** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM10-Q**

 

**(Markone)**

 

| **ý****  Quarterly report pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934** |
|---------------------------------------------------------------------------------------------------------------|
|                                                                                                          |
| **For the quarterly period ended  September 30, 2003**                                                        |
|                                                                                                          |
| **OR**                                                                                                        |
|                                                                                                          |
| **o****  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  incorporation or organization)                    |   | (I.R.S. Employer  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) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports) Yes  ý  No  o,and (2) has been subject to such filing requirements for the past 90 days:  Yes  ý  No  o.

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 126-2 of theExchange Act):  Yes  o  No. ý.

 

As of October 31, 2003, there were 16,879,271 sharesof the Registrant’s Ordinary Shares outstanding, excluding 134,000 OrdinaryShares held by the registrant as treasury shares that are “dormant” shares forpurposes of Israeli law.

 

 

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**RADVIEW SOFTWARE LTD. AND SUBSIDIARIES**

Form 10-Q INDEX

** **
| **PART I. FINANCIAL  INFORMATION** |
|------------------------------------|
|                               |   |
| Item 1.                            | Condensed Consolidated  Financial Statements: |
|                               |   |
|                               | Condensed  Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002 |
|                               |   |
|                               | Condensed  Consolidated Statements of Operations for the three and nine months ended  September 30, 2003 and 2002 |
|                               |   |
|                               | Condensed  Consolidated Statements of Cash Flows for the nine months ended September 30,  2003 and 2002 |
|                               |   |
|                               | Notes  to Condensed Consolidated Financial Statements |
|                               |   |
| Item  2.                           | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |
|                               |   |
| Item  3.                           | Quantitative  and Qualitative Disclosures About Market Risk |
|                               |   |
| Item 4.                            | Controls and  Procedures |
|                               |   |
| **PART II. OTHER INFORMATION**     |
|                               |
| Item 2.                            | Changes in Securities  and Use of Proceeds |
|                               |   |
| Item 6.                            | Exhibits and  Reports on Form 8-K |
|                               |   |
|                               | Signatures |

 

2

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**PARTI - FINANCIAL INFORMATION**

** **

**RADVIEWSOFTWARE LTD. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(Inthousands, except share data)**

**(Unaudited)**

 
|                                                                                                                                                                                                                                                                                         |   | **September  30, 2003** |       | **December 31,  2002** |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|------------------------|------------|
| **ASSETS**                                                                                                                                                                                                                                                                                   |   |                    |       |                   |       |
| Current Assets:                                                                                                                                                                                                                                                                              |   |                    |       |                   |       |
| Cash and cash equivalents                                                                                                                                                                                                                                                                    |   | $                       | 4,144      |                   | $          | 7,566 |   |
| Accounts receivable, net of reserves of $81 at  September 30, 2003 and $171 at December 31, 2002                                                                                                                                                                                             |   | 626                     |       | 1,026                  |       |
| Prepaid expenses and other current assets                                                                                                                                                                                                                                                    |   | 297                     |       | 506                    |       |
| Total Current Assets                                                                                                                                                                                                                                                                         |   | 5,067                   |       | 9,098                  |       |
|                                                                                                                                                                                                                                                                                         |   |                    |       |                   |       |
| Property and Equipment, net                                                                                                                                                                                                                                                                  |   | 433                     |       | 826                    |       |
| Other Assets                                                                                                                                                                                                                                                                                 |   | 637                     |       | 683                    |       |
|                                                                                                                                                                                                                                                                                         |   |                    |       |                   |       |
| Total Assets                                                                                                                                                                                                                                                                                 |   | $                       | 6,137      |                   | $          | 10,607 |   |
|                                                                                                                                                                                                                                                                                         |   |                    |       |                   |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                                                                                               |   |                    | ** ** |                   | ** ** |
| Current Liabilities:                                                                                                                                                                                                                                                                         |   |                    |       |                   |       |
| Accounts payable                                                                                                                                                                                                                                                                             |   | $                       | 455        |                   | $          | 358 |   |
| Accrued expenses                                                                                                                                                                                                                                                                             |   | 887                     |       | 1,503                  |       |
| Accrued restructuring charge, current portion                                                                                                                                                                                                                                                |   | 336                     |       | 271                    |       |
| Deferred revenue                                                                                                                                                                                                                                                                             |   | 1,112                   |       | 1,051                  |       |
| Total Current Liabilities                                                                                                                                                                                                                                                                    |   | 2,790                   |       | 3,183                  |       |
|                                                                                                                                                                                                                                                                                         |   |                    |       |                   |       |
| Long-term Liabilities:                                                                                                                                                                                                                                                                       |   |                    |       |                   |       |
| Accrued restructuring charge, less current portion                                                                                                                                                                                                                                           |   | 105                     |       | 341                    |       |
| Accrued severance pay                                                                                                                                                                                                                                                                        |   | 588                     |       | 772                    |       |
| Total Long-Term Liabilities                                                                                                                                                                                                                                                                  |   | 693                     |       | 1,113                  |       |
|                                                                                                                                                                                                                                                                                         |   |                    |       |                   |       |
| Total Liabilities                                                                                                                                                                                                                                                                            |   | 3,483                   |       | 4,296                  |       |
|                                                                                                                                                                                                                                                                                         |   |                    |       |                   |       |
| Shareholders’ Equity:                                                                                                                                                                                                                                                                   |   |                    |       |                   |       |
| Ordinary shares, NIS 0.01 par value –  Authorized – 40,000,000 shares;  Issued – 16,790,961 shares at September 30, 2003 and 16,605,177 shares at  December 31, 2002;  Outstanding – 16,656,961 shares at September 30, 2003 and 16,471,177 shares  at December 31, 2002 |   | 42                      |       | 42                     |       |
| Treasury shares, at cost – 134,000 shares                                                                                                                                                                                                                                               |   | (100                    | )          | (100                   | )          |
| Additional paid-in capital                                                                                                                                                                                                                                                                   |   | 54,873                  |       | 54,888                 |       |
| Deferred compensation                                                                                                                                                                                                                                                                        |   | (180                    | )          | (536                   | )          |
| Accumulated deficit                                                                                                                                                                                                                                                                          |   | (51,981                 | )          | (47,983                | )          |
| Total Shareholders’ Equity                                                                                                                                                                                                                                                              |   | 2,654                   |       | 6,311                  |       |
|                                                                                                                                                                                                                                                                                         |   |                    |       |                   |       |
| Total Liabilities and Shareholders’ Equity                                                                                                                                                                                                                                              |   | $                       | 6,137      |                   | $          | 10,607 |   |

