F-1 1 v216835_jp-f1.htm VintageFilings,LLC

As filed with the Securities and Exchange Commission on April 4, 2011

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 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
David M. Ruff
Orrick, Herrington & Sutcliffe LLP
51 West 52nd Street
New York, New York 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: 011-972-3-710-9191
Fax: 011-972-3-560-6555
  Colin J. Diamond
Joshua G. Kiernan
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036
Tel: 212-819-8200
Fax: 212-354-8113
  Barry Levenfeld
Shiri Shaham
Yigal Arnon & Co.
22 Rivlin Street
Jerusalem, Israel 91000
Tel: 011-972-2-623-9220
Fax: 011-972-2-623-9236


 

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     5,750,000     $ 43.57     $ 250,527,500     $ 29,087  
(1) Includes 750,000 shares which may be sold pursuant to the underwriters’ over-allotment option.
(2) Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(c) under the Securities Act, as amended, and is based upon the average of the high and low prices of the Registrant’s ordinary shares as reported on The Nasdaq Global Select Market on March 30, 2011.


 

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 and the selling shareholders 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 neither we nor the selling shareholders are soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to completion, dated April 4, 2011

Preliminary prospectus

5,000,000 shares

[GRAPHIC MISSING]

Ordinary Shares

We are offering 1,200,000 ordinary shares and the selling shareholders identified in this prospectus, including certain executive officers and entities affiliated with certain members of our board of directors, are offering 3,800,000 ordinary shares in this offering. We will not receive any proceeds from the sale of ordinary shares by the selling shareholders.

Our ordinary shares are listed on The Nasdaq Global Select Market under the symbol “SODA”. On March 31, 2011, the last reported sale price of our ordinary shares as reported on The Nasdaq Global Select Market was $43.81 per share.

Investing in our ordinary shares involves a high degree of risk. See “Risk factors” beginning on page 12.

   
  Per share   Total
Public offering price   $            $         
Underwriting discounts and commissions   $            $         
Proceeds to SodaStream, before expenses   $            $         
Proceeds to the selling shareholders, before expenses   $            $         

The selling shareholders have granted the underwriters an option to purchase a maximum of 750,000 additional ordinary shares from them, at the public offering price, less the underwriting discount, 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       , 2011.

 
J.P. Morgan   Deutsche Bank Securities

   
William Blair & Company   Oppenheimer & Co.   Stifel Nicolaus Weisel

Roth Capital Partners

          , 2011


 
 

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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 = $1.3269, the noon buying rate for Euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on December 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 continue to 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 continue to grow our installed base and estimate, based on consumer surveys and sales of CO2 refills, that there are currently approximately 4.5 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 40,000 retail stores in 41 countries, including 25 countries that we have entered since the beginning of 2007. In 2010, we started selling our products through a new major retailer in the United States, and added more than 1,000 new stores in that market for a total of over 4,000 stores in the United States. 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.

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•   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 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 $29.99 for a 130-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 2008 through 2010, our revenues grew at a compound annual growth rate of 26.8% from €99.9 million to €160.7 million. We had net income of €530,000, €7.1 million and €9.7 million in 2008, 2009 and 2010, respectively. Similarly, from 2008 through 2010, our revenues from soda makers and exchangeable CO2 cylinders grew from €31.4 million to €74.2 million, while our revenues from sales of consumables grew from €59.8 million to €80.4 million. Although we are only in the early stages of our United States marketing investment plan, our sales in the United States have increased from $4.4 million in 2007 to $39.7 million in 2010, more than doubling in each of 2009 and 2010 as compared to the prior year. Between 2007 and 2010, we further penetrated key existing markets, including France and Italy, where we previously had minimal presence.

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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 $216 billion and $34 billion, respectively, in retail sales in 2009. The United States led most other markets with annual per capita off-premise carbonated soft drink consumption of 118 liters in 2010, 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.

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.

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•   Established presence in certain markets.  We currently sell our products through more than 40,000 stores in 41 countries. We now sell our products at more than 4,000 stores in the United States and have been rapidly establishing strong brand recognition among U.S. consumers. 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 established 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. The significant growth we are experiencing in the sales of consumables also benefits retailers by offering them repeat foot traffic and a strong and recurring revenue stream.

•   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 recently released a new soda maker that comes with a Fizz ChipTM, a digital gas gauge that displays the approximate amount of gas remaining in a CO2 cylinder as well as the carbonation level during use. 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 21%.

We intend to enhance our organic growth strategy through the pursuit of complementary acquisitions that will strengthen our technological capabilities, expand our product offerings and broaden our channel access.

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Expand our installed base of customers

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

•   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. Our products have been well received in the United States, where the 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, and we recently released a soda maker with a digital gas gauge (Fizz ChipTM) that displays the approximate amount of gas remaining in a cylinder, as well as the carbonation level during use.

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 established 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:

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•   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.

•   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 March 31, 2011. 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 March 31, 2011 are not expected to be reported and furnished to the Securities and Exchange Commission until after this offering is completed.

Based on these management estimates, we expect that our revenues for the three months ended March 31, 2011 will increase by more than 40% compared to our revenues for the three months ended March 31, 2010. This revenue growth is attributable to increased sales in all of our regions, in particular in 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 March 31, 2011 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.

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Corporate information

Our principal executive offices are located at Gilboa Street, Airport City 70100 Israel and our telephone number is 011-972-3-976-2301. Our website address is www.sodastream.com. The 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. On November 3, 2010, our ordinary shares commenced trading on The Nasdaq Global Select Market.

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    
    1,200,000 shares
Ordinary shares offered by the selling shareholders    
    3,800,000 shares
Ordinary shares to be outstanding after this
offering
   
    19,865,265 shares
Use of proceeds    
    We estimate that we will receive net proceeds, after deducting the underwriting discount and estimated offering expenses payable by us, of $49.5 million from the sale by us of ordinary shares in this offering, assuming an offering price of $43.81 per share, which was the last reported sale price of our ordinary shares as reported on The Nasdaq Global Select Market on March 31, 2011. In addition, we will receive $427,000 from the exercise of options to purchase 200,000 ordinary shares by certain selling shareholders. We intend to use the net proceeds of this offering for general corporate purposes. General corporate purposes may include, among other things, acquisitions or investments in complementary companies, products or technologies (although we currently do not have any acquisitions or investments planned), additions to working capital, capital expenditures and other investments. See “Use of Proceeds.”
   
