---

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# UNITED STATESSECURITIES AND
EXCHANGE COMMISSIONWashington, D.C. 20549

# FORM 20-F

|o | REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------

# OR

|x | ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

# For the fiscal year
ended December 31, 2007

# OR

|o | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

# OR

|o | SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

Date of event requiring
this shell company report

For the transition period from                         to

Commission file number

RadView Software Ltd. (Exact name of
Registrant as specified in its charter)

ISRAEL (Jurisdiction of incorporation or organization)
14 Hamelacha Street, Park Afek, Rosh Ha'ayin 48091 Israel (Address of principal executive offices)

Securities registered or to be
registered pursuant to Section 12(b) of the Act:    NONE

Securities registered or to be
registered pursuant to Section 12(g) of the Act:     Ordinary Shares, nominal value NIS
0.01 per share

Securities for which there is a
reporting obligation pursuant to Section 15(d) of the Act:    NONE

Indicate the number of outstanding
shares of each of the issuers classes of capital or common stock as of the close of
the period covered by the annual report:    158,571,330 Ordinary Shares, nominal
value NIS 0.01 per share as of December 31, 2007 and 158,571,330 Ordinary Shares, nominal
value NIS 0.01 per share as of June 30, 2008.

Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes
o No  x

If this report is an annual or
transition report, indicate by check-mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o No x

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes
 x No  o

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):

Large accelerated filer  o                       Accelerated filer o      Non-accelerated filer  x

Indicate by check mark which
financial statement item the registrant has elected to follow:

Item  17  o             Item 18  x



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If this is an annual report, indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).

Yes o No  x

Indicate by check mark which basis of
accounting the registrant has used to prepare the financial statements included in this
filing:

U.S. GAAP  x
International  Financial  Reporting  Standards as issued by the International  Accounting  Standards Board  o Other o

If Other has been checked
in response to the previous question, indicate by check mark which financial statement
item the registrant has elected to follow.

Item 17 o Item 18  o



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# TABLE OF CONTENTS

|                                                                                      |   
|------------------------------------------------------------------------------------- | --
|
|
|
|
|PART I                                                                                | 1 
|ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS                         | 1 
|ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE                                       | 1 
|ITEM 3: KEY INFORMATION REGARDING THE COMPANY                                         | 1 
|ITEM 4: INFORMATION ON THE COMPANY                                                    | 13
|ITEM 4A: UNRESOLVED STAFF COMMENTS                                                    | 22
|ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  | 23
|ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    | 39
|ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             | 48
|ITEM 8: FINANCIAL INFORMATION                                                         | 52
|ITEM 9: THE OFFER AND LISTING                                                         | 52
|ITEM 10: ADDITIONAL INFORMATION                                                       | 53
|ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                    | 65
|ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 66
|PART II                                                                               | 66
|ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              | 66
|ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 66
|ITEM 15: CONTROLS AND PROCEDURES                                                      | 66
|ITEM 16: [RESERVED]                                                                   | 67
|ITEM 16A: AUDIT COMMITTEE FINANCIAL EXPERT                                            | 67
|ITEM 16B: CODE OF ETHICS                                                              | 67
|ITEM 16C: PRINCIPAL ACCOUNTANT FEES AND SERVICES                                      | 68
|ITEM 16D: EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  | 69
|ITEM 16E: PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      | 69
|PART III                                                                              | 69
|ITEM 17: FINANCIAL STATEMENTS                                                         | 69
|ITEM 18: FINANCIAL STATEMENTS                                                         | 69
|ITEM 19: EXHIBITS                                                                     | 70
|SIGNATURES                                                                            | 72

ii

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FORWARD-LOOKING
STATEMENTS

In addition to historical
information, this annual report on Form 20-F contains forward-looking statements.Some
of the statements under Item 3.D: Risk Factors, Item 4: Information on
the Company, Item 5:Operating and Financial Review and Prospects and
elsewhere in this annual report, constitute forward-lookingstatements. These
statements relate to future events or other future financial performance, and areidentified
by terminology such as may, will, should, expect,scheduled, plan, intend,anticipate, believe, estimate, aim,potential, or
continue or the negative of those terms or othercomparable
terminology. These forward-looking statements are subject to certain risks, uncertainties
andassumptions about us that could cause actual results to differ materially from
those reflected in theforward-looking statements. These forward-looking
statements are based, among other things, on assumptions inconnection with:

| |  | the
price and market liquidity of our ordinary shares;
| | - | ------------------------------------------------------

| |  | our
ability to attain necessary working capital;
| | - | ------------------------------------------------

| |  | the
market demand for our products;
| | - | -----------------------------------

| |  | our
ability to retain key technical and management personnel; and
| | - | -----------------------------------------------------------------

| |  | our
future performance, sales, gross margins, expenses (includingstock-based
compensation expenses) and cost of revenues.
| | - | -------------------------------------------------------------------------------------------------------------------------

Assumptions relating to the
foregoing involve judgment with respect to, among other things, future economic,competitive
and market conditions, and future business decisions, all of which are difficult or
impossible topredict accurately and many of which are beyond our control. In
light of the significant uncertaintiesinherent in the forward-looking information
included herein, the inclusion of such information should not beregarded as a
representation by us or any other person that our objectives or plans will be achieved.
Factorsthat could cause actual results to differ from our expectations or
projections include the risks anduncertainties relating to our business described
in this annual report under Item 3.D: Risk Factors,Item5:
Operating and Financial Review and Prospects and elsewhere in this annual report.
Readers are cautionednot to place undue reliance on these forward-looking
statements, which reflect managements analysis as ofthe date hereof. We
undertake no obligation to publicly revise these forward-looking statements to reflectevents or circumstances that arise after the date hereof, except as required by
applicable law. In additionto the disclosure contained herein, readers should
carefully review any disclosure of risks and uncertaintiescontained in other
documents that we file from time to time with the Securities and Exchange Commission (theSEC).

References to websites in this Form
20-F do not incorporate the contents of such websites.

iii

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# PART I

# Item 1: Identity of
Directors, Senior Management and Advisors

Not required.

# Item 2: Offer Statistics
and Expected Timetable

Not required.

# Item 3: Key Information
Regarding the Company

Unless the context otherwise
requires, RadView, us, we and our refer to
RadView Software Ltd. and its subsidiaries.

# 3A: Selected
Consolidated Financial Data

The selected consolidated financial
data set forth below as of December 31, 2006 and 2007 and for each of the years ended
December 31, 2005, 2006 and 2007 are derived from our audited consolidated financial
statements, which are included in Item 18 of this Annual Report on Form 20-F. The selected
consolidated financial data as of December 31, 2003 and 2004 and for the years ended
December 31, 2003 and 2004 are derived from our audited consolidated financial statements,
which are not included in this Annual Report on Form 20-F. The data should be read in
conjunction with and is qualified by reference to our Consolidated Financial Statements
and the Notes thereto and with Managements Discussion and Analysis of
Financial Condition and Results of Operations appearing elsewhere in this Annual
Report on Form 20-F.

1

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|                                                         | Year Ended December 31,
|-------------------------------------------------------- | -----------------------
|
|
|
|
|                                                         |                        
|Consolidated Statements of Operations Data:              |                        
|Revenues:                                                |                        
|Software licenses                                        |                        
|Services                                                 |                        
|                                                         |                        
|Total revenues                                           |                        
|                                                         |                        
|                                                         |                        
|Cost of revenues:                                        |                        
|Software licenses                                        |                        
|Nonrecurring royalty reversal                            |                        
|Services                                                 |                        
|                                                         |                        
|Total cost of revenues                                   |                        
|                                                         |                        
|                                                         |                        
|Gross profit                                             |                        
|                                                         |                        
|                                                         |                        
|Operating expenses:                                      |                        
|Sales and marketing                                      |                        
|Research and development                                 |                        
|General and administrative                               |                        
|Restructuring charges                                    |                        
|                                                         |                        
|Total operating expenses                                 |                        
|                                                         |                        
|                                                         |                        
|Operating loss                                           |                        
|                                                         |                        
|Financial income (expenses), net                         |                        
|Income Tax                                               |                        
|                                                         |                        
|Net Loss                                                 |                        
|                                                         |                        
|Deemed dividend on convertible preferred shares and      |                        
|exercise of additional investment rights during the year |                        
|                                                         |                        
|Net loss attributable to ordinary shares                 |                        
|                                                         |                        
|                                                         |                        
|Basic and diluted net loss per ordinary share            |                        
|                                                         |                        
|                                                         |                        
|Weighted average number of ordinary shares used in       |                        
|computing basic and diluted net loss per ordinary share  |                        
|                                                         |                        

|                                     | As of December 31,
|------------------------------------ | ------------------
|
|
|
|                                     |                   
|Consolidated Balance Sheet Data:     |                   
|Cash and cash equivalents            |                   
|Working capital (deficit)            |                   
|Total assets                         |                   
|Total shareholders' equity (deficit) |                   

# 3B: Capitalization and
Indebtedness

Not applicable

# 3C: Reasons for the
Offer and Use of proceeds

Not applicable

2

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# 3D: Risk Factors

In addition to risks and
uncertainties in the ordinary course of business that are common to all businesses,
important factors that are specific to our industry and our company could materially
impact our future performance and results. We have provided below a list of these risk
factors that should be reviewed in connection with our securities. These are not all the
risks we face and other factors currently considered immaterial or unknown to us may
impact our future operations.

# Risks Related to Our
Open Source Model

Our open source edition
of WebLOAD could impede sales of our parallel commercial software solutions.

The nature of open source is that
software is free to use and the source code is provided without charge. Despite the
general inferiority of open source editions relative to the commercial editions, there is
still a risk that existing and potential customers may ignore the quality difference and
choose open source over purchasing the commercial edition. Our future commercial sales of
products, as well as sales of our support services (initial and renewal), may be adversely
affected by the availability of open source editions.

With the launch of our Open Source
Edition we are now competing for user downloads and consumer awareness of and
identification with other open source performance testing tools such as Jmeter, Open STA
and TheGrinder. Some of these open source communities are dedicated communities of users
and contributors that have been built over years.

One of the characteristics of open
source software is that anyone can offer new software products for free under an open
source licensing model in order to gain rapid and widespread market acceptance. Such
competition can develop without the degree of overhead and lead time required by
traditional technology companies. It is possible for new competitors with the greater
resources than ours to develop their own open source solutions, potentially reducing the
demand for our solutions. In addition, some of these communities (such as the Jmeter
community), because they are not affiliated with a commercial vendor, may be viewed as
more desirable than the WebLOAD Open Source community. We may not be able to compete
successfully against current and future competitors. Competitive pressure and/or the
availability of open source software may result in price reductions, reduced revenue,
reduced operating margins and loss of market share, any of which could materially
adversely affect our business.

We are unable to predict
the market acceptance of our open source edition.

We introduced our Open Source Edition
in April 2007 and have not accumulated sufficient information to date on use and
satisfaction with our product to determine if our market strategy has been successful. If
our Open Source Edition does not generate sufficient customer awareness or open source
community participation, we will be unable to realize on the substantial investment we
made in development and marketing efforts and may suffer set backs in development and
market acceptance of our commercial products, which may have a material adverse effect on
our business.

We may be unable to
predict the future course of open source technology development, which could reduce the market
appeal of our products and damage our reputation.

We do not exercise control over many
aspects of the development of open source technology. Different groups of open source
programmers compete with one another to develop new technology. Typically, the technology
developed by one group will become more widely used than that developed by others. If we
acquire or adopt new technology and incorporate it into our products but competing
technology becomes more widely used or accepted, the market appeal of our products may be
reduced and that could harm our reputation, diminish the WebLOAD brand and result in
decreased revenue.

Our products contain
third party open source software, and failure to comply with the terms of the underlying open
source software licenses could restrict our ability to sell our products.

Our products are distributed with
software programs licensed to us by third party authors under open source
licenses, which may include the GPL, the GNU Lesser Public License, or LGPL, the BSD
License and the Apache License. These open source software programs can include, without
limitation, Snort®, Linux, Apache, Openssl, Etheral, IPTables, Tcpdump and Tripwire.
These third party open source programs are typically licensed to us for a minimal fee or
no fee at all, and the underlying license agreements generally require us to make
available to the open source user community the source code for such programs, as well as
the source code for any modifications or derivative works we create based on these third
party open source software programs. Included with our software are copies of the relevant
source code and licenses for the open source programs. Alternatively, we include
instructions to users on how to obtain copies of the relevant open source and licenses.
Additionally, if we combine our proprietary software with third party open source software
in a certain manner, we could, under the terms of certain of these open source license
agreements, be required to release the source code of our proprietary software. This could
allow our competitors to create similar products, which would result in a loss of our
product sales.

3

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Use of third party
software in our open source edition may subject us to claims of misuse and otherwise
restrict our ability to commercialize our products.

Our ability to commercialize our
products by incorporating third party open source software may be restricted because,
among other reasons:

| |  | the
terms of the open source license agreements may be unclear and subject to varying
interpretations, which could result in unforeseen obligations regarding our proprietary
products;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | it
may be difficult to determine the developers of open source software and whether such
licensed software infringes another partys intellectual property rights;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | competitors
will have greater access to information by obtaining these open source products, which
may help them develop competitive products;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------

| |  | open
source software potentially increases customer support costs because licensees can modify
the software and potentially introduce errors; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------

| |  | third
party suppliers may assert claims against us for which we may be required to pay damages
and which may otherwise result in the discontinuance of our sales until we can develop
alternative software solutions.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We may not be able to
protect our intellectual property rights and we may lose a valuable asset or incur costly and
time-consuming litigation attempting to protect our rights.

Our success depends upon the
protection of our technology, trade secrets and trademarks. To protect our rights to our
intellectual property, we rely on a combination of trade secret protection, patent law,
trademark law, confidentiality agreements and other contractual arrangements. The
protective steps we have taken may be inadequate to deter infringement or
misappropriation. We may be unable to detect the unauthorized use of our intellectual
property or take appropriate steps to enforce our intellectual property rights. Policing
unauthorized use of our products and technology is difficult. In addition, the laws of
some foreign countries in which we currently or may in the future sell our products do not
protect our proprietary rights to as great an extent as do the laws of the United States.

With the introduction of our Open
Source Edition, we expose that portion of our proprietary technology to the public which
may lead to unintended access to our confidential proprietary software. The reach of the
open source community, beyond geographic borders, makes difficult the ability to police
the proper use and protection of our software. Failure to adequately protect against or to
promptly detect unauthorized use of our intellectual property could devalue our
proprietary content and impair our ability to compete effectively. Defending our
intellectual property rights could result in the expenditure of significant financial and
managerial resources, whether or not the defense is successful. Our means of protecting
our proprietary rights may not be adequate and our competitors may independently develop
similar technology, or duplicate our products or our other intellectual property. We may
have to resort to litigation to enforce our intellectual property rights, to protect our
trade secrets or know-how or to determine the scope, validity or enforceability of our
intellectual property rights. Our protective measures may prove inadequate to protect our
proprietary rights, and any failure to enforce or protect our rights could cause us to
lose a valuable asset.

# Risks Related to Our
Business

We do not have sufficient
insurance to cover all of our potential product liability and warranty claims.

Companies use our products to
assure the performance of their web applications. In many cases, web applications serve
critical business functions. The sale and support of our products may entail the risk of
product liability or warranty claims based on our products not detecting critical errors
or problems with web applications that fail in a live environment and cause
companies financial loss. In addition, the failure of our products to perform to customer
expectations could give rise to warranty claims. Although we seek to limit our exposure to
claims under our license terms and we carry general liability insurance, it is unlikely
that our insurance would cover potential claims of this type and our insurance may not be
adequate to protect us from all liability that may be imposed. If we are subject to any
claims, our results of operations may be materially adversely affected.

We may be subject to intellectual property infringement claims that, with or without merit, could be costly
to defend or settle.

Substantial litigation regarding
intellectual property rights exists in the software industry. We expect that software
products may be increasingly subject to third-party infringement claims as the number of
competitors in our industry segments grows and the functionality of products in different
industry segments overlaps.

4

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Third parties may make a claim of
infringement against us with respect to our products and technology or claims that our
intellectual property rights are invalid. Any claims, with or without merit, could:

| |  | be
time-consuming to defend;
| | - | ----------------------------

| |  | result
in costly litigation;
| | - | ----------------------------

| |  | divert
management's attention and resources;
| | - | --------------------------------------------

| |  | delay
product delivery, or
| | - | --------------------------

| |  | result
in substantial damage awards.
| | - | ------------------------------------

In addition, if our products were
found to infringe a third partys proprietary rights, we could be required to enter
into royalty or licensing agreements in order to continue to be able to sell our products.
Royalty or licensing agreements, if required, may not be available on terms acceptable to
us or at all. A successful claim of product infringement against us and our failure or
inability to license the infringed or similar technology could have a material adverse
effect on our business.

We expect to depend on
sales of our WebLOAD product for a substantial majority of our revenues for the foreseeable
future.

We anticipate that revenues from our
WebLOAD product will constitute a substantial majority of our revenues for the foreseeable
future. Consequently, any decline in the demand for our WebLOAD product would have a
material adverse effect on our business.

We have also entered into technology
licenses arrangements with Ixia and OPNET Technologies that permit the use of the
technology underlying our WebLOAD product and we may enter into additional licenses in the
future. These technology licenses will generate revenues for only a specified period of
time.

If we fail to develop new
products or fail to enhance our existing products to respond to emerging technologies and
industry trends, we will likely lose market share to our competitors and our revenues
will likely decline.

The target market for our products is
characterized by rapid technological change, frequent new product introductions, changes
in customer requirements, evolving industry standards and significant competition. We
expect to introduce new versions and develop enhancements to our existing products. Our
future financial performance depends upon our ability to timely identify new market trends
and Internet technology and to develop and commercialize software that is compatible with
these emerging trends and technologies. We may not accurately identify trends and
technologies or we may experience difficulties that delay or prevent the successful
development, introduction or marketing of new or enhanced software products in the future.
In addition, our products may not meet the requirements of the marketplace or achieve
market acceptance. If we fail to successfully and timely develop and deploy new products
or product enhancements, we may lose market share to our competitors and our revenues may
decline.

Our existing software products could
become obsolete and unmarketable with the introduction of products, web applications or
computer systems employing new technologies or industry standards.

The commercial web application
performance and testing solutions market is intensely competitive, subject to rapid change
and significantly affected by new product introductions and other activities of market
participants. Our primary competitors include companies which offer performance-testing
software, such as Mercury Interactive (HP), Borland, IBM, Empirix and Compuware. Some of
our competitors have longer operating histories, better brand recognition, a larger
installed base of customers and substantially greater financial, technical, marketing and
other resources than we do. As a result, they may be able to respond more quickly to new
or changing opportunities, technologies, standards or customer requirements.

If our current software products
become obsolete and we fail to introduce new products, our business will not be viable.
Further, if our competitors introduce products earlier or that are more responsive than
our products to emerging technologies and market trends, we will lose market share to our
competitors and our revenues may decline.

5

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New competitors could
emerge or our customers or distributors could internally develop alternatives to our products
and either development could impair our sales.

We may face competition from emerging
companies as well as established companies who have not previously entered the market for
performance testing products. Established companies may not only develop their own
performance testing tools, but they may also acquire or establish product integration,
distribution or other cooperative relationships with our current competitors. New
competitors or alliances among competitors may emerge and rapidly acquire significant
market share due to factors such as greater brand name recognition, a larger installed
customer base and significantly greater financial, technical, marketing and other
resources and experience.

Many of our competitors also have
broader and more established distribution channels that may be used to deliver competing
products directly to customers through bundling or other means. If competitors were to
bundle competing products with their products, the demand for our products might be
substantially reduced and our ability to distribute our products successfully would be
substantially diminished. The entry of new competitors into our market could reduce our
sales, require us to lower our prices, or both. Many of the factors that affect
competition are outside our control, and there can be no assurance that we can maintain or
enhance our competitive position against current and future competitors.

We expect that competition will
intensify in the future and that additional competitors will enter the market with
innovative competing products that may change the competitive landscape. Increased
competition is likely to result in pricing pressures, reduced margins and may result in
the failure of our products to achieve or maintain market acceptance, any of which could
have a material adverse effect on our business, results of operations and financial
condition.

Defects in our products
may increase our costs and diminish the demand for our products.

Our products are complex and they
have occasionally contained, and may in the future contain, undetected errors when first
introduced or when new versions are released. If our products do not perform as intended
in specific company environments, we may incur warranty costs, be subject to liability and
experience delays. Regardless of the source of the errors, we must divert the attention of
our engineering personnel from our research and development efforts to address any errors.
Any insurance policies that we may have may not provide sufficient protection should a
claim be asserted. Moreover, the occurrence of errors, whether caused by our products or
the products of another vendor, may result in significant customer relation problems and
injury to our reputation and may impair the market acceptance of our products and
technology.

Failure to develop
strategic relationships could limit our growth.

We believe that our success in
penetrating our target markets depends in part on our ability to develop and maintain
strategic relationships with resellers, systems integrators and distribution partners. If
we are unable to maintain our existing marketing and distribution relationships, or fail
to enter into additional relationships, we will have to devote substantially more
resources to direct sales and marketing of our products. In addition, licenses of our
products through indirect channels have been limited to date. Our existing relationships
do not, and any future relationships may not, afford us exclusive marketing or
distribution rights. Therefore, our partners could reduce their commitment to us at any
time in the future. Many of these partners have multiple relationships and they may not
regard us as significant for their business. In addition, these partners may terminate
their relationships with us, pursue other relationships with our competitors or develop or
acquire products that compete with our products. Even if we succeed in entering into these
relationships, they may not result in additional customers or revenues.

The success of our
business depends on our senior management, whose knowledge of our business and expertise
would be difficult to replace.

Our success depends largely on the
continued contributions of our senior management. Employment agreements with our senior
management team and other key personnel do not require a specified service obligation. We
also do not carry life insurance on our senior management or other key personnel. If one
or more members of our senior management were to terminate their employment, we could
experience delays in product development, loss of sales and diversion of management
resources.

6

---

---

We may not be able to
retain our existing personnel, which could negatively impact development, sales and
support of our products.

In the past we have reduced the size
of our workforce in order to reduce our operating expenses. As a result, our success
depends on our ability to retain our existing experienced employees. If we fail to retain
our current employees, our revenues could decline. Competition for qualified personnel is
intense, and we may not be able to retain our highly qualified personnel. Our future
success also depends upon the continued service of our key sales, marketing and support
personnel. In addition, our products and technologies are complex and we are substantially
dependent upon the continued service of our existing engineering personnel. None of our
key employees are bound by an employment agreement that requires a specified service
obligation. If we are not able to retain our existing personnel, we could have difficulty
developing, selling or supporting our products.

# Risks Related to Our
Operations

We have had losses since
our inception and expect to incur losses for the foreseeable future.

We incurred net losses of $2.5
million in 2005, $2.7 million in 2006 and $4.8 million in 2007. As of December 31, 2007,
we had an accumulated deficit of $67.2 million. We expect to incur losses for the
foreseeable future and cannot be certain if, or when, we will achieve profitability. Even
if we do achieve profitability, we may not be able to sustain or increase profitability on
a quarterly or annual basis in the future.

We will need additional
capital to finance our operations.

We will need to raise additional
capital to finance our operations unless we are able to generate cash from operations. To
date we have been unable to generate cash from operations. Cash used in operating
activities was, $1.9 million in 2005, $1.9 million in 2006 and $3.5 million in
2007.

In August 2006, the Company completed
a financing transaction under which the investors made an initial investment of $1.5
million, with the investors having the right to invest an additional $2.25 million over
the 18 month period after the closing, out of which they invested $0.7 million during 2006
and $1 million during 2007 to date. In March and May 2007, the Company completed two
private placements for the purchase of our ordinary shares and warrants to purchase
ordinary shares, raising approximately $3.4 million. There is no assurance as to any
additional amounts that the investors in each of these transactions will elect to invest
beyond the investments to date. We expect that current funds will be sufficient to fund
operations for the next twelve months.

Our ability to actively seek
out other forms of financing or pursue strategic alternatives is significantly restricted
under the terms of the 2006 financing. We are restricted in our ability to
seek other financing or pursue other strategic alternatives without the approval of the
holders of our Preferred Shares. As a result, in the event that alternative financing is
needed but not approved by the holders of Preferred Shares, our ability to continue
operations will be materially adversely affected.

Our sales cycle depends
partly on factors outside our control and may cause our revenues to vary significantly.

Our customers view the purchase of
our products as an important decision. As a result, our customers may take a long time to
evaluate our products before making their purchase decisions and this could result in a
long, and often unpredictable, sales and implementation cycle for our products. This may
cause our revenues and results of operations to vary significantly from period to period.
In addition, we may expend significant sales and marketing expenses during the evaluation
period before the customer places an order with us. Our customers often begin by
purchasing our products on a pilot basis before they decide whether or not to purchase
additional licenses for broader use within their organizations.

We usually have no significant order
backlog. This makes revenues in any quarter substantially dependent upon orders we receive
and deliver in that quarter. Because of this, our revenues and results of operations in
any quarter may not meet market expectations or be indicative of future performance and it
may be difficult for an investor to evaluate our prospects.

7

---

---

Our quarterly operating
results may fluctuate, and if we fail to meet the expectations of our investors, our share
price may decrease significantly and shareholders could lose part or all of their
investment.

Our quarterly revenues and operating
results have varied significantly in the past and are likely to continue to vary
significantly in the future. Our future quarterly operating results may fluctuate
significantly and may not meet the expectations of investors.

The factors that may cause
fluctuations of our operating results include the following:

| |  | the
size, timing and terms of sales of our products and services;
| | - | -----------------------------------------------------------------

| |  | unexpected
 delays we may encounter in  introducing  new versions of our existing  products as well
as any          new future products and services;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------

| |  | our
ability to successfully retain our direct sales force and international sales
organization;
| | - | -----------------------------------------------------------------------------------------------

| |  | our
ability to establish and maintain relationships with our partners;
| | - | ----------------------------------------------------------------------

| |  | the
fixed nature of expenses such as base compensation and rent; and
| | - | --------------------------------------------------------------------

| |  | transaction
costs, including legal, investment banking and accounting fees, in connection with
extraordinary activities, such as obtaining financing or pursuing our strategic
alternatives.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Due to these and other factors,
we believe that period-to-period comparisons of our results of operations may not be
meaningful and should not be relied upon as indicators of our future performance. It is
possible that in future periods our results of operations may be below the expectations of
public market analysts and investors. If this occurs, the price of our ordinary shares may
decline.

We may fail to maintain
effective internal control in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.

Pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002, our management is required to evaluate the effectiveness of
our internal control over financial reporting on an annual basis and furnish a report with
managements assessment. Our management is also required to report on the
effectiveness of our disclosure controls and procedures. We believe that significant time,
effort and expense, including time of senior management will continue to be required to
design, maintain and evaluate the internal control system over financial reporting under
these rules. For these reasons, the costs involved in achieving Section 404 compliance
could have a material adverse effect on our business, results of operations and prospects.

We have identified and reported 
significant deficiencies in our internal control over financial reporting that, taken
together, may have constituted a material weakness, and we are in process of remediating
these deficiencies. We may not be successful in remediating these deficiencies in the near
or long term and we may not be able to prevent other deficiencies in the future.

Risks Relating To Our
Financing Transaction

There has been and will
continue to be substantial dilution to our existing shareholders as a result of the 2006 financing.

At the closing of our 2006 financing,
we issued to the investors 25,000,000 Preferred Shares, convertible debt that could be
convertible into 25,000,000 Preferred Shares, and warrants to purchase up to an additional
18,750,000 Preferred Shares. The investors had the additional right, within 18 months
after the closing, to purchase up to an additional 75 million Preferred Shares and
warrants to purchase up to a total of 56,250,000 additional Preferred Shares. That
additional investment right was exercised in part in three additional investments by one
of the investors under that financing, as described below, as a result of which we issued
to that investor 56,666,668 Preferred Shares and warrants to purchase up to an additional
42,500,000 Preferred Shares. The remainder of the additional investment rights expired in
March 2008. As a result, the investors in the 2006 financing have the ability, upon
conversion of the Preferred Shares and convertible debt and exercise of the warrants, to
acquire up to 167,916,668 of our ordinary shares.

The three additional investments by
one of the investors as described above were made pursuant to three addendums to the
purchase agreement for the 2006 financing, each of which granted to the investor a new
option to purchase Preferred Shares and warrants to purchase Preferred Shares equal to the
amount acquired under the additional investments. The new options have expired. See Item
4B.  Business Overview  Recent Financings and Item 7B 
Related Party Transactions for further discussion of the new options.

In addition, in connection with the
Meitav Private Placements by certain institutional investors in March 2007 and May 2007,
the Company issued to those investors a total 56,378,980 ordinary shares and warrants to
purchase up to an additional 39,465,286 ordinary shares. The Company has issued to its
advisor in the private placements warrants to purchase 2,818,949 ordinary shares.

8

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Fortissimo and other
investors in the 2006 financing have control over most matters submitted to a vote of the shareholders,
thereby limiting the power of other shareholders to influence corporate action.

As of May 31, 2008, Fortissimo
Capital Fund GP, LP, or Fortissimo, owned 47.6% of our outstanding ordinary shares and,
together with certain other investors in the 2006 financing with which Fortissimo shares
voting rights, owned 53.9% of our outstanding ordinary shares (including the ordinary
shares issuable upon conversion of the Preferred Shares held by them) and together with
those other investors, owned 69.3% of our outstanding shares, including shares issuable on
exercise of warrants and additional investment rights and conversion of debt. See Item 7A.
 Major Shareholders. Fortissimo and these investors are parties to a
voting agreement to vote their shares with Fortissimo, as a result of which, Fortissimo
has the power to substantially influence the outcome of most matters submitted to a vote
of shareholders, including the election of members of our board and the approval of
significant corporate transactions. This concentration of ownership may also have the
effect of making it more difficult to obtain approval for a change in control of RadView.
In addition, Fortissimo is also entitled to nominate a majority of the members of our
board of directors to be designated as preferred directors. These preferred directors have
been granted approval authority over significant corporate actions and transactions.

As a result, Fortissimo has
substantial control over both the voting shares and our board of directors, which may
significantly limit the power of all other shareholders and our existing directors to
influence corporate actions.

Additionally, Fortissimo may exercise
its control over our business to affect directly or indirectly other aspects of our
operations, such as our business strategy, management structure, and personnel. There can
be no assurance that any changes resulting from the influence of Fortissimo will not
materially adversely affect our business.

We will incur additional
costs in connection with the 2006 financing.

We incur costs and expenses arising
directly from the financing such as interest expense and amortization of deferred
financing charges and warrants. In addition, we are required to pay to Fortissimo a
management fee in a minimum amount of $50,000 per year, plus an additional amount up to
$70,000 per year, such additional amount payable from our annual profits, if any. These
additional expenses will materially adversely affect our results of operations if we are
not able to increase our revenues and/or decrease our other expenses.

# Risks Relating to Our
Share Capital

Our ordinary shares are
listed on the Over-the-Counter Bulletin Board, or OTCBB.

Our shares are quoted on the OTCBB.
Until September 2004, our shares were traded on the Nasdaq SmallCap Market. As a result of
being traded on the OTCBB, our shareholders and we have experienced and may in the future
experience negative consequences, including:

| |  | a
less liquid trading market for our ordinary shares;
| | - | -----------------------------------------------------

| |  | loss
of  investor  confidence  that  could  result in the  decline in the  trading  price or
volume of our          ordinary shares;
| | - | ------------------------------------------------------------------------------------------------------------------------------------

| |  | decrease
of our reputation with prospects, customers, employees and vendors, any of which may have
a material adverse affect on our business; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------

| |  | reduced
access to capital markets in the event we need to raise additional capital.
| | - | -----------------------------------------------------------------------------------

The 2006 financing and
Meitav investments may have an adverse effect on the market price of our ordinary shares.

Under the terms of the 2006 financing
and the Meitav investments, our ordinary shares may be issued as a result of the
conversion of convertible securities and debt or the exercise of warrants. In the event
these ordinary shares would be sold at prices that are below the market price of our
ordinary shares at the time of exercise or conversion, the market price of our ordinary
shares may decline.

9

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The market price of our
ordinary shares has fluctuated and may continue to fluctuate significantly.

Our share price has fluctuated and
may continue to fluctuate significantly. Fluctuations in our share price can occur for
reasons that may be unrelated to operating results, including stock market-wide downturns
and events in the technology industry as well as in Israel. These fluctuations may
adversely affect the market price of our ordinary shares.

There may be an adverse
effect on the market price of our shares as a result of shares being available for sale in
the future.

In connection with previous capital
raising activities, including our private placement in March 2004 and revolving line of
credit facility in 2005, we have outstanding several series of warrants to purchase our
ordinary shares at various exercise prices. In connection with the 2006 financing, we have
issued a substantial number of Preferred Shares and warrants to purchase Preferred Shares,
as well as convertible debt that is convertible into Preferred Shares. Our ordinary shares
may be issued as a result of the conversion of our convertible securities or the exercise
of warrants. Under the terms of the 2006 Financing, the Meitav Private Placements, and the
Comerica warrant, the ordinary shares underlying the securities issued in those
transactions and certain other securities outstanding prior to those transactions may be
registered for resale to the public or may become freely tradeable under Rule 144.

If our current or future shareholders
sell substantial amounts of our ordinary shares, including shares issued upon the
conversion of Preferred Shares or convertible debt, or upon the exercise of outstanding
options and warrants, then the market price of our ordinary shares may decline.

These sales might also make it more
difficult for us to sell equity or equity-related securities in the future at a time and
place that we deem appropriate.

Following the 2006
financing, the privileges and rights of our ordinary shareholders are junior to the
rights of our preferred shareholders.

In connection with the 2006
financing, our Articles of Association were amended to allow for the creation of Preferred
Shares and establishment of their rights and preferences, which include the following:

| |  | Preferred
Shares vote on an as-converted basis with ordinary shares on all matters presented at a
general meeting of shareholders;
| | - | ----------------------------------------------------------------------------------------------------------------------------------

| |  | Preferred
Shares are entitled to nominate a majority of the members of the board of directors;
| | - | ----------------------------------------------------------------------------------------------

| |  | Preferred
Shares have a priority preference upon liquidation; and
| | - | -----------------------------------------------------------------

| |  | Preferred
Shares have protective rights over significant corporate actions, such as approval of
mergers and acquisitions, voluntary liquidation or dissolution, declaration of dividends,
amendments to the articles of association, sale or transfer of assets, and issuance of
securities with equal or superior rights.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result, the rights granted to
holders of our Preferred Shares may have an adverse effect on the rights and preferences
of our ordinary shareholders.

# Risks Relating to Our
Location in Israel

Conditions in Israel
affect our operations and may limit our ability to produce and sell our products, which could
have a material adverse effect on our business.

