---

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

### FORM 10-Q

(Mark one)

| | X   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| | -------------------------------------------------------------------------------------------

#### For the quarterly period ended March 31, 2001

OR

| | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| | ----------------------------------------------------------------------------------------

#### Commission File Number: 0-31151

RADVIEW SOFTWARE LTD.
                              (Exact name of registrant as specified in its charter)

|Israel                          | Not applicable     
|------------------------------- | -------------------
|(State or other jurisdiction of | (I.R.S. Employer   
|incorporation or organization)  | Identification No.)

7 New England Executive Park
Burlington, MA 01803
(Address of principal executive offices)

Telephone Number (781) 238-1111
(Registrant's telephone number, including area code)

None
(Former name, former address and former fiscal year, if changed since last report)

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

As of April 30, 2001, there were
16,366,572 shares of the Registrants Ordinary Shares outstanding.

1

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RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
Form 10-Q INDEX

|        |                                                                      |         
|------- | -------------------------------------------------------------------- | --------
|        | PART I. FINANCIAL INFORMATION                                        |         
|        |                                                                      | Page No.
|Item 1. | Condensed Consolidated Financial Statements:                        
|        | Condensed Consolidated Balance Sheets as of March 31, 2001 and      
|        | December 31, 2000                                                    | 3       
|        | Condensed Consolidated Statements of Operations for the three months
|        | ended March 31, 2001 and 2000                                        | 4       
|        | Condensed Consolidated Statements of Cash Flows for the three months
|        | ended March 31, 2001 and 2000                                        | 5       
|        | Notes to Condensed Consolidated Financial Statements                 | 6-9     
|Item 2. | Managements Discussion and Analysis of Financial Condition and     
|        | Results of Operations                                                | 10-12   
|Item 3. | Quantitative and Qualitative Disclosures About Market Risk           | 13      
|        | PART II. OTHER INFORMATION                                          
|Item 2. | Changes in Securities and Use of Proceeds                            | 13      
|Item 6. | Exhibits and Reports on Form 8-K                                     | 13      
|        | Signatures                                                           | 14      

2

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PART I  FINANCIAL INFORMATION

RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

`March 31,   December 31,
                                                                    2001        2000
                                                                -----------  -----------
ASSETS

Current Assets:
    Cash and cash equivalents                                     $ 24,526     $ 33,469
    Accounts receivable, net                                         1,777        2,473
    Prepaid expenses                                                   801          728
                                                                -----------  -----------
        Total current assets                                        27,104       36,670

Property and Equipment, net                                          2,455        2,503
Deposits and Other Assets                                              591          540
                                                                -----------  -----------
        Total assets                                              $ 30,150     $ 39,713
                                                                ===========  ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
    Current maturities of long-term loans                         $      -     $  3,814
    Accounts payable                                                 1,150        2,004
    Accrued expenses                                                 2,967        2,802
    Deferred revenue                                                 1,523        1,459
                                                                -----------  -----------
        Total current liabilities                                    5,640       10,079
                                                                -----------  -----------
Long-term Liabilities:
    Accrued severance                                                  661          630
                                                                -----------  -----------
        Total liabilities                                            6,301       10,709
                                                                -----------  -----------

Shareholders' Equity:
    Ordinary shares, NIS 0.01 par value --
        Authorized -- 25,000,000 shares;
        Issued and outstanding -- 16,366,572 shares at March 31,
        2001 and December 31, 2000                                      42           42
    Additional paid-in capital                                      57,893       58,688
    Deferred compensation                                           (4,630)      (5,723)
    Accumulated deficit                                            (29,456)     (24,003)
                                                                -----------  -----------
        Total shareholders' equity                                  23,849       29,004
                                                                -----------  -----------
        Total liabilities and shareholders' equity                $ 30,150     $ 39,713
                                                                ===========  ===========`

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

3

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RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