    We will not receive any proceeds from the sale of ordinary shares by the selling shareholders. The selling shareholders include certain executive officers and entities affiliated with certain members of our board of directors. The shares being offered by our executive officers represents less than 15% of the ordinary shares underlying each such officer’s vested and unvested options (20% if the underwriters’ overallotment option is exercised in full) other than with respect to two executive officers with respect to whom such percentage is 17% (23% if the underwriters’ overallotment option is exercised in full). See “Principal and Selling Shareholders.”
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.
Nasdaq Global Select Market symbol    
    “SODA”

The number of ordinary shares to be outstanding immediately after this offering is based on 18,465,265 ordinary shares outstanding as of March 31, 2011 and gives effect to the exercise by certain selling shareholders of options to purchase an aggregate of 200,000 ordinary shares for the purpose of selling such shares in this offering. As of March 31, 2011, the number of shares outstanding excludes 2,195,838 ordinary shares reserved for issuance under our equity incentive plans, of which, as of March 31, 2011, there were options outstanding to purchase 1,586,046 shares (after deducting the shares subject to options to be exercised by certain selling shareholders) at a weighted-average exercise price of €8.36 ($11.10) per share.

Unless otherwise indicated, information in this prospectus assumes no exercise of the underwriters’ option to purchase up to an additional 750,000 ordinary shares from the selling shareholders to cover overallotments, if any.

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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, 2010 and the consolidated balance sheet data as of December 31, 2010 are derived from our audited 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, 2010. These translations are solely for the convenience of the reader and were calculated at the rate of €1.00 = $1.3269, the noon buying rate for Euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on December 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.

       
  Year Ended December 31,
(in thousands, except share and per share amounts)   2008   2009   2010   2010
Consolidated statements of operations data:
                                   
Revenues   99,949     105,023     160,652     $ 213,169  
Cost of revenues     45,213       46,593       74,059       98,268  
Gross profit     54,736       58,430       86,593       114,901  
Operating expenses:
                                   
Sales and marketing     32,184       34,692       57,057       75,708  
General and administrative     12,675       13,134       18,536       24,595  
Other income, net     (19 )      (95 )      (198 )      (263 ) 
Total operating expenses     44,840       47,731       75,395       100,040  
Operating income     9,896       10,699       11,198       14,861  
Interest expense, net     2,742       2,022       1,467       1,947  
Other financial expenses (income), net     1,654       (248 )      (1,766 )      (2,343 ) 
Total financial expenses (income), net     4,396       1,774       (299 )      (396 ) 
Income before income tax     5,500       8,925       11,497       15,257  
Income tax     4,970       1,793       1,769       2,347  
Net income   530     7,132     9,728     $ 12,910  
Net income per ordinary share:
                                   
Basic   0.09     1.14     1.21     $ 1.61  
Diluted   0.07     0.57     0.69     $ 0.92  
Shares used in computing net income per ordinary share:
                                   
Basic     5,850,228       6,259,393       8,026,701       8,026,701  
Diluted     9,629,991       13,206,403       14,680,217       14,680,217  

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  Year Ended December 31,
(in thousands)   2008   2009   2010   2010
Other financial and operating data:
                                   
Total number of soda makers sold (unaudited)     877       1,057       1,922       N/A  
Total number of CO2 refills sold (unaudited)(1)     7,496       8,166       9,787       N/A  
EBITDA(2)   10,218     12,588     15,502     $ 20,571  
Adjusted EBITDA(3)   11,004     13,212     18,796     $ 24,942  
Adjusted net income(3)   1,235     7,688     13,022     $ 17,281  

       
(in thousands)   As of December 31, 2010
  Actual   As Adjusted(4)
Consolidated balance sheet data:
                                   
Cash and cash equivalents   52,900     $ 70,193     90,522     $ 120,114  
Working capital(5)     27,164       36,043       27,164       36,043  
Total assets     168,065       223,005       205,687       272,926  
Loans and borrowings (including short-term obligations)     6,753       8,960       6,753       8,960  
Total liabilities     59,943       79,538       59,943       79,538  
Total shareholders’ equity   108,122     $ 143,467     145,744     $ 193,388  

(1) 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.

(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.

(3) Adjusted EBITDA is a non-IFRS measure and is defined as earnings before interest, income tax, depreciation and amortization, and further eliminates the effect of the non-cash share-based compensation expense (the “Share-Based Compensation”) and for the impact of a discontinued management fee expense paid to Fortissimo Capital (the “Fortissimo Payments”). Adjusted net income is a non-IFRS measure and is defined as net income calculated in accordance with IFRS as adjusted for the impact of Share-Based Compensation and for the impact of the Fortissimo Payments. We use Adjusted Net Income and Adjusted EBITDA as measures of operating performance because they assist us in comparing performance on a consistent basis, as they remove from our operating results the impact of one-time costs associated with non-recurring events and non-cash items such as share-based compensation expense, which can vary depending upon accounting methods. We believe Adjusted Net Income and Adjusted EBITDA are useful to an investor in evaluating our operating performance because they are widely used by investors, securities analysts and other interested parties to measure a company’s operating performance without regard to one-time costs associated with non-recurring events and without regard to non-cash items such as share-based compensation expense, which can vary depending upon accounting methods.

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  Year Ended December 31,
(in thousands)   2008   2009   2010   2010
Reconciliation of Net income to EBITDA and to Adjusted EBITDA:
                                   
Net income   530     7,132     9,728     $ 12,910  
Interest expense, net     2,742       2,022       1,467       1,947  
Income tax     4,970       1,793       1,769       2,347  
Depreciation and amortization     1,976       1,641       2,538       3,367  
EBITDA   10,218     12,588     15,502     $ 20,571  
Management fee     541       461       2,290       3,039  
Share-based payments     245       163       1,004       1,332  
Adjusted EBITDA   11,004     13,212     18,796     $ 24,942  

       
  Year Ended December 31,
(in thousands)   2008   2009   2010   2010
Reconciliation of Net income to Adjusted Net income:
                                   
Net income   530     7,132     9,728     $ 12,910  
Management fee     541       461       2,290       3,039  
Share-based payments     245       163       1,004       1,332  
Income tax effect of the foregoing     (81 )      (68 )             
Adjusted Net income   1,235     7,688     13,022     $ 17,281  

(4) The as adjusted amounts give effect to (i) the receipt by us of estimated net proceeds of $49.5 million from the issuance and sale of 1,200,000 ordinary shares offered by us, assuming an offering price of $43.81 per share, which was the last reported sale price of our ordinary shares as reported on The Nasdaq Global Select Market on March 31, 2011, after deducting the underwriting discount and estimated offering expenses payable by us, and (ii) the receipt by us of proceeds of $427,000 from the exercise of options to purchase 200,000 ordinary shares by certain selling shareholders.