Our principal offices and many of our
subcontractors and suppliers are located in Israel. Accordingly, political, economic and
military conditions in Israel affect our operations. Since the establishment of the State
of Israel in 1948, a number of armed conflicts have taken place between Israel and its
Arab neighbors. A state of hostility, varying in degree and intensity, has led to security
and economic problems for Israel. Since October 2000, there has been a marked increase in
hostilities between Israel and the Palestinians, and in January 2006, Hamas, an Islamic
movement responsible for many attacks against Israelis, won the majority of the seats in
the Parliament of the Palestinian Authority. The election of a majority of Hamas-supported
candidates is expected to be a major obstacle to relations between Israel and the
Palestinian Authority, as well as to the stability in the Middle East as a whole. In July
2006, Israel became involved in a major military conflict with the Hizbullah organization
in Lebanon, which subjected the north of Israel to missile attacks. Israels military
operations required the drafting of a substantial number of reserve soldiers.

10

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The future of relations between
Israel and the Palestinian Authority is uncertain. Terrorist attacks, armed conflicts or
political instability in the region could negatively affect local business conditions and
harm our results of operations. We cannot predict the effect on us of the increase in the
degree of violence against Israel or the effect of military action elsewhere in the Middle
East. Furthermore, several countries restrict doing business with Israel and Israeli
companies, and additional companies may restrict doing business with Israel and Israeli
companies as a result of the increase in hostilities. This may also materially adversely
affect our operating results, financial condition and the expansion of our business.

Additionally, in recent years Israel
has undergone a period of recession in economic activity, resulting in low growth rates
and growing unemployment. Our operations could be adversely affected if the economic
conditions in Israel deteriorate. Furthermore, Israel is a party to certain trade
agreements with other countries, and material changes to these agreements could have a
material adverse effect on our business.

If our key personnel are
required to perform military service, we could experience disruptions in our business.

A number of our key personnel in
Israel have standing obligations to perform periodic reserve duty in the Israel Defense
Forces and are subject to be called for active military duty at any time. If our key
personnel are absent from our business for a significant period of time, we may experience
disruptions in our business that could affect the development, sales or technical support
of our products. As a result, we might not be able to compete in the market and our
results of operations could be harmed.

Because substantially all
of our revenues are generated in U.S. dollars, while a portion of our expenses is incurred
in New Israeli Shekels, or NIS, inflation in Israel could harm our results of
operations.

A substantial portion of our revenues
are generated in U.S. dollars, while a portion of our expenses, primarily salaries and
related expenses incurred in our Israeli facility, is in NIS. This foreign currency
exposure gives rise to market risk associated with exchange rate movements of the U.S.
dollar against the NIS. Our Israeli-based employees salaries are influenced by
inflation in Israel. As a result, any increase in the rate of inflation in Israel may have
a negative impact on our dollar-measured operating results unless the inflation in Israel
is offset by a devaluation of the NIS in relation to the U.S. dollar. In 2004, the rate of
inflation in Israel was increased by 1.2% and the value of the U.S. dollar decreased in
relation to the NIS by 1.6%. In 2005, the rate of inflation in Israel was increased by
2.4% and the value of the U.S. dollar increased in relation to the NIS by 6.8%. In 2006,
the rate of inflation in Israel decreased by 0.1% and the value of the U.S. dollar
decreased in relation to the NIS by 8.2%. In 2007, the rate of inflation in Israel
decreased by 3.4% and the value of the U.S. dollar decreased in relation to the NIS by
8.97%. If future inflation in Israel exceeds the devaluation of the NIS against the U.S.
dollar or if the timing of such devaluation lags behind increases in inflation in Israel,
our results of operations may be materially adversely affected. We cannot predict any
future trends in the rate of inflation in Israel or trends in the rate of exchange between
the NIS and the dollar. If the dollar cost of our operations in Israel increases, our
dollar-measured results of operations will be materially adversely affected.

Israeli regulations may
impact our ability to engage in research and development and export of our products in accordance
with our current practices.

Israeli law requires us to obtain a
government license to engage in research and development of, and export of, the encryption
technology incorporated in our products. We currently have government licenses to engage
in production of our encryption technology in our products in their 40- and 128-bit
versions. Our research and development activities in Israel would need to be modified to
transfer this activity to our U.S. development organization, and our current practice of
exporting our products from Israel to the U.S., with embedded encryption technology, would
need to be changed if:

| |  | the
Israeli government revokes our current licenses;
| | - | ----------------------------------------------------

| |  | our
licenses fail to cover the scope of the technology in our products; or
| | - | --------------------------------------------------------------------------

| |  | Israeli
laws regarding research and development export or use in general of encryption
technologies were to change.
| | - | -------------------------------------------------------------------------------------------------------------------

11

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We currently benefit from
government programs and tax benefits that may be discontinued or reduced.

We currently receive tax benefits and
have been approved for a research and development grant for 2007 of up to approximately
$460,000 under Government of Israel programs, out of which we have received, as of May 31,
2008, the amount of $388,600 out of the entire grant and in order to receive the full
amount of the grant we are required to submit the Companys 2007 annual report. We
have filed an application for a new grant in the amount of $500,000 for 2008, as of the
second quarter, but we cannot assure that an agreement for such grant will be
concluded. In order to maintain our eligibility for these programs and benefits, we must
continue to meet specified conditions, including making specified investments in property
and equipment. We may not be able to continue to meet all of these conditions. In
addition, some of these programs restrict our ability to manufacture particular products
or transfer particular technology outside of Israel. If we fail to comply with these
conditions in the future, the benefits received could be canceled and we could be required
to refund any payments previously received under these programs or to retroactively pay
tax on any income at a higher tax rate than that applying under these benefits.

In recent years, the Government of
Israel has reduced the benefits available under these programs and has amended the
specified conditions that must be met in order to achieve or maintain eligibility. You can
see more information regarding recent changes in Item 10E below and in Note 11(b) to the
Notes to Consolidated Financial Statements. We cannot guarantee that these programs and
tax benefits will continue in the future at their current levels or at all. If the
Government of Israel reduces or ends these tax benefits, our business, financial condition
and results of operations could be materially adversely affected.

It may be difficult to
enforce a U.S. judgment against us or against certain of our directors, or to assert U.S. securities
laws claims in Israel or serve process on these persons.

We are incorporated in Israel. The
chairman of the board of our directors and other directors are nonresidents of the United
States and a portion of our assets is located outside the United States. Therefore, it may
be difficult to enforce a judgment obtained in the United States against us or any of
those persons or to effect service of process upon these persons in the United States. It
may also be difficult to enforce civil liabilities under U.S. federal securities laws in
original actions instituted in Israel.

Provisions of the Israeli
law could delay, prevent, or make difficult, a change of control, thereby depressing the
price of our ordinary shares.

Provisions of the Israeli Companies
Law may have the effect of delaying, preventing or making more difficult a merger with, or
acquisition of, Radview. The Israeli Companies Law generally provides that a merger be
approved by both the board of directors of a company and a majority of the shares present
and voting on the proposed merger at a meeting called upon with at least 21 days
notice. For purposes of the shareholder vote, unless a court rules otherwise, the merger
will not be deemed approved if a majority of the shares not held by the other party to the
merger (or by any person who holds 25% or more of the shares or the right to appoint 25%
or more of the directors of the other party or its general manager) vote against the
merger. Upon the request of any creditor of a party to the proposed merger, a court may
delay or prevent the merger if it concludes that there is a reasonable concern that, as a
result of the merger, the surviving company will be unable to satisfy the obligations of
the merging company. Finally, a merger may not be completed unless at least 50 days have
passed since the filing of the merger proposal signed by both parties with the Israeli
Registrar of Companies.

The Israeli Companies Law also
provides that an acquisition of shares in a public company on the open market must be made
by means of a tender offer if, as a result of the acquisition, the purchaser will become a
25% or greater shareholder of the company unless there is already another 25% or greater
shareholder of the company. Similarly, an acquisition of shares must be made by means of a
tender offer if as a result of the acquisition the purchaser would become a 45% or greater
shareholder of the company, unless there is already a 45% shareholder of the company. In
any event, if as a result of an acquisition of shares the acquirer will hold more than 90%
of a companys shares, the acquisition must be made by means of a tender offer for
all of the shares. Finally, Israeli tax law treats some acquisitions, such as
stock-for-stock exchanges between an Israeli company and a foreign company, less favorably
than United States tax law. For example, Israeli tax law may subject a shareholder who
exchanges our ordinary shares for shares in another corporation to immediate taxation.

These Israeli laws could have the
effect of inhibiting third party attempts to acquire RadView.

12

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# Item 4: Information on
the Company

# 4A: History and
Development of the Company

We were incorporated in Israel in
1991 as a private company under the Israeli Companies Ordinance, 1983 under the name
RadView Software Ltd. and conducted all our operations in Israel from 1993 until April
2000, when we relocated our corporate offices to the United States. We relocated our
headquarters back to Israel in 2006. We maintain our research and development operations
in Israel. In August 2000, we completed the initial public offering of our ordinary
shares, raising $35.3 million after offering costs.

Our corporate headquarters and
research and development facilities are located at 14 Hamelacha St., Park Afek, Rosh
HaAin, 48091, Telephone +972-03-915-7060. Our US sales office is located at 991
Highway 22 West, Bridgewater, New Jersey, 08807.

# 4B: Business Overview

Radview develops and markets software
for testing the performance, scalability and reliability of internet applications. Our
software allows companies to accelerate the development and deployment of their web
applications and enables the successful implementation of their strategies involving their
websites. We also provide support and maintenance services to our installed base of
customers.

Our current customers include more
than approximately 1,600 organizations from all major industries including AerLingus, Best
Western, Citigroup, Deutsche Bank, Federal Express, Harvard University, Morningstar,
Kinkos, Samsung, and Sun Microsystems.

Open Source: In April 2007 we
adopted an open source approach for developing, marketing and selling software. Our goal
for the open source model is to take a leadership position in the distribution of
performance-testing solutions for internet applications. The wide distribution inherent in
an open source model can acquaint a much broader section of the market with the WebLOAD
family of products. With a wide community of users and developers enjoying free access to
a robust, proven product, there is increased exposure to our target commercial market that
requires an enterprise-ready product with associated services and support. For the risks
related to Open Source, see Item 3D  Risk Factors  Risks Related to Our
  Open Source Model.

# Recent Financings

In August 2006, we closed a financing
led by Fortissimo Capital Fund GP LP, or Fortissimo, and a group of co-investors that
included one of our directors and two existing shareholders, for an initial investment of
$1.5 million consisting of $750,000 for the purchase of 25,000,000 convertible preferred
shares, or Preferred Shares, at a purchase price of $0.03 per share, and $750,000 as a
convertible loan. The investors also had the right to purchase up to an additional 75
million Preferred Shares at a price of $0.03 per share, for up to a total of $2.25
million, within 18 months after the closing of the initial investment. The additional
investment rights were exercised in part, as described below, and the remainder of these
rights have expired.

The Preferred Shares are convertible,
at the election of the holder, into our ordinary shares on a one-for-one basis. In
addition to voting rights similar to our ordinary shares, Preferred Shares are also
entitled to nominate a majority of the members of our board of directors and have voting
control over significant corporate actions. Preferred Shares also have a preference in
liquidation over our ordinary shares. The investors also received warrants to purchase up
to 18,750,000 Preferred Shares with respect to the initial investment and up to a total of
56,250,000 additional Preferred Shares in the event they made the additional investment.
The warrants have an exercise price of $0.04 per share and are exercisable for a period of
five years from date of issuance.

In order to secure required financing
in the last quarter of 2006 and the first quarter of 2007, the Company requested
Fortissimo to accelerate the exercise of its right under the financing to make additional
investments. The Company and Fortissimo entered into a series of addendum to the share
purchase agreement of April 2006 for Fortissimos additional investment and purchase
as follows: the purchase on December 24, 2006 of 23,333,334 Preferred Shares and
17,500,000 Preferred Warrants for an investment of $0.7 million (the First
Addendum), the purchase on February 7, 2007 of 16,666,667 Preferred Shares and
12,500,000 Preferred Warrants for an investment of $ 500,000 (the Second
Addendum), and the purchase on March 20, 2007 of 16,666,667 Preferred Shares and
12,500,000 Preferred Warrants for an investment of $ 500,000 (the Third
Addendum).

13

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Pursuant to each of the First, Second
and Third Addendums, respectively, and in consideration of the acceleration of the
additional investment rights, the Company undertook to grant Fortissimo a new option (each
a New Option) to acquire, on the same terms and conditions, the same number of
shares and warrants as purchased under the respective Addendum. Each New Option was
subject to the right of the Company for a period of 12 months from the date of issuance of
the New Option (and subject to RadView having available surplus) to buy back any shares
purchased under the Addendum. Fortisimo did not exercise the New Options. The Company did
not exercise its rights to buy back any shares purchased under the Addendums and these rights
have expired.

In March and May 2007, we closed two
private placements for our ordinary shares led by Meitav Underwriting Ltd., or Meitav, and
several institutional investors, totaling approximately $3.4 million for the purchase of
56,378,980 ordinary shares at a price per share of $0.06 and warrants to purchase
39,465,286 ordinary shares at a price per share of $0.06. The maximum number of ordinary
shares potentially owned by the Meitav investors as a result of the private placements in
95,844,266 ordinary shares, assuming the exercise of all available warrants.

# 2007 Product Highlights

In December 2007, we announced the
launch of WebLOAD 8.2; that version of WebLOAD introduced improvements to the WebLOAD IDE,
with improvements to the stability and performance of the product. In addition, version
8.2 included support for testing the Adobe Flex rich application environment and support
for testing multimedia streaming.

# Industry Background

Distributed Computing
Environments

Historically, companies relied on
traditional client/server applications to perform internal business processes and share
information. The rapid growth and acceptance of the Internet has fundamentally changed the
way companies now conduct business and has enabled the proliferation of distributed
computing environments.

Today, these distributed computing
environments have the following attributes:

| |  | Scope:may include any combination of client/server environments, the Internet, intranets
and extranets;
| | - | -------------------------------------------------------------------------------------------------------

| |  | Structure:may be composed of a complex system of rapidly evolving hardware and software
technologies, all of which may be geographically dispersed throughout the world;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Usage:commonly used to communicate, obtain and share information, sell goods and services,
interact with customers, suppliers and partners; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------

| |  | Accessibility:users can access the application from any location at any time.
| | - | -----------------------------------------------------------------------------

An integral element of software
technology used in todays distributed computing environments is the web application.

Characteristics of Web
Applications

Web applications are becoming the
standard for new application software. We believe that web applications will eventually
displace legacy client/server systems. Web applications have the following characteristics
that present significant challenges to their successful development, deployment and
ongoing operation:

| |  | Complexity.
Web applications typically involve the integration of many hardware and software
components and technologies from multiple vendors often requiring close collaboration
among a wide array of technology, media and graphic specialists;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Unpredictable
Loads and Stresses. Web applications are available to a potentially large number of
users and can be subject to large traffic spikes;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Nonstop
Operation. Due to the business-critical nature of website initiatives, web
applications must be available to users on a constant basis with minimal or no downtime
for upgrades or modifications. Also, given the nature of the Internet, where websites can
be accessed by users from all over the world, from different time zones, operation must
be available 24x7;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Rapidly
Evolving Technologies. Web applications are typically developed using software that
is continuously changing as new technologies and standards emerge; with emerging new
technologies such as those appearing under the Web 2.0, SOA and RIA (Rich Internet
Applications), which continue to rapidly change the nature and complexity of web and
Internet applications; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Continuous
Modifications and Updates. Web applications are typically modified and updated on a
continuous basis as companies add new content and functionality and incorporate new
technologies and standards.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

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Importance of Web
Application Integrity and Performance

As companies move various aspects of
their businesses to corporate intranets, extranets and the Internet, they are placing
greater reliance on their web applications. At the same time, web applications continue to
become more complex, which produces a higher risk of failure. If a companys web
applications operate erroneously, perform poorly, or fail entirely, the resulting
financial and business costs can be substantial, including lost revenues, customer
defections, business interruptions and damage to a companys reputation. In order to
successfully compete, companies must rapidly deploy web applications of high quality and
robust performance.

The performance of web applications
includes the following key elements:

| |  | Integrity:
must operate as designed with full functionality accurately intact;
| | - | ------------------------------------------------------------------------------

| |  | Scalability:must be able to accommodate very large numbers of concurrent users and complex
usage patterns;
| | - | ----------------------------------------------------------------------------------------------------------

| |  | Efficiency:must operate rapidly and efficiently without deteriorating response time or
processing bottlenecks; and
| | - | ------------------------------------------------------------------------------------------------------------------

| |  | Reliability:
must consistently function as intended over prolonged periods when deployed and
integrated into a companys existing and evolving systems.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------

Performance Testing and
the Open Source Community

Open source software is software for
which the source code is readily available, making users capable of developing the
software code for their specific applications. It has long been an alternative for
software developed and sold by commercial software vendors. Since its inception in the
early 1980s with the GNU Project, through the first introduction of Linux in 1991, open
source software has achieved vast recognition and significant usage in organizations and
enterprises around the world. Developers world wide participate and contribute to open
source software projects on an ongoing basis. Several commercial companies base their
business model on selling open source software and related services, including: Red Hat,
MySQL, SugarCRM, JasperSoft and Zend. These companies offer their customers affordable
solutions, which are open, extendible, and flexible and enjoy no vendor lock-in.

Many open source projects attract
developers by providing various development tools like the Eclipse IDE, JBoss application
server and others. Several open source testing projects provide tools and utilities for
performing functional and performance software testing. We believe that none of these
projects provide a comprehensive and complete solution for enterprise grade performance
testing.

Our Market Opportunity
and Solutions

We believe that the distributed
environment segment of the automated software quality, or ASQ, market is where virtually
all the growth of the ASQ market will be realized in the next few years, and that there is
a significant market opportunity for solutions that test and verify the integrity,
scalability, efficiency and reliability of web applications to facilitate their rapid
deployment. This is due to the expanded use of the Internet and corporate intranets and
extranets, the need for high quality software, and the increase in the criticality of web
applications for the success of businesses.

Additionally, we believe that the
release of WebLOAD Open Source provides access to a new segment of users, which will
increase WebLOADs market exposure. In turn with that exposure, we can expect to
attract more commercial customers although we have not accumulated sufficient information
to date on use and satisfaction with our product to determine if our market strategy has
been successful. Another advantage of WebLOAD Open Source lies in the nature of the open
source community, which enjoys free access to development and application tools and in
turn contributes to development of additional features and fixes, all of which can
contribute to our continued product development when the developers code is also
public.

We are a premier provider of
software that enables companies to assure the integrity and performance of
business-critical web applications. We address the functionality and performance
requirements of web applications throughout their product lifecycle, from initial design
through development, deployment and ongoing modifications and upgrades. In meeting these
requirements, companies are able to mitigate the financial and business costs that can
result from unsuccessful deployment and failures of their web applications. Companies
that test their web applications using our solutions benefit from earlier detection of
potentially costly problems such as performance bottlenecks, scalability issues, and
functionality limitations.

15

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This results in significantly
reduced costs and the improved time to market needed to successfully launch high
performing, reliable web applications.

See Sales and Marketing
for a discussion of our marketing channels and sales methods.

In our view, this growing market
opportunity would be best addressed by solutions such as ours, that:

| |  | efficiently
and accurately simulate real world operating conditions;
| | - | --------------------------------------------------------------------

| |  | offer
integrated and comprehensive performance assessment capabilities;
| | - | -----------------------------------------------------------------------

| |  | allow
performance assessment and error detection early in development process;
| | - | ------------------------------------------------------------------------------

| |  | provide
detailed performance analysis to assist companies in better identifying and quickly
resolving performance bottlenecks and other problems;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------

| |  | enable
 collaboration  among all  parties  involved  in the  development  and  deployment  of
web          applications;
| | - | ------------------------------------------------------------------------------------------------------------------------

| |  | provide
open and  extensible  tools,  that can be tailored and customized by our users to fit to
their own          specific needs;
| | - | -----------------------------------------------------------------------------------------------------------------------------------

| |  | enable
rapid  development of new tools and features by  incorporating  other open source
software          projects;
| | - | --------------------------------------------------------------------------------------------------------------------

| |  | leverage
the open source community  contributions to improve and shorten our development  cycles;
         and
| | - | --------------------------------------------------------------------------------------------------------------

| |  | join
with other open source software vendors, providing our tools as plug-ins to their tools,
or vice versa, to bring together a more complete solution.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------

# Competition

Commercial competition

The web application performance and
testing solutions market is intensely competitive, subject to rapid change and
significantly affected by new product introductions and other activities of market
participants. Our primary competitors include companies who offer application-testing
software, such as HP/Mercury Interactive, Compuware, and Empirix. We also compete against
companies that provide a broader spectrum of development tools that include
application-testing functionality, such as IBM/Rational Software. In addition, we compete
with companies like Quest Software whose main offering is application performance
management software.

We expect that competition will
intensify in the future and that additional competitors will enter the market with
innovative products that may change the competitive landscape. Increased competition is
likely to result in pricing pressures, reduced margins and may result in the failure of
our products to achieve or maintain market acceptance, any of which could have a material
adverse effect on our business, results of operations and financial condition.

With the launch of our Open Source
Edition, we are now competing for user downloads and consumer awareness of and
identification with other open source performance testing tools such as Jmeter, Open STA
and TheGrinder. Some of these open source communities are dedicated communities of users
and contributors that have been built over years. In addition, some of these communities
(such as the Jmeter community), because they are not affiliated with a commercial vendor,
may be viewed as more desirable than the WebLOAD Open Source community.

We anticipate that there will be
continuing consolidation in the web application products market and related markets such
as computer software, media and communications. Our competitors may be acquired by,
receive investments from, or enter into other commercial relationships with, larger,
well-established and well-financed companies. As a result, they may be able to respond
more quickly to new or changing opportunities, technologies, standards or customer
requirements. Many of these competitors also have broader and more established
distribution channels that may be used to deliver competing products directly to customers
through bundling or other means. If competitors were to bundle competing products with
their products, the demand for our products might be substantially reduced and our ability
to distribute our products successfully would be substantially diminished.

We believe the principal competitive
factors affecting our market include:

| |  | the
ability to accurately emulate client-user interactions with the web application,
including efficient simulation of very large numbers of users, extreme fluctuations in
traffic and complex user demands placed on web applications;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | breadth
and depth of features for detecting and resolving software errors early in the
development cycle;
| | - | ---------------------------------------------------------------------------------------------------------

| |  | ease
of use and interactive user features;
| | - | ------------------------------------------

16

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| |  | price
and total cost of use, including hardware and training requirements;
| | - | --------------------------------------------------------------------------

| |  | ability
to stay  technically  current and compatible with rapidly  emerging and changing web
 technologies          and standards; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------

| |  | compatibility
with the user's existing network components and software systems.
| | - | -------------------------------------------------------------------------------

To expand our customer base, we must
continue to innovate and improve the performance of our products. Although we believe that
our products compete favorably with respect to these factors, our market is subject to
constant change.

# Proprietary Rights

Our success and ability to compete
depend upon our proprietary technology. In addition, we rely on patent, copyright, trade
secret and trademark law to protect our proprietary information. We also typically enter
into an agreement with each of our employees, consultants and customers to control their
access to and distribution of our software, documentation and other proprietary
information. Nevertheless, a third party could copy or otherwise obtain our software or
other proprietary information without our authorization, or could develop software
competitive to ours. We face additional exposure to this risk with the introduction of our
Open Source Edition, which by its nature makes the source code of at least a portion of
our technology freely available to a community of developers. Our means of protecting our
proprietary rights may not be adequate and our competitors may independently develop
similar technology or duplicate our products or our other intellectual property.

In addition, the laws of some foreign
countries do not protect our proprietary rights to as great an extent as do the laws of
the United States. We expect that it will become more difficult for us to monitor the use
of our products as we increase our international presence.

There has been substantial litigation
in the software and Internet industries regarding intellectual property rights. It is
possible that, in the future, third parties can claim that we, or our current or potential
future products, infringe on their intellectual property. We expect that software product
developers will increasingly be subject to infringement claims as the number of products
and competitors in our industry segment grows and the functionality of products in
industry segments overlaps. Any claims, with or without merit, could be time-consuming,
result in costly litigation, cause product licensing delays, require us to license or pay
royalties for certain products in order to continue to sell our products, or pay
substantial damages. Licensing or royalty agreements, if required, may not be available on
terms acceptable to us or at all. As a result, our business could be harmed.

# Our Strategy

Our objective is to be a leading
provider of software for testing the performance, scalability and reliability of Internet
applications. Our strategy is to use open source as an approach to develop, market and
sell our professional software and services. By giving an Open Source Edition to the
community and establishing webload.org, our goal is to take a leadership position in the
distribution of performance testing solutions for internet applications. WebLOAD Open
Source is being offered in parallel with the commercial version of WebLOAD, WebLOAD
Professional, which is offered with full maintenance and support and is superior in
functionality over the Open Source Edition. We believe that the wide distribution inherent
in an open source model will acquaint a much broader section of the market with the
WebLOAD product line. While a wide community of users and developers enjoy free access to
a robust, proven product, RadView gains increased exposure to a commercial market that
requires an enterprise-ready product and associated services and support.

Increase Revenues and
Control Costs to Achieve Profitability

Our net loss attributed to ordinary
shares was $2.5 million in 2005, $2.7 million in 2006 and $4.8 million in 2007. The
increase in net loss in 2006 resulted primarily from the recording of an $0.88 million
deemed dividend attributable to the preferred shares in the original 2006 financing and
related additional investments. The deemed dividend reflects an adjustment of the
financing components in light of their relative fair value. The increase in net loss in
2007 resulted primarily from decrease in revenues and an increase in research and
development expenses due to the Open Source project and an increase in sales and marketing
expenses and a recording of an $0.85 million deemed dividend attributable to the preferred
shares in the original 2006 financing and related additional investments.. We have lowered
our operating costs in each of the past five years to more closely align costs with our
expected revenues. We expect a decrease in 2008 in our research and development expenses
as well as sales and marketing costs and our general and administration costs. We are
focused on increasing our revenues while continuing to control costs in order to further
reduce our net loss with the objective to ultimately achieve profitability and positive
cash flow in the future.

17

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Maintain and Extend
Product Leadership

In 2006, we introduced WebLOAD IDE, a
new tool for recording, authoring and debugging of test scripts, replacing the AAT and
Browser Playback tools, which were part of the WebLOAD product line. In December 2007, we
announced the launch of WebLOAD 8.2, which, among other things, introduced improvements to
the stability and performance of the WebLOAD IDE, and included support for testing the
Adobe Flex rich application environment and for testing multimedia streaming.

In April 2007, we introduced WebLOAD
Open Source, a commercial grade performance testing product, based on the WebLOAD
product.. We developed and will continue to develop WebLOAD Professional, to introduce new
add-ons to support additional protocols (such as Adobe Flex) and development environments
(such as Oracle Forms).

Develop and Expand
Strategic Relationships

We believe that strategic
relationships with industry leaders will enable us to accelerate our market penetration
and visibility, and maintain our technology leadership. We collaborate with leading
technology companies and Internet software and service providers. These strategic
relationships help to ensure that our software is optimized for use with their product
offerings and allow us to promote market awareness of our products. We plan to continue to
develop strategic technology and marketing relationships with leading providers of
web-related software.

We further believe that certain
proprietary technologies used in our products may have alternative uses for other
companies in their respective markets, such as combining our software product offerings
with hardware platforms meeting the specific needs of a customer. In December 2005, OPNET
Technologies purchased a license to use the source code for our TestView suite of
products. The revenues from the technology license and related professional services under
this arrangement have been recognized in 2005 and 2006.

Lead the Open Source
Software Performance-Testing Market

By incorporating other open source
software projects and tools into WebLOAD Open Source, we will be able to incorporate them
into the WebLOAD Professional, to increase the speed, efficiency and quality of new
features we develop.

We intend to foster strategic
relationships with other open source software vendors, to incorporate our products into
theirs (or vice versa), to expand our market presence and create additional marketing and
sales channels.

Leverage Our Installed
Customer Base

To date, we have licensed our
software to over 1,600 companies worldwide of which approximately 300 have renewed their
software-support agreement with us. A portion of our product orders are received from
existing customers and distribution channels. These orders are typically the result of
support and maintenance renewals and upgrades or expansions to their previously purchased
licenses. For example, upon payment of additional license fees, an existing customer of
our load-testing product may increase either or both the maximum number of allowable
simulated users that can be generated from within the product and the number of end-users
allowed to operate the product.

In addition, as we introduce new
products that complement our existing products, we believe there is an opportunity to
increase our revenues through our installed customer base, in addition to sales to new
customers.

Provide Solutions that
Contribute to a Low Total Cost of Ownership

Companies purchase testing solutions
based on several criteria, including the total cost of ownership. Factors that contribute
to the total cost of ownership for testing solutions include, among others, the costs of
testing software, hardware used to simulate user load traffic, training, and designing,
writing and maintaining test scripts. We believe our software contributes to a low total
cost of ownership in many ways, including:

| |  | We
offer competitive prices and flexible licensing options for our software solutions;
| | - | --------------------------------------------------------------------------------------

| |  | Our
software efficiently simulates user load traffic which reduces the cost of hardware
required to perform tests;
| | - | ------------------------------------------------------------------------------------------------------------------

| |  | Our
open-standards scripting language reduces the learning requirements for users and
simplifies test script generation and reduces script maintenance;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Our
software runs on a variety of platforms allowing users to leverage the infrastructure
they already own or have access to; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------

| |  | We
offer free access to our Open Source Edition.
| | - | ------------------------------------------------

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# Products

Our current product line consists of:

| |  | WebLOAD
Professional: software that assures the performance of web applications by
efficiently simulating very large numbers of users, extreme fluctuations in traffic and
the complex user demands placed on web applications within an operating environment.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | WebLOAD
Open Source: the free, open source edition of WebLOAD Professional which has limited
features compared to the Professional edition, such as limited users simulated. Our Open
Source Edition does not include any of the Professional add-ons and no support or
services are provided.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | WebRM: enterprise
software that promotes efficient use of resources, facilitates collaboration and enables
increased productivity by allowing developers, quality assurance, or QA, and information
technology staff to share the same testing technologies, methodologies and resources
throughout the application development life cycle. This enables the systematic
verification of web application quality at all stages and facilitates rapid deployment.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As part of our focus on performance
testing, we discontinued sales of WebLOAD Analyzer and discontinued development and sales
of the WebFT and TestView Suite products. We have not supported the existing customers for
any of these products beyond April 2008. The phase out of support and maintenance has not
had a material impact on our customer base.

Our products are designed
specifically for web-based applications, and employ Internet-standard technologies. Using
a standards-based approach makes our products easier to use and readily adaptable to new
technology standards.

Key features of our software include:

Comprehensive Performance
Software. Our software provides an integrated solution to simultaneously verify the
integrity, scalability, efficiency and reliability of web applications. In addition, our
software can assess a web applications overall performance, the performance of an
applications specific components and determine critical thresholds where performance
starts to deteriorate.

Designed for Web Applications.
Our software is specifically designed for the complex web-based computing environment and
is based on Internet standards, such as JavaScript, Java, ActiveX, HTML, XML, and DOM.
This enables efficient simulation of very large numbers of users, extreme fluctuations in
traffic and complex user demands placed on web applications. This also makes our software
easier to use and allows it to be readily adaptable to emerging Internet technologies.

Detailed Performance Analysis.
Our software automatically monitors over 75 performance criteria and supports an extensive
number of additional user-defined criteria. Companies using our products have the ability
to verify the performance of web applications for each simulated user or transaction. By
identifying and recording the root cause of a problem, our comprehensive measurement and
reporting mechanisms expedite the process of problem resolution.

Verification Early in the
Development Lifecycle. Our software assists companies in identifying and resolving
issues with their web applications at every point in the development life cycle. Resolving
issues as early as possible in the development life cycle can lower the cost of developing
web applications and accelerate the deployment of scalable, high performance web
applications.

Facilitate Collaboration
Throughout the Development Process. Our software allows designers, developers, quality
assurance and information technology professionals to store and seamlessly share test
scripts, templates and results between products, allowing previously isolated technical
teams within a company to work on a coordinated and collaborative basis.

Ease of Use. All of our test
scripts are generated using JavaScript, the programming language most commonly used by web
application developers. This avoids the learning curve and costs associated with other
products that utilize proprietary scripting languages.

Efficient Use of Resources. We
design our products to run on a variety of platforms and make efficient use of a
companys available computer resources, thereby reducing the hardware requirements
and investments needed to simulate heavy user traffic. In addition, our software allows
users to share company resources on an as-needed basis.

19

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WebLOAD Professional

Using WebLOAD Professional, customers
create test scripts that simulate users interactions with web applications. These
scripts are written in JavaScript, the web standard for application scripting. WebLOAD
includes recorders that enable customers to rapidly generate scripts by copying
interactions between a web browser and a web application. WebLOAD also enables more
advanced users to create highly complex interactions using JavaScript and WebLOAD IDE
 WebLOADs script authoring tools.

WebLOAD can simultaneously run
multiple scripts that reflect different user interactions with the underlying application.
These differences may be task based. For example, a retail application might mix site
visitors that browse with purchasers, or based on other user characteristics such as their
connection speed, the browser they are using, or their Secure Socket Layer, or SSL, which
is an encryption configuration.

WebLOAD Professional executes scripts
for multiple simulated users, or virtual clients, on load generation machines, such as
existing servers, that are centrally managed by the customer. The customer can schedule
these virtual clients independently to simulate fluctuating user traffic patterns.
Alternatively, a customer can use WebLOADs proprietary Cruise Control feature, which
steadily increases the number of virtual clients interacting with an application until
that application fails to perform based on one or more customer-defined performance
criteria. Cruise Control allows our customers to readily and rapidly determine the maximum
user load their application can support while maintaining specified performance criteria.

WebLOAD efficiently generates large
numbers of virtual clients requiring significantly less computer memory than competing
products with comparable functionality. This benefits companies by significantly reducing
the cost of hardware required to simulate large numbers of users.

While a performance session is
running, WebLOAD generates over 75 different pre-defined statistical measurements, which
are displayed to the user in real time. Our customers can also add an extensive number of
user-defined measurements and timers, as well as monitor the performance profile of the
components within a customers Internet architecture. WebLOAD reports these data
points on a per client and per transaction level, thus providing detailed information
about the potential causes of any detected application failures during the simulation and
allowing customers to rapidly and effectively address any performance issues. Customers
can analyze this performance data and readily export it to industry-standard, third party
formats, such as Microsoft Excel.

WebLOAD Professional supports all
modern web development technologies, such as Web 2.0, Ajax, Web Services, SOA, etc. During
2007 we completed the development of add-ons to support Adobe Flex data services 2,
RTSP/RTP and other multimedia protocols which, were released, and are available for
purchase separately from WebLOAD Professional, and added to it to increase its
functionality.

