** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM10-Q**

 

**(Markone)**

 

**ý****Quarterly report pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

**For the quarterlyperiod ended March 31, 2004**

 

**OR**

 

**o****Transition report pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

**Commission FileNumber:  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 EnglandExecutive ParkBurlington, 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 sincelast report)

 

Indicate bycheck mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired 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 April30, 2004, there were 20,414,980 shares of the Registrant’s Ordinary Sharesoutstanding, excluding 134,000 Ordinary Shares held by the registrant astreasury shares that are “dormant” shares for purposes of Israeli law.

 

 

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**RADVIEW SOFTWARE LTD. ANDSUBSIDIARIES**

Form 10-Q INDEX

 
|    | **PART I. FINANCIAL INFORMATION**                                                                          |   |
|---------|------------------------------------------------------------------------------------------------------------|--------|
|    |                                                                                                       |   |
| Item 1. | Condensed  Consolidated Financial Statements:                                                              |   |
|    |                                                                                                       |   |
|    | Condensed Consolidated Balance Sheets as of  March 31, 2004 and  December 31, 2003                    |   |
|    |                                                                                                       |   |
|    | Condensed Consolidated Statements of  Operations for the  three months ended  March 31, 2004 and 2003 |   |
|    |                                                                                                       |   |
|    | Condensed Consolidated Statements of Cash  Flows for the  three months ended  March 31, 2004 and 2003 |   |
|    |                                                                                                       |   |
|    | Notes to Condensed Consolidated Financial  Statements                                                      |   |
|    |                                                                                                       |   |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and  Results of Operations           |   |
|    |                                                                                                       |   |
| Item 3. | Qualitative and Quantitative 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                                                                                                 |   |
|    |                                                                                                       |   |
|    | Certifications                                                                                             |   |

 

2

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**PART I****- FINANCIALINFORMATION**

 

**RADVIEW SOFTWARE LTD. ANDSUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(In thousands, exceptshare data)**

**(Unaudited)**

 
|                                                                                                                                                                                                                                                                                      |   | **March 31,  2004** |   | **December 31,  2003** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|------------------------|--------|
| **ASSETS**                                                                                                                                                                                                                                                                                |   |                |   |                   |   |
| Current Assets:                                                                                                                                                                                                                                                                           |   |                |   |                   |   |
| Cash and cash equivalents                                                                                                                                                                                                                                                                 |   | $                   | 4,025  |                   | $      | 3,075 |   |
| Accounts receivable, net of  reserves of $72 at March 31, 2004 and December 31, 2003                                                                                                                                                                                                      |   | 726                 |   | 678                    |   |
| Prepaid expenses and other  current assets                                                                                                                                                                                                                                                |   | 382                 |   | 426                    |   |
| Total Current Assets                                                                                                                                                                                                                                                                      |   | 5,133               |   | 4,179                  |   |
|                                                                                                                                                                                                                                                                                      |   |                |   |                   |   |
| Property and Equipment, net                                                                                                                                                                                                                                                               |   | 275                 |   | 333                    |   |
| Other Assets                                                                                                                                                                                                                                                                              |   | 655                 |   | 643                    |   |
|                                                                                                                                                                                                                                                                                      |   |                |   |                   |   |
| Total Assets                                                                                                                                                                                                                                                                              |   | $                   | 6,063  |                   | $      | 5,155 |   |
|                                                                                                                                                                                                                                                                                      |   |                |   |                   |   |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                                                                                             |   |                |   |                   |   |
| Current Liabilities:                                                                                                                                                                                                                                                                      |   |                |   |                   |   |
| Accounts payable                                                                                                                                                                                                                                                                          |   | $                   | 252    |                   | $      | 367 |   |
| Accrued expenses                                                                                                                                                                                                                                                                          |   | 1,005               |   | 989                    |   |
| Accrued restructuring charge,  current portion                                                                                                                                                                                                                                            |   | 231                 |   | 225                    |   |
| Deferred revenue                                                                                                                                                                                                                                                                          |   | 1,359               |   | 1,064                  |   |
| Total Current Liabilities                                                                                                                                                                                                                                                                 |   | 2,847               |   | 2,645                  |   |
|                                                                                                                                                                                                                                                                                      |   |                |   |                   |   |
| Long-term Liabilities:                                                                                                                                                                                                                                                                    |   |                |   |                   |   |
| Accrued restructuring charge,  less current portion                                                                                                                                                                                                                                       |   | 18                  |   | 95                     |   |
| Accrued severance                                                                                                                                                                                                                                                                         |   | 635                 |   | 619                    |   |
| Total Long-Term Liabilities                                                                                                                                                                                                                                                               |   | 653                 |   | 714                    |   |
|                                                                                                                                                                                                                                                                                      |   |                |   |                   |   |
| Total Liabilities                                                                                                                                                                                                                                                                         |   | 3,500               |   | 3,359                  |   |
|                                                                                                                                                                                                                                                                                      |   |                |   |                   |   |
| Shareholders’ Equity:                                                                                                                                                                                                                                                                |   |                |   |                   |   |
| Ordinary shares, NIS 0.01 par  value –  Authorized – 40,000,000 shares;  Issued – 20,548,980 shares at March 31, 2004 and 17,194,545 shares at  December 31, 2003  Outstanding – 20,414,980 shares at March 31, 2004 and 17,060,545 shares at  December 31, 2003 |   | 50                  |   | 43                     |   |
| Treasury shares, at cost –  134,000 shares                                                                                                                                                                                                                                           |   | (100                | )      | (100                   | )      |
| Additional paid-in capital                                                                                                                                                                                                                                                                |   | 56,832              |   | 55,010                 |   |
| Deferred compensation                                                                                                                                                                                                                                                                     |   | —              |   | (89                    | )      |
| Accumulated deficit                                                                                                                                                                                                                                                                       |   | (54,219             | )      | (53,068                | )      |
| Total Shareholders’ Equity                                                                                                                                                                                                                                                           |   | 2,563               |   | 1,796                  |   |
|                                                                                                                                                                                                                                                                                      |   |                |   |                   |   |
| Total Liabilities and  Shareholders’ Equity                                                                                                                                                                                                                                          |   | $                   | 6,063  |                   | $      | 5,155 |   |