(5) 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 are focusing our growth efforts on the United States, the world’s largest market for carbonated beverages and our most important target market. Our success depends, 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 is requiring 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 maintaining 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 historically had limited or no presence, including the United States, and other markets in which we have not had a presence in the recent past, including the United Kingdom. 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 believe that the capacity of our current manufacturing facilities and subcontractors is sufficient to meet anticipated demand for our products through 2012. We currently anticipate needing additional manufacturing capacity in the future as the demand for our products continues to increase. We intend to meet this future need for additional manufacturing capacity by constructing or purchasing an additional manufacturing facility in or near one of our existing markets. Pending the construction or purchase of such an additional manufacturing facility, we are investing in expanding our manufacturing capabilities through other means, primarily by expanding the manufacturing capacity at our existing facilities and by increasing the use of sub-contractors for certain products and components.

If we choose to construct a new manufacturing facility, we will need to secure additional real estate and hire additional employees. 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 actual cost to construct or purchase such a facility might be higher than the projected 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

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

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 29 countries, representing 32% of our revenues in 2010. 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

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from other manufacturers of home beverage carbonation systems and consumables and the 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. 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 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

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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. In January 2011, a preparatory hearing was held at the District Court of Stockholm addressing our claim that Vikingsoda had infringed our intellectual property rights. A hearing is likely to take place in the latter part of 2011. Should our case be unsuccessful, we will have to compensate Vikingsoda for its litigation costs. It is also possible that Vikingsoda will claim compensation for damages suffered during the period between the granting of the preliminary injunction by the District Court of Stockholm and the Stockholm Court of Appeal’s decision that the preliminary injunction could not be enforced.

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

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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.

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, 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. The Swedish Competition Authority has indicated that it intends to present us with a draft statement of objections, detailing the alleged infringement.

Further, the Swedish Competition Authority submitted a preliminary opinion to the Stockholm Court of Appeal, requesting that the Stockholm Court of Appeal consider the Swedish Competition Authority’s preliminary opinion when deciding on the preliminary injunction that we requested in relation to 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.

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 41 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

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economic or political uncertainties. All of these risks could result in increased costs or decreased revenues, either of which could adversely affect our profitability.

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

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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 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.

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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 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

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government, political unrest or unstable economic conditions in China. Any of these matters could materially and adversely affect our business and results of operations.

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, our cash on hand and cash flow from operations will be sufficient to finance our strategic plans, including our expansion in markets

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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 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 and its region 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 and the surrounding region 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

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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 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.

Recent political uprisings and social unrest in various countries in the Middle East and north Africa are affecting the political stability of those countries. This instability may lead to deterioration of the political relationships that exist between Israel and these countries, and have raised new concerns regarding security in the region and the potential for armed conflict. Among other things, this instability may affect the global economy and marketplace through changes in oil and gas prices. 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.

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In April 2005 and in January 2011, amendments to the Investment Law became effective under which the criteria for new investments qualified to receive tax benefits were revised and, in some cases, companies were given the choice whether or not to opt into the new benefit regimes or to remain subject to the previous benefit regimes. 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.”

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 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.

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As a foreign private issuer whose shares are listed on The Nasdaq Global Select 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 are listed on The Nasdaq Global Select Market, we have elected to follow certain home country corporate governance practices instead of certain requirements of the Marketplace Rules of The Nasdaq Global Select 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 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 Select 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 are 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 are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not 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.

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Risks related to this offering

The price of our ordinary shares may fluctuate significantly, and you could lose all or part of your investment.

Prior to our initial public offering, or IPO, there was no public market for our ordinary shares. Our ordinary shares were first offered publicly in our IPO in November 2010, at a price of $20.00 per share, and our ordinary shares have subsequently traded as high as $48.20 per share and as low as $23.15 per share.

In the recent past, stocks generally have experienced high levels of volatility. The trading price of our ordinary shares may fluctuate significantly. 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;

•   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;

•   sales of ordinary shares by us or our shareholders; 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.

In the past, many companies that have experienced volatility in the market price of their securities have become subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

Sales of our outstanding ordinary shares into the market in the future could cause the market price of our ordinary shares to drop significantly, even if our business is doing well.

Upon completion of this offering, we will have 19,865,265 ordinary shares outstanding, of which 12,096,190 shares (12,846,190 shares if the underwriters’ over-allotment option is exercised in full), including the shares sold in this offering, will be freely tradable without restrictions or further registration under the Securities Act. We, each of our officers, directors and the selling shareholders have agreed, subject to certain exceptions, with the underwriters not to dispose of or hedge any of their ordinary shares or securities convertible into or exchangeable for ordinary shares for a period of 90 days after 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 and, except in our case, for the issuance of ordinary shares upon exercise of

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options under existing option plans. 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. Starting on May 8, 2011, 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.

See “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling our ordinary shares after this offering. To the extent that any of these shareholders sell, or indicate an intent to sell, substantial amounts of our ordinary shares in the public market after the contractual lock-ups and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our ordinary shares could decline significantly.

In addition, on November 3, 2010, we filed a Registration Statement on Form S-8 registering up to 2,195,838 ordinary shares that we may issue under our option plans. 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.

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 their affiliates will beneficially own approximately     % of our outstanding ordinary shares upon completion of this offering. Moreover, our largest shareholder, Fortissimo Capital, will beneficially own approximately     % 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 significant 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.

If securities or industry analysts cease to publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

We expect that the trading price for our ordinary shares will be affected by any research or reports that securities or industry analysts publish about us or our business. If one or more of the analysts who currently cover us or our business publish inaccurate or unfavorable research about us or our business, and in particular if they downgrade their evaluations of our ordinary shares, the price of our ordinary shares would likely decline. If one or more of these analysts cease coverage of our company, we could lose visibility in the market for our ordinary shares, which in turn could cause our stock price to decline.

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.

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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 intend to use the net proceeds of this offering for general corporate purposes. General corporate purposes may include, among other things, acquisitions or investments in complementary companies, products or technologies (although we currently do not have any acquisitions or investments planned), additions to working capital, capital expenditures and other investments. We will have broad discretion in the way that we use net proceeds of this offering. We cannot assure you that these uses or any other use of the net proceeds of this offering will yield favorable returns or results.

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 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.”