 

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

 

3

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**RADVIEW SOFTWARE LTD. ANDSUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

**(In thousands, except per share data)**

**(Unaudited)**

 
|                                                                                                   |   | **Three Months Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|--------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
|                                                                                                   |   | **2003**                              |   | **2002**                             |   | **2003** |   | **2002** |   |
| Revenues:                                                                                              |   |                                  |   |                                 |   |   |   |   |   |
| Software licenses                                                                                      |   | $                                     | 585    |                                 | $      | 664 |   | $ | 1,874 |   | $ | 2,443 |   |
| Service                                                                                                |   | 567                                   |   | 600                                  |   | 1,709 |   | 1,813 |   |
| Total  Revenues                                                                                        |   | 1,152                                 |   | 1,264                                |   | 3,583 |   | 4,256 |   |
|                                                                                                   |   |                                  |   |                                 |   |   |   |   |   |
| Cost  of Sales:                                                                                        |   |                                  |   |                                 |   |   |   |   |   |
| Software  licenses                                                                                     |   | 63                                    |   | 14                                   |   | 98 |   | 39 |   |
| Service                                                                                                |   | 93                                    |   | 155                                  |   | 323 |   | 474 |   |
| Total  Cost of Sales                                                                                   |   | 156                                   |   | 169                                  |   | 421 |   | 513 |   |
|                                                                                                   |   |                                  |   |                                 |   |   |   |   |   |
| Gross  Profit                                                                                          |   | 996                                   |   | 1,095                                |   | 3,162 |   | 3,743 |   |
|                                                                                                   |   |                                  |   |                                 |   |   |   |   |   |
| Operating  Expenses:                                                                                   |   |                                  |   |                                 |   |   |   |   |   |
| Sales  and marketing                                                                                   |   | 940                                   |   | 1,255                                |   | 3,210 |   | 4,071 |   |
| Research  and development                                                                              |   | 627                                   |   | 767                                  |   | 2,127 |   | 2,482 |   |
| General  and administrative                                                                            |   | 414                                   |   | 552                                  |   | 1,257 |   | 1,654 |   |
| Stock-based  compensation (1)                                                                          |   | 83                                    |   | 113                                  |   | 297 |   | 392 |   |
| Restructuring  charges (Note 4)                                                                        |   | —                                |   | —                               |   | 245 |   | 465 |   |
| Total  Operating Expenses                                                                              |   | 2,064                                 |   | 2,687                                |   | 7,136 |   | 9,064 |   |
|                                                                                                   |   |                                  |   |                                 |   |   |   |   |   |
| Operating  loss                                                                                        |   | (1,068                                | )      | (1,592                               | )      | (3,974 | ) | (5,321 | ) |
|                                                                                                   |   |                                  |   |                                 |   |   |   |   |   |
| Interest income, net                                                                                   |   | 5                                     |   | 33                                   |   | 29 |   | 102 |   |
| Other  income (expense), net                                                                           |   | 1                                     |   | (17                                  | )      | (53 | ) | 61 |   |
|                                                                                                   |   |                                  |   |                                 |   |   |   |   |   |
| Net  loss                                                                                              |   | $                                     | (1,062 | )                                    | $      | (1,576 | ) | $ | (3,998 | ) | $ | (5,158 | ) |
|                                                                                                   |   |                                  |   |                                 |   |   |   |   |   |
| Net loss per share:                                                                                    |   |                                  |   |                                 |   |   |   |   |   |
| Net loss per share – basic and diluted                                                            |   | $                                     | (0.06  | )                                    | $      | (0.10 | ) | $ | (0.24 | ) | $ | (0.31 | ) |
|                                                                                                   |   |                                  |   |                                 |   |   |   |   |   |
| Weighted  average number of shares outstanding used in computing basic and diluted net  loss per share |   | 16,517                                |   | 16,461                               |   | 16,489 |   | 16,451 |   |
|                                                                                                   |   |                                  |   |                                 |   |   |   |   |   |
|                                                                                                        |   |                                  |   |                                 |   |   |   |   |   |
| (1)  The following summarizes the departmental allocation of the stock-based  compensation charge:     |   |                                  |   |                                 |   |   |   |   |   |
| Sales  and marketing                                                                                   |   | $                                     | 28     |                                 | $      | 41 |   | $ | 95 |   | $ | 129 |   |
| Research  and development                                                                              |   | 35                                    |   | 47                                   |   | 115 |   | 155 |   |
| General  and administrative                                                                            |   | 20                                    |   | 25                                   |   | 87 |   | 108 |   |
| Total  stock-based compensation                                                                        |   | $                                     | 83     |                                 | $      | 113 |   | $ | 297 |   | $ | 392 |   |

 

The accompanyingnotes are an integral part of these condensed consolidated financialstatements.

 

4

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**RADVIEWSOFTWARE LTD. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In thousands)**