`Three months ended
                                                               March 31,
                                                          2001        2000
                                                        ---------- -----------
Revenues:
    Software licenses                                    $  1,566    $  1,932
    Service                                                   737         334
                                                        ---------- -----------
      Total revenues                                        2,303       2,266
                                                        ---------- -----------
Cost of Revenues:
    Software licenses                                          87         153
    Service                                                   325          52
                                                        ---------- -----------
      Total cost of revenues                                  412         205
                                                        ---------- -----------
      Gross profit                                          1,891       2,061
                                                        ---------- -----------

Operating Expenses:
    Sales and marketing (1)                                 4,334       1,427
    Research and development (1)                            1,842         777
    General and administrative (1)                            931         668
    Stock-based compensation (1)                              298         181
    Nonrecurring charges (Note 4)                             237           -
                                                        ---------- -----------
      Total operating expenses                              7,642       3,053
                                                        ---------- -----------
      Operating loss                                       (5,751)       (992)
                                                        ---------- -----------
Interest income (expense)                                     277         (41)
Other income (expense)                                         21         (17)
                                                        ---------- -----------
      Net loss attributable to ordinary shareholders     $ (5,453)   $ (1,050)
                                                        ========== ===========
Net Loss Per Share Attributable to
    Ordinary Shares (Note 3(a)):
      Basic and diluted net loss per share               $  (0.33)   $  (0.25)
                                                        ========== ===========
      Basic and diluted weighted average shares
        outstanding                                        16,367       4,194
                                                        ========== ===========
Pro Forma Net Loss Per Share Attributable
    to Ordinary Shares (Note 3 (b)):
      Basic and diluted net loss per share               $  (0.33)   $  (0.09)
                                                        ========== ===========
      Weighted average shares outstanding -
        basic and diluted                                  16,367      11,887
                                                        ========== ===========
------------------------------------
(1)   The following summarizes the departmental allocation of
        the stock-based compensation charge:

      Sales and marketing                                $    158     $    58
      Research and development                                 86          30
      General and administrative                               54          93
                                                        ---------- -----------
        Total stock-based compensation                   $    298    $    181
                                                        ========== ===========`

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

4

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RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

`Three months ended
                                                                                 March 31,
                                                                          2001            2000
                                                                      -------------   --------------
Cash Flows from Operating Activities:
     Net loss                                                           $   (5,453)      $   (1,050)
     Adjustments to reconcile net loss to net cash used
       in operating activities --
           Depreciation and amortization                                       261              134
           Amortization of deferred compensation                               298              181
           Interest accrued on long-term loans                                   -               67
           Accrued severance pay                                                31                4
           Changes in operating assets and liabilities--
               Accounts receivable                                             696              188
               Prepaid expenses                                                (73)             (77)
               Accounts payable                                               (854)            (206)
               Accrued expenses                                                165               76
               Deferred revenue                                                 64              264
                                                                      -------------   --------------
                  Net cash used in operating activities                     (4,865)            (419)
                                                                      -------------   --------------
Cash Flows from Investing Activities:
     Purchases of short-term investments                                         -           (2,013)
     Purchases of property and equipment                                      (213)            (614)
     Increase in other assets                                                  (51)             (38)
                                                                      -------------   --------------
                  Net cash used in investing activities                       (264)          (2,665)
                                                                      -------------   --------------
Cash Flows from Financing Activities:
     Repayment of long-term loans                                           (3,814)            (118)
     Other                                                                       -               25
                                                                      -------------   --------------
                  Net cash used in financing activities                     (3,814)             (93)
                                                                      -------------   --------------
Decrease in Cash and Cash Equivalents                                       (8,943)          (3,177)

Cash and Cash Equivalents, Beginning of Period                              33,469            7,652
                                                                      -------------   --------------
Cash and Cash Equivalents, End of Period                                $   24,526       $    4,475
                                                                      =============   ==============

Cash Paid During the Period for Interest                                $       53       $        -
                                                                      =============   ==============`

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

5

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RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Operations

RadView Software Ltd. (the
Company) is an Israeli corporation. The Company develops, markets and supports
software that enables organizations to verify the scalability, efficiency and
reliability of Web applications, and facilitates their rapid development.