 

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

 

3

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**RADVIEW SOFTWARE LTD.AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(In thousands, exceptper share data)**

**(Unaudited)**

 
|                                                                                             |   | **Three  Months Ended  March 31,** |   |
|--------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                             |   | **2004**                           |   | **2003** |   |
| Revenues:                                                                                        |   |                               |   |   |   |
| Software licenses                                                                                |   | $                                  | 447    |   | $ | 667 |   |
| Services                                                                                         |   | 533                                |   | 553 |   |
| Total Revenues                                                                                   |   | 980                                |   | 1,220 |   |
|                                                                                             |   |                               |   |   |   |
| Cost of Revenues:                                                                                |   |                               |   |   |   |
| Software licenses                                                                                |   | 31                                 |   | 20 |   |
| Services                                                                                         |   | 80                                 |   | 119 |   |
| Total Cost of Revenues                                                                           |   | 111                                |   | 139 |   |
|                                                                                             |   |                               |   |   |   |
| Gross Profit                                                                                     |   | 869                                |   | 1,081 |   |
|                                                                                             |   |                               |   |   |   |
| Operating Expenses:                                                                              |   |                               |   |   |   |
| Sales and marketing                                                                              |   | 805                                |   | 1,230 |   |
| Research and development                                                                         |   | 632                                |   | 850 |   |
| General and administrative                                                                       |   | 502                                |   | 437 |   |
| Stock-based compensation (1)                                                                     |   | 84                                 |   | 111 |   |
| Total Operating Expenses                                                                         |   | 2,023                              |   | 2,628 |   |
|                                                                                             |   |                               |   |   |   |
| Operating loss                                                                                   |   | (1,154                             | )      | (1,547 | ) |
|                                                                                             |   |                               |   |   |   |
| Interest income, net                                                                             |   | 3                                  |   | 14 |   |
| Other expense, net                                                                               |   | —                             |   | (8 | ) |
|                                                                                             |   |                               |   |   |   |
| Net loss                                                                                         |   | $                                  | (1,151 | ) | $ | (1,541 | ) |
|                                                                                             |   |                               |   |   |   |
| Net loss per share – Basic and diluted                                                      |   | $                                  | (0.06  | ) | $ | (0.09 | ) |
|                                                                                             |   |                               |   |   |   |
| Weighted average number of shares used in  computing  basic and diluted net loss  per share |   | 17,796                             |   | 16,471 |   |

 

----

(1)               Thefollowing summarizes the departmental allocation of the stock-basedcompensation charge:

 
| Sales and marketing            |   | $  | 44     |   | $      | 39  |   |
|--------------------------------|--------|----|--------|--------|--------|-----|--------|
| Research and development       |   | 37 |   | 44     |   |
| General and administrative     |   | 3  |   | 28     |   |
| Total stock-based compensation |   | $  | 84     |   | $      | 111 |   |

 

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

 

4

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**RADVIEWSOFTWARE LTD. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Inthousands)**

**(Unaudited)**

 
|                                                                                     |   | **Three Months Ended  March 31,** |   |
|------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                                     |   | **2004**                          |   | **2003** |   |
| Cash Flows from Operating  Activities:                                                   |   |                              |   |   |   |
| Net loss                                                                                 |   | $                                 | (1,151 | ) | $ | (1,541 | ) |
| Adjustments to reconcile net  loss to net cash  used in operating  activities— |   |                              |   |   |   |
| Depreciation                                                                             |   | 76                                |   | 189 |   |
| Amortization of deferred  compensation                                                   |   | 84                                |   | 111 |   |
| Accrued severance pay                                                                    |   | 16                                |   | (43 | ) |
| Changes in operating assets and  liabilities—                                       |   |                              |   |   |   |
| Accounts receivable                                                                      |   | (48                               | )      | 217 |   |
| Prepaid expenses and other  current assets                                               |   | 44                                |   | 111 |   |
| Accounts payable                                                                         |   | (115                              | )      | 3 |   |
| Accrued expenses                                                                         |   | 16                                |   | (197 | ) |
| Accrued restructuring charge                                                             |   | (71                               | )      | (70 | ) |
| Deferred revenue                                                                         |   | 295                               |   | 103 |   |
| Net cash used in operating  activities                                                   |   | (854                              | )      | (1,117 | ) |
|                                                                                     |   |                              |   |   |   |
| Cash Flows from Investing  Activities:                                                   |   |                              |   |   |   |
| Purchases of property and  equipment                                                     |   | (18                               | )      | (15 | ) |
| Decrease (increase) in other  assets                                                     |   | (12                               | )      | 13 |   |
| Net cash used in investing  activities                                                   |   | (30                               | )      | (2 | ) |
|                                                                                     |   |                              |   |   |   |
| Cash Flows from Financing  Activities:                                                   |   |                              |   |   |   |
| Proceeds from private placement  of ordinary shares, net                                 |   | 1,831                             |   | — |   |
| Proceeds from exercise of stock  options                                                 |   | 3                                 |   | 1 |   |
| Net cash provided by financing  activities                                               |   | 1,834                             |   | 1 |   |
|                                                                                     |   |                              |   |   |   |
| Increase (decrease) in cash and  cash equivalents                                        |   | 950                               |   | (1,118 | ) |
|                                                                                     |   |                              |   |   |   |
| Cash and cash equivalents,  beginning of period                                          |   | 3,075                             |   | 7,566 |   |
| Cash and cash equivalents, end  of period                                                |   | $                                 | 4,025  |   | $ | 6,448 |   |
|                                                                                     |   |                              |   |   |   |
| Cash paid during period for  interest                                                    |   | $                                 | 2      |   | $ | 4 |   |

 

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

 

5

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**RADVIEW SOFTWARE LTD.AND SUBSIDIARIES**

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

**1.  Operations**

 

RadView Software Ltd. (the “Company”) is an Israelicorporation.  The Company develops,markets and supports software that enables organizations to verify thescalability, efficiency and reliability of web applications, and facilitatestheir rapid development.