**(Unaudited)**

** **
|                                                                              |   | **Nine Months Ended  September 30,** |   |
|-----------------------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                                              |   | **2003**                             |   | **2002** |   |
| Cash Flows from Operating Activities:                                             |   |                                 |   |   |   |
| Net loss                                                                          |   | $                                    | (3,998 | ) | $ | (5,158 | ) |
| Adjustments to reconcile net loss to net cash used in  operating activities— |   |                                 |   |   |   |
| Depreciation                                                                      |   | 485                                  |   | 675 |   |
| Property and equipment impairment write-off (Note 4)                              |   | —                               |   | 45 |   |
| Amortization of deferred compensation                                             |   | 297                                  |   | 392 |   |
| Accrued severance pay                                                             |   | (184                                 | )      | 1 |   |
| Changes in operating assets and liabilities—                                 |   |                                 |   |   |   |
| Accounts receivable, net                                                          |   | 400                                  |   | 515 |   |
| Prepaid expenses and other current assets                                         |   | 209                                  |   | 71 |   |
| Accounts payable                                                                  |   | 97                                   |   | (134 | ) |
| Accrued expenses                                                                  |   | (616                                 | )      | (291 | ) |
| Accrued restructuring charge                                                      |   | (171                                 | )      | (13 | ) |
| Deferred revenue                                                                  |   | 61                                   |   | (248 | ) |
| Net cash used in operating activities                                             |   | (3,420                               | )      | (4,145 | ) |
|                                                                              |   |                                 |   |   |   |
| Cash Flows from Investing Activities:                                             |   |                                 |   |   |   |
| Purchases of property and equipment                                               |   | (92                                  | )      | (142 | ) |
| Decrease in other assets                                                          |   | 46                                   |   | (23 | ) |
| Net cash used in investing activities                                             |   | (46                                  | )      | (165 | ) |
|                                                                              |   |                                 |   |   |   |
| Cash Flows from Financing Activities:                                             |   |                                 |   |   |   |
| Proceeds from shares issued                                                       |   | 44                                   |   | — |   |
| Net cash provided by financing activities                                         |   | 44                                   |   | — |   |
|                                                                              |   |                                 |   |   |   |
| Decrease in cash and cash equivalents                                             |   | (3,422                               | )      | (4,310 | ) |
|                                                                              |   |                                 |   |   |   |
| Cash and cash equivalents, beginning of period                                    |   | 7,566                                |   | 13,182 |   |
| Cash and cash equivalents, end of period                                          |   | $                                    | 4,144  |   | $ | 8,872 |   |
|                                                                              |   |                                 |   |   |   |
| Cash paid during period for interest                                              |   | $                                    | 12     |   | $ | 18 |   |

 

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

 

5

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**RADVIEW SOFTWARE LTD. ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**(Unaudited)**

** **

**1.  Operations**

** **

RadView Software Ltd. (collectively with itssubsidiaries, the “Company”) is an Israeli corporation.  The Company develops, markets and supportssoftware that enables organizations to verify the scalability, efficiency andreliability of web applications, and facilitates their rapid development.  

 

The Company has a history of incurring net lossesand had an accumulated deficit of approximately  $52.0 million as of September 30, 2003. The Company has fundedthese losses principally from proceeds from equity financing.  Over the last two years, the Company hasrestructured its business to significantly reduce total operating expensesthrough reductions in workforce and the termination of certain leases.  On April 30, 2003, the Company furtherrestructured its operations by reducing its workforce, resulting in anapproximately 23% reduction of quarterly operating expenses.  Management believes that existing cash andcash equivalents will be adequate to fund operations through at least September30, 2004.

 

**2.  Significant Accounting Policies**

** **

The Company’scondensed consolidated financial statements are prepared in accordance withaccounting principles generally accepted in the United States.  The significant policies followed in thepreparation of the condensed consolidated financial statements, applied on aconsistent basis, are as follows:

 

*(a)  Use of Estimates*

 

The preparation ofthe financial statements in conformity with accounting principles generallyaccepted in the United States requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities as of the date of the financialstatements and the reported amounts of revenues and expenses during thereporting periods.  Actual results coulddiffer from these estimates.

 

*(b)  Financial Statements in U.S. Dollars*

* *

The consolidated financial statements of theCompany have been prepared in U.S. dollars because the currency of the primaryeconomic environment in which the operations of the Company are conducted isthe U.S. dollar. Substantially all of the Company’s sales are in U.S. dollars.Most purchases of supplies and equipment and most marketing and managementcosts are denominated in U.S. dollars. Therefore, the functional currency ofthe 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 intoU.S. dollars in accordance with the principles set forth in the FinancialAccounting Standards Board of the United States (“FASB”) Statement of FinancialAccounting Standards (“SFAS”) No. 52, *ForeignCurrency Translation*. Accordingly, items have been translated asfollows:

 

•                  Monetary Items — At the exchange rate in effect on the balance sheetdate.

•                  Nonmonetary Items — At historical exchange rates.

•                  Revenue and Expense Items — At the exchange rates in effect as of thedate of recognition of those items (excluding depreciation and other itemsderiving from nonmonetary items).

 

All exchange gainsand losses from the above-mentioned translation (which were immaterial for allperiods presented) are reflected in the statements of operations.  The representative rate of exchange was U.S.$1.00 to 4.441 New Israeli Shekel (“NIS”) at September 30, 2003, U.S. $1.00 toNIS 4.737 at December 31, 2002, and U.S. $1.00 to NIS 4.871 at September 30,2002.

 

6

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*(c)  InterimFinancial Statements*

 

The accompanying condensed consolidated balancesheet as of September 30, 2003 and the condensed consolidated statements ofoperations for the three and nine months ended September 30, 2003 and 2002, andthe condensed consolidated statements of cash flows for the nine months endedSeptember 30, 2003 and 2002 are unaudited but, in the opinion of management,include all adjustments, consisting of normal recurring adjustments, necessaryfor a fair presentation of results for these interim periods.  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance withaccounting principles generally accepted in the United States have beenomitted, although the Company believes that the disclosures included areadequate to make the information presented not misleading. The condensedconsolidated results of operations for the three and nine months ended September30, 2003 are not necessarily indicative of the results to be expected for theentire fiscal year.  These condensedconsolidated financial statements should be read in conjunction with the annualconsolidated financial statements for 2002 and related notes included in theCompany’s Form 10-K filed with the SEC on March 26, 2003.

 

*(d)  Research and Development Cost*

 

The Company hasevaluated the establishment of technological feasibility of its products inaccordance with SFAS No. 86, *Accounting forthe Costs of Computer Software to Be Sold, Leased or Otherwise Marketed*.  The Company sells products in a market thatis subject to rapid technological change, new product development and changingcustomer needs.  Accordingly, theCompany has concluded that technological feasibility is not established untilthe development stage of the product is nearly complete.  The Company defines technologicalfeasibility as the completion of a working model.  The time period during which costs could be capitalized from thepoint of reaching technological feasibility until the time of general productrelease is very short.  Consequently,the amounts that could be capitalized are not material to the Company’sfinancial position or results of operations. Therefore, the Company has charged all such costs to research anddevelopment expense in the period incurred.

