.0 million. This exemption is valid only for undistributed earnings and we are subject to additional tax payments upon their distribution.

We are in the operational stage of an additional program under the 2005 amendment to the Law for the Encouragement of Capital Investments — 1959. The additional program provides grants of 24% of the investment value in approved assets and ten years of reduced tax rates, of which the first two years are at a 0% tax rate on taxable income produced by the approved assets and the remaining years are at a tax rate of not more than 20% on such taxable income.

Under this and other Israeli legislation, we are entitled to accelerated depreciation and amortization rates for tax purposes on certain of our assets. For more information about the tax benefits available to us as an approved enterprise, see “Taxation and Government Programs.”

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Over the years of our business operations, we have accumulated net operating loss carry forwards for tax purposes amounting to approximately €31.0 million as of December 31, 2009. In some cases, the carrying amount of the losses is restricted due to changes in the share ownership of the company or due to limitations on the utilization period of such losses.

In addition, we have entered into transfer pricing arrangements that establish transfer prices for our inter-company operations. However, our transfer pricing procedures are not binding on the applicable taxing authorities. No official authority in any country has made a binding determination as to whether or not we are operating in compliance with its transfer pricing laws and regulations. Taxing authorities in any of the countries in which we operate could challenge our transfer prices and require us to adjust them to reallocate our income. For example, following a recent audit, the tax authorities in Germany challenged the amount of royalties we recognized on our CO2 refills and issued a tax assessment of approximately €8.2 million, of which €5.6 million is directly in respect of these royalties for the period from 2003 to 2005. While we plan to vigorously challenge this assessment and have applied for a Mutual Agreement Procedure under Article 6 of the EU Arbitration Convention against the tax authority’s assessment, our challenge may not be successful and we may be required to pay some of the entire amount assessed. We have created reserves with respect to such tax liabilities where we believe it to be appropriate. However, there can be no assurance that our ultimate tax liability will not exceed the reserves we have created.

Because we operate in a number of countries, our income is subject to taxation in differing jurisdictions with a range of tax rates. Therefore, we need to apply significant judgment to determine our consolidated income tax position. As a result of our multi-jurisdictional operations, we are exposed to a number of different tax risks including, but not limited to, changes in tax laws or interpretations of these tax laws. The tax authorities in the jurisdictions where we operate may audit our tax returns and may disagree with the position taken in those returns. An adverse outcome resulting from any settlement or future examination of our tax returns may result in additional tax liabilities and may adversely affect our effective tax rate, which could have a material adverse effect on our financial position, results of operations and liquidity. In addition, any examination by the tax authorities could cause us to incur significant legal expenses and divert management’s attention from the operation of our business.

We estimate our effective tax rate for the coming years based on our planed future financial results in existing and new markets and the key factors setting our tax liability, in particular our transfer pricing policy and net operating loss carry forwards. Accordingly, we estimate that our effective tax rate will range between 15% and 20% of our income before income tax. There could be no certainty that our plans will be realized and that our assumptions with regard to the key elements affecting tax rates will be accepted by the tax authorities. Therefore, our actual effective tax rate might be higher than our estimate.

Share-based compensation

During the six months ended June 30, 2010, we granted options to purchase 120,543 ordinary shares under our equity incentive plan. The total amount of share-based compensation derived from the options granted in the six months ended June 30, 2010 is €883,233. The expense will be recognized over a four-year vesting period. The total amount with respect to the 2010 grants that is expected to be recognized in 2010 is €358,217 (of which €104,575 was recognized in the six months ended June 30, 2010).

Segment results

As we have rapidly entered new markets over the past few years, we have begun to review our performance in distinct operating segments representing geographical regions. Each region has similar characteristics relevant to our business and usually includes several markets in which we sell our products. The sales of our products in each market are managed either by wholly owned subsidiaries or by external

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third party distributors. The reported performances of these markets are provided periodically and consolidated for presentation to our board of directors, which acts as our Chief Operating Decision Maker (the “CODM”).

We have identified four reportable operating segments, each of which represents a geographical area with similar characteristics. The products sold in all the segments are similar and generally produced in the same production sites. The identified segments are:

•   Western Europe consists of our markets in western and northern Europe, which are characterized by high standards of living and high price levels. These markets also consume relatively high volumes of sparkling water as compared to carbonated soft drinks.