2. Significant Accounting Policies

The Companys consolidated
financial statements are prepared in accordance with accounting principles
generally accepted in the United States. The significant policies followed in
the preparation of the consolidated financial statements, applied on a
consistent basis, are as follows:

(a) Financial Statements in U.S. Dollars

The consolidated financial statements of the Company have been prepared in U.S. dollars because the currency
of the primary economic environment in which the operations of the Company are conducted is the U.S. dollar.
Substantially all of the Company's sales are in U.S. dollars. Most purchases of materials, components and most
marketing costs are denominated in U.S. dollars. Therefore, the functional currency of the Company is the U.S.
dollar.

Transactions and balances denominated in
U.S. dollars are presented at their original amounts. Transactions and balances in other
currencies are translated into U.S. dollars in accordance with the principles set forth
in Financial Accounting Standards Board of the United States (FASB) Statement of
Accounting Standards (SFAS) No. 52, Foreign Currency Translation.Accordingly,
items have been translated as follows:

- Monetary Items  At the exchange rate in effect on the
balance sheet date.
- Nonmonetary Items  At historical exchange rates.
- Revenue and Expense Items  At the exchange rates in effect as of the date
of recognition of those items (excluding depreciation and other items deriving from nonmonetary items).

All exchange gains and losses from
the above-mentioned translation (which were immaterial for all periods
presented) are reflected in the statements of operations. The representative
rates of exchange as of March 31, 2001 and March 31, 2000 were U.S.$1.00 to
4.205 and 4.038 New Israeli Shekel (NIS), respectively.

(b) Interim Financial Statements

The accompanying consolidated
balance sheet as of March 31, 2001 and the consolidated statements of operations
and consolidated statements of cash flows for the three months ended March 31,
2001 and 2000, are unaudited but, in the opinion of management, include all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of results for these interim periods. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted,
although the Company believes that the disclosures included are adequate to make
the information presented not misleading. The results of operations for the
three months ended March 31, 2001 are not necessarily indicative of the results
to be expected for the entire fiscal year. These financial statements should be
read in conjunction with the consolidated financial statements and related notes
included in the Companys Form 10-K filed with the SEC on March 29, 2001.

(c) Principles of Consolidation

The consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. All material intercompany balances and transactions have been
eliminated in consolidation.

6

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(d) Revenue Recognition

The Company recognizes revenue in
accordance with Statement of Position (SOP) 97-2, Software Revenue
Recognition, and SOP 98-9, Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions. SOP 98-9 requires
use of the residual method for recognition of revenues when vendor-specific
objective evidence exists for undelivered elements but does not exist for
delivered elements of a software arrangement. If fair value for a delivered
element does not exist but the fair value does exist for all undelivered
elements, the Company defers the fair value of the undelivered elements and
recognizes the remaining value for the delivered elements.

Revenues from software product
licenses are recognized upon delivery of the software provided there is
persuasive evidence of an arrangement, the fee is fixed or determinable and
collection of the related receivable is probable. Revenues under multiple
element arrangements, which may include software, software maintenance and
training, are allocated to each element based on their respective fair values,
based on vendor-specific objective evidence. This objective evidence represents
the price of products and services when sold separately. Revenue is recognized
for software licenses sold to resellers or distributors at the time of shipment,
provided that all revenue recognition criteria set forth in SOP 97-2 are
fulfilled.

Revenues from software maintenance
agreements are recognized ratably over the term of the maintenance period, which
is typically one year. Revenues from training arrangements are recognized as the
services are performed.

Amounts collected or billed prior
to satisfying the above revenue recognition criteria are reflected as deferred
revenue. Deferred revenue primarily represents deferred maintenance revenue.

(e) Cash Equivalents

Cash equivalents are highly liquid
investments with original maturities of less than 90 days. The Company accounts
for investments under SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities. Under SFAS No. 115, investments for which the
Company has the positive intent and ability to hold to maturity, consisting of
cash equivalents, are reported at amortized cost, which approximates fair market
value.