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Special note regarding forward-looking statements
and industry data

This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, 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 continued 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 sales of our new Fizz ChipTM soda machine in the United States;

•   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;

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

•   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; and

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

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, 2010 into U.S. Dollars at the rate of €1.00 = $1.3269, the noon buying rate for Euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on December 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,
  2006   2007   2008   2009   2010
High     1.3327       1.4862       1.6010       1.5100       1.4536  
Low     1.1860       1.2904       1.2446       1.2547       1.1959  
Period End     1.3197       1.4603       1.3919       1.4332       1.3269  
Average Rate     1.2661       1.3797       1.4695       1.3955       1.3216  

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
  September   October   November   December   January   February
High     1.3638       1.4066       1.4224       1.3395       1.3715       1.3794  
Low     1.2708       1.3688       1.3036       1.3089       1.2944       1.3474  
End of Month     1.3601       1.3894       1.3036       1.3269       1.3715       1.3793  

On March 25, 2011, 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 = $1.4144.

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Use of proceeds

We estimate that our net proceeds from this offering will be approximately $49.5 million, assuming an offering price of $43.81 per share, which was the last reported sale price of our ordinary shares as reported on The Nasdaq Global Select Market on March 31, 2011, after deducting the underwriting discount and estimated offering expenses payable by us. In addition, we will receive $427,000 from the exercise of options to purchase 200,000 ordinary shares by certain selling shareholders. We will not receive any proceeds from the sale of ordinary shares by the selling shareholders. The selling shareholders include certain executive officers and entities affiliated with certain members of our board of directors. See “Principal and Selling Shareholders.”

We intend to use the net proceeds of this offering for general corporate purposes. General corporate purposes may include, among other things, acquisitions or investments in complementary companies, products or technologies (although we currently do not have any acquisitions or investments planned), additions to working capital, capital expenditures and other investments.

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Market price of ordinary shares

Our ordinary shares have been listed on The Nasdaq Global Select Market under the symbol “SODA” since November 3, 2010. Prior to that date, there was no public trading market for our ordinary shares. Our IPO was priced at $20.00 per share on November 2, 2010. The following table sets forth for the periods indicated the high and low sales prices per ordinary share as reported on The Nasdaq Global Select Market:

   
  Low   High
Year ending December 31, 2010
                 
Fourth Quarter (beginning November 3, 2010)   $ 23.15     $ 43.88  
Year ending December 31, 2011
                 
First Quarter   $ 27.00     $ 46.88  

On March 31, 2011, the last reported sale price of our ordinary shares on The Nasdaq Global Select Market was $43.81 per share.

As of December 31, 2010, we had 9 holders of record of our ordinary shares. The actual number of shareholders is greater than this number of record holders, and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include shareholders whose shares may be held in trust by other entities.

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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 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 cash and cash equivalents and capitalization as of December 31, 2010:

•   on an actual basis; and

•   on an as adjusted basis to give effect to (i) the receipt by us of estimated net proceeds of $49.5 million from the issuance and sale of 1,200,00 ordinary shares offered by us, assuming an offering price of $43.81 per share, which was the last reported sale price of our ordinary shares as reported on The Nasdaq Global Select Market on March 31, 2011, after deducting the underwriting discount and estimated offering expenses payable by us, and (ii) the receipt by us of proceeds of $427,000 from the exercise of options to purchase 200,000 ordinary shares by certain selling shareholders.

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.

       
(in thousands)   As of December 31, 2010
     Actual   As Adjusted
Cash and cash equivalents   52,900     $ 70,193     90,522     $ 120,114  
Loans and borrowings   6,753     $ 8,960     6,753     $ 8,960  
Ordinary shares, par value NIS 0.645 per share; 54,000,000 shares authorized; 18,447,862 shares issued and outstanding, actual; 19,865,265 shares issued and outstanding as of March 31, 2011, as adjusted     2,286       3,034       2,477       3,286  
Share premium     91,870       121,902       129,301       171,571  
Translation reserve     (53 )      (70 )      (53 )      (70 ) 
Retained earnings     14,019       18,601       14,019       18,601  
Total shareholders’ equity     108,122       143,467       145,744       193,388  
Total capitalization   114,875     $ 152,427     152,497     $ 202,348  

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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 public offering price per share and the as adjusted net tangible book value per ordinary share after this offering. Our net tangible book value as of December 31, 2010 was €94.7 million, or $125.7 million, corresponding to a net tangible book value of €5.13, or $6.81, 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 December 30, 2010 of €1.00 = $1.3269). Our net tangible book value per share set forth below represents our total tangible assets less our total liabilities, divided by the number of ordinary shares outstanding on December 31, 2010.

After giving effect to (i) the receipt by us of estimated net proceeds of $49.5 million from the issuance and sale of 1,200,000 ordinary shares offered by us, assuming an offering price of $43.81 per share, which was the last reported sale price of our ordinary shares as reported on The Nasdaq Global Select Market on March 31, 2011, after deducting the underwriting discount and estimated offering expenses payable by us, and (ii) the receipt by us of proceeds of $427,000 from the exercise of options to purchase 200,000 ordinary shares by certain selling shareholders, our as adjusted net tangible book value as of December 31, 2010 would have been €132.3 million, or $175.6 million, corresponding to a net tangible book value of €6.66, or $8.84, 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 December 30, 2010 of €1.00 = $1.3269). This amount represents an immediate increase in our net tangible book value of €1.53, or $2.03, per ordinary share to our existing shareholders and an immediate dilution in as adjusted net tangible book value of approximately €26.35, or $34.97, per ordinary share to new investors purchasing ordinary shares in this offering. We determine dilution by subtracting the 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 public offering price per share                     33.01     $ 43.81  
Net tangible book value per share as of December 31, 2010(1)   5.13     $ 6.81                    
Increase per share attributable to the sale of ordinary shares by SodaStream in this offering(1)     1.53       2.03              
As adjusted net tangible book value per share after this offering(1)                 6.66       8.84  
Dilution per share to new investors(1)               26.35     $ 34.97  

(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 December 30, 2010 of €1.00 = $1.3269.

The following table summarizes, as of March 31, 2011, 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, certain selling shareholders who exercised outstanding options, and new investors paid. For purposes of the following table, we are including in the existing shareholders row the shares that were purchased from us in our IPO, for which we received consideration (before giving effect to the underwriting discount and offering expenses) of $20.00 per share. The calculation below assumes an offering price of $43.81 per share, which was the last reported sale price of our ordinary shares as reported on The Nasdaq Global Select Market on March 31, 2011, before deducting the underwriting discount and estimated offering expenses payable by us.