WebLOAD Open Source

WebLOAD Open Source is the first
commercial-grade open source performance testing tool, currently with a partial set of the
WebLOAD Professional features. The knowledge and assets developed with the Open Source
Edition can be maintained after upgrading to the Professional edition.

WebLOAD Open Source provides the
basic set of features needed to conduct performance tests for internet applications.

WebRM

WebRM addresses the needs of
companies to systematically verify web application quality and standardize their web
application performance solution across the application design, development, quality
assurance and information technology functions. It allows companies to share WebLOAD
resources, so that a web applications architecture, design, implementation and
hardware environment can all be tested using the same technology at each step of the
development life cycle. Verification performed earlier in the development process
generally results in earlier problem detection, lower costs and more rapid application
development. Companies using WebRM can therefore capitalize on WebLOADs
comprehensive, integrated, standard-based approach to facilitate the rapid delivery of
higher quality web applications.

Key features and benefits of WebRM
include flexible management of resources: Customers who license WebRM receive a fixed
number simulated users, or virtual clients, which may be distributed throughout the
enterprise on an as-needed basis. For example, a customer with a license for 10,000
virtual clients could allocate all 10,000 virtual clients for use in one performance
session, or alternatively, could conduct several concurrent performance sessions with any
number of virtual clients, up to an aggregate of 10,000 virtual clients.

20

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# Customers

To date, we have licensed our
software to approximately 1,600 customers worldwide, of which approximately 300 have
renewed their software-support agreement with us. Our customers include companies across a
broad range of industries, including financial services, technology, retail,
manufacturing, government, telecommunication, health care and education.

Our customers are located primarily
in the United States, Canada, Europe, Asia Pacific, and Israel. Revenues derived from
customers in the United States as a percent of total revenues were, 68.6% in 2005 68.8% in
2006 and 57% in 2007. We expect to continue to derive the majority of our revenues from
customers in the United States

# Sales and Marketing

Sales.
          We sell our products through a direct sales force and through channel partners.
          Our direct sales force consists of sales personnel and sales engineers located
          at our corporate headquarters in Israel, as well as an office in the United
          States. Our channel partners consist of testing services providers, web system
          integrators, , independent software vendors and international distributors in
          Europe, Israel and Asia. Revenues from our indirect distribution channels as a
          percentage of total revenues were, 21.5% in 2005, 18.5% in 2006 and 14% in 2007.
          In the future, we expect to expand our network of indirect channel partners to
          increase revenues from sales through them.

Marketing.
          We engage in a variety of corporate and product marketing activities and provide
          product information through our website. We offer free trials of our WebLOAD
          Professional that can be downloaded from our website. Our marketing programs are
          aimed at informing customers and prospects of the benefits of our software,
          increasing the market awareness of our products and generating demand for our
          products. Our marketing activities include public relations initiatives, focused
          lead generation activities, participation in trade shows and conferences, web
          seminars, and cultivating relationships with key technology analysts.

# Customer Support

We offer a range of support and
maintenance and training services to our customers. We believe that providing a high level
of customer service and technical support is necessary to achieve rapid product
implementation, which in turn, is essential to customer satisfaction and continued license
sales and revenue growth. We provide telephone and e-mail technical support from Dallas,
Texas and from our development center in Israel. Support and maintenance agreements are
generally purchased for 12-month terms. We track support requests through a series of
customer databases, including current status reports and historical customer interaction
logs. We use customer feedback as a source of ideas for product improvements and
enhancements. We also provide training (introductory and advanced) and consulting to
assist our customers in the development and deployment of web-based applications using our
products.

# Research and Development

Our research and development efforts
are focused on enhancing our core technology and developing additional functionality and
capabilities for our products. We conduct our research and development from our facility
in Israel. Our software development approach consists of a methodology that provides
guidelines for planning, controlling and implementing projects. This approach uses a
cross-functional, team-based development and release process. Our development group works
closely with our sales and marketing groups, who provide customer and market requirements,
and senior management who provide strategic input, to assist in defining product direction
and to ensure that the right products are brought to market.

Members of our research and
development group have extensive experience working with web technologies and software
testing solutions. We believe that our future performance will depend in large part on our
ability to enhance our current product line, develop new products and provide innovative
solutions for verifying the performance and scalability of web applications. Our research
and development expenses were, $2.2 million in 2005, $1.5 million in 2006 and $1.9 million
in 2007. We received approval for a grant in the amount of up to approximately $460,000
from the Office of the Chief Scientist of the Israel Ministry of Industry, Trade and Labor
for participation in our open source research and development program in 2006. As of May
31, 2008, we have received the amount of US$388,600 out of the entire grant. In order to
receive the full amount of the grant we are required to submit the Companys 2007
annual report. We have filed an application for an additional grant in the amount of
$500,000 for 2008, as of the second quarter, but we cannot assure that an agreement for
such grant will be concluded.

21

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# Product Technology and
Architecture

Our technologies are built on an
open, portable architecture based on industry standard technologies. Our products may be
deployed on Windows NT, Windows 2000, Windows XP, Windows 2003, Sun Solaris and Linux
operating systems. Our products incorporate the Internet standard scripting language,
JavaScript, enabling our customers to easily develop, deploy and manipulate the scripts
required to assess the performance of their web applications. We have also extended
JavaScript to enable integration of Java, ActiveX and XML and work with other standard web
technologies, such as SSL encryption schemes. Integration with these standard technologies
helps ensure our products are available for use regardless of the customers
operating environment.

Use of JavaScript as a core
technology enables our products to perform extensive functional verification capabilities.
Our DOM extensions readily make XML available to the script developer in a familiar
setting making it easier to extend a web application to include XML interactions. Our
efficient browser emulator minimizes the use of computer memory, thereby enabling
companies to simulate a larger number of virtual clients in order to place considerable
load, or stress, on the underlying application infrastructure.

We have developed an application
architecture that scales to any arbitrary test size, delivering consistent throughput for
any arbitrary load size, independent of the number of machines used to generate the load.
We employ a 32-bit, multi-threaded and multi-process implementation, which dynamically
adjusts and allocates new processes as the load requirements are raised. This ensures that
load generators are optimized for the test and the load demanded of them, as well as
readily taking advantage of multi-processor machines to increase performance.

# Exchange Controls

See Item 10D.

# Item 4C. Organizational
Structure

In Israel  RadView Software Ltd., an Israeli  company,  is our corporate  headquarters  and principal  operational
center for research and development and for international sales.

In the US  RadView Software
Inc., a New Jersey corporation with offices in New Jersey, is our wholly-owned subsidiary
and site of our sales, distribution and support center.

We have three inactive wholly-owned
subsidiaries in Europe: RadView Software (UK), RadView GmbH in Germany and RadView AB in
Sweden.

# Item 4D. Property,
Plants and Equipment

We do not own any real property. We lease
approximately 3,446 square feet of office space in Rosh Haayin, Israel for our
corporate headquarters, research and development and international sales operations under
a lease being finalized and which will expire in December 2008. In addition, we rent an
office suite in Bridgewater, New-Jersey under a lease which is renewed on a quarterly
basis. We are currently subleasing our former sales office in Burlington, Massachusetts to
a third party under a lease expiring in July 2009. We believe that the properties leased
by us are adequate for all of our present and near-term needs.

# Item 4A: Unresolved
Staff Comments

Not Applicable

22

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# Item 5: Operating and
Financial Review and Prospects

# Managements
Discussion and Analysis of Financial Condition and Results of Operations

The following managements
discussion and analysis of financial condition and results of operations should be read in
conjunction with our consolidated financial statements and notes thereto filed as an
exhibit to this annual report.

Certain of the following
discussion contains forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. In some
cases, forward-looking statements are identified by words such as believe,
anticipates, expects, intends, plans,
will, may, and similar expressions. In addition, any statements
that refer to our plans, expectations, strategies or other characterizations of future
events or circumstances are forward-looking statements. Our actual results could differ
materially from those discussed in, or implied by, these forward-looking statements.
Factors that could cause actual results or conditions to differ from those anticipated by
these and other forward-looking statements include those more fully described in Item 3D.
Risk Factors.

# Overview

RadView develops and markets software
for testing the performance, scalability and reliability of internet applications.

In April 2007, we adopted an open
source approach for developing, marketing and selling software, with the open source model
we aim to take a leadership position in the distribution of performance testing solutions
for internet applications. The wide distribution inherent in an open source model will
acquaint a much broader section of the market with the WebLOAD. While a wide community of
users and developers enjoy free access to a robust, proven product, we gain increased
exposure to a commercial market that requires an enterprise-ready product, services and
support.

We derive our software license
revenues from perpetual licenses of our load testing products. We derive the majority of
our services revenues from support and maintenance arrangements and, to a lesser extent,
from training and consulting services. Substantially all of our revenues are denominated
in U.S. dollars.

A portion of our software license
revenues, and to a lesser extent our services revenues, was derived from royalty fees,
license fees and engineering service fees from technology license transactions.  Revenues
recognized under such arrangements totaled to $928,000 in 2005 and $496,000 in 2006. In
2007, no such revenues were recognized and we expect that the impact of future technology
license transactions, if any, will not represent a material portion of our total revenues.

We measure our operating success
using both financial and non-financial metrics. The financial metrics include revenue,
gross profit, operating expenses, and loss from operations, as well as cash position and
operating cash flow. Other key metrics include product orders by industry segment, average
deal size, repeat customer orders, and the portion of revenue that is generated by
indirect channels.

We have incurred net losses since our
inception. Our net loss attributed to ordinary shares was $2.5 million in 2005, $2.7
million in 2006 and $4.8 million in 2007. In 2005, the decrease in our net loss was
primarily attributable to an increase in revenues and, to a lesser extent, lower operating
expenses. The increase in our net loss in 2006 resulted primarily from the recording of an
$0.88 million deemed dividend attributable to the preferred shares purchased in the
original 2006 financing and related additional investments. Such deemed dividend reflects
an adjustment of the financing components in light of their relative fair value. The
increase in our net loss in 2007 resulted primarily from the decrease of revenues and the
launch of the Open Source project and a recording of an $0.85 million deemed dividend
attributable to the preferred shares purchased in the original 2006 financing and related
additional investments. If we are to achieve future profitability, we must continue to
increase our revenues while maintaining lower operating expenses.

Cash used in operating activities
$1.9 million in 2005, $1.9 million in 2006 and $3.5 million in 2007, attributable
primarily to our net losses, partially offset by noncash charges such as depreciation
expense and stock-based compensation along with changes in current assets and liabilities.
We expect that operating expenses will constitute a material use of our cash resources

In August, 2006, we closed a
financing led by Fortissimo Capital Fund GP, LP, or Fortissimo, along with several
co-investors including one of our directors and two existing shareholders, to provide for
a minimum initial investment of $1.5 million and up to $2.25 million of additional
investments, at the election of the investors, over 18 months; Fortissimo made three
additional investments to date, for a total amount of $1.7 million, and the remainder of
the additional investment rights have expired.

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In March and May 2007, we closed
private placements for investments by institutional investors led by Meitav Underwriting
Ltd., or Meitav, for an investment of approximately $3.4 million.

Our cash balance was $880,000 as of
December 31, 2007. We believe that our existing cash and cash equivalents, that include
the proceeds available from the additional investments by Fortissimo in 2007 and the
Meitav-led investments, will be sufficient to meet our anticipated needs for working
capital and capital expenditures for at least the next twelve months.

# Critical Accounting
Policies

# General

We
prepare our consolidated financial statements in conformity with U.S. generally accepted
accounting principles. As such, we are required to make certain estimates, judgments and
assumptions that we believe are reasonable based upon the information available. These
estimates and assumptions affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during
the periods presented. To fully understand and evaluate our reported financial results, we
believe it is important to understand the significant estimates and judgments applied as
they relate to our policies for revenue recognition, software development costs, and
accounting for stock options. More detailed descriptions of these policies are provided in
Note 2 to the Consolidated Financial Statements.

# Use of estimates

The preparation of the financial
statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from these
estimates.

# Revenue Recognition

The Company generates revenues from
licensing the rights to use certain of its software products. The Company also generates
revenues from support and maintenance services and, to a lesser extent, training and
consulting services. The Company sells its products primarily through its direct sales
force and, to a lesser extent, through resellers and distributors considered as end-users.

The Company recognizes revenue in
accordance with Statement of Position (SOP) 97-2, Software Revenue
Recognition, and SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, With
Respect to Certain Transactions. Under SOP 97-2, revenues from software product licenses
are recognized upon delivery of the software provided there is persuasive evidence of an
agreement, the fee is fixed or determinable and collection of the related receivable is
probable and no further obligations exist. Revenues under multiple-element arrangements,
which may include software licenses, support and maintenance, and training and consulting
services, are allocated to each element based on their respective fair values based on
vendor-specific objective evidence. This objective evidence represents the price of
products and services when sold separately. When vendor-specific objective evidence of
fair value exists for undelivered elements but does not exist for delivered elements of a
software arrangement, the Company uses the residual method for recognition of revenues,
when all other revenue recognition criteria are met.

Under the residual method, the
Company defers revenues related to the undelivered elements based on their vendor specific
objective evidence of fair value and recognizes the remaining arrangement fee for the
delivered elements. When vendor-specific objective evidence of fair value for undelivered
elements does not exist, and the only undelivered element is services, revenues from the
entire arrangement are recognized over the term of the service agreement.

Revenues from time-based license and
support and maintenance agreements are recognized ratably over the term of the time-based
license or maintenance period, which is typically one year. Revenues from training and
consulting arrangements are recognized as the services are performed.

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The Company generally does not grant
a right of return to its customers. When a right of return exists, revenue is deferred
until the right of return expires, at which time revenue is recognized provided that all
other revenue recognition criteria are met.

Revenue is recognized for software
licenses sold to resellers or distributors at the time of delivery, provided that all
revenue recognition criteria set forth in SOP 97-2 are fulfilled.

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

# Research and development
costs

The Company has evaluated the
establishment of technological feasibility of its products in accordance with SFAS No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed.
The Company sells products in a market that is subject to rapid technological change, new
product development and changing customer needs. Accordingly, the Company has concluded
that technological feasibility is not established until the development stage of the
product is nearly complete. The Company defines technological feasibility as the
completion of a working model. The time period during which costs could be capitalized
from the point of reaching technological feasibility until the time of general product
release is very short. Consequently, the amounts that could be capitalized are not
material to the Companys financial position or results of operations. Therefore, the
Company has charged all such costs to research and development expense in the period
incurred.

# Impairment of long-lived
assets

The Companys long-lived assets
are reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset to the
future undiscounted cash flows expected to be generated by the assets. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets.

# Severance pay

In accordance with Israeli
compensation law, the Company is required to make severance payments to Israeli employees
upon their termination of employment. The amount of such severance payments is based on
the most recent monthly salary multiplied by the number of years of employment as of the
balance sheet date. The Company has accrued for the estimated total cost of severance pay
as computed as of the balance sheet date. Severance expense totaled $ 90,000 in 2005, $
116,000 in 2006 and $62,000 in 2007

The Company has partially funded its
severance pay obligations by monthly deposits for insurance policies. The deposited funds
may be withdrawn only upon the fulfillment of the obligation pursuant to Israeli severance
pay law or labor agreements. The value of the deposited funds is based on the cash
surrender value of these policies and is presented as an asset in the consolidated balance
sheets.

# Legal contingencies

We are not involved in any legal
proceedings that are material to our business or financial condition. We have received a
claim letter from one of our software suppliers claiming the improper use of the
suppliers software interface in our open source product. We have responded to the
letter, denying any wrongdoing, and do not believe that the claim, if successful, would
have a material adverse effect on our business or operations.

# Income taxes

The Company accounts for income taxes
in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 prescribes the
use of the liability method whereby deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect when the
differences are expected to be reversed. The Company provides a valuation allowance, if
necessary, to reduce deferred tax assets to their estimated realizable value.

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In July 2006, the FASB issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation
of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for
income taxes by prescribing the minimum recognition threshold a tax position is required
to meet before being recognized in the financial statements. FIN 48 utilizes a two-step
approach for evaluating tax positions. Recognition (step one) occurs when an enterprise
concludes that a tax position, based solely on its technical merits, is
more-likely-than-not to be sustained upon examination. Measurement (step two) is only
addressed if step one has been satisfied (i.e., the position is more-likely-than-not to be
sustained) otherwise a full liability in respect of a tax position not meeting the
more-than-likely-than-not criteria is recognized. Under step two, the tax benefit is
measured as the largest amount of benefit, determined on a cumulative probability basis,
that is more-likely-than-not to be realized upon ultimate settlement.

FIN 48 applies to all tax positions
related to income taxes subject to FAS 109". This includes tax positions
considered to be routine as well as those with a high degree of uncertainty.

FIN 48 has expanded disclosure
requirements, which include a tabular roll forward of the beginning and ending aggregate
unrecognized tax benefits as well as specific detail related to tax uncertainties for
which it is reasonably possible the amount of unrecognized tax benefit will significantly
increase or decrease within twelve months. (See also note 11).

FIN 48 is effective for fiscal years
beginning after December 15, 2006. The cumulative effect of applying FIN 48 is reported as
an adjustment to the opening balance of retained earnings. The adoption of FIN 48, as of
January 1, 2007, affected the Companys retained earnings and financial position in
the amount of approximately $411,000.

# Stock based compensation

In December 2004, the FASB issued
SFAS No. 123R (Revised 2004) (SFAS 123(R)), Share-Based Payment, which
replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion
No. 25, Accounting for Stock Issued to Employees. SFAS 123(R), as amended, requires all
share-based payments to employees, including grants of employee stock options, to be
recognized in the financial statements based on their fair values beginning with the first
annual reporting period beginning after January 1, 2006. Early adoption will be permitted
in periods in which financial statements have not yet been issued.

The Company has elected to early
adopt the provisions of SFAS 123(R) effective January 1, 2005 following the modified
prospective method of adoption. A modified prospective method in which
compensation cost is recognized beginning with the effective date (a) based on the
requirements of SFAS 123(R) for all share-based payments granted after the effective date
and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to
the effective date of SFAS 123(R) that remain unvested on the effective date.

The Company recognizes compensation
expenses for the value of its awards, which have vested based on straight-line method over
the requisite service period of each of the awards, net of estimated forfeitures.

As a result of adopting SFAS 123(R)
on January 1, 2005, the Companys net loss ended December 31, 2006, is $128,000 lower
than if it had continued to account for stock-based compensation under APB 25. Basic and
diluted net loss per Ordinary share for the year ended December 31, 2006, is $ 0.12 lower
than if the Company had continued to account for share-based compensation under APB 25.
The Companys net loss ended December 31, 2007, is $131,000 lower than if it had
continued to account for stock-based compensation under APB 25. Basic and diluted net loss
per Ordinary share for the year ended December 31, 2007, is $ 0.06 lower than if the
Company had continued to account for share-based compensation under APB 25.

The Company has determined the fair
value of share-based payments issued after January 1, 2005 and unvested options granted in
prior periods using the Black-Scholes option valuation model, using the following
weighted-average assumptions:

| |                         | Year Ended December 31,
| | ----------------------- | -----------------------
|
|
|
|
| | Expected life of option |                        
| | Dividend yield          |                        
| | Expected volatility     |                        
| | Risk-free interest rate |                        

Expected volatilities are based on
historical volatility of the Companys Ordinary shares. The Company uses historical
data to estimate option exercises and employee terminations within the valuation model.
The Company determined the expected life of the options according to the simplified
method allowed under SAB107, which is the midpoint between the vesting and the
contractual term of the Companys stock options. The risk-free rate is based on the
U.S. Treasury yield curve.

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Share based payments are expensed
straight-line.

The Company applies SFAS No. 123 and
Emerging Issues Task Force (EITF) No. 96-18, Accounting for Equity Instruments
That Are Issued to Other Than Employee for Acquiring, or in Conjunction with Selling Goods
or Services, with respect to options and warrants issued to nonemployees. SFAS No. 123
requires the use of option valuation models to measure the fair value of the options and
warrants at the measurement date. No options or warrants were granted to nonemployees in
2006 or 2007.

# Functional currency

A substantial portion of the
Companys revenues are in U.S. dollars, while a portion of our expenses, primarily
salaries and related expenses incurred in our Israeli facility, is in NIS. The
Companys management believes that the U.S. dollar is the primary currency of the
economic environment in which the Company operates. Thus, the functional and reporting
currency of the Company is the U.S. dollar.

Accordingly, monetary accounts
maintained in currencies other than the dollar are remeasured into dollars in accordance
with Statement of Financial Accounting Standard (SFAS) No. 52,
Foreign Currency Translation. Changes in currency exchange rates
between the Companys functional currency and the currency in which a transaction is
denominated are included in the Companys results of operations as financial income
(expense) in the period in which the currency exchange rates change.

All exchange gains and losses from
the above-mentioned remeasurement are reflected in the statements of operations and were
not material for all periods presented. The representative rate of exchange was U.S. $1.00
to New Israeli Shekel (NIS) to NIS 4.603 at December 31, 2005 U.S. $1.00 to
NIS 4.225 at December 31, 2006 and US $1.00 to NIS 3.846 on December 31, 2007.

5A: Results of Operations

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

|                                         | For the Year Ended December 31,
|---------------------------------------- | -------------------------------
|
|
|
|
|Revenues:                                |                                
|Software licenses                        |                                
|Services                                 |                                
|                                         |                                
|Total revenues                           |                                
|                                         |                                
|                                         |                                
|Cost of revenues:                        |                                
|Software licenses                        |                                
|Services                                 |                                
|                                         |                                
|Total cost of revenues                   |                                
|                                         |                                
|                                         |                                
|Gross profit                             |                                
|                                         |                                
|                                         |                                
|Operating expenses:                      |                                
|Sales and marketing                      |                                
|Research and development                 |                                
|General and administrative               |                                
|                                         |                                
|Total operating expenses                 |                                
|                                         |                                
|                                         |                                
|Operating loss                           |                                
|                                         |                                
|                                         |                                
|Financial expense, net                   |                                
|                                         |                                
|Deemed dividend                          |                                
|                                         |                                
|Net loss attributable to ordinary shares |                                
|                                         |                                

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# Comparison of 2007 and
2006

# Revenues

Total Revenues. Total revenues
were $4.28 million in 2006 and $3.12 million in 2007. Total revenues decreased by $1.16
million, or 27.5% due to a $532,000 decrease in product revenues and a $631,000 decrease
in services revenues.

Software License. Software
license revenues consist primarily of revenues from the license of our software products
to end-users, resellers, and technology partners. Software license revenues were $1.757
million in 2006 and $1.225 million in 2007. Software license revenues decreased by
$532,000, or 30%, due to a decrease in sales.

Services.
          Service revenues consist primarily of revenue from annual support and
          maintenance contracts and, to a lesser extent, training and consulting services.
          Services revenues were $2.5 million in 2006 and $ 1.9 in 2007. Services revenues
          decreased by $600,000, or 24%, due to services to Opnet in 2006 that did not
          proceed in 2007.

# Cost of Revenues

Cost of Software Licenses.
Cost of software licenses consists principally of direct product costs, such as product
media and packaging, as well as royalties due to third parties. Cost of software licenses
was $80,000, or 4.6% of software license revenue in 2006 compared to $26,000, or 0.8% of
software license revenue in 2007. The reduction in the cost of software licenses resulted
from lower third-party royalty payments attributable to decreased revenues from
royalty-bearing products in 2007.

Cost of Services. Costof services consists principally of personnel related costs associated with customer
support andtraining. Cost of services $133,000, or 5.2% of service revenues in
2006 compared to $66,000, or 2% of service revenues in 2007. This decrease was due to
lower personnel costs for support and maintenance services resulting from reductions in
personnel and salary-related costs in 2007.

# Operating Expenses

Sales and Marketing. Sales and
marketing expenses consist principally of salaries and commissions for sales personnel,
recruiting costs, trade show costs, travel and other marketing costs such as lead
generation activities, advertising and product promotion. Sales and marketing expenses
were $2.5 million, or 57.8% of total revenues in 2006 compared to $2.7 million, or 86% of
total revenues in 2007. The increase in sales and marketing costs relate primarily to the
launch of the open source product and the marketing activities related to this launch. We
expect that our sales and marketing expenses will not increase over the next year.

Research and Development.
Research and development expenses consist principally of salaries and related expenses
required to develop and enhance our products. Research and development expenses were $1.5
million, or 35.3% of total revenues in 2006 compared to $1.9 million, or 60.6% of total
revenues in 2007. This increase resulted primarily from the resources allocated to the
open source product. We expect that our research and development expenses will decrease in
2008 as a result of reduction in personnel and due to reduced resources for the open
source product.

General and Administrative.
General and administrative expenses consist principally of executive, finance and
administrative salaries and related expenses, and costs of being a publicly held company.
General and administrative expenses were $1.7 million, or 39% of total revenues in 2006
compared to $1.7 million, or 55.3% of total revenues in 2007. We expect that our general
and administrative expenses will decrease in 2008 due to a reduction in personnel.

Financial Income (Expense),
Net. Interest expense, net was $287,000 in 2007 resulting primarily from interest
expense arising from discount amortization and interest of convertible loan received from
a related party. We expect that our interest expense, net may increase in 2008 as a result
of interest and discount amortization of convertible loan and warrants costs in connection
with financings that occurred during 2006.

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Currency translation gains and losses
were $50,000 in 2006 and $70,000 in 2007. The increase resulted from exchange rate
fluctuations between the U.S. dollar and the New Israeli Shekel.

Income Taxes. We have an
estimated net operating loss carry forward for Israeli tax purposes totaling approximately
$ 23.5 million through December 31, 2007 that would reduce future Israeli income taxes, if
any. These net operating losses may be carried forward indefinitely and offset against
future taxable business income. We expect that during the period these losses are
utilized, our income would be substantially tax exempt.

Our U.S. subsidiary has net taxable
losses for U.S. Federal and state tax purposes totaling approximately $37.2 million
through December 31, 2007. Utilization of U.S. net operating losses may be subject to
substantial annual limitation due to Change in ownership provision of the
Internal Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of net operating losses before utilization.

The Company and its subsidiary
provide a valuation allowance on the entire deferred tax asset in respect of the
carryforward losses, due to the uncertainty regarding future realization. Management
currently believes that since the Company has a history of losses, it is more likely than
not that the deferred tax regarding the loss carryforward will not be realized in the
foreseeable future. Deferred taxes in respect of other temporary differences are
immaterial.

# Comparison of 2006 and
2005

# Revenues

Total Revenues.
Total revenues were $5.6 million in 2005 and $4.3 million in 2006.  Total revenues
decreased by $1,362,000, or 24%, due to a $1,381,000 decrease in product revenues offset
by a $19,000 increase in services revenues.

Software License.
Software license revenues consist primarily of revenues from the license of our software
products to end-users, resellers, and technology partners. Software license revenues were
$3.1 million in 2005 and $1.8 million in 2006.  Software license revenues decreased
by $1,381,000, or 44%, due to a decrease in sales.

Services. Service
revenues consist primarily of revenue from annual support and maintenance contracts and,
to a lesser extent, training and consulting services. Services revenues were $2.5 million
in each of 2005 and 2006.

# Cost of Revenues

Cost of Software
Licenses. Cost of software licenses consists principally of direct product
costs, such as product media and packaging, as well as royalties due to third
parties.  Cost of software licenses was $147,000, or 4.7% of software license revenue
in 2005 compared to $80,000, or 4.6% of software license revenue in 2006.  The
reduction in the cost of software licenses resulted from lower third-party royalty
payments attributable to decreased revenues from royalty-bearing products in 2006.

Cost of Services.
Cost of services consists principally of personnel related costs associated with customer
support and training. Cost of services was $255,000, or 10.2% of service revenue in 2005
compared to $133,000, or 5.2% of service revenues in 2006. This decrease was due to lower
personnel costs for support and maintenance services resulting from reductions in
personnel and salary-related costs in 2006.

# Operating Expenses

Sales and
Marketing.  Sales and marketing expenses consist principally of salaries
and commissions for sales personnel, recruiting costs, trade show costs, travel and other
marketing costs such as lead generation activities, advertising and product
promotion.  Sales and marketing expenses were $3.3 million, or 58.2% of total
revenues in 2005 compared to $2.5 million, or 57.8% of total revenues in 2006.  The
decrease in sales and marketing costs related primarily to personnel reductions and lower
marketing program spending.

Research and
Development.  Research and development expenses consist principally of
salaries and related expenses required to develop and enhance our products.  Research
and development expenses were $2.2 million, or 39.5% of total revenues in 2005 compared to
$1.5 million, or 35.3% of total revenues in 2006.  These decreases resulted primarily
from reductions in personnel and salary-related costs.

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General and
Administrative.  General and administrative expenses consist principally of
executive, finance and administrative salaries and related expenses, and costs of being a
publicly held company.  General and administrative expenses were $2.0 million, or
35.5% of total revenues in 2005 compared to $1.7 million, or 39% of total revenues in
2006.  The decrease in general and administrative costs in absolute dollars
resulted primarily from increased professional fees incurred in 2006 arising from the
financing transactions concluded in 2006 and a one time investment fee in 2006.

Financial Income (Expense),
Net.  Interest expense, net was $177,000 in 2005 resulting primarily from
interest expense arising from borrowings under a revolving line of credit facility entered
into in 2005, including amortization of deferred debt issuance costs, partially offset by
interest income from lower invested cash balances in 2005. Interest expense, net was
$160,000 in 2006 resulting primarily from interest expense arising from discount
amortization and interest of convertible loan received from a related party.

Currency translation gains and losses
were $11,000 in 2005 and $50,000 in 2006.  The increase resulted from exchange rate
fluctuations between the U.S. dollar and the New Israeli Shekel.

Income Taxes.  We
have an estimated net operating loss carry forward for Israeli tax purposes totaling
approximately $13.2 million through December 31, 2006 that would reduce future Israeli
income taxes, if any. These net operating losses may be carried forward indefinitely and
offset against future taxable business income.

Our U.S. subsidiary has net taxable
losses for U.S. Federal and state tax purposes totaling approximately $36.7 million
through December 31, 2006.

# Impact of Inflation and
Currency Fluctuations

A substantial majority of our
revenues is received, and a majority of our expenses is incurred, in U.S. dollars.
Revenues denominated in U.S. dollars as a percent of total revenues were 88.9% in 2005,
85.7% in 2006 and 80.9% in 2007. Expenses denominated in U.S. dollars as a percent of
total expenses were 57.6% in 2005, 53.3% in 2006 and 35.8% in 2007.

A portion of our expenses, mainly
salary and personnel costs related to our employees in Israel, is incurred in New Israeli
Shekels, or NIS. The salaries of our Israel-based employees are partially linked to
increases in the Israeli consumer price index. As a result, the U.S. dollar cost of our
Israeli operations is influenced by inflation in Israel as well as the currency exchange
rate between the NIS in relation to the U.S. dollar. Any increase in the rate of inflation
in Israel may have a negative effect on our operating results, unless such inflation is
offset by a devaluation of the NIS in relation to the U.S. dollar. Exchange rates between
the NIS and the U.S. dollar fluctuate continuously, and therefore exchange rate
fluctuations and especially larger periodic devaluations will have an impact on our
operating results and period-to-period comparisons of its results. The effects of foreign
currency translations are reported in our financial statements in current operating
results.

In addition to our operations in
Israel, we also conduct sales operations in the U.S. and Europe. Transactions denominated
in currencies other than the U.S. dollar or NIS were not material.

# Market Risk

We currently do not invest in, or
hold for trading or other purposes, any financial instruments subject to market risk.
Except for a $750,000 convertible loan obtained during 2006, we currently do not have any
outstanding borrowings or other credit facilities

# Impact of Recently
Issued Accounting Standards

In September 2006, the FASB issued
SFAS No. 157, Fair Value Measurements. SFAS 157 establishes a single
authoritative definition of fair value, sets out a framework for measuring fair value, and
requires additional disclosures about fair value measurements. SFAS 157 applies only to
fair value measurements that are already required or permitted by other accounting
standards. The Company will adopt SFAS No. 157 effective on January 1, 2008. The adoption
of SFAS 157 is not expected to have material effect on the Companys financial
statements.

In February 2008, the FASB issued
FASB Staff Position FSP 157-2, Effective Date of FASB Statement No. 157"
(FSP 157-2). FSP 157-2 delays the effective date of
SFAS No. 157 for all non-financial assets and non-financial liabilities, except
for items that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually), until the beginning of the first quarter of fiscal
2009. The Company is currently evaluating the impact that SFAS No. 157 will have
on its consolidated financial statements when it is applied to non-financial assets and
non-financial liabilities beginning in the first quarter of 2009.

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In February 2007, the FASB issued
SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS No. 159), which permits companies to choose to measure
certain financial instruments and other items at fair value that are not currently
required to be measured at fair value which will be determined according to SFAS 157
mentioned above. SFAS No. 159 is effective for fiscal years beginning after November 15,
2007. The Company believes that the adoption of SFAS No. 159 will not have any significant
effect on the Companys financial statements, results of operations or financial
position, since the Company will not apply the fair value option for its existing assets
and liabilities as of January 1st 2008.

In December 2007, the FASB issued
SFAS 141(R), Business Combinations (SFAS 141(R)). This Statement
replaces SFAS 141, Business Combinations, and requires an acquirer to
recognize the assets acquired, the liabilities assumed, including those arising from
contractual contingencies, any contingent consideration, and any noncontrolling interest
in the acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. SFAS 141(R) also requires the acquirer
in a business combination achieved in stages (sometimes referred to as a step acquisition)
to recognize the identifiable assets and liabilities, as well as the noncontrolling
interest in the acquiree, at the full amounts of their fair values (or other amounts
determined in accordance with SFAS 141(R)). In addition, SFAS 141(R)s requirement to
measure the noncontrolling interest in the acquiree at fair value will result in
recognizing the goodwill attributable to the noncontrolling interest in addition to that
attributable to the acquirer.

SFAS 141(R) also amends SFAS No. 109,
Accounting for Income Taxes, to require the acquirer to recognize changes in
the amount of its deferred tax benefits that are recognizable because of a business
combination either in income from continuing operations in the period of the combination
or directly in contributed capital, depending on the circumstances. It also amends SFAS
142, Goodwill and Other Intangible Assets, to, among other things; provide guidance on the
impairment testing of acquired research and development intangible assets and assets that
the acquirer intends not to use.

SFAS 141(R) applies prospectively to
business combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. As such, the
adoption of SFAS 141R is not expected to have any effect on accounting for current
subsidiaries.

In December 2007, the FASB issued
SFAS 160, Noncontrolling Interests in Consolidated Financial Statements
(SFAS 160). SFAS 160 amends ARB 51, Consolidated Financial
Statements, to establish accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. It also clarifies
that a noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated financial
statements. SFAS 160 also changes the way the consolidated income statement is presented
by requiring consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the noncontrolling interest. It also requires
disclosure, on the face of the consolidated statement of income, of the amounts of
consolidated net income attributable to the parent and to the noncontrolling interest.
SFAS 160 requires that a parent recognize a gain or loss in net income when a subsidiary
is deconsolidated and requires expanded disclosures in the consolidated financial
statements that clearly identify and distinguish between the interests of the parent
owners and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is
effective for fiscal periods, and interim periods within those fiscal years, beginning on
or after December 15, 2008.