3. Earnings Per Share

(a) Net Loss Per Share

Basic and diluted net loss per
share is presented in conformity with SFAS No. 128, Earnings Per Share,
for all periods presented. Basic and diluted net loss per ordinary share was
determined by dividing net loss attributable to ordinary shareholders by the
weighted average ordinary shares outstanding during the period. Diluted net loss
per ordinary share is the same as basic net loss per ordinary share for all
periods presented, as the effects of the Companys potential additional
ordinary shares were antidilutive.

The following table summarizes the
securities outstanding as of each period end that were not included in the
calculation of diluted net loss per share as their inclusion would be
antidilutive.

|                                          | As of March 31, |      
|----------------------------------------- | --------------- | -----
|
|                                          | (in thousands) 
|Stock options to purchase ordinary shares | 3,575           | 4,894
|Warrants to purchase ordinary shares      |                | 143  
|Convertible preferred stock               |                | 5,242

In accordance with the Securities
and Exchange Commission Staff Accounting Bulletin No. 98, Earnings Per Share
in an Initial Public Offering, the Company determined that there were no
nominal issuances of the Companys ordinary shares prior to the
Companys initial public offering, completed in August 2000.

7

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(b) Pro Forma Net Loss Per Share

Pro forma net loss per share has
been computed as described above and also gives effect to preferred shares that
were converted upon the completion of the Companys initial public offering
in August 2000, using the if-converted method, from the original date of
issuance.

The following table reflects the
reconciliation of the shares used in the computation of pro forma net loss per
share.

|                                                                 | Three monthsended March 31,
|---------------------------------------------------------------- | ---------------------------
|
|                                                                 | (In thousands)             
|Pro forma basic and diluted:                                     |                            
|Weighted average ordinary shares outstanding used in computing  
|net loss per share                                               | 16,367                     
|Weighted average ordinary shares issuable upon the conversion of
|preferred stock                                                  |                           
|Weighted average ordinary shares issuable upon the exercise of  
|outstanding warrant                                              |                           
|Weighted average ordinary shares issuable upon exercise of      
|outstanding options held by certain shareholders                 |                           
|Weighted average ordinary shares to be issued to certain Series 
|A preferred shareholders                                         |                           
|                                                                 |                            
|Weighted average ordinary shares outstanding used in computing  
|pro forma basic and diluted net loss per share                   | 16,367                     
|                                                                 |                            

4. Nonrecurring Charge

Nonrecurring charges includes a
$237,000 payment to a landlord incurred upon the termination of a facility lease
agreement in March 2001.

5. Shareholders Equity

During the quarter ended March 31,
2001, the Company granted options to purchase an aggregate of 717,000 ordinary
shares to employees and affiliates at exercise prices equal to the then current
fair market value on the date of grant.

6. Comprehensive Income (Loss)

SFAS No. 130, Reporting
Comprehensive Income, requires disclosure of all components of comprehensive
income (loss) on an annual and interim basis. Comprehensive income (loss) is
defined as the change in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner sources. The
Companys comprehensive loss is equal to its net loss for all periods
presented.

7. Disclosures About Segments of an Enterprise

The Company has adopted SFAS No.
131, Disclosures about Segments of an Enterprise and Related Information.SFAS No. 131 establishes standards for reporting information regarding
operating segments in annual financial statements and requires selected
information for those segments to be presented in interim financial reports
issued to shareholders. SFAS No. 131 also establishes standards for related
disclosures about products and services and geographic areas. Operating segments
are identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision-making group, in making decisions how to allocate
resources and assess performance.

8

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The Companys chief operating
decision makers, as defined under SFAS No. 131, are the Chief Executive Officer
and the Chief Financial Officer. To date, the Company has viewed its operations
and has managed its business as principally one operating segment.