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  Shares Purchased   Total Consideration   Average Price
Per Share
     Number   Percent   Amount   Percent
Existing shareholders     18,465,265       93.0 %    $ 138,327,605       72.3 %    $ 7.49  
Options exercised by certain selling shareholders     200,000       1.0       427,262       0.2       2.14  
New investors     1,200,000       6.0       52,572,000       27.5       43.81  
Total     19,865,265       100 %    $ 191,326,867       100 %       

The foregoing tables and calculations exclude 2,195,838 ordinary shares reserved for issuance under our equity incentive plans, of which, as of March 31, 2011, there were options outstanding to purchase 1,586,046 shares (after deducting the shares subject to options to be exercised by certain selling shareholders) at a weighted-average exercise price of €8.36 ($11.10) 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 December 31, 2010, the as adjusted net tangible book value per share after this offering would be €6.79 ($9.01), and total dilution per share to new investors would be €26.22 ($34.80).

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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 “Summary 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, 2010 and the consolidated balance sheet data as of December 31, 2009 and December 31, 2010 are derived from our audited consolidated financial statements appearing elsewhere in this prospectus. The consolidated statement of operations data for the year ended December 31, 2007 and the consolidated balance sheet data as of December 31, 2007 and December 31, 2008 are derived from our audited consolidated financial statements that are not included in this prospectus. Selected consolidated financial information as of December 31, 2006 and for the year ended December 31, 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, 2010. These translations are solely for the convenience of the reader and were calculated at the rate of €1.00 = $1.3269, the noon buying rate for Euros in New York City, as certified for customs purposes by the Federal Reserve Bank of New York, on December 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 share and
per share amounts)
  Year Ended December 31,
     2007   2008   2009   2010   2010
Consolidated statements of
operations data:
                                            
Revenues   85,983     99,949     105,023     160,652     $ 213,169  
Cost of revenues     39,745       45,213       46,593       74,059       98,268  
Gross profit     46,238       54,736       58,430       86,593       114,901  
Operating expenses:
                                            
Sales and marketing     31,449       32,184       34,692       57,057       75,708  
General and administrative     13,769       12,675       13,134       18,536       24,595  
Other income, net     (25 )      (19 )      (95 )      (198 )      (263 ) 
Total operating expenses     45,193       44,840       47,731       75,395       100,040  
Operating income     1,045       9,896       10,699       11,198       14,861  
Interest expense, net     2,195       2,742       2,022       1,467       1,947  
Other financial expenses
(income), net
    134       1,654       (248 )      (1,766 )      (2,343 ) 
Total financial expenses
(income), net
    2,329       4,396       1,774       (299 )      (396 ) 
Income (loss) before income tax     (1,284 )      5,500       8,925       11,497       15,257  
Income tax     306       4,970       1,793       1,769       2,347  
Net income (loss)   (1,590 )    530     7,132     9,728     $ 12,910  
Net income (loss) per ordinary
share:
                                            
Basic   (0.29 )    0.09     1.14     1.21     $ 1.61  
Diluted   (0.29 )    0.07     0.57     0.69     $ 0.92  
Shares used in computing net
income (loss) per ordinary share:
                                            
Basic     5,466,901       5,850,228       6,259,393       8,026,701       8,026,701  
Diluted     5,466,901       9,629,991       13,206,403       14,680,217       14,680,217  

         
  Year Ended December 31,
(in thousands)   2007   2008   2009   2010   2010
Other financial and operating data:
                                            
Total number of soda makers sold
(unaudited)
    730       877       1,057       1,922       N/A  
Total number of CO2 refills sold
(unaudited)(1)
    7,364       7,496       8,166       9,787       N/A  
EBITDA(2)   2,744     10,218     12,588     15,502     $ 20,571  
Adjusted EBITDA(3)   3,005     11,004     13,212     18,796     $ 24,942  
Adjusted net income (loss)(3)   (1,366 )    1,235     7,688     13,022     $ 17,281  

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  As of December 31,
(in thousands)   2007   2008   2009   2010   2010
Consolidated balance sheet data:
                                            
Cash and cash equivalents   1,928     4,349     4,185     52,900     $ 70,193  
Working capital(4)     8,610       7,415       5,086       27,164       36,043  
Total assets     61,664       68,682       77,695       168,065       223,005  
Loans and borrowings (including
short-term obligations)
    23,398       18,329       12,754       6,753       8,960  
Shareholders’ loans     6,330       11,564       11,793              
Total liabilities     53,301       59,372       61,039       59,943       79,538  
Total shareholders’ equity     8,364       9,310       16,656       108,122       143,467  

(1) 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.

(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.

(3) Adjusted EBITDA is a non-IFRS measure and is defined as earnings before interest, income tax, depreciation and amortization, and further eliminates the effect of the non-cash share-based compensation expense (the “Share-Based Compensation”) and for the impact of a discontinued management fee expense paid to Fortissimo Capital (the “Fortissimo Payments”). Adjusted net income is a non-IFRS measure and is defined as net income calculated in accordance with IFRS as adjusted for the impact of Share-Based Compensation and for the impact of the Fortissimo Payments. We use Adjusted Net Income and Adjusted EBITDA as measures of operating performance because they assist us in comparing performance on a consistent basis, as they remove from our operating results the impact of one-time costs associated with non-recurring events and non-cash items such as share-based compensation expense, which can vary depending upon accounting methods. We believe Adjusted Net Income and Adjusted EBITDA are useful to an investor in evaluating our operating performance because they are widely used by investors, securities analysts and other interested parties to measure a company’s operating performance without regard to one-time costs associated with non-recurring events and without regard to non-cash items such as share-based compensation expense, which can vary depending upon accounting methods.

         
  Year Ended December 31,
(in thousands)   2007   2008   2009   2010   2010
Reconciliation of Net income (loss) to EBITDA and to Adjusted EBITDA:
                                            
Net income (loss)   (1,590 )    530     7,132     9,728     $ 12,910  
Interest expense, net     2,195       2,742       2,022       1,467       1,947  
Income tax     306       4,970       1,793       1,769       2,347  
Depreciation and amortization     1,833       1,976       1,641       2,538       3,367  
EBITDA   2,744     10,218     12,588     15,502     $ 20,571  
Management Fee     250       541       461       2,290       3,039  
Share-based payment     11       245       163       1,004       1,332  
Adjusted EBITDA   3,005     11,004     13,212     18,796     $ 24,942  

         
  Year Ended December 31,
(in thousands)   2007   2008   2009   2010   2010
Reconciliation of Net income (loss) to Adjusted net income (loss):
                                            