•   The Americas consists of the United States and other markets in North America and Central America, which are significantly influenced by the consumption culture of the United States and which are characterized by a very high consumption of carbonated soft drinks.

•   Central and Eastern Europe, Middle East and Africa (CEMEA) consists of our markets in Central and Eastern Europe, Israel and South Africa. These markets tend to be characterized by a lower price level in comparison with the other geographical markets in which we operate.

•   Asia-Pacific consists of our Australian and New Zealand, together with our new markets in East Asia, which constitute one unit for the purpose of operations management due to their relative proximity to each other and distance from our main operational units.

The following table presents our revenues, by segment for the periods presented, as well as income (loss) before income tax from each segment:

             
(in thousands)   Western
Europe
  CEMEA   The
Americas
  Asia-Pacific   Reportable
Segments
  Reconciliation   Consolidated
Year ended December 31, 2007
                                                              
Revenues   69,279     10,767     3,177     2,760     85,983         85,983  
Reportable segment income (loss) before income tax     10,250       342       (714 )      (1,096 )      8,782       (10,066 )      (1,284 ) 
Year ended December 31, 2008
                                                              
Revenues     81,779       10,234       4,937       2,999       99,949             99,949  
Reportable segment income (loss) before income tax     18,602       1,694       (1,335 )      46       19,007       (13,507 )      5,500  
Year ended December 31, 2009
                                                              
Revenues     74,433       13,728       10,924       5,938       105,023             105,023  
Reportable segment income (loss) before income tax     20,195       1,104       (2,128 )      1,205       20,376       (11,451 )      8,925  
Six months ended June 30, 2009
                                                              
Revenues     33,402       6,421       4,252       1,734       45,809             45,809  
Reportable segment income (loss) before income tax     7,851       560       (284 )      199       8,326       (7,040 )      1,286  
Six months ended June 30, 2010
                                                              
Revenues     46,567       9,238       8,835       4,036       68,676             68,676  
Reportable segment income (loss) before income tax     9,653       1,326       118       784       11,881       (7,107 )      4,774  

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The following table presents our revenues, as a percentage of total revenues:

         
  Year Ended
December 31,
  Six Months Ended
June 30,
     2007   2008   2009   2009   2010
Western Europe     80.6 %      81.8 %      70.9 %      72.9 %      67.8 % 
CEMEA     12.5       10.2       13.0       14.0       13.4  
The Americas     3.7       5.0       10.4       9.3       12.9  
Asia-Pacific     3.2       3.0       5.7       3.8       5.9  
Total     100.0 %      100.0 %      100.0 %      100.0 %      100.0 % 

One of our distributors in Western Europe accounted for 14.7% of our total revenues in 2009 and 12.5% of our total revenues in the six months ended June 30, 2010. This is our only customer that generated in excess of 10% of our revenues for those periods.

We are headquartered in Israel. Revenues from customers located in Israel amounted to €7.6 million in 2007, €8.1 million in 2008, €8.3 million in 2009, €4.2 million in the six months ended June 30, 2009, and €3.8 million in the six months ended June 30, 2010. Our Israeli sales and marketing subsidiary also serves as the exclusive distributor of Brita water filtration systems in Israel and as a distributor of certain other consumer products. Our revenues derived from distributing Brita products declined to 5.2% in 2009 from 5.5% in 2008 and 6.1% in 2007, and to 3.4% in the six months ended June 30, 2010 from 6.4% in the six months ended June 30, 2009, primarily due to the increase in our revenues from home beverage carbonation systems.

Western Europe

Revenues in Western Europe increased by €13.2 million, or 39.4%, to €46.6 million in the six months ended June 30, 2010 from €33.4 million in the six months ended June 30, 2009. This increase is primarily attributable to our marketing efforts, which resulted in increased sales in both our new and existing markets, as well as to a reduction in purchases during the six months ended June 30, 2009 by our distributor in the Nordics that experienced significant financial difficulty as a result of the recession in that market as well as certain inventory management issues relating to consumables, which have since been resolved.

Income before income tax in Western Europe increased by €1.8 million, or 23.0%, to €9.7 million in the six months ended June 30, 2010 from €7.9 million in the six months ended June 30, 2009. This was primarily due to increased revenues, which were partially offset by a reduction in gross margin, caused by an increase in the percentage of revenues derived from soda makers and exchangeable CO2 cylinders.