 

The Companyhas a history of incurring net losses and had an accumulated deficit ofapproximately $54.2 million at March 31, 2004. The Company has funded these losses principally from proceeds fromequity financing.  In each of 2001, 2002and 2003, the Company restructured its business to reduce total operatingexpenses by more than 60% through reductions in workforce and the terminationof certain leases.

 

In March 2004, the Company completed a private placement of itsordinary shares (see Note 4). Management believes that existingcash and cash equivalents, along with the proceeds from the private placement,will be adequate to fund operations at least through March 31, 2005.

 

**2.  Significant Accounting Policies**

 

The Company’s condensedconsolidated financial statements are prepared in accordance with accountingprinciples generally accepted in the United States for interim financialinformation.  The significant policiesfollowed in the preparation of the condensed consolidated financial statements,applied on a consistent basis, are as follows:

 

*(a)*       Use of Estimates

* *

The preparation of the financial statements inconformity with accounting principles generally accepted in the United Statesrequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities as of the date of the financial statements and the reported amountsof revenues and expenses during the reporting periods.  Actual results could differ from theseestimates.

 

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

 

Theconsolidated financial statements of the Company have been prepared in U.S.dollars because the currency of the primary economic environment in which theoperations of the Company are conducted is the U.S. dollar. Substantially allof the Company’s sales are in U.S. dollars. Most purchases of materials,components and most marketing and management costs are denominated in U.S.dollars. Therefore, the functional currency of the Company is the U.S. dollar.

 

Transactionsand balances denominated in U.S. dollars are presented at their originalamounts. Transactions and balances in other currencies are translated into U.S.dollars in accordance with the principles set forth in the Financial AccountingStandards Board of the United States (“FASB”) Statement of Financial AccountingStandards (“SFAS”) No. 52, *Foreign CurrencyTranslation*. Accordingly, items have been translated as follows:

 

•                  MonetaryItems — At the exchange rate in effect on the balance sheet date.

•                  NonmonetaryItems — At historical exchange rates.

•                  Revenueand Expense Items — At the exchange rates in effect as of the date ofrecognition of those items (excluding depreciation and other items derivingfrom nonmonetary items).

 

All exchangegains and losses from the above-mentioned translation (which were immaterialfor all periods presented) are reflected in the statements of operations.  The representative rate of exchange was U.S.$1.00 to 4.528 New Israeli Shekel (“NIS”) at March 31, 2004, U.S. $1.00 to NIS4.379 at December 31, 2003, and U.S. $1.00 to NIS 4.687 at March 31, 2003.

 

6

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*(c)  Interim Financial Statements*

* *

Theaccompanying condensed consolidated balance sheet as of March 31, 2004, the condensedconsolidated statements of operations and the condensed consolidated statementsof cash flows for the three months ended March 31, 2004 and 2003, are unauditedbut, in the opinion of management, include all adjustments necessary for a fairpresentation of results for these interim periods.  Certain information and footnote disclosures normally included infinancial statements prepared in accordance with accounting principles generallyaccepted in the United States have been omitted, although the Company believesthat the disclosures included are adequate to make the information presentednot misleading. The results of operations for the three months ended March 31,2004 are not necessarily indicative of the results to be expected for theentire fiscal year.  These financialstatements should be read in conjunction with the annual consolidated financialstatements for 2003 and related notes included in the Company’s Form 10-K filedwith the SEC on March 29, 2004.

 

*(d)*       Research and DevelopmentCost

* *

The Companyhas evaluated 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 Companygenerates revenues mainly from licensing the rights to use its softwareproducts.  The Company also generatesrevenues from support and maintenance services and, to a lesser extent,training and consulting services. The Company sells its products primarily throughits direct sales force and, to a lesser extent, through resellers anddistributors considered as end-users.

 

The Companyrecognizes revenue in accordance with Statement of Position (“SOP”) 97-2,Software Revenue Recognition, and SOP 98-9, Modification of SOP 97-2, SoftwareRevenue Recognition, With Respect to Certain Transactions.  Under SOP 97-2, revenues from softwareproduct licenses are recognized upon delivery of the software provided there ispersuasive evidence of an agreement, the fee is fixed or determinable andcollection of the related receivable is probable and no further obligationsexist.  Revenues under multiple-elementarrangements, which may include software licenses, support and maintenance, andtraining and consulting services, are allocated to each element based on theirrespective fair values, based on vendor-specific objective evidence.  This objective evidence represents the priceof products and services when sold separately. Revenue is recognized for software licenses sold to resellers ordistributors at the time of shipment, provided that all revenue recognitioncriteria set forth in SOP 97-2 are fulfilled.

 

SOP 98-9requires the use of the residual method for recognition of revenues whenvendor-specific objective evidence exists for undelivered elements but does notexist for delivered elements of a software arrangement when all other revenuerecognition criteria set forth in SOP 97-2 are met. If fair value for adelivered element does not exist but the fair value does exist for allundelivered elements, the Company defers the fair value of the undeliveredelements and recognizes the remaining value for the delivered elements.

 

Revenues fromsupport and 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.

 

7

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The Company generally does not grant a right of returnto its customers.  When a right ofreturn exists, revenue is deferred until the right of return expires, at whichtime revenue is recognized provided that all other revenue recognition criteriaare met.

 

Amountscollected or billed prior to satisfying the above revenue recognition criteriaare reflected as deferred revenue. Deferred revenue primarily represents deferred maintenance revenue, andto a lesser extent, deferred software license revenues.