 

(e)  Revenue Recognition

 

The Companyrecognizes revenue in accordance with Statement of Position (“SOP”) 97-2, *Software Revenue Recognition,* and SOP98-9, *Modification of SOP 97-2, Software Revenue Recognition, With Respect toCertain Transactions*.  ****SOP 98-9********requires the use of the residual methodfor recognition of revenues when vendor-specific objective evidence exists forundelivered elements but does not exist for delivered elements of a softwarearrangement. If fair value for a delivered element does not exist but the fairvalue does exist for all undelivered elements, the Company defers the fairvalue of the undelivered elements and recognizes the remaining value for thedelivered elements.

 

Revenues fromsoftware product licenses are recognized upon delivery of the software providedthere is persuasive evidence of an agreement, the fee is fixed or determinableand collection of the related receivable is probable. Revenues undermultiple-element arrangements, which may include software, software maintenanceand training, are allocated to each element based on their respective fair values,based on vendor-specific objective evidence. This objective evidence representsthe price of products and services when sold separately. Revenue is recognizedfor software licenses sold to resellers or distributors at the time ofshipment, provided that all revenue recognition criteria set forth in SOP 97-2are fulfilled.

 

Revenues fromsoftware maintenance agreements are recognized ratably over the term of themaintenance period, which is typically one year. Revenues from trainingarrangements are recognized as the services are performed.

 

The Company generallydoes not grant a right of return to its customers.  When a right of return exists, revenue is deferred until theright of return expires, at which time revenue is recognized provided that allother revenue recognition criteria are met.

 

7

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Amounts collected orbilled prior to satisfying the above revenue recognition criteria are reflectedas deferred revenue.  Deferred revenueprimarily represents deferred maintenance revenue.

 

*(f)  Employee Stock Options*

 

At September 30,2003, the Company has three stock option plans.  The Company accounts for those plans under the recognition andmeasurement principles of Accounting Principles Board Opinion No. 25 *Accounting for Stock Issued to Employees*and related interpretations (collectively “APB No. 25”).  Stock-based compensation included in thereported net loss relates to stock options issued to employees at an exerciseprice below the market price on the date of grant.  The following table illustrates the effect on net loss and netloss per share if the Company had applied the fair value recognition provisionsof SFAS No. 123, *Accounting for Stock-BasedCompensation*, to stock-based employee compensation:

 
|                                                                                                  |   | **Three Months Ended  September 30,**      |   | **Nine Months Ended  September 30,** |   |
|-------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|--------------------------------------|--------|
|                                                                                                  |   | **2003**                                   |   | **2002**                             |   | **2003** |   | **2002** |   |
|                                                                                                  |   | **(In thousands, except per  share data)** |   |
|                                                                                                  |   |                                       |   |                                 |   |   |   |   |   |
| Net loss, as reported                                                                                 |   | $                                          | (1,062 | )                                    | $      | (1,576 | ) | $ | (3,998 | ) | $ | (5,158 | ) |
| Add:   Stock-based compensation included   in reported net loss                             |   | 83                                         |   | 113                                  |   | 297 |   | 392 |   |
| Deduct:   Total stock-based compensation expense  determined under fair value based methods |   | (192                                       | )      | (265                                 | )      | (644 | ) | (797 | ) |
| Pro forma net loss                                                                                    |   | $                                          | (1,171 | )                                    | $      | (1,728 | ) | $ | (4,345 | ) | $ | (5,563 | ) |
|                                                                                                  |   |                                       |   |                                 |   |   |   |   |   |
| Basic and diluted net loss per share                                                                  |   |                                       |   |                                 |   |   |   |   |   |
| As reported                                                                                           |   | $                                          | (0.06  | )                                    | $      | (0.10 | ) | $ | (0.24 | ) | $ | (0.31 | ) |
| Pro forma                                                                                             |   | $                                          | (0.07  | )                                    | $      | (0.10 | ) | $ | (0.26 | ) | $ | (0.34 | ) |

 

**3.  Net loss Per Share**

** **

Basic and diluted netloss per share is presented in conformity with SFAS No. 128, *Earnings Per Share*, for all periodspresented.  Basic and diluted net lossper ordinary share was determined by dividing net loss by the weighted average numberof shares outstanding during the period.  Diluted net loss per share is the same as basic net loss per sharefor all periods presented, as the effects of the Company’s potential additionalordinary shares were antidilutive.

 

The calculation ofdiluted net loss per share excludes outstanding stock options because theirinclusion would be antidilutive.  Therewere approximately 4,187,000 stock options outstanding as of September 30, 2003and approximately 4,662,000 stock options outstanding as of September 30, 2002.

 

8

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**4.  RestructuringCharges**

** **

The following is areconciliation of the activity in the accrued restructuring charge for each ofthe nine-month periods ended September 30, 2002 and 2003: 

 
| **Description**                              |   | **Balance,  Beginning  of Period** |   | **Provision** |   | **Payments  and  Write-offs** |   | **Balance,  End of Period** |   |
|----------------------------------------------|--------|------------------------------------|--------|---------------|--------|-------------------------------|--------|-----------------------------|--------|
|                                         |   | **(In thousands)**                 |   |
| **Nine  Months Ended-  September 30, 2002:** |   |                               |   |          |
| Employee severance costs                     |   | $                                  | — |          | $      | 349                           |   | $                           | (349   | ) | $ | — |   |
| Idle-lease  costs                            |   | 231                                |   | 46            |   | (76                           | )      | 201                         |   |
| Property  and equipment impairment           |   | —                             |   | 43            |   | (43                           | )      | —                      |   |
| Vendor  contract termination fees            |   | —                             |   | 27            |   | (10                           | )      | 17                          |   |
|                                         |   | $                                  | 231    |          | $      | 465                           |   | $                           | (478   | ) | $ | 218 |   |
| **September 30, 2003:**                      |   |                               |   |          |   |                          |   |                        |   |
| Employee severance costs                     |   | $                                  | — |          | $      | 207                           |   | $                           | (175   | ) | $ | 32 |   |
| Idle-lease costs                             |   | 612                                |   | 26            |   | (229                          | )      | 409                         |   |
| Vendor contract termination fees             |   | —                             |   | 12            |   | (12                           | )      | —                      |   |
|                                         |   | $                                  | 612    |          | $      | 245                           |   | $                           | (416   | ) | $ | 441 |   |

 

On April 30, 2003, theCompany restructured its operations resulting in an approximately 23% reductionof quarterly operating expenses.  The restructuring charge totaled $245,000 andconsisted of employee severance costs, facility termination charges,idle-lease costs, and vendor contract termination fees.  Employeeseverance costs for the nine months ended September 30, 2003 resulted from thetermination of 20 employees, of whom 6 were sales and marketing employees, 11were research and development employees, and 3 were general and administrativeemployees.