In December 2007, the SEC staff
issued Staff Accounting Bulletin No. 110 (SAB 110), which, effective January
1, 2008. SAB 110 amends and replaces Staff Accounting Bulletin No. 107 (SAB
107), Share-Based Payment. SAB 110 expresses the views of the SEC staff regarding
the use of a simplified method in developing an estimate of expected term of
plain vanilla share options in accordance with FASB Statement No. 123(R),
Share-Based Payment. Under the simplified method, the expected term is
calculated as the midpoint between the vesting date and the end of the contractual term of
the option. The use of the simplified method, which was first described in SAB
107, was scheduled to expire on December 31, 2007. SAB 110 extends the use of the
simplified method for plain vanilla awards in certain situations.
The SEC staff does not expect the simplified method to be used when sufficient
information regarding exercise behavior, such as historical exercise data or exercise
information from external sources, becomes available. The adoption of SAB 110 would not
have any effect on the Companys financial statements.

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In March 2008, the FASB issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities  an
amendment to FASB Statement No. 133". SFAS No. 161 is intended to improve financial
standards for derivative instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand their effects on an entitys
financial position, financial performance, and cash flows. Entities are required to
provide enhanced disclosures about: (a) how and why an entity uses derivative instruments;
(b) how derivative instruments and related hedged items are accounted for under Statement
133 and its related interpretations; and (c) how derivative instruments and related hedged
items affect an entitys financial position, financial performance, and cash flows.
It is effective for financial statements issued for fiscal years beginning after November
15, 2008, with early adoption encouraged. The Company is currently evaluating the impact
of SFAS No. 161 on its financial statements.

In May 2008, the FASB issued SFAS No.
162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162
identifies the sources of accounting principles and the framework for selecting the
principles to be used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting principles in
the United States. It is effective 60 days following the SECs approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, The Meaning of
Present Fairly in Conformity With Generally Accepted Accounting Principles. The
Company is currently evaluating the impact of SFAS No. 162 on its financial statements,
and the adoption of this statement is not expected to have a material effect on the
Companys financial statements.

# Effective Corporate Tax
Rate

Israeli companies are currently
subject to tax at the rate of 31% in 2006, 29% in 2007, 27% in 2008, 26% in 2009 and 25%
in 2010 and years thereafter. However, we have derived, and expect to continue to derive,
a substantial portion of our income under our Approved Enterprise capital investment
program. Subject to compliance with applicable requirements, such income will be tax
exempt for a period of two years and will be subject to a reduced corporate tax rate of
25% in the following five to eight years, subject to the level of foreign shareholders
holdings in our ordinary shares. Tax benefits for each capital investment program are only
effective in restricted periods according to the Encouragement of Capital Investments Law.
If we do not comply with the applicable requirements, the tax benefits may be canceled. We
believe that we comply with these conditions. If we operate under more than one approval,
or if our capital investments are only partially approved, our effective tax rate will be
a weighted combination of the various applicable tax rates. We may not be able to obtain
approval for additional Approved Enterprise programs. Since we have incurred tax losses
through December 31, 2007, we have not yet used the tax benefits for which we are
eligible.

# Passive Foreign
Investment Company Status

# General

Under U.S. federal income tax laws,
we will be treated a passive foreign investment company, or PFIC, in any tax year if, in
such tax year, either 75% or more of our gross income is passive in nature, also referred
to as the Income Test, or, on average for such tax year, 50% or more the fair market value
of our assets produce or are held for the production of passive income, also referred to
as the Asset Test. We must make a separate determination each year as to whether we are a
PFIC. As a result, our PFIC status may change from year to year. Classification as a PFIC
may have important and adverse tax implications to U.S. Holders. For purposes of this
summary, a U.S. Holder is a holder of our ordinary shares that is, for U.S. income tax
purposes:

| |  | a
citizen or resident of the United States;
| | - | -------------------------------------------

| |  | a
domestic U.S. corporation;
| | - | ----------------------------

| |  | an
 estate,  the income of which is subject to U.S.  federal  income tax  regardless  of the
source of its          income; and
| | - | -------------------------------------------------------------------------------------------------------------------------------

| |  | any
trust if either (i) a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the authority to control
all the substantial decisions of the trust, or (ii) the trust has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a United States
person.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In applying the Asset Test, the
average fair market value of our assets is determined on the basis of the average fair
market value of our assets as of the end of each quarter of the tax year. The value of the
total assets of a publicly traded foreign corporation is generally equal to the sum of the
aggregate value of its outstanding stock plus its liabilities. Although we may no longer
be publicly traded for this purpose, we believe our share price continues to
provide the best indication of the fair value of our assets for this purpose.

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# Our Determination of
PFIC Status

Based on the composition of our
income and assets for purposes of the Income Test and the Asset Test, respectively, we
believe that we were a PFIC for the 2002 and 2003 tax years, but we do not believe we were
a PFIC for the 2004, 2005, 2006 and 2007 tax years. There can be no assurance that we will
not be treated as a PFIC in any future tax year. Although we generally will be treated as
a PFIC as to any U.S. Holder if we are a PFIC for any year during such U.S. Holders
holding period of our ordinary shares, such U.S. Holder may avoid the consequences of PFIC
classification for years after we cease to be a PFIC by making an election, as described
below. In view of the complexity of the issues regarding our treatment as a PFIC, U.S.
Holders are urged to consult their own tax advisors for guidance as to our status as a
PFIC.

# Tax Consequences if We
Are a PFIC

There are no U.S. federal income tax
consequences to a non-U.S. Holder if we are classified as a PFIC.

If we are a PFIC for U.S. federal
income tax purposes for any year during a U.S. Holders holding period of our
ordinary shares and such U.S. Holder does not make either of the special elections
described below, any gain recognized by such U.S. Holder upon the sale of ordinary shares,
or upon the receipt of certain distributions, will be treated as ordinary income. Such
income generally would be allocated ratably over the U.S. Holders holding period of
our ordinary shares. The amount allocated to prior years, with certain exceptions, will be
subject to tax at the highest tax rate in effect for those years and an interest charge
will be imposed on the amount of deferred tax on the income allocated to the prior taxable
years.

Although we generally will be treated
as a PFIC as to any U.S. Holder if we are a PFIC for any year during such U.S.
Holders holding period, if we cease to satisfy the requirements for PFIC
classification, the U.S. Holder may avoid PFIC classification for subsequent years by
electing to recognize gain based on the unrealized appreciation in the ordinary shares
through the close of the tax year in which we cease to be a PFIC. Additionally, if we are
a PFIC, a U.S. Holder who acquires ordinary shares from a decedent will be denied the
normally available step-up in tax basis for our ordinary shares to fair market value at
the date of death and instead will have a tax basis equal to the lower of fair market
value or the decedents tax basis.

For any tax year in which we are
determined to be a PFIC, U.S. Holders may elect to treat their ordinary shares as an
interest in a qualified electing fund, or a QEF Election, in which case such U.S. Holders
would be required to include in income currently their proportionate share of our earnings
and profits in years in which we are a PFIC regardless of whether distributions of such
earnings and profits are actually distributed to such U.S. Holders.

Any gain subsequently recognized upon
the sale of their ordinary shares by such U.S. Holders generally would be taxed as capital
gain and a denial of the basis step-up at death would not apply.

A U.S. Holder may make a QEF Election
with respect to a PFIC for any taxable year of the U.S. Holder. A QEF Election is
effective for the year in which the election is made and all subsequent taxable years of
the U.S. Holder. Procedures exist for both retroactive elections and the filing of
protective statements. A U.S. Holder making the QEF Election must make the election on or
before the due date, as extended, for the filing of the U.S. Holders income tax
return for the first taxable year to which the election will apply.

A U.S. Holder must make a QEF
Election by completing Form 8621, Return by a Shareholder of a Passive Foreign
Investment Company or Qualified Electing Fund, and attaching it to their U.S. federal
income tax return, and must satisfy additional filing requirements each year the election
remains in effect. We intend to provide to each U.S. Holder, upon request, the tax
information required to make a QEF Election and to make subsequent annual filings.

As an alternative to a QEF Election,
a U.S. Holder of PFIC shares that are marketable generally may be able to
avoid the imposition of the special tax and interest charge described above by electing to
mark to market the ordinary shares, or a Mark-to-Market Election. Our ordinary shares
ceased being marketable for purposes of the Mark-to-Market Election in 2004,
however, and as a result, any such election made by a U.S. Holder for a prior year
terminated automatically as of the beginning of our 2004 tax year.

U.S.
          Holders should consult their own tax advisors regarding the eligibility, manner
          and advisability of making a QEF Election, the consequences of the automatic
          termination of any existing Mark-to-Market Election in 2004, and the effect of
          these elections on the calculation of the amount of foreign tax credit that may
          be available to them.

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A U.S. Holder who beneficially owns
shares of a PFIC must file Form 8621 with the U.S. Internal Revenue Service for each tax
year in which the U.S. Holder holds shares in a PFIC. This form describes any
distributions received with respect to these shares and any gain realized upon the
disposition of these shares.

The summary above is based on current
provisions of the United States Internal Revenue Code of 1986, as amended, final,
temporary and proposed U.S. Treasury Regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all of which are subject to change,
possibly with retroactive effect. This summary is limited to a description of certain of
the material U.S. federal income tax consequences to U.S. Holders of our status as a PFIC
and does not consider any other aspects of U.S. federal income taxation that may be
relevant to U.S. Holders, nor does it consider all aspects of the PFIC regime that may be
relevant to particular U.S. Holders by reason of their particular circumstances. This
summary is directed only to U.S. Holders that hold ordinary shares as capital assets and
does not address the considerations that may be applicable to particular classes of U.S.
Holders, including tax-exempt organizations, holders of ordinary shares as part of a
straddle, hedge or conversion transaction, U.S.
Holders who own, directly, indirectly or through attribution, 10% or more of our
outstanding ordinary shares, and persons who own ordinary shares through a partnership or
other pass-through entity.

Rules relating to the income tax
consequences of being treated as a PFIC are very complex. U.S. Holders are urged to
consult their own tax advisors regarding the application of the PFIC rules to their
investment in our ordinary shares.

# Grants and Participation

We have received a participation
grant from the Office of the Chief Scientist (OCS) of Israels Ministry
of Industry, Trade and Labor in our Open Source Web Testing project for 2007, in the
amount of up to approximately US$460,000. As of May 31, 2008, we have received the amount
of US$388,600 out of the entire grant. In order to receive the full amount of the grant we
are required to submit the Companys 2007 annual report.Although a new
application was submitted to the OCS on the second quarter of 2008 for a grant of up to
US$ 500,000 we cannot assure that the application will be approved.

Under the Law for the Encouragement
of Industrial Research and Development, 1984 (the Research Law), research and
development programs approved by a research committee of the OCS, are eligible for grants
in exchange for payment to the Government of royalties from the sale of products developed
in accordance with the Program. In order to be eligible, the applicant must be an Israeli
company that proposes to invest in the development of industrial know-how, the development
of new products, the development of new processing or manufacturing procedures or the
development of significant improvements to an existing process or product. A committee of
the OCS reviews the applications, evaluates the feasibility of the proposal, determines
whether or not to approve a grant, and also determines the extent of Chief Scientist
funding (within a range specified by the law) for approved projects. Depending on the
nature of the project, the OCS grants generally amount up to 50% of the approved research
expenses.

Under the terms of the grant for
which we received approval from the OCS, and subject to the agreement and other documents
ancillary thereto, we are obligated to pay royalties of between 3% and 6% on sales of
products incorporating know-how developed within the framework of each funded program or
derived therefrom (including ancillary services in connection therewith), up to an
aggregate of up to 100% of the dollar-linked value of the total grants received. The
royalties payable are subject to interest on the U.S. dollar-linked value of the total
grants received at the annual rate of LIBOR applicable to U.S. dollar deposits at the date
the grants received.

The Research Law requires that the
manufacture of any product developed as a result of research and development funded by the
Israeli Government take place in Israel. If any of the manufacturing is performed outside
of Israel, the company would ordinarily be required to pay royalties at an increased rate
and to increase the aggregate repayment amount to between 120% and 300% of the grant
amount, depending on the manufacturing volume that is performed outside Israel, except in
special cases that receive the prior approval of the research committee, and subject to
certain payments to be made to the Israeli Government (generally an amount no less that
the aggregate grants plus interest less royalties paid).

The Research Law also provides that
know-how from the research may not be transferred to third parties in Israel without prior
approval of the research committee. This approval, however, is not required for the sale
or export of any products resulting from such research and development. Approval of such
transfer of know-how may be granted in specific circumstances, only if the recipient
abides by the provisions of the Research Law and related regulations, including the
restrictions on the transfer of know-how and the obligation to pay royalties in an amount
that may be increased. The Research Law further provides that the know-how developed under
an approved research and development program may not be transferred to any third parties
outside Israel.

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The Research Law imposes reporting
requirements with respect to certain changes in the ownership of a grant recipient. The
law requires the grant recipient and its controlling shareholders and interested parties
to notify the Office of the Chief Scientist of any change in control of the recipient or a
change in the holdings of the significant stockholders of the recipient that results in a
non-Israeli becoming an interested party directly in the recipient and requires the new
interested party to undertake to the Office of the Chief Scientist to comply with the
Research Law. In addition, the rules of the Office of the Chief Scientist may require
prior approval of the Office of the Chief Scientist or additional information or
representations in respect of certain of such events.

In recent years, the funds available
for Office of the Chief Scientist grants out of the annual budget of the State of Israel
have been reduced, and the Israeli authorities have indicated that the government may
further reduce or abolish Office of the Chief Scientist grants in the future.

# Conditions in Israel

We are incorporated under the laws of
Israel. Our offices and product development and manufacturing facilities are located in
Israel. As a consequence, we are directly affected by political, economic and military
conditions in Israel. Our operations would be substantially impaired if major hostilities
involving Israel should occur or if trade between Israel and its present trading partners
should be curtailed. See also Item 3DRisk Factors.

Political and Economic
Conditions

Since the establishment of the State
of Israel in 1948, a number of armed conflicts have taken place between Israel and its
Arab neighbors and a state of hostility, varying from time to time in intensity and
degree, has led to security and economic problems for Israel. While a peace agreement
between Israel and Egypt was signed in 1979, economic relations have been limited. A peace
agreement between Israel and Jordan was signed in 1994. However, as of the date hereof,
Israel has not entered into any peace agreement with Syria or Lebanon. No prediction can
be made as to whether any other written agreements will be entered into between Israel and
its neighboring countries, whether a final resolution of the areas problems will be
achieved, the nature of any such resolution or whether civil unrest will resume and to
what extent such unrest would have an adverse impact on Israels economic development
or on our operations in the future.

There is substantial uncertainty
about how or whether any peace process will develop or what effect it may have upon us.
Since October 2000, there has been a substantial deterioration in the relationship between
Israel and the Palestinians which has resulted in increased violence. The future effect of
this deterioration and violence on the Israeli economy and our operations is unclear. In
January 2006, Hamas, an Islamic movement responsible for many attacks against Israelis,
won the majority of the seats in the Parliament of the Palestinian Authority. The election
of a majority of Hamas-supported candidates is expected to continue to be a major obstacle
to relations between Israel and the Palestinian Authority, as well as to the stability in
the Middle East as a whole. In July 2006, Israel became involved in a major military
conflict with the Hizbullah organization in Lebanon, which subjected the north of Israel
to missile attacks. Israels military operations required the drafting of a
substantial number of reserve soldiers. Ongoing violence between Israel and its Arab
neighbors and Palestinians may have a material adverse effect on our business, financial
condition or results of operations.

The future of relations between
Israel and the Palestinian Authority is uncertain. Terrorist attacks, armed conflicts or
political instability in the region could negatively affect local business conditions and
harm our results of operations. We cannot predict the effect on us of the increase in the
degree of violence against Israel or the effect of military action elsewhere in the Middle
East. Furthermore, several countries restrict doing business with Israel and Israeli
companies, and additional companies may restrict doing business with Israel and Israeli
companies as a result of the increase in hostilities. This may also materially adversely
affect our operating results, financial condition and the expansion of our business.

Some of our employees are obligated
to perform annual reserve duty in the Israel Defense Forces and may, at any time, be
called for active military duty. While we have operated effectively under those and
similar requirements in the past, no assessment can be made of the full impact of such
requirements on us in the future, particularly if emergency circumstances occur.

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In recent years Israel has undergone
a period of recession in economic activity, resulting in low growth rates and growing
unemployment. Our operations could be adversely affected if the economic conditions in
Israel deteriorate.

In 1998, the Israeli currency control
regulations were liberalized dramatically. As a result, Israeli citizens can generally
freely purchase and sell Israeli currency and assets. The Government of Israel has
periodically changed its policies in these areas. There are currently no Israeli currency
control restrictions on remittances of dividends on ordinary shares or proceeds from the
sale of ordinary shares; however, legislation remains in effect pursuant to which currency
controls can be imposed by administrative action at any time.

The costs of our operations in Israel
are generally incurred in New Israeli Shekels (NIS). If the inflation rate in
Israel exceeds the rate of devaluation of the NIS against the US Dollar in any period, the
costs of our Israeli operations, as measured in US Dollars, could increase. Israels
economy has, at various times in the past, experienced high rates of inflation.

Like many Israeli companies, we
receive tax benefits from the Israeli Government. We also participate in programs
sponsored by the Israeli Government. The reduction or termination of any such programs or
tax benefits, especially those benefits available as a result of the Approved
Enterprise status of facilities in Israel, could have a materially adverse effect on
our business.

# 5B: Liquidity and
Capital Resources

Cash and cash equivalents totaled
$166,000 as of December 31, 2005, $229,000 as of December 31, 2006 and $880,000 as of
December 31, 2007. Restricted cash totaled $21,000 as of December 31, 2006 and $26,000 as
of December 31, 2007.

Cash used in operating activities was
$1.9 million in 2005, $1.9 million in 2006 and $3.5 million in 2007. Cash used
in operating activities has resulted substantially from our reported net losses partially
reduced by noncash items such as depreciation and stock-based compensation, and changes in
current assets and liabilities and deferred revenues.

Cash used in operating activities in
2005 was due primarily to a net loss of $2.5 million, an increase of $74,000 in accounts
receivable, a decrease of $15,000 in accrued severance pay, and a decrease of $246,000 in
deferred revenue, partially offset by noncash items, a decrease of $196,000 in prepaid
expenses and other current assets and an increase of $331,000 in accounts payable.
Accounts receivable increased as a result of incremental amounts to be collected under a
technology license agreement entered into in December 2005. Accrued severance pay
decreased due to the termination of several employees in Israel during 2005.

Deferred revenues decreased due
primarily to the recognition of deferred technology license fees during 2005. Prepaid
expenses and other current assets decreased as a result of lower prepayments of insurance
policies and vendor maintenance contracts. Accounts payable increased due to increased
professional costs incurred at end of 2005 and slower payments to vendors.

Cash used in operating activities in
2006 was due primarily to a net loss of $1.8 million, a decrease of $269,000 in accounts
receivable, a decrease of $63,000 in accrued severance pay, and a decrease of $574,000 in
deferred revenue, partially offset by noncash items, an increase of $125,000 in accrued
expenses and a decrease of $142,000 in accounts payable. Accounts receivable decreased as
a result of revenues reduction and due to the absence of incremental amounts to be
collected under technology license agreements as opposed to 2005 when a technology license
agreement was entered into in December 2005. Deferred revenues decreased due primarily to
the recognition of deferred technology license fees during 2006 and vendor maintenance
contracts. Accounts payable decreased due to payments before year end and a decrease in
the US subsidiarys activity.

Cash used in operating activities in
2007 was due primarily to a net loss of $3.9 million, an increase of $241,000 in accounts
receivable, a decrease of $54,000 in accrued severance pay, partially offset by noncash
items, an increase of $380,000 in accrued expenses, an increase of $55,000 in deferred
revenue and a decrease of $144,000 in accounts payable. Accounts receivable increased as a
result of incremental amounts to be collected under technology license agreements.
Deferred revenues decreased due primarily to the recognition of vendor maintenance
contracts. Accounts payable decreased due to payments before year end and a decrease in
the US subsidiarys activity.

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Cash used in investing activities was
$54,000 in 2005, $21,000 in 2006 and $52,000 in 2007.  Cash used in investing activities in
2005 for the purchase of $79,000 in property and equipment and investment in restricted
cash of $40,000 was partially offset by the decrease of $65,000 in operating lease
deposit. Cash used in investing activities in 2006 was for the purchase of $40,000 in
property and equipment partially offset by the decrease in restricted cash of $19,000.
Cash used in investing activities in 2007 was for the purchase of $47,000 in property and
equipment and for the increase in restricted cash of $5,000.

There was no net cash provided by
financing activities in 2005 attributable to the issuance of warrants for $52,000 and
borrowings of $1.3 million under the revolving line of credit, entirely offset by
repayments totaling $1.3 million under the revolving line of credit and payment of debt
issuance costs of $70,000. Cash provided by financing activities was $2.0 million in 2006
consisting, as more fully described below, primarily of the net proceeds from a share
purchase agreement in August 2006 for 25,000,000 of our preferred shares, plus warrants
and additional investment rights for an aggregate purchase price of $750,000, a
convertible loan of $750,000 and a subsequent investment of $700,000 in December 2006 of
23,333,334 of our preferred shares, plus warrants. The proceeds from the share purchase in
2006 were offset by issuance costs and a $70,000 repayment under the revolving line of
credit. Cash provided by financing activities was $4.2 million in 2007 consisting, as more
fully described below, primarily of the net proceeds from an additional investment of
Fortissimo in February and March 2007 for 33,333,334 of our preferred shares and a private
offering led by Mietav Underwriting Ltd. in March and May 2007 for 56,378,980 of our
preferred shares, plus warrants and additional investment rights.

In May 2005, we entered into a
one-year revolving line of credit facility with Comerica Bank for borrowings of up to $2.0
million. Advances under the facility were limited to the lesser of $2.0 million or the sum
of 75% of eligible accounts receivables plus $1.0 million. In December 2005, our
borrowings under the credit facility exceeded the collateral base and, as a result, we
triggered an event of default. We agreed upon a repayment plan with Comerica Bank to repay
the outstanding borrowings under the facility in installments through January 2006. As of
December 31, 2005, we had an outstanding balance under the facility of $70,000. In January
2006, all outstanding borrowings under the credit facility were fully repaid and the
revolving line of credit facility was terminated.

In August 2006, we closed a financing
with Fortissimo Capital Fund GP LP, or Fortissimo, on behalf of several limited
partnerships in which it serves as general partner and other co-investors including one of
our directors and two existing shareholders, or the Investors. The initial financing was
for $1.5 million consisting of $750,000 to purchase 25,000,000 of convertible preferred
shares,  or Preferred Shares, at a price of $0.03 per share and $750,000 as a
convertible loan. The financing also provided for an additional investment, at the option
of the Investors, to purchase up to an additional 75 million Preferred Shares for up to
$2.25 million, at a price of $0.03 per share, for a period of 18 months after the closing
of the initial investment. Each Preferred Share is convertible into one of our ordinary
shares, subject to adjustment for anti-dilution events. Each Preferred Share receives the
same voting rights as ordinary shares, except Preferred Shares are entitled to elect the
majority of our board of directors and have approval rights over specified actions. Each
Preferred Share is entitled to a preference in liquidation over our ordinary shares. The
Investors also received warrants to purchase up to 18,750,000 Preferred Shares in
connection with the initial investment and up to 56,250,000 Preferred Shares in the event
they make the additional investment. The additional investment rights were exercised in
part, as described below, and have otherwise expired. The warrants have an exercise price
of $0.04 per share for a period of five years from date of issuance.

In order to secure additional
financing in the last quarter of 2006 and the first quarter of 2007, the Company requested
Fortissimo to accelerate the exercise of its right under the financing to make additional
investments. The Company and Fortissimo entered in a series of addendum to the share
purchase agreement of April 2006 for Fortissimos additional investment and purchase
as follows: the purchase on December 24, 2006 of 23,333,334 Preferred Shares and
17,500,000 Preferred Warrants for $0.7 million (the First Addendum), the
purchase on February 7, 2007 of 16,666,667 Preferred Shares and 12,500,000 Preferred
Warrants for $0.5 million (the Second Addendum) and the purchase on March 20,
2007 of 16,666,667 Preferred Shares and 12,500,000 Preferred Warrants for $0.5 million
(the Third Addendum).

Pursuant to each of the First, Second
and Third Addendums, respectively, and in consideration of the acceleration of the
additional investment rights, the Company undertook to grant Fortissimo a new option (each
a New Option) to acquire on the same terms and conditions the same number of
shares and warrants as purchased under the respective Addendum. The New Option is subject
to the right of the Company for a period of 12 months from the date of issuance of the New
Option to buy back any shares and warrants purchased under the Addendum by payment to
Fortissimo of the purchase price paid for the shares and warrants under the Addendum plus
interest at the annual rate of 8%. The Company did not exercise its rights to buy back any
shares purchased under the Addendums and these rights have expired.

37

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The convertible loan under the
financing bears interest at 8.0% per annum. The convertible loan plus, at the election of
the Investors, any accrued interest thereon, is convertible into Preferred Shares at a
conversion price of $0.03 per share. The convertible loan matures three years from the
closing date of the initial investment and, if not converted by such date, becomes due and
payable 30 days thereafter.

The financing also provided for us to
enter into a management services agreement with Fortissimo, under which Fortissimo will
provide management and board services in consideration a minimum fee of $50,000 per year
payable quarterly (the Fixed Fee) plus an additional amount of up to $70,000
payable at the end of each year that we are profitable, provided that such additional
amount may not to exceed the available profits (the Additional Fee).

In March and May 2007, we closed two
private placements for our ordinary shares to several institutional investors led by
Meitav Underwriting Ltd., or Meitav, totaling approximately $3.4 million for the purchase
of 56,378,980 ordinary shares at a price per share of $0.06 and warrants to purchase
39,465,286 ordinary shares at a price per share of $0.06.

We expect that operating expenses
will constitute a material use of our cash resources. We believe that our existing cash
and cash equivalents, along with amounts available under the investments by Fortissimo and
the Meitav private placements, will be sufficient to meet our anticipated needs for
working capital for at least the next twelve months.

# Contractual Obligations

We lease all of our office facilities
under noncancellable operating leases that expire over varying terms through 2009.

# Financial Instruments
and Commitments

Not Applicable

# 5C: Research and
Development

Our research and  development  expenses  were $2.2 million in 2005,  $1.5 million in 2006 and $1.9 million in 2007.
For additional information, see Item 4B.- Business Overview- Research and Development.

# 5D: Trend Information

Not applicable

# 5E: Off-Balance Sheet
Arrangements

Not applicable

# 5F: Tabular Disclosure
of Contractual Obligations

The following table of our material
contractual obligations as of December 31, 2007, summarizes the aggregate effect that
these obligations are expected to have on our cash flows:

|                 | Payments due by Period
|---------------- | ----------------------
|
|
|
|
|Operating leases |                       
|Severance pay(1) |                       
|Fin 48 provision |                       
|                 |                       
|Total            |                       
|                 |                       

|
|

|(1) | Severance pay relates to accrued severance obligations to our Israeli employees
                    as required under Israeli labor laws. These obligations are payable only upon
                    the termination of the respective employee and may be reduced if the
                    employees termination is voluntary.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

38

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# Item 6: Directors,
Senior Management and Employees

# 6A: Directors and Senior
Management

The
following table contains certain information about our directors, and executive officers:

|Name               | Age | Position                                               
|------------------ | --- | -------------------------------------------------------
|
|
|
|
|Jaron Lotan        | 48  | Chairman of the Board                                  
|Yochai Hacohen     | 42  | Director                                               
|Rami Goraly        | 41  | Chief Executive Officer, Director                      
|Amira Paz          | 41  | Vice President of Finance (Principal Financial Officer)
|Shai Beilis        | 59  | Director                                               
|Hadas Gazit Kaiser | 31  | External Director                                      
|David Assia        | 55  | External Director                                      
|Eli Blatt          | 44  | Director                                               

JARON LOTAN has served as a
Director and the Chairman of the Board since May 2006.  Mr. Lotan served as the President
and Chief Executive Officer of Technomatix Technologies Ltd., a provider of digital
manufacturing solutions, from October 2002 until the sale of that company to UGS Corp. in
April 2005. He was appointed Chief Executive Officer of Technomatix in January 2004.
Following the acquisition of Technomatix Technologies Ltd., Mr. Lotan served as Senior
Vice President of UGS Corp. from April 2005 until September 2005. Prior to joining
Technomatix in October 2002, he was corporate executive vice president for business and
strategy at Orbotech Ltd., a supplier of automated optical inspection and other
productivity solutions for the electronics industry, responsible for the worldwide sales,
marketing and support organization, corporate marketing activities, and strategy and
business development. Prior to this, Mr. Lotan served as president of the Orbotech PCB
Division and president of Orbotech Europe. Before joining Orbotech in 1992, he co-founded
and served as general manager, North America for Rosh Intelligent Systems, a software
company offering knowledge-based solutions to customer support organizations. Mr. Lotan
holds a B.A. in Economics and Mathematics and an M.A. in Economics both from the Hebrew
University in Jerusalem, Israel.

YOCHAI HACOHEN has served as a
Director of the Company since February 2006. On June 11, 2006, Mr. Hacohen was appointed
as interim President and Chief Executive Officer, which appointment was made permanent by
action of the Board of Directors on December 26, 2007. On April 7, 2008, Mr. Hacohen
stepped down as CEO and was replaced by Mr. Rami Goraly. Mr. Hacohen remains a member of
the Board of Directors. Mr. Hacohen joined Fortissimo in May 2004 and became a partner in
January 2005. He currently serves on the boards of directors of Fortissimo Acquisition
Corp. and Advanced Answers on Demand Inc. From October 2003 through May 2004, Mr. Hacohen
served as the General Manager of a U.S. division of Magal Security Systems Ltd., a
provider of hardware and software solutions for the surveillance market. From October 1998
through September 2002, Mr. Hacohen served as the Director of EMEA Sales and Marketing for
the video recording division of Nice Systems Ltd., a provider of digital video and audio
recording solutions. Mr. Hacohen holds a B.Sc. degree in Biotechnology and M.B.A. degree
in Marketing from Tel Aviv University.

RAMI GORALY serves as the
Companys Chief Executive Officer since April 7, 2008. Mr. Goraly previously served as
RadViews Vice President of Marketing from June 2006. From 2005-2006 Mr. Goraly was
the CEO of Telrad Connegy Ltd., a provider of converged telecommunication solutions and
from 2004-2005 Mr. Goraly was the CEO of SweetIM provider of an interactive content for
instant messaging platform. From 1996 through 2004, Mr. Goraly worked in the United
States, where he founded and served as the CEO of Accept Software Corporation, a leading
developer of enterprise product planning solutions. Other positions held by Mr. Goraly
include management positions in Cheyenne Software Inc. (acquired by Computer Associates)
and Check Point Software Technologies Ltd.. Mr. Goraly received bachelor degrees in
Economics and Accounting from Tel Aviv University, and an MBA degree from the Cass
Business School in London.

AMIRA PAZserves as Vice
President of Finance since February 2008. Prior to joining RadView, Ms. Paz served for a
period of ten years as Chief Financial Officer in three Formula-Group software companies:
Tiltan Systems Engineering Ltd., Enformia Software Ltd. and Idit Technologies Ltd. Ms. Paz
is a licensed CPA in Israel and holds a BA in Economics and Business Management from
Ben-Gurion University, an MBA in Finance and Accounting from Tel-Aviv University and an
LL.M from Bar-Ilan University.

39

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SHAI BEILIS has served as a
Director since May 1998 and served as Chairman of the Board from May 2001 until May 2006.
Mr. Beilis has been the Chairman and Managing Partner of Formula Ventures Ltd. since
December 1998. From January 1995 until joining Formula Ventures Ltd., Mr. Beilis served as
the Chief Executive Officer of Argotec Ltd., a wholly-owned subsidiary of Formula Systems
(1985) Ltd., established in 1993 to capitalize on investment opportunities in the IT
sector, where he was responsible for initiating, overseeing and managing Argotecs
investments. Before joining Formula Systems (1985) Ltd., Mr. Beilis served as Chief
Executive Officer of Clal Computers and Technology Ltd. and was employed by Digital
Equipment Corporation. Mr. Beilis serves as a director for several private companies and
until February 2008, served as a director in Blue Phoenics Ltd. Mr. Beilis is a director
and principal shareholder of Shem Basum, Ltd. Mr. Beilis holds a B.S. degree in
Mathematics and Economics from the Hebrew University in Jerusalem, Israel and a M.S.
degree in Computer Science from the Weizmann Institute of Science.

HADAS GAZIT KAISERserves as
an External Director of the Company since October 2007. Mrs. Gazit Kaiser is the Chief
Financial Officer and Finance Director of Emblaze Ltd. (LSE:BLZ.L), a publicly traded
company on the London Stock Exchange.  Before becoming the CFO of Emblaze in December
2006, Mrs. Gazit Kaiser acted as the Vice President of Finance for the Emblaze group of
companies and as the CFO of Emblaze Mobile. Prior to joining Emblaze, Mrs. Gazit Kaiser
was with TTI Team Telecom International (NASDAQ:TTIL), where she acted as the budget
control manager from August 2003 to September 2005. From August 2000 to August 2003, Mrs.
Gazit Kaiser acted as a manager at Ernst & Young Global (Kost, Forer Gabbay &
Kasierer) where she conducted accounts of both private and publicly traded companies in
Israel and abroad, especially in the technology, venture capital and investments
industries. Mrs. Gazit Kaiser is a Certified Public Accountant in Israel and received an
MBA in Finance and a BA in Economics and Accounting both from Tel Aviv University.

DAVID ASSIA has served as an
External Director of the Company since November 2002. Mr. Assia, a co-founder and acting
CEO since August 2005 of Magic Software Enterprises Ltd., has served as Chairman and/or
Vice Chairman of Magic Software since 1986, and as a director of Magic Software since its
inception in 1984. From 1986 until September 1997, he was Chief Executive Officer of Magic
Software. He also serves as a Director of Aladdin Knowledge Systems Ltd., Babylon
Ltd.,Enformia Ltd, the Israel Electronics & Software Association and the Weizmann
Institute of Science. Mr. Assia holds B.A. and M.B.A. degrees from Tel Aviv University.