Net income (loss)   (1,590 )    530     7,132     9,728     $ 12,910  
Management Fee     250       541       461       2,290       3,039  
Share-based payment     11       245       163       1,004       1,332  
Income tax effect of the foregoing     (37 )      (81 )      (68 )             
Adjusted Net income (loss)   (1,366 )    1,235     7,688     13,022     $ 17,281  
(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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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 40,000 retail stores in 41 countries, including 25 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 by 5.1% from €99.9 million in 2008 to €105.0 million in 2009, and by 53.0% to €160.7 million in 2010. The growth in 2010 was achieved by year-over-year growth in each of our regions, led by the Americas in which revenues increased in 2010 by 188.9% compared to 2009, the majority of which came from the United States. Although we are only in the early stages of our United States marketing investment plan, our sales in the United States have increased from $4.4 million in 2007 to $39.7 million in 2010, more than doubling in each of 2009 and 2010 as compared to the prior year. This was followed by Asia-Pacific, in which revenues increased by 66.8% in 2010 compared to 2009; CEMEA, in which revenues increased by 41.8% in 2010 compared to 2009; and Western Europe, in which revenues increased by 34.0% in 2010 compared to 2009. By product, our two major segments — Soda Makers and exchangeable CO2 cylinders, and Consumables — delivered revenue growth of 89.9% and 35.4%, respectively. Within the Consumables product segment, CO2 refills increased 19.8% to 9.8 million units, and flavors increased 68.0% to 13.8 million units.

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

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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.

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. 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:

     
(in thousands)   Year Ended December 31,
  2008   2009   2010
     Revenues
Soda makers and exchangeable CO2 cylinders   31,406     39,091     74,223  
Consumables     59,768       59,329       80,351  
Other(1)     8,775       6,603       6,078  
Total   99,949     105,023     160,652  

     
  Year Ended December 31,
  2008   2009   2010
     As a Percentage of Revenues
Soda makers and exchangeable CO2 cylinders     31.4 %      37.2 %      46.2 % 
Consumables     59.8       56.5       50.0  
Other(1)     8.8       6.3       3.8  
Total     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

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user base. The number of soda maker units that we sold in 2010 increased by 119.2% compared to 2008 and the number of CO2 refills increased by 30.6%. We estimate, based on consumer surveys and sales of CO2 refills, that there are currently approximately 4.5 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 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 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, 2009 and the year ended December 31, 2010 (in each case, as compared to the prior fiscal year), the annual growth in the volume of soda makers sold was 20.5% and 81.9%, respectively. The increase in CO2 refills for those periods was 9.3% and 19.8%, respectively. The change in sales of flavors for those periods was a decrease of 12.8% and an increase of 68.0%, respectively. The increase in sales of carbonation bottles for those periods was 8.5% and 30.3%, respectively.

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 placed by our distributor in the Nordics during the first half of that year, 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 revenues 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 revenues 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 promotional 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 promotional 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 absolute 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, mainly due to the additional information technology and finance resources required for supporting our business growth and our new 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 and capital gains and losses.

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 our IPO in cash, cash equivalents and marketable securities pending their application to grow our business.

Corporate taxes

The regular corporate tax rate in Israel in 2011 is 24%. The Israeli corporate tax rate for the 2010 tax year was 25%, for the 2009 tax year was 26% and for the 2008 tax year was 27%. 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. The benefits period of an investment program that was approved in December 1999 has not yet ended. This investment program provides a tax exemption on undistributed earnings derived from program assets for a period of ten years from the first year in which taxable income is generated from the approved assets. The ten-year period will end at the end of the 2012 tax year. Calculation of the approved enterprise tax benefits is based on the increase in the Euro value in revenues during each year of the benefit period, compared to the “base year” (the year prior to operation of the program) revenues (“Base Revenue”). The current Base Revenue is €36.0 million.

The operational phase of another program, which is in the investment grant course and was approved in December 2005, has not yet commenced. The subsidiary will be entitled to a grant of 24% of part of the approved investment. The benefit period for this program will be ten years (tax exemption for two years and reduced tax for eight more years) beginning in the first year the subsidiary has taxable income from the approved assets.

The subsidiary’s income that is not derived from assets eligible for reduced taxation benefits, as described above, is taxed at the regular corporate income tax rate in Israel of 25% in 2010 (2009: 26%; 2008: 27%).

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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.”

Over the course of our business operations, we have accumulated net operating loss carry-forwards for tax purposes amounting to approximately €14.7 million as of December 31, 2010.

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 planned 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 year ended December 31, 2010, we granted options to purchase 847,992 ordinary shares under our equity incentive plan. The total amount of share-based compensation derived from the options granted in the year ended December 31, 2010 is €7.2 million. The expense will be recognized over a four-year vesting period. The total amount with respect to the 2010 grants that was recognized in 2010 is €1.0 million.

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.

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The sales of our products in each market are managed either by wholly owned subsidiaries or by external 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, 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  
Year ended December 31, 2010
                                                              
Revenues     99,722       19,466       31,562       9,902       160,652             160,652  
Reportable segment income (loss) before income tax     20,908       2,350       (4,173 )      2,213       21,298       (9,801 )      11,497  

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

     
  Year Ended December 31,
     2008   2009   2010
Western Europe     81.8 %      70.9 %      62.1 % 
CEMEA     10.2       13.0       12.1  
The Americas     5.0       10.4       19.6  
Asia-Pacific     3.0       5.7       6.2  
Total     100.0 %      100.0 %      100.0 % 

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One of our distributors in Western Europe accounted for 14.7% of our total revenues in 2009 and 13.1% of our total revenues in 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 €8.1 million in 2008, €8.3 million in 2009, and €8.1 million in 2010. Our Israeli sales and marketing subsidiary also serves as the exclusive distributor of Brita water filtration systems in Israel and as the distributor of certain other consumer products. Our revenues derived from distributing Brita products declined, as a percentage of total revenues, to 3.0% in 2010 from 5.2% in 2009 and 5.5% in 2008, primarily due to the increase in our revenues from home beverage carbonation systems.

Western Europe

Revenues in Western Europe increased by €25.3 million, or 34.0%, to €99.7 million in 2010 from €74.4 million in 2009. This increase is primarily attributable to our marketing efforts, which resulted in increased sales in both our newer markets (primarily France, Italy and the United Kingdom) and our established markets (primarily Germany, the Nordics and Switzerland). Our revenue growth in Western Europe took place in both soda makers and consumables. This growth in revenues also reflects a slowdown in purchases during the first six months of 2009 by our distributor in the Nordics that experienced significant financial difficulty as a result of the global recession as well as certain inventory management issues relating to consumables, which have since been resolved. 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 2009 by our distributor in the Nordics who experienced financial difficulty as mentioned above. 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.