The Companys revenues by
geographic area are as follows:

|               | Three monthsended March 31,
|-------------- | ---------------------------
|
|               | (In thousands)             
|United States  | $       1,673              
|Europe         | 295                        
|Israel         | 147                        
|Other          | 188                        
|               |                            
|Total revenues | $       2,303              
|               |                            

8. Recent Accounting Pronouncements

In June 1998, the Financial
Accounting Standards Board issued Statements of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, which establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. To date, the Company has
not engaged in derivative and hedging activities, and accordingly the adoption
of the SFAS No. 133 did not have a material impact on its financial reporting
and related disclosures.

9

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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements in this Quarterly
Report on Form 10-Q concerning RadViews business outlook or future
performance; anticipated revenues, expenses or other financial items; product
introductions and plans and objectives related thereto; and statements
concerning assumptions made or expectations as to any future events, conditions,
performance or other matters, are forward-looking statements as that
term is defined under U. S. federal securities laws. Forward-looking statements
are subject to various risks, uncertainties and other factors that could cause
actual results to differ materially from those stated in such statements. These
risks, uncertainties and factors include, but are not limited to: our limited
operating history and history of losses; market acceptance of our products; our
ability to develop new products and enhance existing products; impact of
significant competition; and other factors detailed in RadViews filings
with the Securities and Exchange Commission, including this Quarterly Report on
Form 10-Q.

Results of Operations

The following table sets forth, as
a percentage of total revenues, consolidated statement of operations data for
the periods indicated:

`Three months ended
                                                          March 31,
                                                   2001            2000
                                             --------------  --------------
Revenues:
    Software licenses                                  68.0%           85.3%
    Services                                           32.0%           14.7%
                                               --------------  --------------
      Total revenues                                  100.0%          100.0%
                                               --------------  --------------
Cost of Revenues:
    Software licenses                                   3.8%            6.7%
    Services                                           14.1%            2.3%
                                               --------------  --------------
      Total cost of revenues                           17.9%            9.0%
                                               --------------  --------------
      Gross profit                                     82.1%           91.0%
                                               --------------  --------------
Operating Expenses:
    Sales and marketing                               188.2%           63.0%
    Research and development                           80.0%           34.3%
    General and administrative                         40.4%           29.5%
    Stock-based compensation                           12.9%            8.0%
    Nonrecurring charges                               10.3%            0.0%
                                               --------------  --------------
                                                      331.8%          134.8%
                                               --------------  --------------
      Operating loss                                 (249.7%)         (43.8%)
                                               --------------  --------------
Interest income (expense), net                         12.0%           (1.8%)
Other income (expense)                                  0.9%           (0.7%)
                                               --------------  --------------
      Net loss                                       (236.8%)         (46.3%)
                                               ==============  ==============`

Three Months Ended March 31, 2001 and 2000

Revenues

Total Revenues. Total revenues were
approximately $2.3 million for the three months ended March 31, 2000 and 2001.

10

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Software Licenses. Software
license revenues decreased 18.9%, from $1.9 million for the three months ended
March 31, 2000 to $1.6 million for the same period in 2001. Software license
revenues decreased due to lower revenues from the Webload Resource Manager
product, which represented 44.0% of software license revenues for the three
months ended March 31, 2000 to 28.5% for the same period in 2001.

Services. Services revenues
increased 120.7%, from $334,000 for the three months ended March 31, 2000 to
$737,000 for the same period in 2001. The increase was due to higher maintenance
and training revenues resulting from an increase in the Companys installed
customer base.

Cost of Revenues

Software Licenses. Cost of
software licenses consists principally of direct product costs, such as product
media and packaging, as well as royalties due to third parties. Cost of software
licenses decreased from $153,000, or 7.9% of software license revenue, for the
three months ended March 31, 2000 to $87,000, or 5.6% of software license
revenue, for the same period in 2001. This decrease was due to lower royalty
costs for third-party software in 2001.

Services. Cost of services
consists principally of personnel-related costs associated with customer support
and training. Cost of services increased from $52,000, or 15.6% of service
revenue, for the three months ended March 31, 2000 to $325,000, or 44.2% of
service revenue, for the same period in 2001. This increase was due to increased
personnel costs to provide support and maintenance services.