ELI BLATT has served as
Director of the Company since April 2006. Mr. Blatt joined Fortissimo as a partner in
January 2005. From March 1999 through May 2004, Mr. Blatt served as the Chief Financial
Officer and Vice President of Operations of Noosh, Inc., a supplier of cross-enterprise
e-business software solutions. From September 1997 through February 1999, Mr. Blatt served
as the Director of Operations for CheckPoint Software Technologies Inc., an internet
security company, where he was responsible for OEM operations, product licensing and
customer service. Mr. Blatt currently serves on the board of directors of Telrad Networks
Ltd., Fortissimo Acquisition Corp, Soda-Club Holdings Ltd. and Advanced Answers on Demand
Inc. Mr. Blatt holds a B.Sc. degree in Industrial Engineering from Tel Aviv
University and an MBA degree from Indiana University. Mr. Blatt also served as a fighter
pilot in the Israeli air force.

# 6B: Board Compensation

The Company reimburses its directors
for expenses incurred to attend meetings of the Board of Directors and any committees of
the Board of Directors. To date, the Company has made annual cash payments in the amount
of $5,000 to each of its non-employee directors and has granted options to purchase
ordinary shares to its directors from time to time. The Company makes an annual cash
payment in accordance with the rate permitted by applicable Israeli law and regulations.
The current rates paid by the company are an annual fee of NIS 18,280, which is
approximately $5,540 and a meeting participation fee of NIS 1,220, which is approximately
$370. This compensation will apply to our existing external directors, Mr. David Assia and
Ms. Hadas Gazit Kaiser. In addition, each of the external directors shall be entitled to
options to purchase up to 792,856 ordinary shares at an exercise price equal to fair
market value. Pursuant to the terms of the management services agreement entered into by
the Company and Fortissimo, Messrs. Hacohen and Blatt are not entitled to cash
remuneration or compensation for their services as directors as such other than the
management fee payable to Fortissimo under the management services agreement. Mr. Hacohen,
who served as the Companys Chief Executive Officer and President on an interim basis
from June 2006 through April 2008, received cash compensation and options from the Company
for such service as an employee director.

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The following table sets forth the
aggregate compensation paid or accrued for services rendered to the Company in all
capacities for the fiscal year ended December 31, 2007 by its directors and executive
officers

|                                                       | Salaries, Directors Fees,
Service Fees, Commissions
and Bonuses | Pension, Retirement
and Similar Benefits
|------------------------------------------------------ | --------------------------------------------------------------- | ----------------------------------------
|
|
|
|
|All directors and officers as a group (then 8 persons) |                                                                 |                                         

Such remuneration does not include
amounts expended by the Company for expenses, including business association dues and
expenses, reimbursed to such officers, and other fringe benefits commonly reimbursed or
paid by companies in the location at which the particular executive officer is located.
See also Item 7  Major Shareholders and Related Party Transactions for a
discussion of the stock options granted to directors and executive officers.

Jaron
Lotan, as the Chairman of the Board, receives cash compensation based on an annual salary
rate of $240,000 on a pro-rata basis according to the actual number of days per week that
Mr. Lotan provides services to the Company. The Company also granted to Mr. Lotan an
option to purchase 455,000 ordinary shares under the Key Employee Share Incentive Plan,
equivalent to one percent of the Companys issued and outstanding ordinary shares and
preferred shares, on an as-converted basis, immediately after the closing of the initial
investment in the 2006 financing by the Fortissimo Entities and other investors. Mr. Lotan
is entitled to anti-dilution protection for any additional investments pursuant to the
2006 financing, by way of the grant of additional options to purchase one percent of the
incremental number of issued and outstanding ordinary shares and preferred shares (on an
as-converted basis) immediately following each additional investment. In furtherance of
that anti-dilution commitment, Mr. Lotan was granted additional options for a total of
566,666 ordinary shares upon the closings of the additional investments made by the
Fortissimo Entities in December 2006 and February and March 2007. The options are now
fully vested. Additionally, as a bonus to Mr. Lotan, Mr. Lotan was granted an option to
acquire 1,350,994 ordinary shares (representing up to one percent of the Companys
issued and outstanding ordinary shares and preferred shares (on an as-converted basis))
which option will vest over four years and will receive the same anti-dilution protection
as described above. The exercise price of the options granted to Mr. Lotan was between
$0.06 and $0.08 and any further options to be granted to him shall be at an exercise price
equal to the market price on the then current date of grant

Yochai
Hacohen was both a director and an employee of the Company, serving as the Chief Executive
Officer and President from July 1, 2006 (on an interim basis until December 2006 when the
appointment was made permanent). On April 7, 2008, Mr. Hacohen stepped down as CEO and was
replaced by Mr. Rami Goraly. In connection with his services as Chief Executive Officer
and President, the Company has paid to Mr. Hacohen an annual salary of $125,000 (effective
as of June 11, 2006), which was increased by 20% on the anniversary of the effective date.
Mr. Hacohen is entitled to options under the Companys Key Employee Share Incentive
Plan for a total of 4,750,000 ordinary shares, such options to vest in quarterly parts
over four years as of December 26, 2006. The options continue to vest as long as Mr.
Hacohen serves as a director in the Company. In the event of a change in control of the
Company, 50% of all then unvested options shall become immediately vested.

As of December 31, 2007, all
directors and officers as a group (then 8 persons), held options to purchase 8,858,372 of
our ordinary shares. Out of such options, 150,000 expire in 2008, 455,000 expire in 2011
and 8,253,372 expire in 2012, at exercise prices ranging from $0.06 to $0.945.

# 6C: Board Practices

# Board Meetings and
Committees

Our Board of Directors is currently comprised
of 6 directors. The directors are elected at the annual shareholders meeting, to serve
until the next annual meeting of our shareholders and until their respective successors
are elected and qualified, with the exception of the external directors who, by rule of
the Israeli Companies Law 1999, serve for three years. The Board of Directors has
established two committees, the Audit Committee and the Compensation Committee, each of
which is briefly described below.

The Board of Directors does not have
a nominating committee or any committee performing similar functions; however, the Board
of Directors has adopted the nominations process described below with respect to the
consideration and nomination of candidates to serve on the Board of Directors. The Board
of Directors adopted a nominating process rather than a nominating committee because the
nominating process provides greater flexibility and improved participation by allowing all
eligible members to contribute instead of assigning the duties to a static group of
members.

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Under the Companies Law and the
regulations promulgated pursuant thereto, Israeli companies whose shares have been offered
to the public in, or that are publicly traded outside of, Israel are required to appoint
at least two natural persons as external directors. No person may be appointed
as an external director if the person, or a relative, partner or employer of the person,
or any entity under the persons control, has or had, on or within the two years
preceding the date of the persons appointment to serve as an external director, any
affiliation with the company to whose board the external director is proposed to be
appointed or with any entity controlling or controlled by such company or by the entity
controlling such company. The term affiliation includes an employment relationship, a
business or professional relationship maintained on a regular basis, control and service
as an office holder (which term includes a director).

In addition, no person may serve as
an external director if the persons position or other business activities create, or
may create, a conflict of interest with the persons responsibilities as an external
director or interfere with the persons ability to serve as an external director or
if the person is an employee of the Israel Securities Authority or of an Israeli stock
exchange. If, at the time of election of an external director, all other directors are of
the same gender, the external director to be elected must be of the other gender. The
external directors must have professional qualifications to serve as a director, and at
least one of the external directors must be a financial expert.

External directors are elected for a
term of three years and may be re-elected for one additional three-year term. Each
committee of a companys Board of Directors that has the authority to exercise powers
of the Board of Directors is required to include at least one external director and its
audit committee must include all external directors.

External directors are elected at the
general meeting of shareholders by a simple majority, provided that the majority includes
at least one-third of the shareholders who are not controlling shareholders, who are
present and voting, or that the non-controlling shareholders who vote against the election
hold one percent or less of the voting power of the company.

Under the Companies Law an external
director cannot be dismissed from office unless: (i) the Board of Directors determines
that the external director no longer meets the statutory requirements for holding the
office, or that the external director is in breach of the external directors
fiduciary duties and the shareholders vote, by the same majority required for the
appointment, to remove the external director after the external director has been given
the opportunity to present his or her position; (ii) a court determines, upon a request of
a director or a shareholder, that the external director no longer meets the statutory
requirements of an external director or that the external director is in breach of his or
her fiduciary duties to the company; or (iii) a court determines, upon a request of the
company or a director, shareholder or creditor of the company, that the external director
is unable to fulfill his or her duty or has been convicted of specified crimes.

Officers serve at the discretion of
the Board or until their successors are appointed.

# Audit Committee

The Audit Committee of the Board of Directors
currently consists of David Assia, Shai Beilis and Hadas Gazit Kaiser who commenced her
services on October 2007. Hanna Lerman served as a member of the Audit Committee from her
election at the last annual meeting in August 2006 until her resignation from the Board of
Directors in April 2007. Kathleen Cote also served as a member of the Audit Committee
until her resignation from the Board of Directors in April 2006. The Israeli Companies Law
requires a public company to maintain an audit committee comprised of at least three
persons, including two external directors, none of whom may be chairman of the Board of
Directors, a director employed by or providing other services to a company and a
controlling shareholder or any relative of a controlling shareholder. The Company had not
been in compliance with this requirement from April 2007, when Ms. Lerman resigned from
service as an external director, to October 2007, when Ms. Gazit Kaiser was appointed to
the Committee. The Company cannot evaluate the impact of noncompliance with this
requirement during that period.

The responsibilities of our Audit
Committee include identifying flaws in the management of our business, making
recommendations to the Board of Directors as to how to correct them and deciding whether
to approve actions or transactions which by law require Audit Committee approval. The
Audit Committee may not approve an action or transaction with a controlling shareholder or
with an office holder unless at the time of approval two external directors are serving as
members of the Audit Committee and at least one participated in the meeting at which the
action or transaction was approved.

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In order to comply with the
Sarbanes-Oxley Act of 2002, the Board of Directors has expanded the role of the
Companys Audit Committee to provide assistance to the Board of Directors in
fulfilling its legal and fiduciary obligations with respect to matters involving the
accounting, auditing, financial reporting and internal control functions of the Company.
In carrying out these duties, the Audit Committee must meet at least once in each fiscal
quarter with management at which time, among other things, it reviews, and either approves
or disapproves, the financial statements of the Company for the immediately preceding
fiscal quarter and conveys its conclusions in this regard to the Board of Directors. The
Audit Committee also monitors generally the services provided by the Companys
external auditors to ensure their independence, and reviews, and either approves or
disapproves, all audit and non-audit services provided by them. The Companys
external and internal auditors must also report regularly to the Audit Committee at its
meetings, and the Audit Committee discusses with the Companys external auditors the
quality, not just the acceptability, of the accounting principles, the reasonableness of
significant judgments and the clarity of disclosures in the Companys financial
statements, as and when it deems it appropriate to do so.

Under the Sarbanes-Oxley Act of 2002,
the Audit Committee is also responsible for the appointment, compensation, retention and
oversight of the work of the Companys external auditors. However, under Israeli law,
the appointment of external auditors requires the approval of the shareholders of the
Company. Accordingly, the appointment of the external auditors is approved and recommended
to the shareholders by the Audit Committee and ratified by the shareholders. Furthermore,
pursuant to the Companys Articles of Association, the Board of Directors is the
organ that has the authority to determine the compensation of the external auditors.

The Board of Directors has determined
that all of the members of the Audit Committee are Audit Committee financial
experts as that term is defined in Item 401 of Regulation S-K under the Securities
Exchange Act of 1934. Each of the members of the Audit Committee satisfies the
independence requirements under Rule 10A(m)(3) of the Securities Exchange Act of 1934 and
is an independent director, as that term is used in Item 7(d)(3)(iv) of
Schedule 14A under the Securities Exchange Act of 1934.

The Company has adopted an Audit
Committee Charter which sets forth the responsibilities of the committee. A copy of this
charter is available upon written request to the Company at its address in Israel.

# Compensation Committee

The Compensation Committee currently
consists of Jaron Lotan, Shai Beilis and David Assia. William Geary served as a member of
the Compensation Committee until his resignation from the Board of Directors in February
2006.

Each of the members of the
Compensation Committee is an independent director under the rules of the Securities and
Exchange Commission. Pursuant to authority delegated by the Board of Directors, the
Compensation Committee is responsible for reviewing and administering the Companys
stock option plans and reviewing and approving salaries and other incentive compensation
of the Companys directors, officers and employees including recommendations to the
Board of Directors with respect to the grant of stock options to officers and employees. A
copy of the Compensation Committee charter is available upon written request to the
Company at its address in Israel.

# Nominations Process

As noted above, the Board of
Directors does not have a nominating committee. However, the Board of Directors has
adopted a set of written procedures (the Nominations Process) to be followed
by the Companys independent directors, consisting of Jaron Lotan, David Assia, Shai
Beilis, and Hadas Gazit Kaiser. The Nominations Process requires the independent directors
to assist the Board of Directors in its selection of individuals (i) as nominees for
election to the Board of Directors at each annual meeting of the Board of Directors or
(ii) to fill any vacancies or newly created directorships on the Board of Directors. A
copy of the Nominations Process is available upon written request to the Company at it
registered address.

Identification and
Evaluation of Candidates for Board Membership

The independent directors may utilize
a variety of methods for identifying and evaluating candidates for director. Candidates
may come to the attention of the independent directors through current directors,
management, professional search firms, shareholders or other persons. Candidates may be
considered by the independent directors at any point during the year. The independent
directors have sole authority to retain search firms to assist them identifying director
candidates. They are required to exercise their business judgment in carrying out their
responsibilities under the Nominations Process in a manner they reasonably believe to be
in the best interests of the Company and its shareholders. In connection with their
evaluation of a candidate, the independent directors may conduct candidate interviews,
make inquiries of the person recommending the candidate, engage an outside search firm to
gather additional information, or rely on the knowledge of the Board of Directors or
management.

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In evaluating a candidate, the
independent directors may consider, among other things, a candidates personal and
professional integrity, demonstrated ability and judgment, business experience, relevant
expertise, and reputation. The Company believes that having directors with relevant
experience in business and industry and other areas is beneficial to the Board of
Directors as a whole, and that directors with such backgrounds can provide useful
perspectives on significant risks and competitive advantages and in understanding the
challenges that the Company faces. The independent directors may also consider, in
accordance with applicable law, the current size and composition of the Board of Directors
and the needs of the Board of Directors and its committees. The Nominations Process calls
for the independent directors to develop and revise, as appropriate, selection criteria
for nominees to the Board of Directors, which include the following minimum qualifications
that must be met by a candidate:

| |  | The
highest personal and professional ethics and integrity;
| | - | -----------------------------------------------------------

| |  | Proven
 achievement  and  competence in the  candidate's  field and the ability to exercise
sound          business judgment;
| | - | -----------------------------------------------------------------------------------------------------------------------------

| |  | Skills
that are complementary to those of the existing directors; and
| | - | ---------------------------------------------------------------------

| |  | The
ability to assist and support management and make significant contributions to the Companys
success.
| | - | ---------------------------------------------------------------------------------------------------------

Preferred Directors

In addition to the Nominations
Process, in connection with the 2006 financing as described in Item 4B 
Business Overview  Recent Developments and Item 7B  Related
Party Transactions, Fortissimo is entitled to nominate up to four of seven board
members to serve as Preferred Directors. The responsibilities and privileges of Preferred
Directors are also described in Item 10B  Memorandum and Articles of
Association. Currently, Jaron Lotan, Yochai Hacohen and Eli Blatt serve as Preferred
Directors, having been designated as such by Fortissimo after the closing of the 2006
financing.

# 6D: Employees.

As of December 31, 2007, we had 26
employees worldwide, of whom 12 were employed in research and development, 6 in sales and
marketing, 1 in technical support, and 7 in management and administration. Out of our
employees, 3 are based in the United States, and 23 are based in Israel. None of our
employees is represented by a labor union and we consider our relations with employees to
be good.

Although our Israeli employees are
not party to any collective bargaining agreement, all of our Israeli employees are subject
to Israeli labor laws and certain provisions of collective bargaining agreements among the
Government of Israel, the General Federation of Labor in Israel and one or more
employers associations. These provisions and laws concern the length of the workday,
minimum daily wages for workers, procedures for dismissing employees, determination of
severance pay, adjustments of wages to increases in the Israeli consumer price index, and
other conditions of employment.

44

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# 6E: Share Ownership

See table under Item 7:  "Major Shareholders and Related Party Transactions" below.

# Share Option Plans

The Key Employee Share Incentive
Plan. The Board of Directors and the Companys shareholders approved the Key
Employee Share Incentive Plan (1996) (the Key Employee Plan) in 1996 and
amended the plan in 2002. The Company has reserved for issuance an aggregate of 21,214,609
ordinary shares under the Key Employee Plan, such that, along with the ordinary shares
reserved under the US Plan (as defined below), the total number of ordinary shares
reserved by the Company is equal to 15% of the issued and outstanding shares of the
Company; as of May 31, 2008, the Company had granted options for a total of
19,950,128 ordinary shares, of which 8,811,683 had been terminated or expired (and thus
became available for future grant) and 2,465,331 had been exercised. As a result,
9,104,801 ordinary shares are available for future grant as of May 31, 2008.

The shareholders also authorized the
Board of Directors to increase the number of ordinary shares reserved under the Key
Employee Plan such that, if as a result of future dilutive issuances of shares of the
Company, the total number of shares reserved under the Key Employee Plan and the US Plan
(as defined below) in the aggregate falls below 10% of the then issued and outstanding
shares of the Company (including preferred shares onan as converted basis), the Board may
further increase the number of shares available under the Key Employee Plan to equal 10%
of the then issued and outstanding shares of the Company (including preferred shares on an
as converted basis) without the need for further shareholder approval.

The United States Share Incentive
Plan. The Board of Directors and the Companys shareholders approved the United
States Share Incentive Plan (the US Plan) in 2000 and amended the US Plan in
2002. The Company had previously reserved for issuance an aggregate of 3,950,000 ordinary
shares under the US Plan. As of May 31, 2008, the Company had granted options to purchase
a total of 5,113,855 ordinary shares, of which 3,618,889 had been terminated or expired
(and thus became available for future grant) and 407,547 had been exercised. As a result,
2,455,034 ordinary shares are available for future grant as of May 31, 2008.

The Employee Share Purchase Plan.In November 2002, the Company established an employee share purchase plan (the
ESPP) which permits the eligible employees of the Company to purchase ordinary
shares of the Company at 85% of the lesser of the closing market price on the first day or
the last day of the applicable three month offering period. Employees may participate in
the ESPP through regular payroll deductions of up to 10% of their pre-tax gross salary.
Subject to adjustments for stock splits, stock dividends and similar events, a maximum of
1,500,000 ordinary shares may be issued under the ESPP. No ordinary shares were issued in
connection with the ESPP in 2004, 2005, 2006 and 2007. As of May 31, 2008, there are
1,491,791 ordinary shares available for issuance under the ESPP.

The Board of Directors adopted the
1997 Option Plan to provide for the grant by the Company of nonqualified option awards to
employees of RAD-Bynet Group of companies, then affiliated companies. Through December 31,
2000, all available authorized options under this plan had been granted. No options were
granted under this plan since completion of the initial public offering in August 2000.
The Company accounted for these options in accordance with SFAS No. 123 utilizing the
Black-Scholes option-pricing model. As of December 31, 2007, there were no options
outstanding under this plan.

# Material Features of the
Key Employee Plan and US Plan

The purpose of the Key Employee Plan
is to attract, retain and motivate employees, directors and consultants through the
issuance of stock options and to encourage ownership of ordinary shares by employees,
directors and consultants of the Company. The Key Employee Plan is administered by the
Compensation Committee, which has the authority to submit recommendations to the Board of
Directors as to the issuance of options under the plans. Under the Israeli Companies Law,
the authority to issue options vests exclusively with the Board of Directors. Subject to
the provisions of the Key Employee Plan, the Compensation Committee determines the persons
to whom options will be granted, the number of shares to be covered by each option and the
terms and conditions upon which an option may be granted, and has the authority to
administer the provisions of the Key Employee Plan. All employees, directors and
consultants of the Company and its affiliates are eligible to participate in the Key
Employee Plan. Approximately 35 individuals are eligible to participate in this plan.

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Options granted under the Key
Employee Plan may be either (i) options intended to benefit from the provisions of Section
102 of the Israeli Income Tax Ordinance (New Version), 1961 and the rules promulgated
thereunder, or (ii) stock options not designed to so benefit.

Stock options granted under the Key
Employee Plan may not be granted at a price less than the par value of the ordinary shares
on the date of grant. If any option award, or any part thereof, under the Key Employee
Plan has not been exercised and the shares covered thereby not paid for within sixty-two
(62) months after the date of grant (or any other period set forth in the instrument
granting such option award), such option award, or such part thereof, and the right to
acquire such shares, shall terminate.

An option granted under the Key
Employee Plan is exercisable, during the optionholders lifetime, only by the
optionholder and is not transferable by him or her except by will or by the laws of
descent and distribution.

Options granted under the US Plan may
be either (i) options intended to qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended (the Code), or
(ii) non-qualified stock options. Incentive stock options may be granted under the US Plan
to employees of the Company and its affiliates. Non-qualified stock options may be granted
to consultants, directors and employees of the Company and its affiliates.

The aggregate fair market value
(determined at the time of grant) of shares issuable pursuant to incentive stock options
that become exercisable in any calendar year under any incentive stock option plan of the
Company may not exceed $100,000. Incentive stock options granted under the US Plan may not
be granted at a price less than the fair market value of the ordinary shares on the date
of grant, or 110% of fair market value in the case of options granted to an employee
holding 10% or more of the voting stock of the Company. Non-qualified stock options
granted under the US Plan may not be granted at an exercise price less than the par value
per share of the ordinary shares on the date of grant. Incentive stock options granted
under the US Plan expire not more than ten years from the date of grant, or not more than
five years from the date of grant in the case of incentive stock options granted to an
employee holding 10% or more of the voting stock of the Company. An option granted under
the US Plan is exercisable, during the optionholders lifetime, only by the
optionholder and is not transferable by him or her except by will or by the laws of
descent and distribution, or as otherwise determined by the Board of Directors and set
forth in the applicable option agreement.

After the termination of the
optionholders employment with the Company, or cessation of status as a director or
consultant of the Company (other than by reason of death, disability or termination for
cause as defined in the Key Employee Plan), all rights in respect of options held at the
date of termination shall terminate within two weeks after the termination or cessation of
status. In the event of the optionholders death, stock options held by the estate of
the employee generally may be exercised, to the extent exercisable on the date of death,
by the optionholders survivors at any time prior to the earlier of the options
specified expiration date or three months from the date of the optionholders death.
If an optionholder is unable to continue to be employed by the Company or to provide
services to the Company, by reason of his becoming incapacitated while in the employ or
service of the Company as a result of an accident or illness or other cause which is
approved by the Committee, such optionholder shall continue to enjoy rights under the Key
Employee Plan on such terms and conditions as the Committee in its discretion may
determine. Generally, in the event of the optionholders termination for cause, all
outstanding and unexercised options are forfeited.

If the ordinary shares shall be
subdivided or combined into a greater or smaller number of shares or if the Company shall
issue any ordinary shares as a dividend on its outstanding ordinary shares, the number of
ordinary shares deliverable upon the exercise of an option granted under the Key Employee
Plan shall be appropriately increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to reflect such subdivision,
combination or stock dividend. If the Company is to be consolidated with or acquired by
another entity in a merger, sale of all or substantially all of the Companys assets
or otherwise, an optionholder, upon exercising an option under the Key Employee Plan,
shall be entitled to receive for the purchase price paid upon such exercise the securities
he or she would have received if he or she had exercised such option prior to such action.

The Key Employee Plan may be amended
by the Board of Directors. Each grantee is responsible for all personal tax consequences
of the grant and the exercise thereof.

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# Israeli Tax
Considerations

Under the provisions of Section 102
of the Israeli Income Tax Ordinance, an Israeli employee issued options to purchase shares
in the Company under a qualifying share incentive plan will not incur a tax liability at
the time the options are issued or exercised, such tax being deferred until the sale of
the shares purchased pursuant to the options. Section 102 generally requires that a
trustee hold the options for a minimum of two years, in order for the tax benefit to
apply. In the event that an employee will cease to be employed by the Company prior to
completion of the 2-year holding period, such employee, under certain circumstances, will
be required to pay the greater of (a) the tax payable at the time of the grant of options,
together with interest and linkage differentials, (b) the tax payable on the date of
cessation of his employment and (c) the tax payable two years from the date of the grant
of options, unless the cessation of employment results from the death of the employee or
for reasons which are beyond the employees control.

Upon sale of the shares purchased
with the options, the employee will be liable for tax at a rate of up to 50%, depending on
the employees marginal tax rate, for the net gain in value of the shares between the
value on the date of grant and their value on the date of sale. The trustee is required to
withhold 30% of the total consideration received from such a sale. The Company will
withhold any remaining tax payable by the employee, according to the employees
actual tax rate.

In the event that Section 102 is not
applicable to the options, the taxation of the optionee will be governed by Section 3(i)
of the Israeli Income Tax Ordinance. Under this section, there is no deferral of tax until
the sale of shares, and exercise of the options constitutes a taxable event. Upon the
exercise of the options, tax will be paid on the difference between the exercise price and
the fair market value on the exercise date. In addition, upon the sale of the shares
received pursuant to the exercise of the options tax will be paid on the difference
between the fair market value of the shares on the date the shares were purchased and the
price at which they were sold.

Under Section 3(i), the tax paid on
the exercise date will be ordinary income tax. The type of tax paid upon the ultimate sale
of the shares, however, will be capital gains tax.

# Federal Income Tax
Considerations

The following is a description of
certain U.S. federal income tax consequences of the issuance and exercise of options under
the US Plan:

Incentive Stock Options. An
incentive stock option does not result in taxable income to the optionee or deduction to
the Company at the time it is granted or exercised, provided that no disposition is made
by the optionee of the shares acquired pursuant to the option within two years after the
date of grant of the option nor within one year after the date of issuance of shares to
him (the ISO holding period). However, the difference between the fair market
value of the shares on the date of exercise and the option price will be an item of tax
preference includable in alternative minimum taxable income. Upon disposition
of the shares after the expiration of the ISO holding period, the optionee will generally
recognize long term capital gain or loss based on the difference between the disposition
proceeds and the option price paid for the shares. Such gain will be eligible for the 20
percent maximum rate introduced by the Taxpayers Relief Act of 1997 if the shares have
been held for more than 18 months after option exercise, otherwise such gain will be
eligible for the 28% maximum rate. If the shares are disposed of prior to the expiration
of the ISO holding period, the optionee generally will recognize taxable compensation, and
the Company will have a corresponding deduction, in the year of the disposition, equal to
the excess of the fair market value of the shares on the date of exercise of the option
over the option price. Any additional gain realized on the disposition will normally
constitute capital gain. If the amount realized upon such a disqualifying disposition is
less than fair market value of the shares on the date of exercise, the amount of
compensation income will be limited to the excess of the amount realized over the
optionees adjusted basis in the shares.

Non-Qualified Stock Options.
The grant of a non-qualified option will not result in taxable income to the optionee or
deduction to the Company at the time of grant. The optionee will recognize taxable
compensation, and the Company will have a corresponding deduction, at the time of exercise
in the amount of the excess of the then fair market value of the shares acquired over the
option price. Upon disposition of the shares, the optionee will generally realize capital
gain or loss, and his basis for determining gain or loss will be the sum of the option
price paid for the shares plus the amount of compensation income recognized on exercise of
the option.

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# Item 7: Major
Shareholders and Related Party Transactions

# 7A: Major Shareholders

The following table sets forth
certain information known to us regarding the beneficial ownership of the Companys
ordinary shares as of May 31, 2008, unless otherwise indicated, by: (i) each person known
by the Company to beneficially own more than 5% of the Companys ordinary shares; and
(ii) all of the Companys directors and executive officers as a group. Beneficial
ownership is determined in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, ordinary shares under options and warrants held by
that person that are currently exercisable or exercisable within 60 days of May 31, 2008
are considered outstanding. These shares, however, are not considered outstanding when
computing the percentage ownership of each other person. Except as indicated in the
footnotes to this table and pursuant to state community property laws, each shareholder
named in the table has sole voting and investment power for the shares shown as
beneficially owned by them. Ownership percentages are based on 158,571,330 ordinary shares
outstanding on May 31, 2008, excluding 134,000 shares held as treasury shares. Unless
otherwise noted below, the address of each of the Companys directors and executive
officers is c/o RadView Software Ltd., 14 Hamelacha Street, Park Afek, Rosh Haayin, 48091,
Israel.

|Name of Beneficial Owner:                                                        | Total Shares
Beneficially Owned | Percentage of
Ordinary Shares
|-------------------------------------------------------------------------------- | ------------------------------- | -----------------------------
|
|
|
|
|Five Percent Shareholders:                                                       |                                 |                              
|Fortissimo Capital Fund (1)                                                      |                                 |                              
|Perfect Provident Fund Ltd (2)                                                   |                                 |                              
|Prima Investment House Ltd. (3)                                                  |                                 |                              
|Tamir Fishman Provident and Education Funds Ltd. (4)                             |                                 |                              
|Meitav Gemel Ltd. (5)                                                            |                                 |                              
|                                                                                 |                                 |                              
|Directors and Executive Officers (9):                                            |                                 |                              
|                                                                                 |                                 |                              
|Rami Goraly                                                                      |                                 |                              
|Jaron Lotan(6)                                                                   |                                 |                              
|Shai Beilis (7)                                                                  |                                 |                              
|David Assia (8)                                                                  |                                 |                              
|Yochai Hacohen (9)                                                               |                                 |                              
|Eli Blatt                                                                        |                                 |                              
|All executive officers and Directors as a group (7 persons) (6) (7) (8) (9) (10) |                                 |                              

|                                                                                            
|--------------------------------------------------------------------------------------------
|                                                                                            
|* Represents beneficial ownership of
less than one percent of the Companys ordinary shares.

(1)    
          Information is derived in part from Amendment No. 3 to Schedule 13 D, filed on
          March 27, 2007 by Fortissimo Capital Funds G.P. L.P. (FFC-GP),
          Fortissimo Capital Fund L.P. (FFC Cayman), Fortissimo Capital Fund
          (Israel) L.P. (FFC-Israel), and Fortissimo Capital Funds (Israel
          DP), L.P. (FFC-Israel-DP) (Collectively, the Fortissimo
          Entities). Includes 150,729,167 ordinary shares owned of record by the
          Fortissimo Entities: 4,779,243 ordinary shares owned of record by FFC Cayman,
          136,210,432 ordinary shares owned of record by FFC Israel, and 9,739,491
          ordinary shares owned of record by FCC-Israel-DP. FFC GP, in its capacity of
          being the sole general partner of FFC-Israel, FFC-Israel-DP and FFC Cayman,
          controls and manages each of the Fortissimo Entities. Accordingly, FFC GP is the
          beneficial owner of the ordinary shares held by each of the Fortissimo Entities.
          FFC GP, in its capacity as the general partner of each of the Fortissimo
          Entities, has the voting and dispositive power over the ordinary shares held by
          each of them. FFC GP may be deemed to be the indirect beneficial owner of the
          ordinary shares directly beneficially owned by the Fortissimo Entities.

Each of the Fortissimo Entities share
voting power over 158,125,001 ordinary shares and share dispositive power over 169,583,334
ordinary shares. None of the Fortissimo Entities has sole voting power or sole dispositive
power over our ordinary shares. Pursuant to a shareholders agreement among the Fortissimo
Entities and Yehuda Zisapel, Shem Basum Ltd. and Michael Chill (the
Co-Investors) in connection with the financing in August 2006, the number of
ordinary shares for which there is shared voting power includes 5,729,168 ordinary shares
held by Shem Basum Ltd. and Michael Chill and the number for which there is shared
dispositive power includes 18,854,167 ordinary shares held by all the Co-Investors.
However, the Fortissimo Entities disclaim beneficial ownership of the Co-Investor shares.
The Fortissimo address is: 14 Hamelacha Street, Park Afek, Rosh Haayin, 48091
Israel.

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(2)    
          Information is derived from Schedule 13D, filed on June 18, 2007 by Perfect
          Provident Fund Ltd. (Perfect) and from the records of the Company.
          Includes 22,820,698 ordinary shares owned of record by Perfect; 1,091,961
          ordinary shares owned of record by Perfect Central Compensation Fund; and
          10,673,841 ordinary shares owned of record by Perfect Education Fund, each of
          which fund is managed by Perfect, a wholly-owned subsidiary of Perfect (Y.N.E.)
          Capital Markets Ltd, which in turn is owned equally by Malka Nir Holdings Ltd.,
          Levinstein Yair Holdings Ltd. and Enter Holdings 1 Ltd. Any economic interest or
          beneficial ownership in any of the securities held by Perfect are held for the
          benefit of the members of the fund. The address of Perfect is 4 Maskit Street,
          Herzliya, Isarel.

(3)    
          Information is derived from Schedule 13G, filed on June 4, 2007 by Prisma
          Investment House Ltd. (Prisma). Includes 21,950,000 ordinary shares,
          beneficially owned by provident funds, continuing education funds and
          compensation funds (Hermon Provident Fund, Mazmon Provident Fund, Tavor
          Provident Fund and Signon Hermon Provident Fund) managed by Prisma Provident
          Funds Ltd., a wholly owned subsidiary of Prisma. Any economic interest or
          beneficial ownership in any of the securities held by Prisma are held for the
          benefit of the members of the fund. The address of Prisma and Prisma Provident
          Funds is: Sonol Tower, 52 Menachem Begin Road, Tel Aviv, 67137 Israel.

(4)    
          Information is derived form Schedule 13G, filed on June 7, 2007 by Tamir Fishman
          Provident and Education Funds Ltd. (Tamir Fishman). Includes a total
          of 19,060,400 ordinary shares: 986,000 ordinary shares are owned of record by
          Tamir Fishman Severance Pay Fund  General; 6,893,500ordinary shares are
          owned of record by Tamir Fishman Education Fund  General; 8,262,000
          ordinary shares are owned of record by Tamir Fishman Provident Fund 
          General; 2,077,400 ordinary shares are owned of record by Tamir Fishman
          Severance Pay Fund  Value; 289,000 ordinary shares are owned of record by
          Tamir Fishman Education Fund  Shares; and 552,500 ordinary shares are
          owned of record by Tamir Fishman Provident Fund  Shares. Tamir Fishman, as
          manager of the funds, has sole voting and investment power and is beneficial
          owner of the 19,060,400 ordinary shares (including warrants) owned of record by
          the foregoing funds. Any economic interest or beneficial ownership in any of the
          securities held of record by the foregoing funds is held for the benefit of the
          members of the funds. The address of Tamir Fishman and each of the foregoing
          funds is: 21 Haarbaa Street, Tel Aviv, 64739, Israel.