 

Amountspayable within one year have been classified as a current liability in theaccompanying condensed consolidated balance sheets.

 

**5.  Disclosures About Segments of an Enterprise**

** **

To date, the Company hasviewed its operations and has managed its business as principally one operatingsegment.

 

The Company’s revenues bythe geographic location of the customer are as follows: 

 
|           |   | **Three Months Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|----------------|--------|---------------------------------------|--------|--------------------------------------|--------|
|           |   | **2003**                              |   | **2002**                             |   | **2003** |   | **2002** |   |
|           |   | **(In thousands)**                    |   |
|           |   |                                  |   |                                 |   |   |   |   |   |
| United States  |   | $                                     | 793    |                                 | $      | 787 |   | $ | 2,375 |   | $ | 2,598 |   |
| Europe         |   | 151                                   |   | 251                                  |   | 406 |   | 587 |   |
| Israel         |   | 164                                   |   | 168                                  |   | 492 |   | 538 |   |
| Other          |   | 44                                    |   | 58                                   |   | 310 |   | 533 |   |
| Total revenues |   | $                                     | 1,152  |                                 | $      | 1,264 |   | $ | 3,583 |   | $ | 4,256 |   |

 

9

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**MANAGEMENT’S DISCUSSION AND ANALYSISOFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

** **

*Statements in this Quarterly Reporton Form 10-Q concerning RadView’s business outlook or future performance;anticipated revenues, expenses or other financial items; product introductionsand plans and objectives related thereto; and statements concerning assumptionsmade or expectations as to any future events, conditions, performance or othermatters, are “forward-looking statements” as that term is defined under U. S.federal securities laws. Forward-looking statements are subject to variousrisks, uncertainties and other factors that could cause actual results todiffer materially from those stated in such statements. These risks,uncertainties and factors include, but are not limited to: our history oflosses; market acceptance of our products; our ability to develop new productsand enhance existing products; impact of significant competition; and otherfactors detailed in RadView’s filings with the Securities and ExchangeCommission, including this Quarterly Report on Form 10-Q.*

* *

**Overview**

 

RadView develops, marketsand supports software that enables companies to assure the scalability, efficiencyand reliability of web applications.  In1997, we introduced our first web-testing product, WebLOAD, which was initiallyfocused on assessing the scalability of web applications.  Since then, we have enhanced thefunctionality of WebLOAD to provide an integrated solution to assess theperformance and accelerate the deployment of web applications.  In February 2000, we introduced WebRM, whichis designed to facilitate the systematic verification of web applicationquality throughout the application development lifecycle and to accelerate thedeployment of high performance web applications.  In August 2001, we introduced WebFT, a testing tool forverification of the functionality of web applications.  In July 2003, we introduced WebLOADAnalyzer, a solution for use in identifying the root-cause of performanceproblems within web applications.

 

**Application of Critical AccountingPolicies**

 

***General***

*** ***

We prepare ourconsolidated financial statements in conformity with accounting principlesgenerally accepted in the U.S.  As such,we are required to make certain estimates, judgments and assumptions that webelieve are reasonable based upon the information available. These estimatesand assumptions affect the reported amounts of assets and liabilities at thedate of the financial statements and the reported amounts of revenues andexpenses during the periods presented. To fully understand and evaluate our reported financial results, webelieve it is important to understand our policies for revenue recognition,software development costs and stock options.

 

***Revenue Recognition***

*** ***

We recognize softwarelicense revenues upon delivery of our software to customers, providedpersuasive evidence of an agreement exists, the fee is fixed or determinableand collection of the related receivable is probable.  We allocate our software license revenues under arrangementswhere we sell software and services together under one contract to each elementbased on its relative fair value, with these fair values being determined usingthe price charged when that element is sold separately.  If fair value for a delivered element doesnot exist but the fair value does exist for all undelivered elements, we deferthe fair value of the undelivered elements and recognize the remaining valuefor the delivered elements.

 

We generally recognizesoftware license revenues from resellers or distributors at the time ofshipment, provided that all other revenue recognition criteria set forth ingoverning statements of position on software revenue recognition have beenmet.  We recognize services revenuesfrom software maintenance agreements ratably over the term of the maintenanceperiod, typically one year.  We recognizeservices revenues from training as the services are performed. Amounts collectedor billed prior to satisfying the above revenue recognition criteria arereflected as deferred revenue.

 

10

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***SoftwareDevelopment Costs***

 

We account for softwaredevelopment costs in accordance with SFAS No. 86, *Accounting for the Costs of Computer Software to Be Sold, Leased orOtherwise Marketed*.  Softwaredevelopment costs incurred from the point of reaching technological feasibilityuntil the time of general product release should be capitalized.  We define technological feasibility as thecompletion of a working model.  Becausewe sell our products in a market that is subject to rapid technological change,new product development and changing customer needs, we have concluded thattechnological feasibility is not established until the development stage of theproduct is nearly complete.  For us, theperiod in which we can capitalize software development costs is very short, sothe amounts that could be capitalized are not material to our financial statements.  Therefore, we have charged all such costs toresearch and development expense in the period incurred.

 

***Stock Options***

*** ***

We account for stockoptions issued to employees under the intrinsic method in accordance withAccounting Principles Board, or APB, Opinion No. 25, *Accounting for Stock Issued to Employees*.  Under this approach we do not record anyexpense at the time the options are granted unless the exercise price of agranted option is greater than the fair market price of our ordinary shares onthe date of grant.   We have provideddisclosures of impact to our reported net loss and net loss per share if we hadapplied the fair value provisions of SFAS No. 123, *Accounting for Stock-Based Compensation*, to stock-basedemployee compensation.