 

*(f)*           Employee Stock Options

* *

At March 31,2004, the Company has three stock option plans.  The Company has elected to follow Accounting Principles Board(“APB”) Opinion No. 25, *Accounting for StockOptions Issued to Employees* and FASB Interpretation (“FIN”) No. 44 *Accounting for Certain Transactions Involving StockCompensation,* in accounting for its employee stock option plans.  Under APB No. 25, when the exercise price ofan employee stock option is equivalent to or above the market price of theunderlying stock on the date of grant, no compensation expense is recognized.  The Company adopted the disclosureprovisions of SFAS No. 148, *Accounting forStock-Based Compensation - Transition and Disclosure*, which amendedcertain provisions of SFAS No. 123 *Accountingfor Stock-Based Compensation*, to provide alternative methods oftransition for an entity that voluntarily changes to the fair value basedmethod of accounting for stock-based employee compensation, effective as of thebeginning of the fiscal year.  TheCompany continues to apply the provisions of APB No. 25 in accounting for stock-basedcompensation.

 

Pro forma informationregarding the Company’s net loss and net loss per share is required by SFAS No.123 and has been determined as if the Company had accounted for its employeestock options under the fair value method prescribed by SFAS No. 123.   The following table illustrates the effecton net loss and net loss per share if the Company had applied the fair valuerecognition provisions of SFAS No. 123 to stock-based employee compensation.

 
|                                                                                       |   | **Three  Months Ended  March 31,** |   |
|--------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                       |   | **2004**                           |   | **2003** |   |
|                                                                                       |   | **(In  thousands)**                |   |
|                                                                                       |   |                               |   |   |   |
| Net loss, as reported                                                                      |   | $                                  | (1,151 | ) | $ | (1,541 | ) |
| Add:   Stock-based compensation included in reported net loss                         |   | 84                                 |   | 111 |   |
| Deduct:   Total stock-based compensation expense under  fair value based methods |   | (142                               | )      | (238 | ) |
| Pro forma net loss                                                                         |   | $                                  | (1,209 | ) | $ | (1,668 | ) |
|                                                                                       |   |                               |   |   |   |
| Net loss per share:                                                                        |   |                               |   |   |   |
| As reported                                                                                |   | $                                  | (0.06  | ) | $ | (0.09 | ) |
| Pro forma                                                                                  |   | $                                  | (0.07  | ) | $ | (0.10 | ) |

 

8

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**3.  Earnings Per Share**

 

Basicand diluted net loss 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 attributable to ordinaryshareholders by the weighted average ordinary shares outstanding during theperiod.  Diluted net loss per ordinaryshare is the same as basic net loss per ordinary share for all periodspresented, as the effects of the Company’s potential additional ordinary shareswere antidilutive.

 

Thecalculation of diluted net loss per share excludes outstanding stock options,warrants and additional investment rights held by certain investors becausetheir inclusion would be antidilutive, as set forth in the following table.

 
|                                                                    |   | **March 31,**       |   |
|-------------------------------------------------------------------------|--------|---------------------|--------|
|                                                                    |   | **2004**            |   | **2003** |   |
|                                                                    |   | **(In  thousands)** |   |
|                                                                    |   |                |   |   |   |
| Stock options                                                           |   | 3,702               |   | 5,110 |   |
| Warrants (See Note 4(b))                                                |   | 3,000               |   | — |   |
| Additional investment rights held by  certain investors (See Note 4(b)) |   | 3,333               |   | — |   |

 

**4.  Shareholders’ Equity**

 

*(a)*       Private Placement

* *

On March 17,2004, the Company completed a private placement (the “Private Placement”) ofits ordinary shares, additional investment rights to purchase ordinary shares(“Additional Investment Rights”) and four series of warrants to purchaseordinary shares (“Warrants”) pursuant to a securities purchase agreement (the“Purchase Agreement”) between the Company and certain purchasers named therein(the “Purchasers”), in reliance on an exemption under Section 4(2) of theSecurities Act of 1933, as amended, and Regulation D promulgated thereunder.

 

The Companyissued 3,333,331 ordinary shares to the Purchasers for a purchase price pershare of $0.60, or aggregate gross proceeds of $2.0 million.  The Companyreceived net proceeds of $1.8 million from the Private Placement.

 

In accordancewith the Purchase Agreement, the Company is required to register for resale onForm S-3 (the “Registration Statement”) the ordinary shares issued in thePrivate Placement and the ordinary shares issuable upon exercise of theAdditional Investment Rights and Warrants. The Company filed the Registration Statement (No. 333-114308) with theSecurities and Exchange Commission on April 8, 2004 and is required to use itsbest efforts to cause the Registration Statement to be declared effective bythe Securities and Exchange Commission by June 8, 2004.   The Company must also comply with certainconditions to maintain the effectiveness of the Registration Statement for aperiod of up to two years from the effective date of the RegistrationStatement.

 

Pursuant tothe terms of the Purchase Agreement, the Company agreed not to offer, sell orgrant any option to purchase ordinary shares or securities convertible intoordinary shares until 30 trading days after the effective date of theRegistration Statement, subject to specified exceptions, and not to file anyregistration statement (other than the Registration Statement) until theRegistration Statement has been declared effective, subject to specifiedexceptions.

 

9

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*(b)  Warrants and Additional Investment Rights*

* *

In connectionwith the Private Placement, the Company issued to the Purchasers AdditionalInvestment Rights to purchase 3,333,331 ordinary shares at an exercise price of$0.810 per share, exercisable from March 11, 2004 until one year after theeffective date of the Registration Statement.

 

In addition, the Company issued to the Purchasers fourseries of warrants as follows:

 
| **Series**        |   | **Term**               |   | **Exercise  Price** |   | **Number of  Shares** |      |
|-------------------|--------|------------------------|--------|---------------------|--------|-----------------------|-----------|
|              |   |                   |   |                |   |                  |      |
| Series A warrants |   | Four and a  half years |   | $                   | 0.992  |                  | 1,000,000 |   |
| Series B warrants |   | Two years              |   | $                   | 0.873  |                  | 666,668   |   |
| Series C warrants |   | Four and a  half years |   | $                   | 0.992  |                  | 666,664   |   |
| Series D warrants |   | Two years              |   | $                   | 0.873  |                  | 666,664   |   |
|              |   |                   |   |                |   | 2,999,996             |      |

 

The Series A and Series B warrants are exercisablebeginning upon the later of September 11, 2004 or the effective date of theRegistration Statement and for a term as noted in the table above.  Series C and Series D warrants becomeexercisable only in the event that the Company’s ordinary shares are delistedfrom The Nasdaq SmallCap Market, beginning upon the later of the date ofdelisting and September 11, 2004, for the term noted in the table above. All of the Warrants are subject to customary anti-dilution adjustments.