Income before income tax in Western Europe increased by €713,000, or 3.5%, to €20.9 million in 2010 from €20.2 million in 2009. This was mainly due to the increase in revenues, which was partially offset by an increase of 44.7% in selling and marketing expenses, resulting from promotional and marketing activities that took place mainly in the United Kingdom, following our re-launch in this market, and in Germany. 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 sales and marketing expenses.

CEMEA

Revenues in CEMEA increased by €5.7 million, or 41.8%, to €19.4 million in 2010 from €13.7 million in 2009. Revenues in CEMEA increased by €3.5 million, or 34.1%, to €13.7 million in 2009 from €10.2 million in 2008. These increases were primarily attributable to continued growth in certain of our markets in Central Europe, primarily the Czech Republic.

Income before income tax in CEMEA increased by €1.2 million, or 112.9%, to €2.3 million in 2010 from €1.1 million in 2009. This was mainly due to the revenue increase mentioned above. 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 mainly due to increased selling and marketing expenses.

The Americas

Revenues in the Americas increased by €20.6 million, or 188.9%, to €31.5 million in 2010 from €10.9 million in 2009. Revenues in the Americas increased by €6.0 million, or 121.3%, to €10.9 million in 2009 from €4.9 million in 2008. In each year, this increase is primarily attributable to the addition of new retail

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customers and, to a lesser extent, an increase in our revenues from online sales, both of which reflect the increase of our installed base in the United States, as well as our entry into the Canadian market.

Loss before income tax in the Americas increased by €2.1 million, or 96.1%, to €4.2 million in 2010 from €2.1 million in 2009 due to our advertising and promotional activities designed to introduce the home beverage carbonation category, our system and the SodaStream brand to consumers in the United States in parallel to our rollout into major retailers in the country. 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 mainly due to higher sales and marketing expenses in the United States as mentioned above.

Asia-Pacific

Revenues in Asia-Pacific increased by €4.0 million, or 66.8%, to €9.9 million in 2010 from €5.9 million in 2009. This was mainly due to the increase of our installed base in the Australian and New Zealand markets and the addition of new markets in Asia. Revenues in Asia-Pacific increased by €2.9 million, or 98.0%, to €5.9 million in 2009 from €3.0 million in 2008 as a result of an increase in our installed base and the addition of new retailers.

Income before income tax in Asia-Pacific increased by €1.0 million, or 83.7%, to €2.2 million in 2010 from €1.2 million in 2009. Income before income tax in Asia-Pacific increased by €1.2 million to €1.2 million in 2009 from €46,000 in 2008. These increases were as a result of the increase in revenues.

Results of operations

Year ended December 31, 2010 compared to year ended December 31, 2009

Revenues increased by €55.7 million, or 53.0%, to €160.7 million in 2010 from €105.0 million in 2009. This growth was attributable primarily to an increase of 81.9% in the volume of soda makers sold to 1.9 million in 2010, compared to 1.1 million in 2009. CO2 refills increased by 19.8% to 9.8 million units in 2010 from 8.2 million units in 2009 and flavors increased by 68.0% to 13.8 million units in 2010 from 8.2 million in 2009, both reflecting the expansion of our active installed user base. By segment, the key regions of revenue growth were Western Europe with an increase of €25.3 million and the Americas with an increase of €20.6 million. Revenues from CEMEA and from Asia-Pacific increased by €5.7 million and €4.0 million, respectively.

Gross profit increased by €28.2 million, or 48.2%, to €86.6 million in 2010 from €58.4 million in 2009. Gross profit as a percentage of revenues, or gross margin, decreased by 1.7 percentage points to 53.9% in 2010 compared to 55.6% in 2009. This decrease was mainly due to the growing portion of soda maker starter kits in the revenue mix, which have lower gross margins than our consumables products.

Sales and marketing expenses increased by €22.4 million, or 64.5%, to €57.1 million in 2010 from €34.7 million in 2009. As a percentage of revenues, sales and marketing expenses increased to 35.5% in 2010 from 33.0% in 2009. These changes were attributable primarily to increased advertising and promotional expenses, mainly in the United States, as part of our ongoing initiative to increase our active user installed base in that market.

General and administrative expenses increased by €5.4 million, or 41.1%, to €18.5 million in 2010 from €13.1 million in 2009. As a percentage of revenues, general and administrative expenses decreased to 11.5% in 2010 from 12.5% in 2009. The general and administrative expenses include non-recurring management fees paid to Fortissimo Capital of €2.3 million (including a one-time termination payment of €1.75 million) in 2010 and €461,000 in 2009. These management fees were terminated at the time of our IPO. Recurring administrative expenses increased to €16.2 million in 2010 from €12.7 million in 2009 primarily due to share-based compensation charges that increased to €1.0 million in 2010 from €163,000 in

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2009 and an increase in our information technology and financial department expenses required to support our expansion, particularly in the United States, as well as the additional expenses for supporting our new public company status.

Other income increased by €103,000 to €198,000 in 2010 from €95,000 in 2009, due primarily to capital gain from sale of property, plant and equipment.

Total financial expenses (income), net was income of €299,000 in 2010 as compared to a net expense of €1.8 million in 2009, primarily due to a decrease in interest expense, net by €555,000 to €1.5 million in 2010 from €2.0 million in 2009, mainly due to lower debt balances, and to the impact of foreign exchange rates on assets and liabilities denominated in currencies other than the Euro.

Income tax expense was €1.8 million in 2010 essentially unchanged compared to 2009. Our effective tax rate for 2010 was 15.4%, compared to 20.1% for 2009. The decrease in our effective tax rate was primarily attributable to the utilization of tax losses in some of our taxable units.

Year ended December 31, 2009 compared to year ended December 31, 2008

Revenues increased by €5.1 million, or 5.1%, to €105.0 million in 2009 from €99.9 million in 2008. This increase is attributable primarily to an increase of 20.5% in the volume of soda makers sold to 1.1 million in 2009 compared to 877,000 in 2008. CO2 refills increased by 9.3% to 8.2 million units in 2009 from 7.5 million units in 2008, primarily due to the expansion of our active installed user base. By segment, the key components of revenue growth were an increase in revenues from the Americas of €6.0 million, an increase in revenues from Central and Eastern Europe, Middle East and Africa of €3.5 million, and an increase in revenues from Asia-Pacific of €2.9 million, partially offset by a decrease in revenues from Western Europe of €7.4 million.

Gross profit increased by €3.7 million, or 6.7%, to €58.4 million in 2009 from €54.7 million in 2008. Gross profit as a percentage of revenues, or gross margin, increased by 0.8 percentage points to 55.6% in 2009 compared to 54.8% in 2008. The change in gross margin was primarily caused by a reduction in our per unit production cost as a result of the increase in soda maker production volumes, continued cost reduction programs and, to a lesser extent, a modest price increase implemented in 2009. The cost savings were largely offset by the negative impact that resulted from an increasing share of soda makers and exchangeable CO2 cylinders in our overall revenue mix, competition in sales of consumables in some of our markets and a slight strengthening of the U.S. Dollar and the NIS against the Euro in 2009 as compared to 2008.