 

**Results of Operations**

** **

The following table setsforth, as a percentage of total revenues, consolidated statement of operationsdata for the periods indicated:

 
|                        |   | **Three  Months Ended  September 30,** |   | **Nine  Months Ended  September 30,** |   |
|-----------------------------|--------|----------------------------------------|--------|---------------------------------------|--------|
|                        |   | **2003**                               |   | **2002**                              |   | **2003** |   | **2002** |   |
| Revenues:                   |   |                                   |   |                                  |   |   |   |   |   |
| Software licenses           |   | 50.8                                   | %      | 52.5                                  | %      | 52.3 | % | 57.4 | % |
| Service                     |   | 49.2                                   |   | 47.5                                  |   | 47.7 |   | 42.6 |   |
| Total revenues              |   | 100.0                                  |   | 100.0                                 |   | 100.0 |   | 100.0 |   |
|                        |   |                                   |   |                                  |   |   |   |   |   |
| Cost  of Sales:             |   |                                   |   |                                  |   |   |   |   |   |
| Software  licenses          |   | 5.5                                    |   | 1.1                                   |   | 2.7 |   | 0.9 |   |
| Service                     |   | 8.0                                    |   | 12.3                                  |   | 9.0 |   | 11.1 |   |
| Total  cost of sales        |   | 13.5                                   |   | 13.4                                  |   | 11.7 |   | 12.0 |   |
|                        |   |                                   |   |                                  |   |   |   |   |   |
| Gross  Profit               |   | 86.5                                   |   | 86.6                                  |   | 88.3 |   | 88.0 |   |
|                        |   |                                   |   |                                  |   |   |   |   |   |
| Operating Expenses:         |   |                                   |   |                                  |   |   |   |   |   |
| Sales  and marketing        |   | 81.6                                   |   | 99.3                                  |   | 89.6 |   | 95.7 |   |
| Research  and development   |   | 54.4                                   |   | 60.7                                  |   | 59.4 |   | 58.3 |   |
| General  and administrative |   | 35.9                                   |   | 43.7                                  |   | 35.1 |   | 38.9 |   |
| Stock-based compensation    |   | 7.2                                    |   | 8.9                                   |   | 8.3 |   | 9.2 |   |
| Restructuring  charges      |   | 0.0                                    |   | 0.0                                   |   | 6.8 |   | 10.9 |   |
| Total  operating expenses   |   | 179.2                                  |   | 212.6                                 |   | 199.2 |   | 213.0 |   |
|                        |   |                                   |   |                                  |   |   |   |   |   |
| Operating  loss             |   | (92.7                                  | )      | (126.0                                | )      | (110.9 | ) | (125.0 | ) |
|                        |   |                                   |   |                                  |   |   |   |   |   |
| Interest  income, net       |   | 0.4                                    |   | 2.6                                   |   | 0.8 |   | 2.4 |   |
| Other  income (expense)     |   | 0.1                                    |   | (1.3                                  | )      | (1.5 | ) | 1.4 |   |
|                        |   |                                   |   |                                  |   |   |   |   |   |
| Net  loss                   |   | (92.2                                  | )%     | (124.7                                | )%     | (111.6 | )% | (121.2 | )% |

 

11

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**Three and Nine Months Ended September 30, 2003 and 2002**

** **

***Revenues***

*** ***

*Total Revenues*. Total revenues were $1.2 million for the three months ended September30, 2003 and $1.3 million for the same period in 2002, which represents adecrease of $112,000, or 8.9%.  Totalrevenues were $3.6 million for the nine months ended September 30, 2003 and$4.3 million for the same period in 2002, which represents a decrease of$673,000, or 15.8%.  Total revenuesdecreased due to declines in both software licenses revenues and servicerevenues.

 

*Software Licenses*. Software license revenues were $585,000 for the three months endedSeptember 30, 2003 and reflect a decrease of $79,000, or 11.9%, as compared tosoftware license revenues of $664,000 for the same period in 2002.  This decrease consisted of a decline insoftware license revenues of $101,000 from international customers, offset, inpart, by an increase in software license revenues of $22,000 from U.S.customers.

 

Softwarelicense revenues were $1.9 million for the nine months ended September 30, 2003and reflect a decrease of $569,000, or 23.3%, as compared to software licenserevenues of $2.4 million for the same period in 2002.  This decrease consisted of a decline in software license revenuesof $87,000 from U.S. customers and $482,000 from international customers.

 

Thedecreases in software license revenues for the three and nine months endedSeptember 30, 2003 as compared to the same periods in 2002, resulted from lowerunit volume sales attributable to weakness in the global economy and slowertechnology spending.  

 

*Services*.  Service revenues were $567,000for the three months ended September 30, 2003, showing a decrease of $33,000,or 5.5%, as compared to service revenues of $600,000 for the same period in2002.  This decrease consisted of adecline in service revenues of $17,000 from U.S. customers and $16,000 frominternational customers.

 

Servicerevenues were $1.7 million for the nine months ended September 30, 2003,representing a decrease of $104,000, or 5.7%, as compared to service revenuesof $1.8 million for the same period in 2002. This decrease consisted of a decline in service revenues of $138,000from U.S. customers, offset, in part, by a $34,000 increase of service revenuesfrom international customers.

 

Thedecreases in service revenues resulted from a decline in maintenance servicesand training services that typically accompany software license orders.

 

***Cost of Revenues***

*** ***

*Cost of Software Licenses*. Cost of software licenses consistsprincipally of direct product costs, such as product media and packaging, aswell as royalties due to third parties. Cost of software licenses increased from $14,000, or 2.1% of softwarelicense revenue, for the three months ended September 30, 2002 to $63,000, or10.8% of software license revenue, for the same period in 2003.  Cost of software licenses increased from$39,000, or 1.6% of software license revenue, for the nine months endedSeptember 30, 2002 to $98,000, or 5.2% of software license revenue, for thesame period in 2003.   The increases incost of software licenses resulted from a one-time license fee to a third-partyincurred during the third quarter of 2003 totaling approximately $42,000.

 

*Cost of Service*. Cost of service consists principally ofpersonnel-related costs associated with customer support and training.  Cost of service decreased from $155,000, or25.8% of service revenue, for the three months ended September 30, 2002 to $93,000,or 16.4% of service revenue, for the same period in 2003.  Cost of service decreased from $474,000, or26.1% of service revenue, for the nine months ended September 30, 2002 to$323,000, or 18.9% of service revenue, for the same period in 2003.  These decreases were due to reducedpersonnel costs to provide support and maintenance services resulting from theheadcount reductions taken in 2002 and 2003.