 

The Companymay require the Purchasers to exercise their right to purchase ordinary sharespursuant to the Additional Investment Rights or Warrants if the closing priceof the ordinary shares on The Nasdaq SmallCap Market or alternative thereforexceeds the respective exercise prices of the Additional Investment Rights orany series of the Warrants by at least 100% for twenty consecutive trading dayson which the average daily trading volume of the ordinary shares on the NasdaqSmallCap Market or alternative therefor is at least 250,000 Ordinary Shares,excluding blocks of 25,000 or more ordinary shares.

 

**5.   Accrued Restructuring Charges**

 

Accruedrestructuring charges consisted entirely of idle-lease costs as of March 31,2004 and 2003.  The following is areconciliation of the accrued restructuring charges for the three-month periodsended March 31, 2004 and 2003.

 
|                                |   | **Three  Months Ended  March 31,** |   |
|-------------------------------------|--------|------------------------------------|--------|
|                                |   | **2004**                           |   | **2003** |   |
|                                |   | **(In  thousands)**                |   |
|                                |   |                               |   |   |   |
| Balance at beginning of period      |   | $                                  | 320    |   | $ | 612 |   |
| Less:   Payments during period |   | (71                                | )      | (70 | ) |
| Balance at end of period            |   | $                                  | 249    |   | $ | 542 |   |

 

Amounts payable within one year have been classified as a currentliability in the accompanying condensed consolidated balance sheets.

 

10

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

 

The Company hasadopted SFAS No. 131, *Disclosures About Segments of an Enterprise andRelated Information*. The Company operates in one reportable segment(see Note 1 for a brief description of the Company’s business). The totalrevenues are attributed to geographic areas based on the location of theend-user customer as follows:

 
|           |   | **Three  months ended  March 31,** |   |
|----------------|--------|------------------------------------|--------|
|           |   | **2004**                           |   | **2003** |   |
|           |   | **(in  thousands)**                |   |
|           |   |                               |   |   |   |
| United States  |   | $                                  | 661    |   | $ | 778 |   |
| Europe         |   | 124                                |   | 174 |   |
| Israel         |   | 118                                |   | 162 |   |
| Other          |   | 77                                 |   | 106 |   |
| Total revenues |   | $                                  | 980    |   | $ | 1,220 |   |

 

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**MANAGEMENT’S DISCUSSION AND****ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

*Statements in thisQuarterly Report on Form 10-Q concerning RadView’s business outlook or futureperformance; anticipated revenues, expenses or other financial items; productintroductions and plans and objectives related thereto; and statementsconcerning assumptions made or expectations as to any future events,conditions, performance or other matters, are “forward-looking statements” asthat term is defined under U. S. federal securities laws. Forward-lookingstatements are subject to various risks, uncertainties and other factors thatcould cause actual results to differ materially from those stated in suchstatements. These risks, uncertainties and factors include, but are not limitedto: our history of losses; market acceptance of our products; our ability todevelop new products and enhance existing products; impact of significantcompetition; and other factors detailed in RadView’s filings with theSecurities and Exchange Commission, including this Quarterly Report on Form10-Q.*

 

# **Overview**

# ** **

We develop, market and support software that enablescompanies to assure the scalability, efficiency and reliability of webapplications.   In 1997, we introducedWebLOAD, a single-user load testing solution, which provides an integratedsolution to assess the performance and accelerate the deployment of webapplications.  In February 2000, weintroduced WebRM, a multiple-user load testing solution, which extends thefunctionality of WebLOAD to facilitate the collaborative testing efforts ofboth small and large testing teams to verify web application quality throughoutthe application development lifecycle. In August 2001, we introduced WebFT, a testing tool for verification ofthe functionality of web applications. In July 2003, we introduced WebLOAD Analyzer, a solution for identifyingthe root-cause of performance problems within web applications.

 

In March 2004,we completed a private placement of our ordinary shares, warrants and the rightto purchase additional shares.  Werealized net proceeds from of $1.8 million from this private placement.

 

# **Application of CriticalAccounting Policies and Estimates**

# ** **

## ***General***

## *** ***

We prepare our consolidated financial statements inconformity with accounting principles generally accepted in the U.S.  As such, we are required to make certainestimates, judgments and assumptions that we believe are reasonable based uponthe information available. These estimates and assumptions affect the reportedamounts of assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the periodspresented.  To fully understand andevaluate our reported financial results, we believe it is important tounderstand the significant estimates and judgments applied as they relate toour policies for revenue recognition, software development costs, restructuringcosts and accounting for stock options.  More detailed descriptions of these policies are provided in Note2 to the consolidated financial statements.

 

## ***Revenue Recognition***

## *** ***

Our revenue recognition approach requires that fourbasic criteria must be met before revenue can be recognized: (1) persuasiveevidence of an arrangement exists; (2) delivery has occurred or servicesrendered; (3) the fee is fixed and determinable; and (4) collectibility isreasonably assured.  Determination ofcriteria (3) and (4) is based on management’s judgments regarding the fixednature of the fee charged for services rendered and products delivered, and thecollectibility of those fees.  Shouldchanges in conditions cause management to determine these criteria are not metfor certain future transactions, revenue recognized for any reporting periodcould be adversely affected.