Sales and marketing expenses increased by €2.5 million, or 7.8%, to €34.7 million in 2009 from €32.2 million in 2008. As a percentage of revenues, sales and marketing expenses increased to 33.0% in 2009 from 32.2% in 2008. These changes were attributable primarily to increased advertising and promotional expenses, primarily in the United States as part of our ongoing initiative to increase our active user installed base in that market, and to an increase in wages and salaries necessary to support our future expansion plans.

General and administrative expenses increased by €459,000, or 3.6%, to €13.1 million in 2009 from €12.7 million in 2008. As a percentage of revenues, general and administrative expenses decreased to 12.5% in 2009 from 12.7% in 2008. Recurring administrative expenses were reduced during 2009 as a result of a continued reduction in most ongoing expense components, although immediate savings were largely offset by higher business realignment and termination expenses recorded in the year.

Other income increased by €76,000 to €95,000 in 2009 from €19,000 in 2008, due primarily to an increase in rental income from a rental property currently owned by us and leased to a third party.

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Total financial expenses, net decreased by €2.6 million to €1.8 million in 2009 as compared to €4.4 million in 2008, primarily due to the impact of foreign exchange rates in 2008 on assets and liabilities denominated in currencies other than the Euro and in particular on a financial liability denominated in U.S. Dollars.

Income tax expense decreased by €3.2 million to €1.8 million in 2009 as compared to €5.0 million in 2008, of which €3.4 million was attributable to an exceptional tax provision relating to a prior years’ dispute with the tax authorities in Germany. Our effective tax rate for 2009, excluding this provision, was 20.1%, compared to 28.5% for 2008. The decrease in our effective tax rate was primarily attributable to the utilization of tax losses in some of our taxable units combined with favorable tax rates in comparison with the primary tax rate in Israel resulting from our approved enterprise benefits in Israel and lower tax rates in other countries.

Seasonality

Historically, we have recognized a somewhat larger share of our revenues in the second quarter of the year, driven by increased sales volume in preparation for the warm summer months. The fourth quarter is also generally stronger than the first and third quarters as a result of increased sales associated with holiday shopping. In 2009 and 2010, this seasonality was not reflected in our quarterly sales as sales in the third quarter were higher than in the second quarter, which was as a result of continued growth of our installed base in our new and fast growing markets. We believe that we may see the same trend in several of the next few years, as we continue to experience rapid growth of our installed base in both new and existing markets.

Our revenues may also be impacted by the effect of the weather. Specifically, in periods when the weather is warmer than usual our revenues would likely increase, and in periods when the weather is colder than usual our revenues would likely decline.

In the short term, due to our expansion in certain key markets, our revenues may increase in each quarter of a given year, as they did in 2009 and 2010, thereby masking the seasonality fluctuations described above.

Our operating expenses and, therefore, our overall margins are also seasonally impacted. Specifically, we typically increase our advertising and promotional expenditures in the second quarter and, to a lesser extent, in the fourth quarter relating to the holiday season. Consequently, our overall operating income typically is significantly lower in the second quarter.

Quarterly financial information

The following table sets forth certain unaudited consolidated quarterly statement of operations data for each of the eight quarters ended December 31, 2010. This unaudited information has been prepared on a basis consistent with our annual financial statements. This information should be read in conjunction with our audited consolidated financial statements and related notes, appearing elsewhere in this prospectus. The results of operations for any quarter are not necessarily indicative of results that we may achieve for any subsequent periods.

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(in thousands)   March 31,
2009
  June 30,
2009
  Sept. 30,
2009
  Dec. 31,
2009
  March 31,
2010
  June 30,
2010
  Sept. 30,
2010
  Dec. 31,
2010
     (unaudited)
Consolidated statements of operations data:
                                                                       
Revenues   21,484     24,325     27,676     31,538     30,159     38,517     41,974     50,002  
Cost of revenues     9,575       10,883       11,920       14,215       13,894       18,992       18,341       22,832  
Gross profit     11,909       13,442       15,756       17,323       16,265       19,525       23,633       27,170  
Operating expenses:
                                                                       
Sales and marketing     7,694       8,803       8,918       9,277       9,793       14,150       14,176       18,938  
General and administrative     2,938       3,795       3,278       3,123       3,880       3,924       6,084       4,648  
Other expense (income), net     (4 )      (54 )      (66 )      29       (23 )      (38 )      (31 )      (106 ) 
Total operating expenses     10,628       12,544       12,130       12,429       13,650       18,036       20,229       23,480  
Operating income     1,281       898       3,626       4,894       2,615       1,489       3,404       3,690  
Financial expenses (income), net     373       520       678       203       290       (960 )      904       (533 ) 
Income before income tax     908       378       2,948       4,691       2,325       2,449       2,500       4,223  
Income tax     537       277       495       484       284       318       427       740  
Net income for the period   371     101     2,453     4,207     2,041     2,131     2,073     3,483  

               
  March 31,
2009
  June 30,
2009
  Sept. 30,
2009
  Dec. 31,
2009
  March 31,
2010
  June 30,
2010
  Sept. 30,
2010
  Dec. 31,
2010
As a percentage of revenues:
                                                                       
Revenues     100.0 %      100.0 %      100.0 %      100.0 %      100.0 %      100.0 %      100.0 %      100.0 % 
Gross profit     55.4       55.3       56.9       54.9       53.9       50.7       56.3       54.3  
Operating expenses:
                                                                       
Sales and marketing     35.8       36.2       32.2       29.4       32.5       36.7       33.8       37.9  
General and administrative     13.7       15.6       11.8       9.9       12.9       10.2       14.5       9.3  
Other expense (income), net     (0.0 )      (0.2 )      (0.2 )      0.1       (0.1 )      (0.1 )      (0.1 )      (0.2 ) 
Total operating expenses     49.5       51.6       43.8       39.4       45.3       46.8       48.2       47.0  
Net income for the period     1.7 %      0.4 %      8.9 %      13.3 %      6.8 %      5.5 %      4.9 %      7.0 % 
As a percentage of full year results:
                                                                       
Revenues     20.4 %      23.2 %      26.4 %      30.0 %      18.8 %      24.0 %      26.1 %      31.1 % 
Gross profit     20.4       23.0       27.0       29.6       18.8