Operating Expenses

Sales and Marketing. Sales
and marketing expenses consist principally of salaries and commissions earned by
sales personnel, recruiting costs, trade show costs, travel and other marketing
communication costs such as advertising and product promotion. Sales and
marketing expenses increased from $1.4 million, or 63.0% of total revenues, for
the three months ended March 31, 2000 to $4.3 million, or 188.2% of total
revenues, for the same period in 2001. The increase was due to the expansion of
the Companys sales department from 15 to 46 employees and an incremental
$1.7 million spent on marketing programs, such as advertising, trade shows and
lead-generation activities.

Research and Development.
Research and development expenses consist principally of salaries and related
expenses required to develop and enhance the Companys products. Research
and development expenses increased from $777,000, or 34.3% of total revenues,
for the three months ended March 31, 2000, to $1.8 million, or 80.0% of total
revenues, for the same period in 2001. The increase was due to an increase in
the number of research and development personnel from 32 to 52 employees and
related costs.

General and Administrative.
General and administrative expenses consist principally of finance, executive
and administrative salaries and related expenses and costs. General and
administrative expenses increased from $668,000, or 29.5% of total revenues, for
the three months ended March 31, 2000 to $931,000, or 40.4% of total revenues,
for the same period in 2001. The increase was due to an increase in the number
of finance and administrative personnel to accommodate the Companys
growing U.S. operations and increased costs associated with being a
publicly-held company.

Stock-based Compensation.
Stock-based compensation expenses increased from $181,000 or 8.0% of total
revenues, for the three months ended March 31, 2000, to $298,000 or 12.9% of
total revenues, for the same period 2001. The increase was due to the timing of
recording stock-based compensation.

Nonrecurring Charges. Nonrecurring charges
consist of a $237,000 payment to a landlord incurred upon the termination of a facility
lease agreement in March 2001.

Interest Income (Expense),
Net. Interest income (expense), net consists principally of interest expense
incurred in connection with long-term debt, offset by interest earned on cash
investments. There was interest expense of $41,000 for the three months ended
March 31, 2000 compared to interest income of $276,000 for the same period in
2001. The interest income resulted from investment of the net proceeds of the
Companys initial public offering in August 2000 and the decrease in
interest expense resulted from the repayment of all long-term debt during the
first quarter of 2001.

11

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Other Income (Expense),
Net. Other income (expense), net consists principally of currency
translation gains and losses. There was other expense of $17,000 for the three
months ended March 31, 2000 compared to other income of $21,000 for the same
period in 2001. This change was due to exchange rate fluctuations.

Income Taxes. The Company
has estimated net operating loss carryforwards for Israeli tax purposes totaling
approximately $10 million through March 31, 2001 that would reduce future
Israeli income taxes, if any. These net operating losses may be carried forward
indefinitely and offset against future taxable income. The Company expects that
during the period in which these tax losses are utilized its income would be
substantially tax exempt. Therefore, the income tax rate of the Company during
the tax-exempt period will be zero. There will be no tax benefit available from
these losses and no deferred income taxes have been included in the
Companys financial statements.

The Companys U.S. subsidiary has net
operating loss carryforwards for U.S. Federal and state tax purposes totaling
approximately $5 million through March 31, 2001. These losses are available to offset any
future U.S. taxable income of the U.S. subsidiary and will expire between 2012 and 2021.
The Company has recorded a full valuation allowance against its deferred tax asset due to
the uncertainty surrounding the ability and the timing of the realization of these tax
benefits.

Liquidity and Capital Resources

As of March 31, 2001, cash and
cash equivalents totaled $24.5 million compared to $33.5 million as of December
31, 2000.

Cash used in operating activities
was $4.9 million for the three months ended March 31, 2001 and $419,000 for the
same period in 2000. Cash used for the first three months of 2001 was due to the
net loss of $5.5 million and a $854,000 decrease in accounts payable, offset in
part by depreciation, other noncash charges, a $696,000 decrease in accounts
receivable, a $165,000 increase in accrued expenses and a $64,000 increase in
deferred revenue. Cash used for the first three months of 2000 was due to a net
loss of $1.0 million and a $206,000 decrease in accounts payable, offset in part
by depreciation, other noncash charges, a $188,000 increase in accounts
receivable and a $264,000 increase in deferred revenue.