 

## ***Software Development Costs***

## *** ***

Software development costs incurred from the point ofreaching technological feasibility until the time of general product releaseshould be capitalized.  We define technologicalfeasibility as the completion of a working

 

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model.  The determination of technologicalfeasibility requires the exercise of judgment by our management.  Because we sell our products in a marketthat is subject to rapid technological change, new product development andchanging customer needs, we have concluded that technological feasibility isnot established until the development stage of the product is nearly complete.  For us, the period in which we cancapitalize software development costs is very short, so the amounts that couldbe capitalized are not material to our financial statements.  Therefore, we have charged all such costs toresearch and development expense in the period incurred

 

## ***Restructuring Charges***

## *** ***

In 2001, 2002 and 2003, we recorded significantrestructuring charges. These restructuring charges included estimatespertaining to employee separation costs and the settlements of contractualobligations resulting from our actions. In addition, we have estimated the costs for certain under-utilizedfacilities and have made assumptions regarding a potential sub-lessee’s futurerental rate, as well as the amount of time required to identify a sub-lessee.  To date, our actual restructuring costs haveapproximated the estimated costs recorded; however, actual future costs ofamounts not yet paid may differ from these estimates.

 

## ***Accounting for Stock Options***

## *** ***

We account forstock options 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 below the fair market price of our ordinary shares on thedate of grant.   We have provideddisclosures of impact to our reported net loss and net loss per share if we hadapplied the fair value method.  The proforma fair value disclosures requires the application of estimates, such asestimated expected life of the options and estimated market volatility for ourordinary shares.  These estimates arebased on management’s review of historical option lives and computations of marketvolatility for our ordinary shares.

 

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**Results of Operations**

 

The followingtable sets forth, as a percentage of total revenues, consolidated statement ofoperations data for the periods indicated:

 

 
|                       |   | **Three  Months Ended  March 31,** |   |
|----------------------------|--------|------------------------------------|--------|
|                       |   | **2004**                           |   | **2003** |   |
| Revenues:                  |   |                               |   |   |   |
| Software licenses          |   | 45.6                               | %      | 54.7 | % |
| Services                   |   | 54.4                               | %      | 45.3 | % |
| Total revenues             |   | 100.0                              | %      | 100.0 | % |
|                       |   |                               |   |   |   |
| Cost of revenues:          |   |                               |   |   |   |
| Software licenses          |   | 3.2                                | %      | 1.6 | % |
| Services                   |   | 8.1                                | %      | 9.8 | % |
| Total cost of revenues     |   | 11.3                               | %      | 11.4 | % |
|                       |   |                               |   |   |   |
| Gross profit               |   | 88.7                               | %      | 88.6 | % |
|                       |   |                               |   |   |   |
| Operating expenses:        |   |                               |   |   |   |
| Sales and marketing        |   | 82.1                               | %      | 100.8 | % |
| Research and development   |   | 64.5                               | %      | 69.7 | % |
| General and administrative |   | 51.2                               | %      | 35.8 | % |
| Stock-based compensation   |   | 8.6                                | %      | 9.1 | % |
| Total operating expenses   |   | 206.4                              | %      | 215.4 | % |
|                       |   |                               |   |   |   |
| Loss from operations       |   | (117.8%                            | )      | (126.8% | ) |
|                       |   |                               |   |   |   |
| Other income:              |   |                               |   |   |   |
| Interest income, net       |   | 0.3                                | %      | 1.1 | % |
| Other expense, net         |   | (0.0%                              | )      | (0.6% | ) |
|                       |   |                               |   |   |   |
| Net loss                   |   | (117.5%                            | )      | (126.3% | ) |

 

**Three Months Ended March 31, 2004 and 2003**

 

***Revenues***

 

*Total Revenues*. Total revenues were $980,000 for the threemonths ended March 31, 2004 and $1.2 million for the same period in 2003.  Total revenues decreased $240,000, or 19.7%,due to a $119,000 decrease in total revenues from customers in North Americaand a $121,000 decrease in total revenues from international customers.  The decrease in total revenues resultedprimarily from a decline in software licenses orders.

 

*Software Licenses*. Software license revenues were $447,000 for the three months ended March31, 2004 and $667,000 for the same period in 2003.  Software licenses revenues decreased $220,000, or 33.0%, andconsisted of a decline in software license revenues of $108,000 from NorthAmerican customers and $112,000 from international customers.  Software license revenues decreased as aresult of reduced average order size for our products and a decrease in ordervolumes in Europe and Asia Pacific.

 

*Services*. Service revenues consist primarily of revenue from annual support andmaintenance contracts and, to a lesser extent, training and consultingservices.  Services revenues were$533,000 for the three months ended March 31, 2004 and $553,000 for the sameperiod in 2003.  The decrease inservices revenues of $20,000, or 3.6%, was

 

14

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lesssignificant than that of software licenses due to improved renewal orders fromour support and maintenance business.

 

***Cost of Revenues***

 

*Cost of SoftwareLicenses*. Costof software licenses consists principally of direct product costs, such asproduct media and packaging, as well as royalties due to third parties.  Cost of software licenses increased to$31,000, or 6.9% of software license revenue, for the three months ended March31, 2004 from $20,000, or 3.0% of software license revenue, for the same periodin 2003.  The increase was due toincreased royalties payable to a third party based on revenues from our WebLOADAnalyzer product introduced in July 2003.

 

*Cost of Services*. Cost of services consists principally ofpersonnel-related costs associated with customer support and training.  Cost of services decreased to $80,000, or15.0% of service revenue, for the three months ended March 31, 2004 from$119,000, or 21.5% of service revenue, for the same period in 2003.  The decrease was due to reduced personnelcosts to provide support and maintenance services resulting from the headcountreductions taken in the second quarter of 2003.

 

***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 to $805,000, or 82.1% oftotal revenues, for the three months ended March 31, 2004 from $1.2 million, or100.8% of total revenues, for the same period in 2003.  The decrease was due primarily to headcountreductions of sales and marketing personnel during the second quarter of 2003along with reduced marketing program spending.

 

*Research andDevelopment*.  Research and development expenses consistprincipally of salaries and related expenses required to develop and enhancethe Company’s products.  Research anddevelopment expenses decreased to $632,000, or 64.5% of total revenues, for thethree months ended March 31, 2004, from $850,000, or 69.7% of total revenues,for the same period in 2003.  Thedecrease was due primarily to headcount reductions of research and developmentpersonnel during the second quarter of 2003.