 

12

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***Operating Expenses***

*** ***

*Sales and Marketing*. Sales and marketing expenses consist principally of salaries andcommissions earned by sales personnel, travel and marketing program costs suchas trade shows, advertising and product promotion.  Sales and marketing expenses decreased from $1.3 million, or 99.3%of total revenues, for the three months ended September 30, 2002 to $940,000,or 81.6% of total revenues, for the same period in 2003.  Sales and marketing expenses decreased from$4.1 million, or 95.7% of total revenues, for the nine months ended September30, 2002 to $3.2 million, or 89.6% of total revenues, for the same period in2003.  These decreases were dueprimarily to headcount reductions of sales and marketing personnel in 2002 and2003.

 

*Research and Development*. Research and development expenses consist principally of salaries and relatedexpenses required to develop and enhance the Company’s products.  Research and development expenses decreasedfrom $767,000, or 60.7% of total revenues, for the three months ended September30, 2002, to $627,000, or 54.4% of total revenues, for the same period in2003.  Research and development expensesdecreased from $2.5 million, or 58.3% of total revenues, for the nine monthsended September 30, 2002, to $2.1 million, or 59.4% of total revenues, for thesame period in 2003.  The decrease inabsolute dollars was due primarily to headcount reductions of research anddevelopment personnel in 2002 and 2003.

 

*General and Administrative*. General and administrative expenses consist principally of finance,executive and administrative salaries and related expenses, professional feesand other costs associated with being a public company.  General and administrative expensesdecreased from $552,000, or 43.7% of total revenues, for the three months endedSeptember 30, 2002 to $414,000, or 35.9% of total revenues, for the same periodin 2003.  General and administrativeexpenses decreased from $1.7 million, or 38.9% of total revenues, for the ninemonths ended September 30, 2002 to $1.3 million, or 35.1% of total revenues,for the same period in 2003.  These decreaseswere due to lower professional fees and headcount reductions of general andadministrative personnel in 2003.

 

*Stock-based Compensation*. Stock-based compensation expense reflectsthe accounting charge relating to the issuance of equity instruments toemployees at an exercise price below fair market value at the date of grant andto all equity instruments issued to nonemployees.  For stock options granted to employees, the difference betweenthe exercise price and the estimated fair value of the ordinary shares on thedate options are granted is charged to operations as stock-based compensationexpense over the vesting period of the underlying options.  For stock options granted to nonemployees,the value of a particular grant as determined by the Black-Scholes valuationmodel is charged to operations as stock-based compensation expense over theservice period or vesting period of the underlying option.  Stock-based compensation expense was $83,000for the three months ended September 30, 2003 compared to $113,000 for the sameperiod in 2002.  Stock-basedcompensation expense was $297,000 for the nine months ended September 30, 2003compared to $392,000 for the same period in 2002.  These decreases resulted from the forfeiture of employee stockoptions for terminated employees for whom stock-based compensation wasoriginally recorded.

 

Deferredcompensation on the unvested options is included as a component ofshareholders’ equity and is amortized to stock-based compensation expense overthe vesting period of the underlying options. Deferred stock-based compensation totaled $180,000 at September 30,2003, and will result in additional charges to operations through May 2004.

 

*Restructuring Charges*. Restructuring charges totaled $245,000 for the nine months endedSeptember 30, 2003 and $465,000 for thesame period in 2002.

 

The restructuring chargesof $245,000 for the nine months ended September 30, 2003 was incurred in April2003, when we restructured our operations by reducing our workforce.  The charge consisted of severance costs forterminated employees of $207,000, lease termination costs of $26,000, vendorcontract termination fees and other costs of $12,000.  A total of 20 employees were terminated, or approximately 27% ofthe then current workforce, of whom 6 employees were from sales and marketing,11 employees were from research and development, and three employees were fromgeneral and administrative.

 

13

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The restructuring chargesof $465,000 recorded in the nine months ended September 30, 2002, were incurredin January 2002, when we implemented restructuring plans in an effort to loweroperating costs.  The restructuringplans and related charges recorded in the first quarter of 2002 consisted ofseverance costs for terminated employees of $349,000, lease termination costsof $46,000, property and equipment impairment and other costs of $70,000.  A total of 26 employees were terminated, orapproximately 27% of the thencurrent workforce, of whom 13 employees were from sales and marketing, 11employees were from research and development, and two employees were fromgeneral and administrative.

 

*Interest Income, Net*. Interest income, net consists principallyof interest earned on cash investments. Interest income, net was $5,000 for the three months ended September 30,2003 compared to $33,000 for the same period in 2002.  Interest income, net was $29,000 for the nine months endedSeptember 30, 2003 compared to $102,000 for the same period in 2002.  The decreases in interest income resulted from lower investedcash balances and lower interest rates in 2003 when compared to 2002.

 

*Other Income (Expense), Net*. Other income (expense), net consistsprincipally of currency translation gains and losses.  There was other income of $1,000 for the three months endedSeptember 30, 2003 compared to other expense of $17,000 for the same period in2002.  There was other expense of$53,000 for the nine months ended September 30, 2003 compared to other incomeof $61,000 for the same period in 2002. These changes were due to exchange rate fluctuations.

 

*IncomeTaxes.*  The Companyhas estimated net operating loss carryforwards for Israeli tax purposestotaling approximately $17.0 million through September 30, 2003 that wouldreduce future Israeli income taxes, if any. These net operating losses may be carried forward indefinitely andoffset against future taxable income.

 

The Company’s U.S.subsidiary has net operating loss carryforwards for U.S. Federal and state tax purposestotaling approximately $27.0 million through September 30, 2003.  These losses are available to offset anyfuture U.S. taxable income of the U.S. subsidiary and will expire between 2012and 2023.

 

The Company has recordeda full valuation allowance against its deferred tax asset due to theuncertainty surrounding the ability and the timing of the realization of thesetax benefits.

 

**Liquidityand Capital Resources**

** **

Cashand cash equivalents totaled $4.1 million as of September 30, 2003 compared to$7.6 million as of December 31, 2002.