(5)    
          Information is derived from Meitav Gemel Ltd. (Meitav). Includes a
          total of 14,166,678 ordinary shares owned of record by the provident, education
          and severance funds managed by Meitav: 5,043,339 ordinary shares owned of record
          by Meitav Tagmulim Clali; 3,201,661 ordinary shares owned of record by Meitav
          Histalmut Clali; 1,048,339 ordinary shares owned of record by Meitav Pizuim
          Clali; 410,839 ordinary shares owned of record by Meitav Tagmulim Shares;
          212,500 ordinary shares owned of record by Meitav Hishtalmut Shares; 2,266,661
          ordinary shares owned of record by Meitav Chisachon Gemel; 1,643,339 ordinary
          shares owned of record by Meitav Chisachon Hishtalmut; and 340,000 ordinary
          shares owned of record by Meitav Chisachon Pizuim. Meitav, as manager of the
          funds, has sole voting and investment power and is beneficial owner of the
          14,166,678 ordinary shares (including warrants) owned of record by the foregoing
          funds. Any economic interest or beneficial ownership in any of the securities
          held of record by the foregoing funds is held for the benefit of the members of
          the funds. The address of Meitav is Museum Tower, 4 Berkowitz Street, Tel Aviv
          61180 Israel.

(6)    
          All options exercisable as of March 1, 2008.

(7)    
          Information is derived in part from Amendment No. 2 to Schedule 13G/A, filed on
          February 20, 2004 by Formula Ventures L.P., FV-PEH, L.P. and Formula Ventures
          (Israel) L.P. Includes 1,108,593 ordinary shares owned of record by Formula
          Ventures L.P; 311,947 ordinary shares owned of record by FV-PEH L.P.; 356,140
          ordinary shares owned of record by Formula Ventures (Israel) L.P.; 6,289,143
          ordinary shares owned of record by Shem Basum Ltd., and 9,800 ordinary shares
          and an option for 125,000 ordinary shares exercisable within 60 days of May 31,
          2007 owned directly and of record by Shai Beilis, the principal shareholder and
          a director of Shem Basum Ltd. Shai Beilis, one of RadViews directors, is
          the CEO and Managing Director of Formula Ventures Ltd., which is the general
          partner of Formula Ventures L.P., Formula Ventures (Israel) L.P. and FV-PEH L.P.
          Shai Beilis disclaims beneficial ownership of the shares held of record by
          Formula Ventures L.P., FV-PEH L.P. and Formula Ventures (Israel) L.P., except to
          the extent of his pecuniary interest therein. Shai Beilis has sole voting and
          investment power and is the beneficial owner of the 6,289,143ordinary shares
          owned of record by Shem Basum Ltd. Formula Ventures L.P., Formula Ventures
          (Israel) L.P. and FV-PEH L.P. are part of an affiliated group of investment
          entities managed by Formula Ventures Ltd. and Formula Ventures Partners (Cayman
          Islands) Ltd., a subsidiary thereof. Shai Beilis, Nir Linchevski and Benny
          Maiden, by virtue of their board of positions in Formula Venture Ltd., and Shai
          Beilis and Nir Linchevski, by virtue of their board positions in Formula Venture
          Partners (Cayman Islands) Limited, each share voting and dispositive power with
          respect to the shares held by Formula Ventures L.P., FV-PEH and Formula Ventures
          (Israel) L.P. Decisions with respect o voting and investment of the shares owned
          of record are made by majority vote and as CEO, Shai Beilis shares voting and
          investment power over ordinary shares held by Formula Ventures L.P., FV-PEH
          L.P., Formula Ventures (Israel) L.P. and Shem Basum Ltd. The address of Formula
          Ventures (Israel) L.P., Formula Ventures L.P., FV-PEH L.P. and Shai Beilis is 11
          Galgalei Haplada St. Herzliya, Israel, 46733.

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(8)    
          Includes 150,000 options exercisable within 60 days of May 31, 2008.

(9)    
          Excludes former directors who served on the Board of Directors for all or a
          portion of 2007 and who held no beneficial ownership of the Companys
          ordinary shares as of May 31, 2008, and former Executive Officers. The former
          directors and former Executive Officers and their respective dates of
          resignation are as follows: Hanna Lerman served as a member of the Audit
          Committee from her election in August 2006 until her resignation from the Board
          of Directors in April 2007; Ilan Kinreich served as Director and Chief Strategy
          Officer until December 2007; Limor Stoller sereved as Vice President of Finance
          until December 2007.

As of May 31, 2008, there were 148
record holders of ordinary shares, of which 91 were registered with addresses in the
United States, representing approximately 0.8% of the outstanding ordinary shares.However, the number of record holders in the United States is not representative of
the number of beneficial holders nor is it representative of where such beneficial holders
are resident since many of the ordinary shares are held of record by brokers and other
nominees.

# 7B: Related Party
Transactions

The Companys Board of Directors
and the shareholders have approved the new options for Preferred Shares and warrants to
acquire Preferred Shares (the New Options) included in the series of addendum
to the 2006 financing by Fortissimo and other investors. See Item 4B. 
Business Overview  Recent Financings for a further description of the
2006 financing and New Options. Each Addendum was included as an Exhibit to the
Companys Annual Report on Form 20-F for the year 2006.

The principal participants in the
2006 financing were Fortissimo (an entity affiliated with two of the Companys
directors, Mr. Yochai Hacohen and Eli Blatt) and Shem Basum Ltd. (an entity controlled by
Mr. Shai Beilis, a director of the Company) as well as Yehuda Zisapel (then a significant
shareholder of the Company).

Initial
Investment. As described above, at the closing of the 2006 financing, the
investors made an initial investment of $1.5 million, consisting of $750,000 for the
purchase of 25,000,000 convertible Preferred Shares at a purchase price of $0.03 per
share, and $750,000 as a loan convertible into Preferred Shares. As part of the initial
investment, the investors also received warrants to purchase 18,750,000 Preferred Shares
at an exercise price of $0.04 per share exercisable for a period of five years from date
of issuance.

Additional Investment
Rights. Under the 2006 financing, the investors had the right, within 18
months after the closing in August 2006, to purchase up to an additional 75 million
Preferred Shares at a price of $0.03 per share for a total investment of up to $2.25
million, and warrants to purchase up to a total of 56,250,000 additional Preferred Shares,
each at an exercise price of $0.04 per share exercisable for a period of five years from
date of issuance. The additional investment rights were exercised in part, as described
below, and have otherwise expired.

Addendum to Purchase
Agreement. In order to secure required financing in the last quarter of
2006 and the first quarter of 2007, the Company requested Fortissimo to accelerate the
exercise of its right under the financing to make additional investments. The Company and
Fortissimo entered in a series of addendum to the share purchase agreement of April 2006
for Fortissimos additional investment and purchase as follows: the purchase on
December 24, 2006 of 23,333,334 Preferred Shares and 17,500,000 Preferred Warrants for an
investment of $0.7 million (the First Addendum), the purchase on February 7,
2007 of 16,666,667 Preferred Shares and 12,500,000 Preferred Warrants for an investment of
$ 500,000 (the Second Addendum), and the purchase on March 20, 2007 of
16,666,667 Preferred Shares and 12,500,000 Preferred Warrants for an investment of $
500,000 (the Third Addendum).

New Options.
Pursuant to each of the First, Second and Third Addendums, respectively, and in consideration of the acceleration of the
additional investment rights, the Company undertook to grant Fortissimo a new option (each
a New Option) to acquire on the same terms and conditions the same number of
shares and warrants as purchased under the respective Addendum. Each New Option is subject
to the right of the Company (subject to RadView having available surplus) for a period of
12 months from the date of issuance of the New Option to buy back any shares and warrants
purchased under the Addendum by payment to Fortissimo of the purchase price paid for the
shares under the Addendum plus interest at the annual rate of 8%. The Company did not
exercise its rights to buy back any shares purchased under the Addendums and these rights
have expired.

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Registration Rights. In
connection with the 2006 financing, the Company entered into a registration rights
agreement (the Registration Rights Agreement) with (i) the investors and (ii)
with other shareholders who are affiliated with the investors, specifically, with Zohar
Zisapel and certain Formula Ventures entities (identified in Item 7A  Major
Shareholders). Pursuant to the Registration Rights Agreement, upon demand of the
investors, the Company will file a registration statement to permit the resale of the
ordinary shares underlying the Preferred Shares and warrants issued in the investment and
other ordinary shares held by the parties to the Registration Rights Agreement. The
Company will also, upon request, include such securities in a registration statement that
the Company may file for other purposes. The Company will bear all the expenses of the
registration, other than commissions or transfer taxes in connection with the resale of
the shares under the Registration Statement. When the shares are registered, they may be
freely transferable without restriction under the Securities Act, absent other securities
law restrictions.

Management Services Agreement.
As part of the 2006 financing, the Company entered into a management services agreement
with Fortissimo, pursuant to which, Fortissimo, through its employees, officers and
directors, provides management services and advises and provides assistance to the
Companys management concerning the Companys affairs and business. In
consideration of the performance of the management services and the board services, the
Company agreed to pay to Fortissimo (i) The Fixed Fee, payable in quarterly installments;
and (ii) The Additional Fee, payable at the end of the fiscal year, commencing in 2006, in
the event that the Company is profitable in such fiscal year, provided that such
additional management fees shall be payable only out of profits of the Company of such
fiscal year. The management services agreement became effective upon the closing of the
2006 financing and may not be terminated for so long as the Board of Directors includes at
least three Preferred Directors.

Indemnity Undertakings to the
Directors and Officers. In August 2006, the Company approved indemnification
agreements to indemnify a director for any expenses incurred by the director in connection
with any event that fall within one or more categories of covered indemnifiable events, as
these terms are defined in the indemnification agreements, related to any act or omission
of the director while serving as an office holder of the Company, or serving or having
served as a director or officer, at the Companys request, of any subsidiary of the
Company, or any other corporation or partnership.

The categories of indemnifiable
events provided for in the indemnification agreements include actions in connection with
any sale or purchase of securities made by the company or shareholders and, investments of
the Company in other corporations, merger or other reorganization, actions in connection
with the business of the Company, sale or purchase of other entities or assets, and the
division of consolidations thereof, actions in connection with labor relation, employment
matters and trade relations, actions in connection with development of products and any
distribution, sale or license of such product developed, actions in connection with
intellectual property, actions taken pursuant to or in accordance with the policies and
procedures of the Company, approval of corporate actions, in good faith, claims of failure
to exercise business judgment and a reasonable level of proficiency, exercise and care,
violations of laws requiring the Company to obtain regulatory and governmental approvals,
claims in connection with publishing or providing any information on behalf of the
Company, claims in connection with any announcement or statements made in good faith.

Under the indemnification agreements,
the Company has undertaken to indemnify the directors against all expenses, judgments and
amounts paid in settlement incurred by the director with respect to any specific
indemnifiable event up to a total limit amount of $1.5 million for all of the directors
and officers covered by the indemnification agreements to be entered into by the Company.

The indemnification agreements also
provide for the Company to advance all expenses incurred by the director in connection
with an indemnifiable event. The director will repay such amounts advanced if, when, and
to the extent, that a court of competent jurisdiction determines that the director should
not be permitted to be so indemnified under applicable law.

The indemnification provided under
the indemnification agreements continues for any action taken or not taken by the director
while serving as a director even if he or she no longer served in such capacity at the
time of the action, suit or other covered proceeding. An indemnification agreement will
terminate, among other instances, upon the lapse of five years from the termination, for
whatever reason, of the directors service as an office holder of the Company.

In addition, under the
indemnification agreements, the Company exempts and releases each director from any and
all liability to the Company related to any breach by each director of his duty of care to
the Company, to the maximum extent permitted by law.

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# 7C: Interests of Experts
and Counsel

Not applicable.

# Item 8: Financial
Information.

# 8A: Consolidated
Statements and Other Financial Information

See Item 18.

# Legal Proceedings

We are not involved in any legal
proceedings that are material to our business or financial condition. We received a claim
letter from one of our software suppliers claiming the improper use of the suppliers
software interface in our open source product. We responded to the letter, denying any
wrongdoing, and do not believe that such claim, if successful, would have a material
adverse effect on our business or operations.

# Dividend Policy

The Company does not currently have a
dividend policy. The declarations and payment of any cash dividends in the future will be
determined by the Board of Directors in light of the conditions exiting at that time. This
will include our earnings and financial condition. We may only pay cash dividends in any
fiscal year, out of profits, as defined under Israeli law. Any dividends paid
out of Approved Enterprise earnings (i.e., tax exempt income) will be liable to tax. As we
cannot currently distribute dividends, no provision has been made for this additional tax
in our Financial Statements.

# 8B: Significant Changes

Not applicable.

# Item 9: The Offer and
Listing

# 9A: Offer and Listing
Details

Set forth below are high and low
reported prices for our ordinary shares on the OTC Bulletin Board for the periods
indicated.

| |      |  | OTCBB
| | ---- |  | -----
|
|
|
|
| | 2003 |  |      
| | 2004 |  |      
| | 2005 |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| | 2006 |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| | 2007 |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| | 2008 |  |      
| |      |  |      
| |      |  |      
| |      |  |      
| |      |  |      

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# 9B: Plan of Distribution

Not applicable.

# 9C: Markets

Our shares are quoted on the OTCBB.
Until September 2004, our shares were traded on the Nasdaq SmallCap Market.

# 9D.: Selling Shareholders

Not applicable.

# 9E: Dilution

Not applicable.

# 9F: Expenses of Issue

Not applicable.

# Item 10: Additional
Information.

# 10A: Share Capital

Not applicable.

# 10B: Memorandum and Articles
of Association

In August 2006 the Company adopted
amended and restated Articles of Association.

Set forth below is a summary of
certain provisions of our Memorandum and Articles of Association. This summary is not
complete and should be read together with our Memorandum and Articles of Association,
previously filed.

1.    Objects of the
Company:

The Companys objects and
purposes are outlined in the Memorandum of Association. These objects include: the
development, manufacture and marketing of products in the electronics field generally and
specifically in the field of computer communication. The Companys Articles of
Association (Article 3) provide that the Company operates in accordance with business
considerations to generate profits.

2.    Provisions related to
the directors of the Company:

(a)    
          The Board of Directors may issue shares and other securities, which are
          convertible or exercisable into shares, up to the limit of the Companys
          authorized share capital.

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(b)    
          Approval of certain transactions under the Companies Law: RadView is subject to
          the provisions of the Israeli Companies Law 1999, which became effective on
          February 1, 2000. The Companies Law codifies the fiduciary duties that an Office
          Holder has to the Company. An Office Holder is defined in the
          Companies Law as any Director, General Manager or any other Manager directly
          subordinate to the General Manager and any other person with similar
          responsibilities. An Office Holders fiduciary duties consist of a Duty of
          Loyalty and a Duty of Care.

The Duty of Loyalty includes: the
avoidance of any conflict of interest between the Office Holders position in the
Company and his personal affairs; the avoidance of any competition with the company; the
avoidance of any exploitation of any business opportunity of the Company in order to
receive personal advantage for himself or others; and a duty to reveal to the Company any
documents or information relating to the Companys affairs that the Office Holder has
received due to his position.

The Duty of Care requires an Office
Holder to act at a level of care that a reasonable Office Holder in the same position
would employ under the same circumstances. This includes the duty to utilize reasonable
means to obtain (1) information regarding the appropriateness of a given action brought
for his approval or performed by him by virtue of his position and (2) all other
information of importance pertaining to the foregoing actions.

Under the Companies Law, all
arrangements with regard to the compensation of Office Holders who are not Directors
require the approval of the Board of Directors. Arrangements regarding the compensation of
Directors require Audit Committee, Board and Shareholder approval.

The Companies Law requires that an
Office Holder of a company promptly disclose to the companys Board of Directors any
personal interest that he or she may have, and all related material information known to
him in connection with any existing or proposed transaction by the company. This
disclosure must be made by the Office Holder, whether orally or in writing, no later than
the first meeting of the companys board of directors which discusses the particular
transaction. An Office Holder is deemed to have a personal interest if he,
certain members of his family, or a corporation in which he or any one of those family
members is a 5% or greater shareholder or exercises or has the right to exercise control,
has an interest in a transaction with the company. An Extraordinary
Transaction is defined as a transaction, other than in the ordinary course of
business, not on market terms, or that is likely to have a material impact on the
companys profitability, assets or liabilities.

In the case of a transaction that is
not an Extraordinary Transaction, after the Office Holder complies with the above
disclosure requirements, only board approval is required. The transaction must not be
adverse to the companys interests. In the case of an Extraordinary Transaction, the
companys Audit Committee and the Board of Directors, and, under certain
circumstances, the shareholders of the company must approve the transaction, in addition
to any approval stipulated by the Articles of Association. An Office Holder who has a
personal interest in a matter that is considered at a meeting of the Board of Directors or
the Audit Committee may not be present at this meeting or vote on this matter, unless a
majority of the members of the Board of Directors or Audit Committee, respectively, have a
personal interest in the matter, in which case they may all be present and vote, after
which the matter must be approved by the shareholders of the Company.

In addition, Article 50 of our
Articles of Association provides that Directors who are not employees of the Company and
who are not external Directors shall not receive any compensation from the Company, unless
approved by the shareholders, and that expenses incurred by a Director in connection with
his service as such may be reimbursed if authorized by the Board.

(c)    
          The Board has broad borrowing powers for the purposes of the Company (Article
          44.3.1).

(d)    
          The Companys Articles of Association do not contain provisions regarding
          the retirement of directors under an age limit requirement, nor do they contain
          a provision requiring a Director to hold any Company shares in order to qualify
          as a Director.

3.    
          Rights, Preferences and Restrictions attached to each class of Shares:

(a)    
          Rights to shares in the Companys Profits: The Company may effect a
          distribution to its Shareholders to the extent permitted by the Companies Law.
          Except as permitted by the Companies Law or Companies Regulations, distributions
          shall not be made except out of the profits of the Company legally available for
          such distributions (Article 60).

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(b)    
          Dividend rights: A Shareholder shall be entitled to receive dividends or bonus
          shares, upon the resolution of the Board, provided in each case the distribution
          is permitted in accordance with the provisions of the Companies Law and
          consistent with the rights attached to the shares held by such Shareholder. The
          Shareholders entitled to receive dividends or bonus shares shall be those who
          are registered in the Register on the date of the resolution approving the
          distribution or allotment, or on such later date, as may be determined in such
          resolution (Article 61.1). Any dividend or other moneys payable in cash in
          respect of a Share may be paid by check sent by registered mail to, or left at
          the registered address of the person entitled thereto or by transfer to a bank
          account specified by such person, or to such person and at such address as the
          person entitled thereto may direct in writing (Article 61.5). The Board of
          Directors of the Company may settle, as it deems fit, any difficulty arising
          with regard to the distribution of bonus Shares, distributions of dividends or
          otherwise, and in particular, to issue certificates for fractions of Shares and
          sell such fractions of Shares in order to pay their consideration to those
          entitled thereto, to set the value for the distribution of certain assets and to
          determine that cash payments shall be paid to the Shareholders on the basis of
          such value, or that fractions whose value is less than NIS 0.01 shall not be
          taken into account. The Board may pay cash or convey these certain assets to a
          trustee in favor of those people who are entitled to a dividend or to a
          capitalized fund, as the Board shall deem appropriate (Article 61.9). If the
          Company at any time shall make a distribution of its assets to the holders of
          its Ordinary Shares, as a dividend in liquidation or partial liquidation or by
          way of return of capital or other than as a dividend payable out of earnings or
          surplus legally available for dividends, the holders of Preferred Shares shall
          be entitled to receive without payment of any additional consideration a sum
          equal to the amount of such assets as would have been payable to such holder as
          owner of that number of Ordinary Shares receivable by exercise of the conversion
          rights herein had such holder been the holder of record of such Ordinary Shares
          on the record date for such distribution, and an appropriate provision therefor
          shall be made a part of any such distribution (Article 33.7).

(c)    
          Rights to share in any surplus in the event of liquidation: Subject to
          applicable Law, in a Liquidation Event and/or a Deemed Liquidation (as defined
          in the Articles), the proceeds of such Liquidation Event and/or Deemed
          Liquidation shall be paid as follows (unless the majority of the holders of
          Preferred Shares elects otherwise): (i) the holders of Preferred Shares shall be
          entitled to receive prior to and in preference to the holders of all other
          Shares in the Company, for each Preferred Share then held, the respective
          Original Issue Price (adjusted for any Recapitalization Event), plus any
          declared and unpaid dividends thereon (the Preference Amount); and
          (ii) after the payment in full of the Preference Amount, and to the extent any
          assets remain legally available for distribution by the Company, the holders of
          Ordinary Shares shall be entitled to receive for each Ordinary Share held, an
          amount per share up to the Price Per Share, adjusted for any Recapitalization
          Event (the Ordinary Share Preference Amount) and (iii) after the
          payment in full in accordance with (i) and (ii) above, then the remaining assets
          legally available for distribution, if any, shall be distributed to the holders
          of the Preferred Shares (on an as-converted basis) and Ordinary Shares, pro-rata
          to the number of shares outstanding (on an as converted basis) (Article 67.1).
          If the funds or assets available for distribution are less than the amount
          needed to pay the Preference Amount, the holders of Preferred Shares shall be
          entitled to receive a pro rata portion of the amount available for distribution,
          based on the Preference Amount to which each Preferred Shareholder is entitled
          hereunder. If, after the payment in full of the Preference Amount, the remaining
          funds or assets available for distribution, if any, are less than the amount
          needed to pay the Ordinary Share Preference Amount, the holders of Ordinary
          Shares shall be entitled to receive a pro rata portion of the amount available
          for distribution, based on the Ordinary Shares Preference Amount to which each
          Ordinary Shareholder is entitled hereunder (Article 67.2).

(d)    
          Voting Rights: No Shareholder shall be entitled to vote at any General Meeting
          (or be counted as a part of the lawful quorum thereat), unless all calls and
          other sums then payable by him in respect of his Shares in the Company have been
          paid (Article 34.1). Any Shareholder entitled to vote may vote either personally
          (or, if the Shareholder is a company or other corporate entity, by a
          representative authorized by him in accordance with the Articles) or by proxy,
          or by deed of vote (Article 34.3).

(e)    
          Election of Directors: The Directors are elected at each Annual General Meeting
          by a resolution adopted by an ordinary majority; provided, however, that
          external Directors are elected in accordance with the Companies Law and/or any
          securities exchange rule applicable to the Company and the holders of Preferred
          Shares are entitled to nominate a majority of the Directors. The Directors shall
          serve in office until the close of the next Annual General Meeting, unless their
          office is vacated earlier in accordance with the provisions of applicable Law or
          the Articles (Article 46.3.1). The General Meeting, by a resolution adopted by
          an ordinary majority, or the Board, upon approval of the majority of the
          Directors of the Company, may elect any person as a Director, to fill an office
          which became vacant, and also in any event in which the number of members of the
          Board is less than the maximum set in Article 46.1 (i.e. not less than 5 and no
          more than 9). Any Director elected in such manner shall serve in office until
          the next Annual Meeting. Notwithstanding the foregoing, if a Director is
          appointed by the Board as aforesaid, and the vacant office was originally
          occupied by a Preferred Director, then the new Director shall be elected by a
          resolution adopted by the remaining Preferred Directors (Article 46.3.3).

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(f)    
          Protective Provisions for Preferred Shares. So long as any of the preferred
          shares are outstanding and preferred shareholders hold at least 20% of the
          issued and outstanding shares of the Company, on an as-converted basis, or 50%
          of the original amount of the convertible loan remains outstanding, the Company
          will not effect any of the following actions without the consent of a majority
          of the preferred shareholders: amend the Articles of Association or change the
          Companys share capital; alter the rights, preferences or privileges of the
          preferred shares; declare or pay any dividends or make any distributions on any
          of the Companys shares, other than on the preferred shares; redeem any of
          the Companys shares ranking junior or equal to the preferred shares,
          except for repurchases of shares under the Companys stock option plans and
          redemption of preferred shares; authorize or issue any shares having rights
          and/or preferences senior to or equal with the preferred shares with respect to
          voting, dividends redemption or liquidation; a sale of the Company by sale of
          all or substantially all of the Companys issued and outstanding shares,
          merger, consolidation sale of assets or otherwise; sale or transfer of all or a
          material part of the Companys intellectual property assets; or voluntary
          dissolution or cessation of operations of the Company.

(g)    
          Additional Rights of Preferred Shares: Preferred Shares are convertible, at the
          discretion of the holder, in the ratio of one ordinary share for one preferred
          share, subject to anti-dilution adjustments, as described below; vote on an
          as-converted basis with ordinary shares on all matters presented at a general
          meeting of shareholders; receive anti-dilution adjustments to the conversion
          ratio of the preferred shares upon issuances of securities by the Company at a
          price below the original issue price of the preferred shares; and receive a
          preemptive right to participate in subsequent equity financings of the Company.

(h)    
          Redemption Provisions: With respect to any consolidation of issued shares into
          shares of larger nominal value, and with respect to any other action which may
          result in fractional shares, the Board of Directors of the Company may settle
          any difficulty which may arise with regard thereto, as it deems appropriate,
          including by redeeming, in the case of redeemable shares, and subject to
          applicable Law, such shares or fractional shares sufficient to preclude or
          remove fractional shareholdings (Article 8.2(c)). So long as any of the
          Preferred Shares are outstanding and the holders of the Preferred Shares hold at
          least twenty percent (20%) of the issued and outstanding shares of the Company
          [or fifty percent (50%) of the original amount of the convertible loan remains
          outstanding], the Company will not, without the written consent of the Preferred
          Majority, either directly or by amendment, merger, consolidation, or otherwise,
          redeem, purchase or otherwise acquire any of the Companys shares ranking
          junior or pari passu with the Preferred Shares (except for: (i) repurchases of
          Ordinary Shares from participants of an ESOP or arrangements approved by the
          Board upon termination of employment; and (ii) redemptions of Preferred
          Shares)(Article 35.4).

(i)    
          Capital Calls by the Company: The Board may, from time to time, make such calls
          as it may deem appropriate upon Shareholders in respect of any sum unpaid in
          respect of Shares held by such Shareholders (Article 13.1).

(j)    
          Discrimination: No provision in the Companys Articles of Association
          discriminates against an existing or prospective holder of securities, as a
          result of such shareholder owing a substantial amount of shares.

4.    
          Modification of Rights of Holders of Stock

The general meeting of shareholders
may adopt by an ordinary majority to increase its registered capital by the creation of
new shares. Any such increase shall be in such amount and shall be divided into shares of
such nominal amounts, and such shares shall confer such rights and preferences, and shall
be subject to such restrictions, as such resolution of the General Meeting shall provide
(Article 6.1). The rights attached to any class of issued Shares, may be modified or
abrogated by the Company by a resolution of the General Meeting adopted by an Ordinary
Majority, provided that any modification that would directly alter the rights attached to
such class shall require the consent in writing of the holders of more than fifty percent
(50%) of the issued shares of such class or a resolution of a separate Class Meeting
adopted by an Ordinary Majority. Unless otherwise provided by the Companys Articles
of Association, the increase of the authorized and registered number of shares of an
existing class of shares, or the issuance of additional shares thereof, shall not be
deemed, for purposes hereof, to alter the rights attached to the previously issued Shares
of such class or of any other class. When effecting an increase of the authorized and
registered share capital under Article 6, or when modifying rights of shares under Article
7, the Company may provide for shares with such preferred or deferred rights or rights of
redemption or other special rights and/or such restrictions, whether in regard to
dividends, voting, repayment of share capital or otherwise, as may be stipulated in the
adopted resolutions (Article 7).

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# 5.    General Meetings

An annual General Meeting of the
Companys shareholders shall be held once every calendar year, within a period of no
more than 15 months after the last annual General Meeting (Article 22.1). The annual
meetings agenda shall include a discussion of the Board of Directors reports
and the financial statements as required by law. The annual meeting shall appoint an
auditor (or renew the term of appointment thereof), appoint the directors pursuant to the
Companys Articles of Association and discuss all the other matters which must be
discussed at the Companys annual general meeting, pursuant to the articles or the
Law, as well as any other matter determined by the Board of Directors (Article 22.2).

Extraordinary General Meeting 
the Board of Directors of the Company may convene such General Meeting and shall be
required to do so upon the demand of any 2 directors or a quarter of the directors
(whichever is lower) or any 1 or more shareholders holding at least 5% of the issued share
capital of the Company (Article 23.2). The Board of Directors of the Company shall
announce the Extraordinary General Meeting within 21 days from receipt of such demand and
the date for the meeting shall be no later than 35 days from publication of such
announcement (Article 23.3).

Notice to the Companys
shareholders regarding the convening of a General Meeting shall be sent to all the
shareholders listed in the Companys shareholders register at least 21 days
prior to the meeting and shall be published in other ways insofar as required by the law,
unless a shorter period is permitted by law (provided that such period is not less than 7
days prior to the date fixed for the meeting). The accidental omission to give notice of a
meeting to any member, or the non-receipt of notice sent to such member, shall not cause
the cancellation of the resolution adopted at the meeting, or the cancellation of acts
based on such notice (Article 25.3).

Quorum  any 2 or more
shareholders present in person or by proxy or who have delivered to the Company a deed of
vote indicating their manner of voting, and who hold in the aggregate at least 33.3% of
the voting power of the Company shall constitute a lawful quorum (Article 27.2). If within
half an hour of the time appointed for the meeting no quorum is present, the meeting if
convened by the Board upon the demand of any 2 directors or a quarter of the directors
(whichever is lower) or any 1 or more shareholders holding at least 5% of the issued share
capital of the Company, or if convened by a demanding shareholder in accordance with the
law, shall be dissolved, but in any other case, it shall be adjourned for one week, to the
same day, time and place, or to such day and at such time and place as the Chairman may
determine with the consent of the holders of a majority of the voting power represented at
the meeting in person or by proxy or by deed of vote and voting on the question of
adjournment (Article 27.3). No business shall be transacted at any adjourned meeting
except business, which might lawfully have been transacted at the meeting as originally
called. At such adjourned meeting, any 2 shareholders present in person or by proxy or by
deed of vote, shall constitute a lawful quorum.

Subject to the restrictive provisions
contained in Article 35, and to any special majority requirements mandated by law, all
resolutions at any and all General Meetings, including those with respect to the matters
detailed in Article 21.1, shall be adopted by an Ordinary Majority (Article 30.1). A
resolution in writing, signed by all shareholders of the Company then entitled to attend
and vote, shall be deemed to have been unanimously adopted (Article 31).

# 6.     Limitations on the
rights to own securities

There are no limitations on the
rights to own the Companys securities, including the rights of non-residents or
foreign shareholders to do so.

# 7.    Change of Control

Under the Companies Law, a merger is,
generally, required to be approved by the shareholders and Board of Directors of each of
the merging companies. Shareholder approval is not required if the company that will not
survive is controlled by the surviving company. Additionally, the law provides some
exceptions to the shareholder approval requirement in the surviving company. If the share
capital of the company that will not be the surviving company is divided into different
classes of shares, the approval of each class is also required, unless determined
otherwise by the court. A majority of votes approving the merger shall suffice, unless the
company (like in this case) was incorporated in Israel prior to the Companies Law of 1999,
in which case a majority of 75% of the voting power is needed in order to approve the
merger. Additionally, unless the court determines differently, a merger will not be
approved if it is objected to by a majority of the shareholders present at the meeting,
after excluding the shares held by the other party to the merger, by any person who holds
25% or more of the other party to the merger and by the relatives of and corporations
controlled by these persons. Upon the request of a creditor of either party to the
proposed merger, the court may delay or prevent the merger if it concludes that there
exists a reasonable concern that, as a result of the merger, the surviving company will be
unable to satisfy the obligations of any of the parties of the merger. Also, a merger can
be completed only after all approvals have been submitted to the Israeli Registrar of
Companies and provided that 30 days have elapsed since shareholder approval was received
and 50 days have elapsed from the time that a proposal for approval of the merger was
filed with the Registrar.

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The Companies Law also provides that
an acquisition of shares in a public company must be made by means of a tender offer if,
as a result of the acquisition, the purchaser would become a holder of 25% or more of the
voting power at general meetings.

This rule does not apply if there is
already another holder of 25% or more of the voting power at general meetings. Similarly,
the Companies Law provides that an acquisition of shares in a public company must be made
by means of a tender offer if, as a result of the acquisition, the purchaser would become
a holder of more than 45% of the voting power of the company. This rule does not apply if
someone else already holds 45% of the voting power of the company. An acquisition from a
25% or 45% holder, which turns the purchaser into a 25% or 45% holder respectively, does
not require a tender offer. An exception to the tender offer requirement may also apply
when the additional voting power is obtained by means of a private placement approved by
the general meeting of shareholders. These tender offer requirements do not apply to
companies whose shares are listed for trading outside of Israel if, under local law or the
rules of the stock exchange on which their shares are traded, there is a limitation on the
percentage of control which may be acquired or the purchaser is required to make a tender
offer to the public.

Under the Companies Law, a person may
not acquire shares in a public company if, after the acquisition, he will hold more than
90% of the shares or more than 90% of any class of shares of that company, unless a tender
offer is made to purchase all of the shares or all of the shares of the particular class.
The Companies Law also provides that as long as a shareholder in a public company holds
more than 90% of the companys shares or of a class of shares, that shareholder shall
be precluded from purchasing any additional shares (an exemption exists where the
shareholder held prior to and following February 2000, over 90% of any class of shares, in
which case he may purchase additional shares by a tender offer that was accepted by a
majority of the offerees). If a tender offer is accepted and less than 5% of the shares of
the company are not tendered, all of the shares will transfer to the ownership of the
purchaser. If 5% or more of the shares of the company are not tendered, the purchaser may
not purchase shares in a manner which will grant him more than 90% of the shares of the
company.

In addition to the foregoing, Article
35.6 of the Companys Articles of Association provides that so long as any of the
Preferred Shares are outstanding and the holders of the Preferred Shares hold at least
twenty percent (20%) of the issued and outstanding shares of the Company (or fifty percent
(50%) of the original amount of the Convertible Loan remains outstanding), the Company
will not, without the written consent of the Preferred Majority, either directly or by
amendment, merger, consolidation, or otherwise, effect a sale of the Company by sale of
all or substantially all of the Companys issued and outstanding shares, merger,
consolidation, sale of assets or otherwise.

# 8.     Disclosing share
ownership

The Company has no bylaw provisions
governing the ownership threshold, above which shareholder ownership must be disclosed.

# 10C: Material Contracts

Our material contracts outside of the
ordinary course of business were: (i) the 2006 share purchase agreement and related
documents for the financing with Fortissimo and certain other investors, copies of which
were filed with the Companys Proxy Statement for the annual shareholders meeting in
August 2006, (ii) the Addendums to the share purchase agreement with Fortissimo for the
additional investments with new options, copies of which were filed with the
Companys Proxy Statement for the annual shareholders meeting in October 2007, and
(iii) the private placements led by Meitav, copies of which were filed as exhibits to the
2006 Annual Report. See Item 4B  Business Overview  Recent
Financings and Item 7  Major Shareholders and Related
Party Transactions for a description of each.