 

*General andAdministrative*.  General and administrative expenses consistprincipally of finance, executive and administrative salaries and relatedexpenses, professional fees and other costs associated with being a publiccompany.  General and administrativeexpenses decreased to $502,000, or 51.2% of total revenues, for the threemonths ended March 31, 2004 from $437,000, or 35.8% of total revenues, for thesame period in 2003.  The decrease wasdue primarily to headcount reductions of general and administrative personnelduring the second quarter of 2003, partially offset by higher professional feesincurred in the first quarter of 2004.

 

*Stock-basedCompensation*.Stock-based compensation expense reflects the accounting charge relating to theissuance of equity instruments to employees at an exercise price below fairmarket value at date of grant and to all equity instruments issued tononemployees.  For stock options grantedto employees, the difference between the exercise price and the fair value ofthe ordinary shares on the date options are granted is charged to operations asstock-based compensation expense over the vesting period of the underlyingoptions.  For stock options granted tononemployees, the value of a particular grant as determined by theBlack-Scholes valuation model is charged to operations as stock-basedcompensation expense over the service period or vesting period of theunderlying option.  Stock-basedcompensation expense was $84,000 for the three months ended March 31, 2004compared to $111,000 for the same period in 2003.  This decrease resulted from the completion of all amortization ofdeferred compensation.  Deferredcompensation on the unvested options was included as a component ofshareholders’ equity and charged to stock-based compensation expense over thevesting period of the underlying options. As of March 31, 2004, there is no remaining unamortized deferredcompensation.

 

*Interest Income, Net*. Interest income, net consists principallyof interest earned on cash investments. Interest income, net was $3,000 for the three months ended March 31,2004 compared to $14,000 for the same period in 2003.  The decreases in interest income resulted from lower investedcash balances in 2004 as compared to 2003.

 

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*Other Expense, Net*. Other expense, net consists principally ofcurrency translation gains and losses. Other expense, net was $8,000 for the three months ended March 31,2004.  There was not other expense, netfor the same period in 2004.  The changewas due to exchange rate fluctuations.

 

*Income Taxes.*  We have estimated net operating loss carryforwards for Israelitax purposes totaling approximately $20.7 million through March 31, 2004 thatwould reduce future Israeli income taxes, if any. These net operating lossesmay be carried forward indefinitely and offset against future taxable businessincome.  We expect that during theperiod these losses are utilized, our income would be substantially taxexempt.  Accordingly, there will be notax benefit available from these losses and no deferred income taxes have beenincluded in our consolidated financial statements.

 

OurU.S. subsidiary has estimated net operating loss carryforwards for U.S. Federaland state tax purposes totaling approximately $28.3 million through March 31,2004.  These losses are available tooffset any future U.S. taxable income of the U.S. subsidiary and will expirebetween 2012 and 2024.  The Company hasrecorded a full valuation allowance against its deferred tax asset due to theuncertainty surrounding the ability and the timing of the realization of thesetax benefits.

 

**Liquidity and Capital Resources**

 

Cash and cash equivalentstotaled $4.0 million as of March 31, 2004 and $3.1 million as of December 31,2003.

 

Cash used in operating activities have resultedsubstantially from our reported net losses partially reduced by noncash itemssuch as, depreciation and stock-based compensation, and changes in currentassets and liabilities.

 

Cash used in operating activities was $854,000 for thethree months ended March 31, 2004 and $1.1 million for the same period in2003.  Cash used in operating activitiesfor the three months ended March 31, 2004 was due primarily to a net loss of$1.2 million and a decrease of $99,000 in accounts payable and accruedexpenses, partially offset by noncash items and an increase of $295,000 indeferred revenues.  Accrued expenses andaccounts payable decreased as a result of the payment of accruedpayroll-related costs and professional fees. Deferred revenues increased resulting from several large support and maintenancerenewal orders received during the quarter along with the receipt of a prepaidroyalty from a channel partner.

 

Cash used inoperating activities for the first three months of 2003 was due primarily to anet loss of $1.5 million, a decrease of $264,000 in accounts payable, accruedexpenses and accrued restructuring, partially offset by noncash items and adecrease of $217,000 in accounts receivable, a decrease of $111,000 in prepaidexpenses and other current assets, and an increase of $103,000 in deferredrevenues.  Accrued expenses, accountspayable and accrued restructuring decreased as a result of payment of such obligations.  Accounts receivable decreased as a result ofdecreased order volume.  Prepaidexpenses decreased as a result of amortization of prepaid insuranceamounts.  Deferred revenues increased asa result of the receipt of a prepaid royalty from a channel partner.

 

Cash used in investing activities was $30,000 for the three monthsended March 31, 2004 and resulted from the purchase of $18,000 in property andequipment and an increase of $12,000 in other assets.  Cash used in investing activities was $2,000 for the three monthsended March 31, 2003 and resulted from the purchase of $15,000 in property andequipment, partially offset by a decrease of $13,000 in other assets.

 

Cash used in financing activities was $1.8 million forthe three months ended March 31, 2004 and consisted of $1.8 million of netproceeds from a private placement of 3,333,331 of our ordinary shares in March2004 for an aggregate purchase price of $2.0 million.  In connection with the private placement, the investors also received four series ofwarrants to purchase an aggregate of up to 2,999,996 ordinary shares atexercise prices ranging from $0.87 to $0.99 per share.  In addition, we granted the investors anoption to purchase within one year an additional 3,333,331 ordinary shares at apurchase price of $0.81 per share.  Cashprovided by financing activities was $1,000 for the three months ended March31, 2003 and consisted of proceeds from exercise of stock options.

 

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We expect that operating expenses and, to a lesser extent, our plannedcapital expenditures, will constitute a material use of our cashresources.  We believe that our existingcash and cash equivalents, including the net proceeds from our recent privateplacement, will be sufficient to meet our anticipated needs for working capitaland capital expenditures for at least the next 12 months.  We may find it necessary to obtainadditional equity or debt financing.  Inthe event additional financing is required, we may not be able to completefinancing on acceptable terms or at all.