 

Cashused in operating activities was $3.4 million for the nine months endedSeptember 30, 2003 and $4.1 million for the same period in 2002.  Cash used in operating activities forthe nine months ended September 30, 2003 was due to a net loss of $4.0 million,a decrease of $184,000 in accrued severance pay, a decrease of $616,000 inaccrued expenses, and a decrease of $171,000 in accrued restructuring chargeoffset, in part, by depreciation of $485,000, amortization of deferredcompensation of $297,000, a decrease of $400,000 in accounts receivable, adecrease of $209,000 in prepaid expenses and other current assets, an increaseof $97,000 in accounts payable and an increase of $61,000 in deferred revenue.  Cash used in operating activities for thenine months ended September 30, 2002 was due to a net loss of $5.2 million, adecrease of $134,000 in accounts payable, a decrease of $291,000 in accruedexpenses, a decrease of $13,000 in accrued restructuring charge and a decreaseof $248,000 in deferred revenue offset, in part, by depreciation of $675,000,amortization of deferred compensation of $392,000, $45,000 of property andequipment impairment write-off,an increase of $1,000 in accrued severance pay, a decrease of $515,000 inaccounts receivable and a decrease of $71,000 in prepaid expenses and othercurrent assets.

 

Cashused in investing activities was $46,000 for the nine months ended September30, 2003 and $165,000 for the same period in 2002.  Cash used in investing activities for the nine months endedSeptember 30, 2003 was for purchases of $92,000 in property and equipmentoffset, in part, by a decrease of $46,000 in other assets.  Cash used in investing activities for thenine months ended September 30, 2003 was for purchases of $142,000 in propertyand equipment and an increase of $23,000 in other assets.

 

14

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Cashprovided by financing activities was $44,000 for the nine months endedSeptember 30, 2003 and there was no cash provided by financing activities forthe nine months ended September 30, 2002. Cash from financing activities for the nine months ended September 30,2003 consisted of $43,000 of proceeds from the exercise of stock options and$1,000 from proceeds from the employee share purchase plan.

 

We lease all of ouroffice facilities under noncancellable operating leases that expire overvarying terms through 2005.  As ofSeptember 30, 2003, the future total lease payments under these leases, beforereductions for idle-lease costs of $409,000 included in accrued restructuring, were as follows: $147,000 in 2003, $517,000in 2004, and $166,000 in 2005.

 

Weexpect that operating expenses, as well as planned capital expenditures, willconstitute a material use of our cash resources.  We believe that our existing cash and cash equivalents will besufficient to meet our anticipated needs for working capital and capitalexpenditures for at least the next 12 months. We may find it necessary to obtain additional equity or debtfinancing.  In the event additionalfinancing is required, we may not be able to complete financing on acceptableterms or at all.

 

**ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK**

** **

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

 

The Company conductsbusiness in various foreign currencies, primarily in Europe and Israel.  As a result, the Company is exposed to theeffect of foreign currency exchange rate fluctuations on the U.S. dollar valueof foreign currency-denominated revenues and expenses.  The Company does not use foreign exchangeforward contracts to hedge its foreign currency denominated receivables.  Looking forward, there can be no assurancethat changes in foreign currency rates, relative to the U.S. dollar, will notmaterially adversely affect the consolidated results of the Company.

 

**ITEM 4.  CONTROLS AND PROCEDURES**

** **

**Evaluationof Controls and Procedures**

** **

We carried out anevaluation, under the supervision and with the participation of the Company’smanagement, including the Company’s Chief Executive Officer (“CEO”) and ChiefFinancial Officer (“CFO”), of the effectiveness of the design and operation ofthe Company’s disclosure controls and procedures as of the end of the periodcovered by this Quarterly Report on Form 10-Q. Based on this evaluation, the CEO and CFO have concluded that the Company’sdisclosure controls and procedures are effective to ensure that materialinformation is recorded, processed, summarized and reported by management ofthe Company on a timely basis in order to comply with the Company’s disclosureobligations under the Securities Exchange Act of 1934 and the SEC rulesthereunder.  

** **

**Changes in internal controls**

** **

There were no significantchanges in the Company’s internal controls or in other factors that couldsignificantly affect these controls subsequent to the date of theevaluation.  

 

15

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**PARTII - OTHER INFORMATION**

** **

**Item2.  Changes in Securities**

** **

**(d) Use of Proceedsfrom Sale of Registered Securities**

** **

On August 9, 2000, inconnection with our initial public offering, the Securities and ExchangeCommission 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 LufkinJenrette, Wit SoundView, Piper Jaffrey, and DLJdirect.

 

On August 15, 2000, wesold 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 underwritingdiscounts and approximately $1.9 million in other related expenses, the netproceeds to us were approximately $35.3 million.

 

Through September 30,2003, we have used $31.1 million of the net proceeds from our initial publicoffering as follows:

 

•     $1.9 million for capital expenditures;

•      $1.4 million for repayment of principaland accrued interest on a loan with Rad Data Communications, Inc., a relatedparty; 

•      $3.8 million for repayment of principaland accrued interest on long-term debt with a bank;

•      $100,000 for the repurchase of ordinaryshares; and

•      $23.9 million for working capital.

 

**Item6.  Exhibits and Reports on Form 8-K**

** **

**(a)Exhibit Index**

** **

10.1*                    EmploymentAgreement dated September 16, 2003 with Christopher Dineen, Chief FinancialOfficer

 

31.1*                    Certificationby Chief Executive Officer pursuant to 15 U.S.C. Section 7241, as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2*                    Certificationby Chief Financial Officer pursuant to 15 U.S.C. Section 7241, as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32*                             Certificationpursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002.

 

----

*  Filed herewith

 

**(b)Reports on Form 8-K:**

** **

•                  On July 24, 2003, RadView SoftwareLtd. issued a press release announcing its earnings for the quarter ended June30, 2003.

 

16

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**SIGNATURES**

 

Pursuant to therequirements of the Securities and Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|                          | RADVIEW SOFTWARE LTD.   |
|-------------------------------|-------------------------|
|                          |                    |
|                          |                    |
| Date:  November 13, 2003 | /s/ CHRISTOPHER DINEEN  |
|                          | Christopher Dineen      |
|                          | Chief Financial Officer |

 

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