# 10D: Exchange Controls

All exchange control restrictions
imposed by the State of Israel have been removed, although there are still reporting
requirements for foreign currency transactions. Legislation remains in effect, however,
pursuant to which currency controls can be imposed by administrative action at any time.

Pursuant to the General Permit issued
by the Israeli Controller of Foreign Currency, at the Bank of Israel (under the Currency
Control Law, 1978), non-residents of Israel who purchase our ordinary shares will be able
to convert any proceeds from the sale of these ordinary shares, as well as dividend and
liquidation distributions, if any, into non-Israeli currency, provided that Israeli Income
Tax has been paid (or withheld) on such amounts (to the extent applicable).

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# 10E: Taxation

The following is a summary of the
material Israeli tax consequences, Israeli foreign exchange regulations and certain
Israeli government programs affecting the Company.

To the extent that the discussion is
based on new tax or other legislation that has not been subject to judicial or
administrative interpretation, there can be no assurance that the views expressed in the
discussion will be accepted by the tax or other authorities in question. The discussion is
not intended, and should not be construed, as legal or professional tax advice and is not
exhaustive of all possible tax considerations.

ISRAELI TAX CONSIDERATIONS

On January 1, 2003 a comprehensive
tax reform took effect in Israel. Pursuant to the reform, resident companies are subject
to Israeli tax on income accrued or derived in Israel or abroad. In addition, the concept
of controlled foreign corporation was introduced according to which an Israeli
company may become subject to Israeli taxes on certain income of a non-Israeli subsidiary
if the subsidiarys primary source of income is passive income. The tax reform also
substantially changes the taxation of capital gains.

General Corporate Tax
Structure

Israeli companies are generally
subject to income tax on their taxable income at the rate of 31% for the year 2006, 29%
for 2007, 27% for 2008, 26% for 2009 and 25% for year 2010 and thereafter, and are subject
to capital gains tax at a rate of 25% for capital gains (other than gains deriving from the
sale oflisted securities) derived after January 1,2003.

Tax benefits under the Law for the
Encouragement of Capital Investments, 1959.

The Law for the Encouragement of
Capital Investments, 1959 (the Investment Law) provides certain tax and
financial benefits to investment programs that have been granted such status. The
Investment Law provides that a proposed capital investment in eligible facilities may,
upon application to the Investment Center of the Ministry of Industry and Trade of the
State of Israel, be designated as an Approved Enterprise. Each certificate of
approval for an Approved Enterprise relates to a specific investment program delineated
both by its financial scope, including its capital sources, and by its physical
characteristics, e.g., the equipment to be purchased and utilized pursuant to the program.
The tax benefits derived from any such certificate of approval relate only to taxable
income attributable to the specific Approved Enterprise. If a company has more than one
approval or only a portion of its capital investments are approved, its effective tax rate
is the result of a weighted combination of the applicable rates. Income derived from
activity that is not integral to the activity of the enterprise should not be divided
between the different enterprises and should not enjoy tax benefits.

The principal stated objectives of
the Investment Law are to promote the development of industry, the creation of jobs and
the growth of exports. The Investment Center of the Ministry of Industry and Trade granted
RadView an Approved Enterprise status under Alternative Benefits Program
Status. This status entitles the Company to a benefit period of seven years on
income derived from this program as follows: (a) a full income tax exemption for the first
two years and (b) a reduced income tax rate of 25%, instead of the regular rate of 31% in
2006, for the remaining five-year period. Depending on the level of non-Israel investments
in the Company, the period for which the Company is entitled to a reduced tax rate of 25%
can be extended to eight years. The period of the benefit is limited to 12 years from
commencement of production or 14 years from the date of approval. As the Company has not
yet reported any taxable income, the benefit period has not yet commenced.

The benefits from the Companys
approved enterprise programs are dependent upon the Company fulfilling the conditions
stipulated by the Law for Encouragement of Capital Investments, 1959 and the regulations
published under this law, as well as the specific criteria in the Companys approved
enterprise programs. If the Company does not comply with these conditions, the tax
benefits may be canceled, and the Company may be required to refund the amount of the
canceled benefits, with the addition of linkage differences and interest. As of the date
of this Annual Report on Form 20-F, the Company believes it complies with these
conditions.

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If the Company distributes a cash
dividend out of retained earnings which were tax exempt due to its approved enterprise
status, the Company would have to pay a 25% corporate tax on the amount distributed, and a
further 15% withholding tax would be deducted from the amounts distributed to the
recipients.

As of December 31, 2007, the
Company does not have retained earnings and accordingly, no tax-exempt income. Tax-exempt
income attributable to the Approved Enterprise cannot be distributed to shareholders
without subjecting the Company to taxes except upon complete liquidation of the Company.
If the retained tax-exempt income is distributed in a manner other than upon the complete
liquidation of the Company, it would be taxed at the corporate tax rate applicable to such
profits as if the Company had not elected alternative tax benefits. The Companys
board of directors does not intend to distribute any amounts of its undistributed
tax-exempt income as dividends.

An amendment to the Investment Law
that became effective on April 1, 2005, limits the scope of enterprises which may be
approved by the Investment Center by setting criteria for the approval of a facility as an
Approved Enterprise, such as provisions generally requiring that at least 25% of the
Approved Enterprises income will be derived from export. Additionally, the amendment
enacted major changes in the manner in which tax benefits are awarded so that companies no
longer require Investment Center approval in order to qualify for tax benefits (although
approval is required if grants are sought). Rather, a company may claim the tax benefits
offered by the Investment Law directly in its tax returns, provided that its facilities
meet the criteria for tax benefits set out by the amendment (a Benefited
Enterprise). However, the Investment Law provides that terms and benefits included
in any certificate of approval already granted will remain subject to the provisions of
the Law as they were on the date of such approval. Therefore, the Companys existing
Approved Enterprise will generally not be subject to the provisions of the Amendment.

As a result of the Amendment,
tax-exempt income generated under the provisions of the new law as and when applicable
will subject the Company to taxes upon distribution or liquidation and the Company may be
required to record a deferred tax liability with respect to such tax-exempt income.

Income from sources other than the
Approved Enterprise during the benefit period will be subject to tax at the regular
corporate tax rate. Israeli companies are subject to income tax at the corporate tax rate
of 34% for the 2005 tax year. On July 25, 2005, the Knesset (Israeli Parliament)
passed the Law for the Amendment of the Income Tax Ordinance (No. 147), 2005, which
prescribes, among others, a gradual decrease in the corporate tax rate in Israel to the
following tax rates: 31% in 2006, 29% in 2007, 27% in 2008, 26% in 2009and 25% in 2010 and
years thereafter.

Due to reported losses for tax
purposes, the benefit period under the Approved Enterprise program has not yet commenced.

By virtue of this law, the Company is
entitled to claim accelerated depreciation on equipment used by the Approved Enterprise
during five tax years. The Company has received final approval in respect to the
investment program. We cannot assure that we will receive approvals in the future for
Approved or Benefited Enterprise status.

Tax Benefits and Grants
for Research and Development

Israeli tax law allows, under certain
conditions, a tax deduction in the year incurred for expenditures (including capital
expenditures) in scientific research and development projects, if the expenditures are
approved by the relevant Israeli government ministry, determined by the field of research,
the research and development is for the promotion of the enterprise and is carried out by
or on behalf of the company seeking such deduction.

In case the tax deduction, in the
year research and development expenditures are incurred, is not approved by the relevant
Israeli government ministry, the Company will be entitled for the tax deduction over a
period of three years.

Tax Benefits Under the
Law for the Encouragement of Industry (Taxation), 1969

According to the Law for the
Encouragement of Industry (Taxation), 1969, or the Industry Encouragement Law, an
Industrial Company is a company resident in Israel that at least 90% of its
income, in any tax year, determined in Israeli currency, exclusive of income from certain
government loans, capital gains, interest and dividends, is derived from an
Industrial Enterprise owned by it. An Industrial Enterprise is
defined as an enterprise whose major activity in a given tax year is industrial production
activity.

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The following preferred corporate tax
benefits are available to Industrial Companies, among others: (a) deduction of purchases
of know-how and patents over an eight-year period for tax purposes; (b) deduction over a
three-year period of expenses involved with the issuance and listing of shares on the Tel
Aviv Stock Exchange or, on or after January I, 2003, on a recognized stock market outside
of Israel; (c) an election under certain conditions to file a consolidated tax return with
additional related Israeli Industrial Companies that satisfy conditions set forth in the
law; and (d) accelerated depreciation rates on equipment and buildings.

Eligibility for the benefits under
the Industry Encouragement Law is not subject to receipt of prior approval from any
governmental authority.

The Company currently qualifies as an
Industrial Company under the Law for Encouragement of Industry (Taxes), 1969
and is therefore entitled to tax benefits, mainly accelerated depreciation of machinery
and equipment and deduction of expenses incurred in connection with a public offering.

Special Provisions
Relating to Taxation Under Inflationary Conditions

The Income Tax Law (Inflationary
Adjustments), 1985, generally referred to as the Inflationary Adjustments Law, is intended
to adjust the corporate tax system to the rate of inflation, i.e., to tax profits on an
inflation-adjusted basis.

Under the Inflationary Adjustments
Law, results for tax purposes are measured in historical cost terms and are subject to a
series of adjustments based on movements in the Israel consumer price index. We are taxed
under this law. The discrepancy between the change in (I) the Israel consumer price index
and (2) the exchange rate of the NIS to the dollar, each year and cumulatively, may result
in a significant difference between taxable income and the income denominated in dollars
as reflected in our financial statements. In addition, subject to certain limitations,
depreciation of fixed assets and losses carried forward are adjusted for inflation on the
basis of changes in the Israel consumer price index.

The salient features of the
Inflationary Adjustments Law can be described generally as follows:

(a)
          A special tax adjustment for the preservation of equity whereby certain
          corporate assets are classified broadly into fixed (inflation immune) assets and
          non-fixed assets. Where a companys equity, as defined in such law, exceeds
          the depreciated cost of fixed assets, a deduction from taxable income that takes
          into account the effect of the applicable annual rate of inflation on such
          excess is allowed, up to a ceiling of 70% of taxable income in any single tax
          year, with the unused portion permitted to be carried forward, linked to the
          increase in the consumer price index. If the depreciated cost of fixed assets
          exceeds a companys equity, then such excess multiplied by the applicable
          annual rate of inflation is added to taxable income.

(b)
          Subject to certain limitation set forth in the Inflationary adjustments Law,
          depreciation deductions on fixed assets and losses carried forward are adjusted
          for inflation based on the increase in the Israel consumer price index.

(c)
          Gains on the sale of certain listed securities which are taxed at a reduced rate
          with respect to individuals are taxable at a company tax rate in certain
          circumstances. However, dealers in securities are subject to the regular tax
          rules applicable to business income in Israel. As of January 1, 2006, the
          relevant provisions governing taxation of companies on capital gains derived
          from the sale of traded securities are included in the Tax Ordinance, and the
          Adjustments Law no longer includes provisions in this regard.

(d)
          Accelerated depreciation rates on equipment and buildings.

Capital Gains Tax on
Sales of Ordinary Shares

Israeli law generally imposes a
capital gains tax on the sale of any capital assets by residents of Israel, as defined for
Israeli tax purposes, and on the sale of assets located in Israel, including shares in
Israeli companies by both residents and non-residents of Israel, unless a specific
exemption is available or unless a tax treaty between Israel and the shareholders
country of residence provides otherwise. The law distinguishes between the real gain and
the inflationary surplus. The real gain is the excess of the total capital gain over the
inflationary surplus, computed on the basis of the increase in the Israel consumer price
index between the date of purchase and the date of sale. Generally, up until the 2006 tax
year, capital gains tax was imposed on Israeli resident individuals at a rate of 15% on
real gains derived on or after January 1, 2003 from the sale of shares in, among others,
Israeli companies publicly traded on Nasdaq or on a recognized stock exchange or regulated
market in a country that has a treaty for the prevention of double taxation with Israel
(such as our company). This tax rate was contingent upon the shareholder not claiming a
deduction for financing expenses in connection with such shares (in which case the gain
will be taxed at a rate of 25%), and did not apply to: (i) the sale of shares to a
relative (as defined in the Israeli Income Tax Ordinance); (ii) the sale of shares by
dealers in securities; (iii) the sale of shares by shareholders that report in accordance
with the Inflationary Adjustment Law (that will be taxed at corporate tax rates for
corporations and at marginal rates for individuals); or (iv) the sale of shares by
shareholders who acquired their shares prior to an initial public offering (that may be
subject to a different tax arrangement).

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As of January 1, 2006, the tax rate
applicable to capital gains derived from the sale of shares, whether listed on a stock
market or not, is 20% for Israeli individuals, unless such shareholder claims a deduction
for financing expenses in connection with such shares, in which case the gain will
generally be taxed at a rate of 25%. Additionally, if such shareholder is considered a
significant shareholder at any time during the 12-month period preceding such
sale (i.e. such shareholder holds directly or indirectly, including jointly with others,
at least 10% of any means of control in the company), the tax rate will be 25%.

Israeli companies are subject to the
corporate lax rate on capital gains derived from the sale of shares, unless such companies
were not subject to the Adjustments Law (or certain regulations) at the time of
publication of the aforementioned amendment to the Tax Ordinance, in which case the
applicable tax rate is 25%. However, the different tax rates will not apply to dealers in
securities and shareholders who acquired their shares prior to an initial public offering.

The tax basis of shares acquired
prior to January 1, 2003 will be determined in accordance with the average closing share
price in the three trading days preceding January 1,2003. However, a request may be made
to the tax authorities to consider the actual adjusted cost of the shares as the tax basis
if it is higher than such average price.

Non-Israeli residents are exempt from
Israeli capital gains tax on any gains derived from the sale of shares of Israeli
companies publicly traded on a recognized stock exchange or regulated market outside of
Israel, provided that such capital gains are not derived from a permanent establishment in
Israel, that such shareholders are not subject to the Inflationary Adjustment Law and that
such shareholders did not acquire their shares prior to the issuers initial public
offering. However, non-Israeli corporations will not be entitled to such exemption, if an
Israeli resident (i) has a controlling interest of 25% or more in such non-Israeli
corporation, or (ii) is the beneficiary or is entitled to 25% or more of the revenues or
profits of such non-Israeli corporation, whether directly or indirectly.

In some instances where our
shareholders may be subject to Israeli tax on the sale of their ordinary shares, the
payment of the consideration may be subject to the withholding of Israeli tax at the
source.

The US-Israel Tax Treaty

Pursuant to the Convention Between
the Government of the United States of America and the Government of Israel with Respect
to Taxes on Income, as amended (the United States- Israel Tax Treaty), the
sale, exchange or disposition of ordinary shares by a person who qualifies as a resident
of the United States within the meaning of the United States-Israel Tax Treaty and who is
entitled to claim the benefits afforded to such person by the United States- Israel Tax
Treaty (a Treaty United States Resident) generally will not be subject to the
Israeli capital gains tax unless such Treaty United States Resident holds, directly or
indirectly, shares representing 10% or more of the Companys voting power during any
part of the 12- month period preceding such sale, exchange or disposition, subject to
certain conditions. A sale, exchange or disposition of ordinary shares by a Treaty United
States Resident who holds, directly or indirectly, shares representing 10% or more of the
Companys voting power at any time during such preceding 12-month period would be
subject to such Israeli tax, to the extent applicable; however, under the United
States-Israel Tax Treaty, such Treaty United States Resident would be permitted to claim a
credit for such taxes against the United States federal income tax imposed with respect to
such sale, exchange or disposition, subject to the limitations specified in the treaty.
The United States-Israel Tax Treaty does not relate to United States state or local taxes.

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Taxation of Non-Resident
Holders of Ordinary Shares

Non-residents of Israel are subject
to income tax on income accrued or derived from sources in Israel. These sources of income
include passive income such as dividends, royalties and interest, as well as non-passive
income from services rendered in Israel. On distributions of dividends other than bonus
shares or stock dividends, income tax is withheld at the source at the following rates:
(i) for dividends distributed prior to January 1,2006  25%; and (ii) for dividends
distributed on or after January 1, 2006, 20%, or 25% for a shareholder that is considered
a significant shareholder at any time during the 12-month period preceding such
distribution; unless a different rate is provided in a treaty between Israel and the
shareholders country of residence. Under the U.S.-Israel Tax Treaty, the maximum tax
on dividends paid to a holder of shares who is a resident of the United States is 25% or
12.5% if such U.S. resident is a corporation which holds, directly or indirectly, shares
representing at least 10% or more of our issued voting power during the part of the tax
year which precedes the date of payment of the dividend and during the whole of its prior
tax year. However, under the U.S.-Israel Tax Treaty and the Investments Law, dividends
generated by an Approved Enterprise (or Benefiting Enterprise) are taxed at the rate of
15%.

Foreign Exchange
Regulations

Dividends, if any, paid to the
holders of the ordinary shares, and any amounts payable upon dissolution, liquidation or
winding up, as well as the proceeds of any sale in Israel of the ordinary shares to an
Israeli resident, may be paid in non-Israeli currency or, ifpaid in Israeli currency, may
be converted into dollars at the rate of exchange prevailing at the time of conversion.

UNITED STATES FEDERAL
INCOME TAXES

The following general discussion sets
forth the material United States federal income tax consequences applicable to the
following persons who purchase, hold or dispose of the ordinary shares as capital assets
(U.S. Shareholders): (i) citizens or residents (as defined for U.S. federal
income tax purposes) of the United States; (ii) corporations or other entities taxable as
corporations created or organized in or under the laws of the United States or any state
thereof; (iii) estates, the income of which is subject to United States federal income
taxation regardless of its source; and (iv) a trust if (a) a U.S. court is able to
exercise primary supervision over its administration and (b) one or more U.S. persons have
the authority to control all of its substantial decisions. This discussion is based on the
provisions of the Internal Revenue Code of 1986, as amended (the Code), United
States Treasury Regulations promulgated thereunder and administrative and judicial
interpretations thereof, all as in effect as of the date of this Annual Report on Form
20-F. This discussion generally considers only U.S. Shareholders that will hold the
ordinary shares as capital assets and does not consider (a) all aspects of U.S. federal
income taxation that may be relevant to particular U.S. Shareholders by reason of their
particular circumstances (including potential application of the alternative minimum tax),
(b) U.S. shareholders subject to special treatment under the U.S. federal income tax laws,
such as financial institutions, insurance companies, broker-dealers, tax-exempt
organizations, financial institutions or foreign individuals or entities, (c) U.S.
Shareholders owning directly or by attribution 10% or more of the Companys
outstanding voting shares, (d) U.S. Shareholders who hold the ordinary shares as part of a
hedging, straddle or conversion transaction, (e) U.S. Shareholders who acquire their
ordinary shares in a compensatory transaction, (f) U.S. Shareholders whose functional
currency is not the dollar, or (g) any aspect of state, local or non-United States tax
law.

THE FOLLOWING SUMMARY DOES NOT
ADDRESS THE IMPACT OF AN INVESTORS INDIVIDUAL TAX CIRCUMSTANCES. ACCORDINGLY, EACH
INVESTOR SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
TO HIM OR HER OF AN INVESTMENT IN THE ORDINARY SHARES, INCLUDING THE EFFECTS OF APPLICABLE
ST ATE, LOCAL OR FOREIGN TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.

# Dividends Paid on the
Ordinary Shares

Distributions paid on ordinary shares
(including any Israeli taxes withheld) to a U.S. Shareholder will be treated as ordinary
dividend income for United States federal income tax purposes to the extent of the
Companys current and accumulated earnings and profits (as computed for U.S. federal
income tax purposes). Such dividends, which will be treated as foreign source income for
U.S. foreign tax credit purposes, generally will not qualify for the dividends-received
deduction available to corporations. Distributions in excess of such earnings and profits
will be applied against and will reduce the shareholders tax basis in the ordinary
shares and, to the extent in excess of such tax basis, will be treated as gain from a sale
or exchange of such ordinary shares.

The amount of the distribution will
equal the US Dollar value of the distribution, calculated by reference to the exchange
rate in effect on the date the distribution is received (or otherwise made available to
the U.S. Shareholders), regardless of whether a payment in Israeli currency is actually
converted to US Dollars at that time. U.S. Shareholders should consult their own tax
advisors concerning the treatment of foreign currency gain or loss, if any, on any Israeli
currency received which is converted into US Dollars subsequent to receipt.

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Qualified dividend income received by
an individual (as well as certain trusts and estates) U.S. Shareholder for taxable years
beginning before January 1, 2009 are taxed at reduced rates of either 5 or 15 percent,
depending upon the amount of such shareholders taxable income. If a non-corporate
U.S. Shareholder does not hold ordinary shares for more than 60 days during the 120 day
period beginning 60 days before an ex-dividend date, dividends received on ordinary shares
are not eligible for reduced rates. Dividends received from a foreign corporation that was
a passive foreign investment company (as further discussed below) in either the taxable
year of the distribution or the preceding taxable year are not qualified dividend income.
Qualified dividend income includes dividends received from a qualified foreign
corporation. A qualified foreign corporation includes a foreign
corporation whose shares are readily tradable on an established securities market in the
United States as well as a foreign corporation that is entitled to the benefits of a
comprehensive income tax treaty with the United States which includes an exchange of
information program. Israel and the United States are parties to a comprehensive income
tax treaty which includes an exchange of information program. The United States Treasury
Department will periodically issue guidance regarding which income tax treaties will be
satisfactory for treating a corporation as a qualified foreign corporation. In
the event ordinary shares should not be readily tradable on an established securities
market in the United States, non-corporate US Shareholders should consult their own tax
advisors as to whether any distributions paid on ordinary shares will be taxed for United
States federal income tax purposes at reduced tax rates.

Credit for Israeli Taxes
Withheld

Subject to certain conditions and
limitations, any Israeli tax withheld or paid with respect to dividends on the ordinary
shares generally will be eligible for credit against a U.S. Shareholders United
States federal income tax liability at such US.Shareholders election. The
Code provides limitations on the amount of foreign tax credits that a US Shareholder may
claim, including extensive separate computation rules under which foreign tax credits
allowable with respect to specific categories of income cannot exceed the United States
federal income taxes otherwise payable with respect to each such category of income.
Dividends with respect to the ordinary shares generally will be classified as foreign
source passive income for the purpose of computing a US Shareholders
foreign tax credit limitations for U.S. foreign tax credit purposes. The availability of
the Israeli withholding tax as a foreign tax credit will also be subject to certain
restrictions on the use of such credits, including a prohibition on the use of the credit
to reduce liability for the United States individual and corporate minimum taxes by more
than 90%. Alternatively, US.Shareholders that do not elect to claim a foreign tax
credit may instead claim a deduction for Israeli income tax withheld or paid, but only for
a year in which these U.S. Shareholders elect to do so for all foreign income taxes. The
rules relating to foreign tax credits are complex, and you should consult your tax advisor
to determine whether and if you would be entitled to this credit.

Disposition of the
Ordinary Shares

Subject to the discussion under the
heading Passive Foreign Investment Company Status the sale or exchange of
ordinary shares generally will result in the recognition of capital gain or loss in an
amount equal to the difference between the amount realized on the sale or exchange and the
US.Shareholders tax basis in the ordinary shares. Such gain or loss
generally will be long-term capital gain or loss if the US.Shareholders
holding period of the ordinary shares exceeds one year at the time of the disposition.

Certain limitations apply to the
deductibility of capital losses by both corporate and non-corporate taxpayers. Under the
Code, gain or loss recognized by a US.Shareholder on a sale or exchange of
ordinary shares generally will be treated as USsource income or loss for US
foreign tax credit purposes. Under the tax treaty between the United States and Israel,
however, gain derived from the sale, exchange or other disposition of ordinary shares by a
holder who is a resident of the United States for purposes of the treaty and who sells the
ordinary shares within Israel may be treated as foreign source income for US.foreign tax credit purposes. USShareholders should consult their own tax
advisors regarding the treatment of any foreign currency gain or loss on any Israeli
currency received in respect oft he sale, exchange or other disposition of ordinary
shares.

Passive Foreign
Investment Company Status

See discussion in Item 5A
above.

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Tax Consequences for
Non-U.S. Holders of Ordinary Shares

Except as described in
Information Reporting and Back-up Withholding below, a non-U.S. holder of
ordinary shares will not be subject to U.S. federal income or withholding tax on the
payment of dividends on, and the proceeds from the disposition of, ordinary shares,
unless:

| |  | the
 item is  effectively  connected  with  the  conduct  by the  non-U.S.  holder  of a
trade or                   business in the United States and:
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | in
the case of a resident  of a country  which has a treaty with the United  States,  the
item is                   attributable to a permanent establishment; or
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | in
the case of an  individual,  the item is  attributable  to a fixed  place of  business
 in the                   United States;
| | - | ----------------------------------------------------------------------------------------------------------------------------------

| |  | the
non-U .S.  holder is an  individual  who holds the ordinary  shares as a capital asset
and is                   present in the United  States for 183 days or more in the
 taxable  year of the  disposition  and                   does not qualify for an
exemption; or
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the
non-U.S.  holder is subject to tax under the  provisions  ofU.S.  tax law  applicable to
U.S.                   expatriates.
| | - | --------------------------------------------------------------------------------------------------------------------------------

Information Reporting and
Back up Withholding

A non-corporate U.S. Shareholder may,
under certain circumstances, be subject to information reporting requirements and
backup withholding at a 30% rate on cash payments in the United States of
dividends on, and the proceeds of disposition of, ordinary shares. Backup withholding will
apply only if a U.S. Shareholder: (a) fails to furnish its social security or other
taxpayer identification number (TIN) within a reasonable time after the
request therefore; (b) furnishes an incorrect TIN; (c) is notified by the IRS that it has
failed properly to report payments of interest and dividends; or (d) under certain
circumstances, fails to certify, under penalty of perjury, that it has furnished a correct
TIN and has not been notified by the IRS that it is subject to backup withholding for
failure to report interest and dividend payments. U.S. Shareholders should consult their
tax advisors regarding their qualification for exemption, if applicable. The amount of
backup withholding from a payment to a U.S. Shareholder generally will be allowed as a
credit against such U.S. Shareholders federal income tax liability and may entitle
such U.S. Shareholder to a refund, provided that the required information is furnished to
the IRS.

# 10F: Dividends and
Paying Agents

Not applicable

# 10G: Statement by Experts

Not applicable

# 10H: Documents on Display

The documents concerning the Company
that are referred to in the form may be inspected at the Companys office in Israel.

# 10I: Subsidiary
Information

For information relating to the
Companys subsidiary, see Item 4Organizational Structure as well as
the Companys Consolidated Financial Statements (Items 8 and 18 of this form).

# Item 11. Quantitative
and Qualitative Disclosure about Market Risk

We do not use derivative financial
instruments in our investing portfolio. We place our investments in instruments that meet
high credit quality standards such as money market funds, government securities, and
commercial paper. We limit the amount of credit exposure to any one issuer. We do not
expect any material loss with respect to our investment portfolio.

# Currency Exchange Rate
Risk Management

We conduct business in various
foreign currencies, primarily in Europe and the Israel. As a result, we are exposed to the
effect of foreign currency exchange rate fluctuations on the U.S. dollar value of foreign
currency-denominated revenues and expenses. We do not use foreign exchange forward
contracts to hedge our foreign currency denominated receivables. Looking forward, there
can be no assurance that changes in foreign currency rates, relative to the U.S. dollar,
will not materially adversely affect our consolidated results.

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# Credit Risk Management

Financial instruments that
potentially subject the Company to concentrations of credit risk consist principally of
cash, cash equivalents, restricted cash and accounts receivables.

Cash, cash equivalents and restricted
cash are invested mainly in U.S. dollars with major banks in Israel and the United States.
Such deposits in the United States may be in excess of insured limits and are not insured
in other jurisdictions. Management believes that the financial institutions that hold the
Companys investments are financially sound and, accordingly, minimal credit risk
exists with respect to these investments.

Accounts receivable are derived from
sales to customers located in the United States, Europe, Israel and APAC. The Company
performs on-going credit evaluations of its customers and to date has not experienced any
material losses. An allowance for doubtful accounts is maintained with respect to those
amounts that the Company has determined to be doubtful of collection.

The Company has no significant
off-balance-sheet concentration of credit risk such as foreign exchange contracts, option
contracts or other foreign hedging arrangements.

# Item 12: Description of
Securities Other than Equity Securities

Not Applicable

# PART II

# Item 13: Defaults,
Dividend Arrearages and Delinquencies

Not applicable.

Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

# Item 15: Controls and
Procedures

# Evaluation of Controls
and Procedures

(a)Disclosure controls and procedures

As of December 31, 2007, under the
supervision and with the participation of our management, including our CEO and Vice
President of Finance, an evaluation of the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934) was performed. Based on this evaluation, management has concluded that due
to deficiencies that may amount to material weakness (which are discussed below)
in the Companys internal control, its disclosure controls and
procedures were not effective as of December 31, 2007.

(b) Managements
Annual Report on Internal Control Over Financial Reporting

Our management, under the supervision
of our Chief Executive Officer and Vice President of Finance, is responsible for
establishing and maintaining adequate internal control over financial reporting as defined
in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act. Our internal control system was
designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation and fair presentation of our consolidated financial statements for
external purposes in accordance with generally accepted accounting principles. Our Chief
Executive Officer and Vice President of Finance assessed the effectiveness of our internal
control over financial reporting as of December 31, 2007. In making this assessment, they
used the criteria established in Internal ControlIntegrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on
this assessment, our Chief Executive Officer and Vice President of Finance have concluded
that, as of December 31, 2007, our internal control over financial reporting was not
effective based on those criteria.

Management identified significant
deficiencies in our internal control, that occurred in some processes due to lack of
financial resources to ensure segregation of duties and not sufficient evidence of control
since the control was not documented properly and have concluded that taken together these
significant deficiencies may have constituted a material weakness.

The management is currently taking
the necessary remediation measures to ensure accuracy and effectiveness of our monitoring
controls over the completeness and accuracy of financial reporting.

66

---

---

Notwithstanding the foregoing, all
internal control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective may not prevent or detect
misstatements and can provide only reasonable assurance with respect to financial
statement preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

This Annual Report does not include
an attestation report of our registered public accounting firm regarding internal controls
over financial reporting. Managements report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the SEC that permit us to
provide only managements report in this Annual Report.

(c)Change in Internal Control over Financial Reporting.

There were no changes in the
Companys internal controls over financial reporting that occurred during the fiscal
year ended December 31, 2007, that have materially affected or are reasonably likely to
materially affect these controls.

(d) Inherent Limitations
on Effectiveness of Controls

Our management, including our CEO and
Vice President of Finance, does not expect that our disclosure controls and procedures or our internal control
over financial reporting will prevent or detect all error and all fraud. A control system,
no matter how well designed and operated, can provide only reasonable, not absolute,
assurance that the control systems objectives will be met. The design of a control
system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Further, because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute
assurance that misstatements due to error or fraud will not occur or that all control
issues and instances of fraud, if any, within the company have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty
and that breakdowns can occur because of simple error or mistake. Controls can also be
circumvented by the individual acts of some persons, by collusion of two or more people,
or by management override of the controls. The design of any system of controls is based
in part on certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential
future conditions. Projections of any evaluation of controls effectiveness to future
periods are subject to risks. Over time, controls may become inadequate because of changes
in conditions or deterioration in the degree of compliance with policies or procedures.

# Changes in internal
controls

Our internal controlers have been
replaced during the first quarter of 2008.

Section 404 of the
Sarbanes-Oxley Act.

We are required to comply with the
internal control evaluation and certification requirements of Section 404 of the
Sarbanes-Oxley Act. We have determend whether our existing internal controls over
financial reporting systems are compliant with Section 404 or not. In issues we determine
that we are not in compliance with Section 404, we are taking actions in order to
remediate our internal control procedures and reevaluate our financial reporting.

# Item 16: [Reserved]

# Item 16A: Audit
Committee Financial Expert

The Audit Committee of the Board of
Directors currently consists of David Assia Shai Beilis and Hadas Gazit Kaiser.

The Board of Directors has determined
that all of the members of directors of the Audit Committee are Audit Committee
financial experts as that term is defined in Item 401 of Regulation S-K under the
Securities Exchange Act of 1934. Each of the members of the Audit Committee satisfies the
independence requirements under Rule 10A(m)(3) of the Securities Exchange Act of 1934 and
is an independent director, as that term is used in Item 7(d)(3)(iv) of
Schedule 14A under the Securities Exchange Act of 1934.

# Item 16B: Code of Ethics

The Company has adopted a code of
ethics and business conduct (the Code of Ethics) which applies to its
principal executive officer, principal financial officer, principal accounting officer or
controller and persons performing similar functions. A copy of the Code of Ethics was
attached as an Exhibit to the Annual Report on Form 20-F for year 2006. Written copies are
available upon written request to the Company at its address in Israel. We will disclose
any amendments or waivers to the Code of Ethics that apply to the Companys principal
executive officer, principal financial officer, principal accounting officer or controller
and persons performing similar functions.

67

---

---

# Item 16C: Principal
Accountant Fees and Services

The Companys consolidated
financial statements at December 31, 2007 have been audited by Kost Forer Gabbay &
Kasierer, a member of Ernst & Young Global. The Companys audit committee has
recommended that Kost Forer Gabbay & Kasierer continue to serve as the Companys
independent auditors for the fiscal year ending December 31, 2007. The Board of Directors
proposes that the shareholders approve and ratify this appointment. Representatives of
Kost Forer Gabbay & Kasierer are expected to be present at the Annual Meeting to
respond to appropriate questions and will be given the opportunity to make a statement
should they desire to do so.

The following table presents the
aggregate fees for professional audit services and other services rendered by the
Companys independent auditors, Kost Forer Gabbay & Kasierer, a member of Ernst
& Young Global, in 2006 and 2007.

| |                    | Year Ended December 31,
| | ------------------ | -----------------------
|
|
|
|
| | Audit Fees         |                        
| | Audit Related Fees |                        
| | Tax Fees           |                        
| | All Other Fees     |                        
| |                    |                        
| |                    |                        
| |                    |                        

# Audit Fees

Audit Fees consist of fees billed for
the annual audit of the Companys annual consolidated financial statements included
in the Companys Annual Report on Form 10-K and for years 2006 forwards, on Forms
20-F and the quarterly reviews of the Companys quarterly consolidated financial
statements included in the Companys Forms 10-Q and for years 2006 forward, on Forms
6-K.

# Audit Related Fees

Audit
Related Fees include fees billed for other audit services, which are those services that
only the external auditor reasonably can provide, and include the review of documents
filed with the SEC.

# Tax Fees

Tax
Fees include fees billed for tax compliance services, including the preparation of tax
returns and claims for refund and tax consultations.

# All Other Fees

All
Other Fees include fees billed for assistance with tax examinations by Israeli income tax
authorities.