 

On February11, 2004, we received a letter from the Nasdaq under which we were informedthat we were not in compliance with Marketplace Rule 4320(e)(2)(B). This rulerequires a listed company to meet one of three tests involving shareholders’equity, market capitalization or net income. The Nasdaq’s staff advised us thatit would review our eligibility for continued listing on The Nasdaq SmallCapMarket. We provided the Nasdaq with our plan to achieve and sustain compliancewith The Nasdaq SmallCap Market minimum shareholders’ equity requirement of$2.5 million.  On April 1, 2004, at theNasdaq’s request, we filed a Form 8-K with the SEC that included a pro formabalance sheet reflecting that our pro forma shareholders’ equity as of February29, 2004 was approximately $2,735,000 after giving effect to the receipt of theproceeds of our private placement of 3,333,331 ordinary shares completed onMarch 17, 2004.  On April 5, 2004, theNasdaq advised us in writing that, based upon its review of our Form 8-K, itsstaff had determined that we were in compliance with Marketplace Rule4320(e)(2)(B) and that it had concluded its review of our eligibility forcontinued listing on The Nasdaq SmallCap Market.  The Nasdaq will continue to monitor our ongoing compliance withthe shareholder’s equity and if our future periodic reports do not evidencecompliance we may be subject to delisting.

 

# **Contractual Obligations**

# ** **

We lease all of our office facilities undernoncancellable operating leases that expire over varying terms through 2005.

 
|                        |   | **Payments due by Period** |   |
|-----------------------------|--------|----------------------------|--------|
| **Contractual Obligations** |   | **Total**                  |   | **Less than  1 year** |   | **1-3 years** |   | **3-5 years** |   | **More than  5 years** |   |
|                        |   | **(In Thousands)**         |   |
|                        |   |                       |   |   |   |   |   |   |   |   |   |
| Operating  leases           |   | $                          | 593    |   | $ | 516 |   | $ | 77 |   | $ | — |   | $ | — |   |
| Severance pay (1)           |   | 635                        |   | — |   | — |   | — |   | 635 |   |
| Total                       |   | $                          | 1,228  |   | $ | 516 |   | $ | 77 |   | $ | — |   | $ | 635 |   |
|                             |        |                            |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

# ** **

----

(1)        Severancepay relates to accrued severance obligations to our Israeli employees asrequired under Israeli labor laws. These obligations are payable only upon the termination of therespective employee and may be reduced if the employee’s termination isvoluntary.

 

**ITEM 3****.  QUALITATIVE AND QUANTITATIVE DISCLOSURESABOUT MARKET RISK**

 

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

 

The Companyconducts business in various foreign currencies, primarily in Europe andIsrael.  As a result, the Company isexposed to the effect of foreign currency exchange rate fluctuations on theU.S. dollar value of 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.

 

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**ITEM 4****.  CONTROLS AND PROCEDURES**

 

**Evaluationof Controls and Procedures**

 

We carried outan evaluation, under the supervision and with the participation of theCompany’s management, including the Company’s Chief Executive Officer (“CEO”)and Chief Financial Officer (“CFO”), of the effectiveness of the design andoperation of the Company’s disclosure controls and procedures as of the end ofthe period covered by this Quarterly Report on Form 10-Q. Based on thisevaluation, the CEO and CFO have concluded that the Company’s disclosurecontrols and procedures are effective to ensure that material information isrecorded, processed, summarized and reported by management of the Company on atimely basis in order to comply with the Company’s disclosure obligations underthe Securities Exchange Act of 1934 and the SEC rules thereunder.

 

**Changesin internal controls**

 

There were nosignificant changes in the Company’s internal controls or in other factors thatcould significantly affect these controls subsequent to the date of theevaluation.

 

**PARTII****- OTHER INFORMATION**

 

**Item2.****  Changes inSecurities and Use of Proceeds**

 

**(c) Sale ofUnregistered Securities**

 

See Part I,Item 1, Notes to the Condensed Consolidated Financial Statements, Note4—Shareholders’ Equity, and Part I, Item 2, “Management’s Discussion andAnalysis of Financial Condition and Results of Operations—Liquidity and CapitalResources” for a description of the Company’s private placement completed onMarch 17, 2004, which is incorporated by reference into Part II of this report.

 

**(d) Use of Proceeds from Sale of Registered Securities**

 

OnAugust 9, 2000, in connection with our initial public offering, the Securitiesand Exchange Commission declared effective a Registration Statement on Form F-1(No. 333-41526) that registered 5,750,000 ordinary shares.

 

Through March31, 2004, we have used $33.1 million of the net proceeds of the $35.3 millionfrom our initial public offering as follows:

•                  $1.9 million forcapital expenditures;

•                  $1.4 million forrepayment of principal and accrued interest on a loan with Rad DataCommunications, Inc., a related party;

•                  $3.8 million forrepayment of principal and accrued interest on long-term debt with a bank;

•                  $100,000 for therepurchase of ordinary shares; and

•                  $25.9 millionfor working capital.

 

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**Item6****.  Exhibits andReports on Form 8-K**

 

**(a)Exhibit Index**

 
| 31.1*  | Certification  by Chief Executive Officer pursuant to 15 U.S.C. Section 7241, as adopted  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                 |
| 31.2*  | Certification  by Chief Financial Officer pursuant to 15 U.S.C. Section 7241, as adopted  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |                                                                                                                                                 |
| 32*    | Certification  pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                             |

 

----

*  Filed herewith

 

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

 

•                  On March 18,2004, the Company reported the completion of a private placement of $2.0million of its ordinary shares, additional investment rights to purchaseordinary shares and four series of warrants to purchase ordinary shares.

 

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**SIGNATURES**

 

Pursuant tothe requirements 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:  May 13, 2003 | /s/  CHRISTOPHER DINEEN |   |
|                     | Christopher  Dineen     |
|                     | Chief Financial Officer |

 

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