Cash used in investing activities
was $264,000 for the three months ended March 31, 2001 and $2.7 million for the
same period in 2000. Cash used in investing activities for the first three
months of 2001 was primarily for purchases of property and equipment. Cash used
in investing activities for the first three months of 2000 was primarily to
purchase $2.0 million of short-term investments and $614,000 of property and
equipment.

Cash used in financing activities
was $3.8 million for the three months ended March 31, 2001 and $93,000 for the
same period in 2000. Cash used in financing activities for the first three
months of 2001 consisted primarily of $3.8 million for the repayment of all
outstanding long-term debt. Cash used in financing activities for the first
three months of 2000 consisted principally of $118,000 for the repayment of
principal on related party loans.

The Company expects to continue
investing in its operating expenses at the current levels, particularly sales
and marketing and research and development expenses, for the foreseeable future
as it executes its business plan. As a result, these operating expenses, as well
as planned capital expenditures, are expected to constitute a material use of
the Companys cash resources. In addition, the Company may utilize its cash
resources to fund acquisitions or investments in complementary businesses,
technologies or product lines.

The Company believes that its
existing cash and cash equivalents will be sufficient to meet its anticipated
needs for working capital and capital expenditures for at least the next 12
months. The Company may find it necessary to obtain additional equity or debt
financing. In the event additional financing is required, the Company may not be
able to complete financing on acceptable terms or at all.

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ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not use
derivative financial instruments in its investing portfolio. The Company places
its investments in instruments that meet high credit quality standards such as
money market funds, government securities, and commercial paper. The Company
limits the amount of credit exposure to any one issuer. The Company does not
expect any material loss with respect to its investment portfolio.

The Company conducts business in
various foreign currencies, primarily in Europe and the Middle East. As a
result, the Company is exposed to the effect of foreign currency exchange rate
fluctuations on the U.S. dollar value of foreign currency-denominated revenues
and expenses. The Company does not use foreign exchange forward contracts to
hedge its foreign currency denominated receivables. Looking forward, there can
be no assurance that changes in foreign currency rates, relative to the U.S.
dollar, will not materially adversely affect the consolidated results of the
Company.

PART II  OTHER INFORMATION

Item 2. Changes in Securities

(d) Use of Proceeds from Sale of Registered Securities

On August 9, 2000, in connection
with the Companys initial public offering, the Securities and Exchange
Commission declared effective a Registration Statement on Form F-1
(No.333-41526) that registered 5,750,000 ordinary shares. The managing
underwriters in the offering were Donaldson Lufkin Jenrette, Wit SoundView,
Piper Jaffrey, and DLJdirect.

On August 15, 2000, the Company
sold 4,000,000 of such ordinary shares at an initial public offering price of
$10.00 per share, generating gross offering proceeds of $40 million. After
deducting $2.8 million in underwriting discounts and approximately $1.9 million
in other related expenses, the net proceeds to the Company were approximately
$35.3 million.

Through March 31, 2001, the
Company has used $10.8 million of the net proceeds from the initial public
offering as follows:

- $1.2 million for capital expenditures;
- $1.4 million for
repayment of principal and accrued interest on a loan with Rad Data
Communications, Inc., a related party;
- $3.8 million for repayment of principal and accrued interest
on long-term debt with a bank; and
- $4.4 million for working capital.

Item 6. Exhibits and Reports of Form 8-K

(a) Exhibit Index

10.1 Employment Agreement dated February 6,
2001 with Ilan Kinreich, President and Chief Executive Officer

(b) Reports on Form 8-K:

No reports on Form 8-K were filed in
the three-month period ended March 31, 2001.

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SIGNATURES

Pursuant to the requirements of
the Securities and Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.

RADVIEW SOFTWARE LTD. (Registrant)

Brian E.LeClairVice President and Chief Financial Officer

Dated: May 14, 2001

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