Revenues in Western Europe decreased by €7.4 million, or 9.0%, to €74.4 million in 2009 from €81.8 million in 2008. This was primarily due to a reduction in purchases during the six months ended June 30, 2009 by our distributor in the Nordics that experienced significant financial difficulty as a result of the recession in that market as well as certain inventory management issues relating to consumables, which have since been resolved. Revenues from other countries in Western Europe increased during this period despite the worldwide recession affecting many of these markets, through increased household penetration, new retail customers and the acquisition of certain of the assets of one of our competitors in Germany. Revenues in Western Europe increased by €12.5 million, or 18.0%, to €81.8 million in 2008 from €69.3 million in 2007 as a result of our entering into exclusive distributorship agreements in various markets in Europe.

Income before income tax in Western Europe increased by €1.6 million, or 8.6%, to €20.2 million in 2009 from €18.6 million in 2008. This was primarily due to sales to new distributors and higher-margin revenue growth from consumables in some of our existing distribution markets, in particular France and Italy, which were partially offset by reduced consumables sales in other markets in the territory, and increased

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sales and marketing expenses. Income before income tax in Western Europe increased by €8.3 million, or 81.5%, to €18.6 million in 2008 from €10.3 million in 2007 due to revenue growth and the benefits from restructuring and other cost-saving initiatives.

CEMEA

Revenues in CEMEA increased by €2.8 million, or 43.9%, to €9.2 million in the six months ended June 30, 2010 from €6.4 million in the six months ended June 30, 2009. This increase is primarily attributable to growth in certain of our markets in Central Europe, primarily the Czech Republic.

Income before income tax in CEMEA increased by €766,000, or 136.8%, to €1.3 million in the six months ended June 30, 2010 from €560,000 in the six months ended June 30, 2009. This was primarily due to increased revenues.

Revenues in CEMEA increased by €3.5 million, or 34.1%, to €13.7 million in 2009 from €10.2 million in 2008 as a result of growth in certain of our markets in Central Europe, primarily the Czech Republic. Revenues in CEMEA decreased by €533,000, or 5.0%, to €10.2 million in 2008 from €10.8 million in 2007 as a result of reduced revenues following recession and significant local currency devaluation in one of our markets, which was partially offset by revenue growth in other markets.

Income before income tax in CEMEA decreased by €590,000, or 34.8%, to €1.1 million in 2009 from €1.7 million in 2008 due to reduced margins on some of our products and an increase in selling expenses. Income before income tax in CEMEA increased by €1.4 million, or 395.3%, to €1.7 million in 2008 from €342,000 in 2007 due to increased margins and cost-savings initiatives, which were partially offset by reduced margins following recession and significant local currency devaluation in one of our markets.

The Americas

Revenues in the Americas increased by €4.5 million, or 107.8%, to €8.8 million in the six months ended June 30, 2010 from €4.3 million in the six months ended June 30, 2009. This increase is primarily attributable to the addition of new retail customers and an increase in our revenues from online sales in the United States, and to our entry into the Canadian market.

Income (loss) before income tax in the Americas increased by €402,000 to €118,000 in the six months ended June 30, 2010 from €(284,000) in the six months ended June 30, 2009. This was primarily due to increased revenues.

Revenues in the Americas increased by €6.0 million, or 121.3%, to €10.9 million in 2009 from €4.9 million in 2008, primarily as a result of an increase in our direct Internet revenues, the addition of new retail customers in the United States and our entry into the Canadian market. Revenues in the Americas increased by €1.7 million, or 55.4%, to €4.9 million in 2008 from €3.2 million in 2007 as a result of strong demand through our Internet channel and initial sales to new retailer customers in the United States.

Loss before income tax in the Americas increased by €793,000, or 59.4%, to €2.1 million in 2009 from €1.3 million in 2008 due to higher sales and marketing expenses in the United States supporting the increased installed base and initial sales in various retailers. Loss before income tax in the Americas increased by €621,000, or 87.0%, to €1.3 million in 2008 from €714,000 in 2007 due to increased sales and marketing expenses to support our activities to increase the installed base in the United States.

Asia-Pacific

Revenues in Asia-Pacific increased by €2.3 million, or 132.8%, to €4.0 million in the six months ended June 30, 2010 from €1.7 million in the six months ended June 3