# Pre-Approval Policy

The Audit Committee is required to
approve in advance any audit or permissible non-audit services performed by the
Companys independent auditors, the fees to be paid for those services and the time
period over which those services are to be provided. On an annual basis, the independent
auditors present a listing of all services they expect to perform for the Company in the
ensuing one-year period, including fee estimates, in sufficient detail to enable the Audit
Committee to perform an independence review of each proposed service. The pre-approval
policies and procedures established by the Audit Committee require that the Audit
Committee meet with the independent auditor and financial management prior to the audit to
review planning and staffing, the scope of the proposed audit for the current year, the
audit procedures to be utilized, and the proposed fees. With respect to any additional
services proposed to be performed by the independent auditors during the year, management
will evaluate the impact on the independent accountants independence and obtain
Audit Committee approval for such service. During 2006 and 2007, 100% of the audit,
audit-related and tax fees were pre-approved by the Audit Committee.

68

---

---

# Item 16D: Exemptions
from the Listing Standards for Audit Committees

Not applicable.

# Item 16E: Purchases of
Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

# PART III

# Item 17: Financial
Statements

Not applicable.

# Item 18: Financial Statements

The following financial statements
are filed as part of this Annual Report:

69

---

---

RADVIEW
SOFTWARE LTD. AND SUBSIDIARIES

CONSOLIDATED
FINANCIAL STATEMENTS

AS
OF DECEMBER 31, 2007

IN
U.S. DOLLARS

INDEX

|                                                          |  |      |            | 
|--------------------------------------------------------- |  | ---- | ---------- | 
|                                                          |  | Page |           
|                                                          |  |      |           
|                                                          |  |      |            | 
|Report of Independent Registered Public
  Accounting Firm |  |      | F-2        | 
|                                                          |  |      |            | 
|Consolidated Balance Sheets                               |  |      | F-3 - F-4  | 
|                                                          |  |      |            | 
|Consolidated Statements of Operations                     |  |      | F-5        | 
|                                                          |  |      |            | 
|Statements of Shareholders Deficit                       |  |      | F-6        | 
|                                                          |  |      |            | 
|Consolidated Statements of Cash Flows                     |  |      | F-7        | 
|                                                          |  |      |            | 
|Notes to Consolidated Financial Statements                |  |      | F-8 - F-35 | 

---

---

|                     |  |                                                                                                                                
|-------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|(ERNST & YOUNG LOGO) |  | Kost
  Forer Gabbay & Kasierer3 Aminadav St.
  Tel-Aviv 67067, Israel
Tel: 972 (3)6232525
  Fax: 972 (3)5622555
  www.ey.com/il

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board
of Directors and Shareholders of
RadView Software Ltd.

We
have audited the accompanying consolidated balance sheets of RadView Software
Ltd. and its subsidiaries (the Company) as of December 31, 2006 and 2007 and
the related consolidated statements of operations, shareholders deficit and
cash flows for each of the three years in the period ended December 31,
2007. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Companys internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of RadView
Software Ltd. and its subsidiaries as of December 31, 2006 and 2007 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2007 in conformity with U.S.
generally accepted accounting principles.

As
discussed in Note 2. m. and 11. g. to the consolidated financial statements, effective
January 1, 2007, the Company adopted FIN 48, Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement No. 109".

As
discussed in Note 2. n. to the consolidated financial statements, in 2005, the Company
adopted Statement of Financial Accounting Standards Board No. 123 (R), Share Based
Payment.

|                 |                                 
|---------------- | --------------------------------
|Tel-Aviv, Israel | KOST FORER
  GABBAY & KASIERER  
|July 13, 2008    | A Member of Ernst & Young Global

F-2

---

---

|                                                      
|------------------------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES                
|                                                      
|CONSOLIDATED BALANCE SHEETS                           
|                                                      
|U.S.
          dollars in thousands, except share data

|                                                                                                       |  |      |  |              |       |      |   |       | 
|------------------------------------------------------------------------------------------------------ |  | ---- |  | ------------ | ----- | ---- | - | ----- | 
|                                                                                                       |  |      |  | December 31, |      
|                                                                                                       |  |      |  |              |      
|                                                                                                       |  | Note |  | 2006         |       | 2007 |  
|                                                                                                       |  |      |  |              |       |      |  
|                                                                                                       |  |      |  |              |       |      |   |       | 
|ASSETS                                                                                                 |  |      |  |              |       |      |   |       | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|CURRENT ASSETS:                                                                                        |  |      |  |              |       |      |   |       | 
|Cash and cash equivalents                                                                              |  |      |  | $            | 229   |      | $ | 880   | 
|Restricted cash                                                                                        |  |      |  |              | 21    |      |   | 26    | 
|Accounts receivable (net of allowance for
  doubtful accounts of $46 as of December 31, 2006 and 2007) |  |      |  |              | 410   |      |   | 651   | 
|Prepaid expenses and other current assets                                                              |  | 4    |  |              | 166   |      |   | 204   | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|Total current assets                                                                                   |  |      |  |              | 826   |      |   | 1,761 | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|LONG-TERM INVESTMENTS:                                                                                 |  |      |  |              |       |      |   |       | 
|Operating lease deposit                                                                                |  |      |  |              | 40    |      |   | 40    | 
|Severance pay funds                                                                                    |  |      |  |              | 284   |      |   | 292   | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|Total long-term investments                                                                            |  |      |  |              | 324   |      |   | 332   | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|PROPERTY AND EQUIPMENT, NET                                                                            |  | 5    |  |              | 102   |      |   | 68    | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|DEFERRED FINANCING COSTS RELATED TO CONVERTIBLE
  LOAN                                                 |  |      |  |              | 30    |      |   | 18    | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|                                                                                                       |  |      |  |              |       |      |   |       | 
|Total assets                                                                                           |  |      |  | $            | 1,282 |      | $ | 2,179 | 
|                                                                                                       |  |      |  |              |       |      |   |       | 

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

F-3

---

---

|                                              
|----------------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES        
|                                              
|CONSOLIDATED BALANCE SHEETS                   
|                                              
|(U.S. dollars in thousands, except share data)

|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ------------ | ------- | ---- | - | ------- | -
|                                                                                                                                                                                                                                                                             |  |      |  | December 31, |        
|                                                                                                                                                                                                                                                                             |  |      |  |              |        
|                                                                                                                                                                                                                                                                             |  | Note |  | 2006         |         | 2007 |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|LIABILITIES AND SHAREHOLDERS
  DEFICIT                                                                                                                                                                                                                                      |  |      |  |              |         |      |   |         |  
|CURRENT LIABILITIES:                                                                                                                                                                                                                                                         |  |      |  |              |         |      |   |         |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|Accounts payable                                                                                                                                                                                                                                                             |  |      |  | $            | 428     |      | $ | 284     |  
|Accrued expenses                                                                                                                                                                                                                                                             |  | 7    |  |              | 1,297   |      |   | 2,147   |  
|Deferred revenues                                                                                                                                                                                                                                                            |  |      |  |              | 1,085   |      |   | 1,140   |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|Total current liabilities                                                                                                                                                                                                                                                    |  |      |  |              | 2,810   |      |   | 3,571   |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|CONVERTIBLE LOAN                                                                                                                                                                                                                                                             |  |      |  |              | 94      |      |   | 344     |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|ACCRUED SEVERANCE PAY                                                                                                                                                                                                                                                        |  |      |  |              | 417     |      |   | 371     |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|COMMITMENTS AND CONTINGENT
  LIABILITIES                                                                                                                                                                                                                                     |  |      |  |              |         |      |   |         |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|SHAREHOLDERS DEFICIT:                                                                                                                                                                                                                                                       |  | 9    |  |              |         |      |   |         |  
|Ordinary shares, NIS 0.01 par
  value                                                                                                                                                                                                                                       |  |      |  |              |         |      |   |         |  
|Authorized: 340,000,000 and 550,000,000
  shares as of December 31, 2006 and 2007, respectively; Issued: 20,659,682 and
  77,038,662 shares as of December 31, 2006 and 2007; Outstanding: 20,525,682
  and 76,904,662 shares as of December 31, 2006 and 2007, respectively |  |      |  |              | 51      |      |   | 188     |  
|Preferred A shares, NIS 0.01
  par value 
  Authorized: 125,000,000 and 225,000,000 shares as of December 31, 2006 and
  2007, respectively; Issued and outstanding: 48,333,334 and 81,666,668 shares
  as of December 31, 2006 and 2007, respectively;                     |  |      |  |              | 112     |      |   | 191     |  
|Preferred B shares, NIS 0.01
  par value 
  Authorized: 75,000,000 and 150,000,000 shares as of December 31, 2006 and
  2007, respectively; Issued: None as of December 31, 2006 and 2007                                                                                   |  |      |  |              |        |      |   |        |  
|Treasury shares, at cost:
  134,000 shares as of December 31, 2006 and 2007                                                                                                                                                                                                  |  |      |  |              | (100    | )    |   | (100    | )
|Additional paid-in capital                                                                                                                                                                                                                                                   |  |      |  |              | 59,891  |      |   | 64,835  |  
|Accumulated deficit                                                                                                                                                                                                                                                          |  |      |  |              | (61,993 | )    |   | (67,221 | )
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|Total shareholders deficit                                                                                                                                                                                                                                                  |  |      |  |              | (2,039  | )    |   | (2,107  | )
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  
|Total liabilities and shareholders deficit                                                                                                                                                                                                                                  |  |      |  | $            | 1,282   |      | $ | 2,179   |  
|                                                                                                                                                                                                                                                                             |  |      |  |              |         |      |   |         |  

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

F-4

---

---

|                                                            
|------------------------------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES                      
|                                                            
|CONSOLIDATED STATEMENTS OF OPERATIONS                       
|                                                            
|(U.S. dollars in thousands, except share and per share data)

|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|---------------------------------------------------------------------------------------------------------------- |  |  | ---- |  | ----------------------- | ------ | ---- | - | ------ | - | - | ------ | -
|                                                                                                                 |  |  |      |  | Year Ended December 31, |       
|                                                                                                                 |  |  |      |  |                         |       
|                                                                                                                 |  |  | Note |  | 2005                    |        | 2006 |   | 2007   |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Revenues:                                                                                                        |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Software licenses                                                                                                |  |  |      |  | $                       | 3,138  |      | $ | 1,757  |   | $ | 1,225  |  
|Services                                                                                                         |  |  |      |  |                         | 2,507  |      |   | 2,526  |   |   | 1,895  |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Total
  Revenues                                                                                                 |  |  |      |  |                         | 5,645  |      |   | 4,283  |   |   | 3,120  |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Cost of Revenues:                                                                                                |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Software licenses                                                                                                |  |  |      |  |                         | 147    |      |   | 80     |   |   | 26     |  
|Services                                                                                                         |  |  |      |  |                         | 255    |      |   | 133    |   |   | 66     |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Total Cost
  of Revenues                                                                                         |  |  |      |  |                         | 402    |      |   | 213    |   |   | 92     |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Gross Profit                                                                                                     |  |  |      |  |                         | 5,243  |      |   | 4,070  |   |   | 3,028  |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Operating Expenses:                                                                                              |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Sales and marketing                                                                                              |  |  |      |  |                         | 3,287  |      |   | 2,475  |   |   | 2,687  |  
|Research and development, net                                                                                    |  |  |      |  |                         | 2,229  |      |   | 1,512  |   |   | 1,890  |  
|General and administrative                                                                                       |  |  |      |  |                         | 2,004  |      |   | 1,671  |   |   | 1,729  |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Total
  Operating Expenses                                                                                       |  |  |      |  |                         | 7,520  |      |   | 5,658  |   |   | 6,306  |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Operating loss                                                                                                   |  |  |      |  |                         | (2,277 | )    |   | (1,588 | ) |   | (3,278 | )
|Financial expenses, net                                                                                          |  |  | 10   |  |                         | (188   | )    |   | (210   | ) |   | (358   | )
|Income Tax                                                                                                       |  |  | 11   |  |                         |       |      |   |       |   |   | 331    |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Net loss                                                                                                         |  |  |      |  | $                       | (2,465 | )    | $ | (1,798 | ) | $ | (3,967 | )
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Deemed dividend on convertible Preferred A shares and exercise of
  additional investment rights during the year |  |  |      |  | $                       |       |      | $ | (882   | ) | $ | (850   | )
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Net loss attributed to Ordinary shares                                                                           |  |  |      |  | $                       | (2,465 | )    | $ | (2,680 | ) | $ | (4,817 | )
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Basic and diluted net loss per Ordinary share                                                                    |  |  |      |  | $                       | (0.12  | )    | $ | (0.13  | ) | $ | (0.08  | )
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  
|Weighted average number of shares used in computing basic and diluted
  net loss per Ordinary share              |  |  |      |  |                         | 20,526 |      |   | 20,526 |   |   | 60,488 |  
|                                                                                                                 |  |  |      |  |                         |        |      |   |        |   |   |        |  

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

F-5

---

---

|                                                
|------------------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES          
|                                                
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIT
|                                                
|(U.S. dollars in thousands, except share data)  

|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---------- | --------------- | - | ------------------ |  | ---------- | ---------- | ------------------ | - | ----- | ----- | -------------- | ------- | ------------------ | - | ------------------- | - | - | ------ |  | - | ------- | - | - | ------ | -
|                                                                                                                  |  | Preferred A shares |            | Ordinary shares |   | Treasury shares    |  |            |            |                    |   |       |       |                |         |                   
|                                                                                                                  |  |                    |            |                 |   |                    |  | Additional |            |                    |   |       | Total |               
|                                                                                                                  |  | Number
  of shares |            | Value           |   | Number
  of shares |  | Value      |            | Number
  of shares |   | Value |       | paid-incapital |         | Accumulateddeficit |   | shareholdersdeficit |  
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |  
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  
|Balance, December 31, 2004                                                                                        |  |                    |           |                 | $ |                   |  |            | 20,659,682 |                    | $ | 51    |       |                | 134,000 |                    | $ | (100                | ) | $ | 56,813 |  | $ | (56,848 | ) | $ | (84    | )
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  
|Stock-based compensation                                                                                          |  |                    |           |                 |   |                   |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   | 116    |  |   |        |   |   | 116    |  
|Issuance of warrants in connection with revolving line of credit                                                  |  |                    |           |                 |   |                   |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   | 52     |  |   |        |   |   | 52     |  
|Net loss                                                                                                          |  |                    |           |                 |   |                   |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   |       |  |   | (2,465  | ) |   | (2,465 | )
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  
|Balance, December 31, 2005                                                                                        |  |                    |           |                 |   |                   |  |            | 20,659,682 |                    |   | 51    |       |                | 134,000 |                    |   | (100                | ) |   | 56,981 |  |   | (59,313 | ) |   | (2,381 | )
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  
|Stock-based compensation                                                                                          |  |                    |           |                 |   |                   |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   | 128    |  |   |        |   |   | 128    |  
|Proceeds from private placement of Preferred A shares and warrants,
  net of issuance costs of $188               |  |                    | 48,333,334 |                 |   | 112                |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   | 1,900  |  |   |        |   |   | 2,012  |  
|Deemed dividend on convertible Preferred shares and an exercise of
  additional investment rights during the year |  |                    |           |                 |   |                   |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   | 882    |  |   | (882    | ) |   |       |  
|Net loss                                                                                                          |  |                    |           |                 |   |                   |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   |       |  |   | (1,798  | ) |   | (1,798 | )
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  
|Balance, December 31, 2006                                                                                        |  |                    | 48,333,334 |                 |   | 112                |  |            | 20,659,682 |                    |   | 51    |       |                | 134,000 |                    |   | (100                | ) |   | 59,891 |  |   | (61,993 | ) |   | (2,039 | )
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  
|Proceeds from exercise of additional investment rights                                                            |  |                    | 33,333,334 |                 |   | 79                 |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   | 921    |  |   |        |   |   | 1,000  |  
|Proceeds from private placement of Ordinary shares and warrants, net
  of issuance costs of $203                  |  |                    |           |                 |   |                   |  |            | 56,378,980 |                    |   | 137   |       |                |        |                    |   |                    |   |   | 3,042  |  |   |        |   |   | 3,179  |  
|Stock-based compensation                                                                                          |  |                    |           |                 |   |                   |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   | 131    |  |   |        |   |   | 131    |  
|Deemed dividend on exercise of additional investment rights during the
  year                                     |  |                    |           |                 |   |                   |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   | 850    |  |   | (850    | ) |   |       |  
|Cumulative effect
  of FIN 48 adoption                                                                            |  |                    |           |                 |   |                   |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   |       |  |   | (411    | ) |   | (411   | )
|Net loss                                                                                                          |  |                    |           |                 |   |                   |  |            |           |                    |   |      |       |                |        |                    |   |                    |   |   |        |  |   | (3,967  | ) |   | (3,967 | )
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  
|Balance, December 31, 2007                                                                                        |  |                    | 81,666,668 |                 | $ | 191                |  |            | 77,038,662 |                    | $ | 188   |       |                | 134,000 |                    | $ | (100                | ) | $ | 64,835 |  | $ | (67,221 | ) | $ | (2,107 | )
|                                                                                                                  |  |                    |            |                 |   |                    |  |            |            |                    |   |       |       |                |         |                    |   |                     |   |   |        |  |   |         |   |   |        |  

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

F-6

---

---

|                                       
|---------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES 
|                                       
|CONSOLIDATED
  STATEMENTS OF CASH FLOWS
|                                       
|(U.S. dollars in thousands)            

|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- | - | ------ | - | - | ------ | -
|                                                                                                  |  | Year Ended December 31, |       
|                                                                                                  |  |                         |       
|                                                                                                  |  | 2005                    |        | 2006 |   | 2007   |  
|                                                                                                  |  |                         |        |      |   |        |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|Cash Flows from Operating
  Activities:                                                           |  |                         |        |      |   |        |   |   |        |  
|Net loss                                                                                          |  | $                       | (2,465 | )    | $ | (1,798 | ) | $ | (3,967 | )
|Adjustments required to
  reconcile net loss to net cash used in operating activities:            |  |                         |        |      |   |        |   |   |        |  
|Depreciation                                                                                      |  |                         | 99     |      |   | 82     |   |   | 81     |  
|Stock-based compensation                                                                          |  |                         | 116    |      |   | 128    |   |   | 131    |  
|Amortization of debt discount,
  long-term convertible loan discount and deferred financing costs |  |                         | 122    |      |   | 94     |   |   | 262    |  
|Accrued interest of loan-term
  convertible loan                                                  |  |                         |       |      |   | 38     |   |   | 59     |  
|Severance pay, net                                                                                |  |                         | (15    | )    |   | (63    | ) |   | (54    | )
|Decrease (increase) in accounts
  receivable                                                      |  |                         | (74    | )    |   | 269    |   |   | (241   | )
|Decrease (increase) in prepaid
  expenses and other current assets                                |  |                         | 196    |      |   | (47    | ) |   | (38    | )
|Increase (decrease) in accounts payable                                                           |  |                         | 331    |      |   | (142   | ) |   | (144   | )
|Increase in accrued expenses                                                                      |  |                         | 22     |      |   | 125    |   |   | 380    |  
|Accrued restructuring charge                                                                      |  |                         | (29    | )    |   |       |   |   |       |  
|Increase (decrease) in deferred revenue                                                           |  |                         | (246   | )    |   | (574   | ) |   | 55     |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|Net cash used in operating
  activities                                                           |  |                         | (1,943 | )    |   | (1,888 | ) |   | (3,476 | )
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|Cash Flows from Investing
  Activities:                                                           |  |                         |        |      |   |        |   |   |        |  
|Purchases of property and
  equipment                                                             |  |                         | (79    | )    |   | (40    | ) |   | (47    | )
|Restricted cash                                                                                   |  |                         | (40    | )    |   | 19     |   |   | (5     | )
|Decrease in operating lease
  deposit                                                             |  |                         | 65     |      |   |       |   |   |       |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|Net cash used in investing
  activities                                                           |  |                         | (54    | )    |   | (21    | ) |   | (52    | )
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|Cash Flows from Financing
  Activities:                                                           |  |                         |        |      |   |        |   |   |        |  
|Issuance of warrants in
  connection with revolving line of credit                                |  |                         | 52     |      |   |       |   |   |       |  
|Debt issuance costs in
  connection with revolving line of credit                                 |  |                         | (70    | )    |   |       |   |   |       |  
|Borrowings under revolving line
  of credit                                                       |  |                         | 1,348  |      |   |       |   |   |       |  
|Repayments under revolving line
  of credit                                                       |  |                         | (1,330 | )    |   | (70    | ) |   |       |  
|Proceeds from private
  placements of Ordinary shares and warrants, net                           |  |                         |       |      |   |       |   |   | 3,179  |  
|Proceeds from private placement
  of convertible loan, Preferred A shares and warrants, net       |  |                         |       |      |   | 2,042  |   |   |       |  
|Proceeds from exercise of
  additional investment rights                                          |  |                         |       |      |   |       |   |   | 1,000  |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|Net cash provided by financing
  activities                                                       |  |                         |       |      |   | 1,972  |   |   | 4,179  |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|Increase (decrease) in cash and
  cash equivalents                                                |  |                         | (1,997 | )    |   | 63     |   |   | 651    |  
|Cash and cash equivalents at
  the beginning of the year                                          |  |                         | 2,163  |      |   | 166    |   |   | 229    |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|Cash and cash equivalents at
  the end of the year                                                |  | $                       | 166    |      | $ | 229    |   | $ | 880    |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  
|Cash paid during the year for
  interest and taxes                                                |  | $                       | 82     |      | $ | 16     |   | $ | 17     |  
|                                                                                                  |  |                         |        |      |   |        |   |   |        |  

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

F-7

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |           
|-------- | ----------
|NOTE 1:- | OPERATIONS

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | RadView
  Software Ltd (the Company) develops, markets and supports software that
  enables organizations to verify the scalability, efficiency and reliability
  of web applications, and facilitates their rapid development.                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Company
  has four wholly-owned subsidiaries in the United States, United Kingdom,
  Germany and Sweden. To date the British, Swedish and German subsidiaries are
  inactive.                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Company incurred net losses of about $2.5 million in 2005, about
  $1.8 million in 2006 and about $4 million in 2007, and had an accumulated
  deficit of approximately about $67.2 million as of December 31, 2007. The
  Company has funded these losses principally from equity financing proceeds,
  including an initial public offering in August 2000, a private placement in
  March 2005, August 2006 and during 2007, as well as proceeds from technology
  license arrangement (see Note 3).
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Company
  is addressing its liquidity issues by implementing initiatives to improve
  revenues and cash collections and reducing expenses. In addition, the
  Companys controlling shareholder has committed to support the Company by
  providing or arranging for financing as may be necessary to allow the
  coverage of any budget deficit through the second quarter of 2009 up to an
  amount of $500,000.                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Accordingly, the Companys
management believes that the expected increase in revenues, the reduction of expenses and
the guaranteed support from the controlling shareholder will enable the Company to
continue its operation at least through the end of 2008.                                                                                                                                                                                                                                           

|         |                                
|-------- | -------------------------------
|NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES

| |                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
  Companys consolidated financial statements are prepared in accordance with
  U.S. generally accepted accounting principles. The significant accounting
  policies followed in the preparation of the consolidated financial
  statements, applied on a consistent basis, are as follows:
| |                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                       
| | a.                                                                                                                                                                                                                                                                                              | Use of
  estimates:                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                 | The
  preparation of the financial statements in conformity with U.S. generally
  accepted accounting principles requires management to make estimates and
  assumptions that affect the amounts reported in the financial statements and
  accompanying notes. Actual results could differ from these estimates.     
| |                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                       
| | b.                                                                                                                                                                                                                                                                                              | Financial
  statements in U.S. dollars:                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                 | A
  substantially portion of the Companys revenues and expenses are in U.S.
  dollars. The Companys management believes that the U.S. dollar is the
  currency of the primary economic environment in which the Company operates.
  Thus, the functional and reporting currency of the Company is the U.S.
  dollar.

F-8

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                        
|-------- | ---------------------------------------
|NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.)

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | Accordingly,
  monetary accounts maintained in currencies other than the dollar are
  remeasured into dollars in accordance with Statement of Financial Accounting
  Standard (SFAS) No. 52, Foreign Currency Translation. Changes in currency
  exchange rates between the Companys functional currency and the currency in
  which a transaction is denominated are included in the Companys results of
  operations as financial income (expense) in the period in which the currency
  exchange rates change.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | All exchange
  gains and losses from the above-mentioned remeasurement are reflected in the
  statements of operations and were not material for all periods presented. The
  representative rate of exchange was U.S. $1.00 to New Israeli Shekel (NIS)
  4.603 at December 31, 2005, U.S. $1.00 to NIS 4.225 at December
  31, 2006 and U.S. $1.00 to NIS 3.846 at December 31, 2007.                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | c. | Principles
  of consolidation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | The
  consolidated financial statements include the accounts of RadView Software
  Ltd. and its wholly owned subsidiaries. All intercompany balances and
  transactions have been eliminated upon consolidation.                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | d. | Cash
  equivalents and restricted cash:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Cash
  equivalents are short-term highly liquid investments that are readily
  convertible to cash with original maturities of three months or less.
  Restricted cash is invested in a short-term bank deposit, which is used as
  security for Companys guarantee to leased facilities. The deposit is in U.S.
  dollars and bears interest at an average rate of 4.292%.                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | e. | Allowance for doubtful accounts:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | The Company
  provides an allowance for doubtful accounts against its accounts receivable.
  The reserve is computed for specific accounts, the collectibility of which is
  doubtful based upon the Companys experience. A summary of the allowance for
  doubtful accounts is as follows:                                                                                                                                                                                                                           

|                                 |  |                           |     |      |   |      |   |   |    | 
|-------------------------------- |  | ------------------------- | --- | ---- | - | ---- | - | - | -- | 
|                                 |  | Year Ended December 31,   |    
|                                 |  |                           |    
|                                 |  | 2005                      |     | 2006 |   | 2007 |  
|                                 |  |                           |     |      |   |      |  
|                                 |  | U.S. dollars in thousands |    
|                                 |  |                           |    
|                                 |  |                           |     |      |   |      |   |   |    | 
|Balance at the beginning of year |  | $                         | 72  |      | $ | 56   |   | $ | 46 | 
|Provision                        |  |                           |    |      |   |     |   |   |   | 
|Write-offs                       |  |                           | (16 | )    |   | (10  | ) |   |   | 
|                                 |  |                           |     |      |   |      |   |   |    | 
|                                 |  |                           |     |      |   |      |   |   |    | 
|Balance at the end of year       |  | $                         | 56  |      | $ | 46   |   | $ | 46 | 
|                                 |  |                           |     |      |   |      |   |   |    | 

F-9

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                        
|-------- | ---------------------------------------
|NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.)

| |    |                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | f. | Property and
  equipment, net:                                                                                                                                                                    
| |    |                                                                                                                                                                                                   
| |    | Property and
  equipment are stated at cost, net of accumulated depreciation. Depreciation
  is computed using the straight-line method over the estimated useful life of
  the assets as follows:

|                       |  |                       |                                                                    | 
|---------------------- |  | --------------------- | ------------------------------------------------------------------ | 
|                       |  | Estimated Useful Life |                                                                   
|                       |  |                       |                                                                   
|                       |  | (In years)            |                                                                   
|                       |  |                       |                                                                    | 
|Category               |  |                       |                                                                    | 
|                       |  |                       |                                                                    | 
|Equipment              |  |                       | 3                                                                  | 
|Office furniture       |  |                       | 3 to 6                                                             | 
|Leasehold improvements |  |                       | Over the shorter of the term of the lease or the life of the asset | 

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | g. | Impairment of long-lived assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The
  Companys long-lived assets are reviewed for impairment in accordance with
  SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
  whenever events or changes in circumstances indicate that the carrying amount
  of an asset may not be recoverable. Recoverability of assets to be held and
  used is measured by a comparison of the carrying amount of an asset to the
  future undiscounted cash flows expected to be generated by the assets. If
  such assets are considered to be impaired, the impairment to be recognized is
  measured by the amount by which the carrying amount of the assets exceeds the
  fair value of the assets. During 2005-2007 no impairment losses have been
  identified.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | h. | Severance
  pay:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | In accordance with Israeli severance
pay law, the Company is required to make severance payments to Israeli employees upon
their termination of employment. The amount of such severance payments is based on the
most recent monthly salary multiplied by the number of years of employment as of the
balance sheet date. The Company has accrued for the estimated total cost of severance pay
as computed as of the balance sheet date. Severance expense totaled $ 90,000 in 2005 and $
116,000 in 2006 and $ 62,000 in 2007.                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The Company
  has partially funded its severance pay obligations by monthly deposits for
  insurance policies. The deposited funds may be withdrawn only upon the
  fulfillment of the obligation pursuant to Israeli severance pay law or labor
  agreements. The value of the deposited funds is based on the cash surrendered
  value of these policies and is presented as an asset in the consolidated
  balance sheets.                                                                                                                                                                                                                                                                                                                    

F-10

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                        
|-------- | ---------------------------------------
|NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.)

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | i. | Revenue
  recognition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Company
  generates revenues mainly from licensing the rights to use its software
  products. The Company also generates revenues from support and maintenance
  services and, to a lesser extent, training and consulting services. The
  Company sells its products primarily through its direct sales force and, to a
  lesser extent, through resellers and distributors considered as end-users.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Company
  recognizes revenue in accordance with Statement of Position (SOP) 97-2, Software Revenue Recognition, and SOP
  98-9, Modification of SOP 97-2, Software
  Revenue Recognition, With Respect to Certain Transactions. Under
  SOP 97-2, revenues from software product licenses are recognized upon
  delivery of the software provided there is persuasive evidence of an
  agreement, the fee is fixed or determinable and collection of the related
  receivable is probable and no further obligations exist. Revenues under
  multiple-element arrangements, which may include software licenses, support
  and maintenance, and training and consulting services, are allocated to each
  element based on their respective fair values based on vendor-specific
  objective evidence. This objective evidence represents the price of products
  and services when sold separately. When vendor-specific objective evidence of
  fair value exists for undelivered elements but does not exist for delivered
  elements of a software arrangement, the Company uses the residual method for
  recognition of revenues, when all other revenue recognition criteria are met.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | Under the
  residual method, the Company defers revenues related to the undelivered
  elements based on their vendor specific objective evidence of fair value and
  recognizes the remaining arrangement fee for the delivered elements. When
  vendor-specific objective evidence of fair value for undelivered elements
  does not exist, and the only undelivered element is services, revenues from
  the entire arrangement are recognized over the term of the service agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | Revenues
  from time-based license and support and maintenance agreements are recognized
  ratably over the term-of the time-based license or maintenance period, which
  is typically one year. Revenues from training and consulting arrangements are
  recognized as the services are performed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Company
  generally does not grant a right of return to its customers. When a right of
  return exists, revenue is deferred until the right of return expires, at
  which time revenue is recognized provided that all other revenue recognition
  criteria are met.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | Revenue is recognized for software
licenses sold to resellers or distributors at the time of delivery, provided that all
revenue recognition criteria set forth in SOP 97-2 are fulfilled.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | Amounts collected
  or billed prior to satisfying the above revenue recognition criteria are
  reflected as deferred revenue. Deferred revenue primarily represents deferred
  maintenance revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F-11

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                        
|-------- | ---------------------------------------
|NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.)

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | j. | Advertising
  expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Advertising
  expenses are charged to the consolidated statements of operations as they are
  incurred. Advertising expenses totaled $200,000 in 2005, $290,000 in 2006 and
  $94,000 in 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | k. | Research and
  development costs:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Company
  has evaluated the establishment of technological feasibility of its products
  in accordance with SFAS No. 86, Accounting
  for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed.
  The Company sells products in a market that is subject to rapid technological
  change, new product development and changing customer needs. Accordingly, the
  Company has concluded that technological feasibility is not established until
  the development stage of the product is nearly complete. The Company defines
  technological feasibility as the completion of a working model. The time
  period during which costs could be capitalized from the point of reaching
  technological feasibility until the time of general product release is very
  short. Consequently, the amounts that could be capitalized are not material
  to the Companys financial position or results of operations. Therefore, the
  Company has charged all such costs to research and development expense in the
  period incurred.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | l. | Royalty 
  bearing grants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Royalty 
  bearing grants from the Government of Israel for funding approved research
  and development projects are recognized at the time the company is entitled
  to such grants on the basis of the research and development costs incurred.
  Such grants are included as a deduction of research and development costs,
  since at the time received it is not probable the Company will generate sales
  from these projects and pay the royalties resulting from such sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Research and
  development grants received or accrued by the company in 2007 accumulated to
  $388,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | m. | Income
  taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | 1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | The Company
  accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS No.
  109 prescribes the use of the liability method whereby deferred tax assets
  and liabilities are determined based on differences between financial
  reporting and tax bases of assets and liabilities and are measured using the
  enacted tax rates and laws that will be in effect when the differences are expected
  to be reversed. The Company provides a valuation allowance, if necessary, to
  reduce deferred tax assets to their estimated realizable value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | 2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | In July
  2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
  in Income Taxes, an Interpretation of FASB Statement No. 109 (FIN 48). FIN
  48 clarifies the accounting for income taxes by prescribing the minimum
  recognition threshold a tax position is required to meet before being
  recognized in the financial statements. FIN 48 utilizes a two-step approach
  for evaluating tax positions. Recognition (step one) occurs when an
  enterprise concludes that a tax position, based solely on its technical
  merits, is more-likely-than-not to be sustained upon examination. Measurement
  (step two) is only addressed if step one has been satisfied (i.e., the
  position is more-likely-than-not to be sustained) otherwise a full liability
  in respect of a tax position not meeting the more-than-likely-than-not
  criteria is recognized. Under step two, the tax benefit is measured as the
  largest amount of benefit, determined on a cumulative probability basis, that
  is more-likely-than-not to be realized upon ultimate settlement.

F-12

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                        
|-------- | ---------------------------------------
|NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.)

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | FIN 48
  applies to all tax positions related to income taxes subject to FAS 109.
  This includes tax positions considered to be routine as well as those with
  a high degree of uncertainty.                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | FIN 48 has
  expanded disclosure requirements, which include a tabular roll forward of the
  beginning and ending aggregate unrecognized tax benefits as well as specific
  detail related to tax uncertainties for which it is reasonably possible the
  amount of unrecognized tax benefit will significantly increase or decrease
  within twelve months. (See also note 11. g).
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | FIN 48 is
  effective for fiscal years beginning after December 15, 2006. The cumulative
  effect of applying FIN 48 is reported as an adjustment to the opening balance
  of retained earnings. The adoption of FIN 48, as of January 1, 2007, affected
  the Companys retained earnings and financial position in the amount of
  approximately $411,000.                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                    
| | n. | Stock-Based
  Compensation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Effective
  January 1, 2005 (the effective date), the Company applies SFAS No. 123(R),
  Share-Base Payment (SFAS 123(R), which is a revision of FASB Statement
  No. 123, Accounting for Stock-Based Compensation (SFAS 123). SFAS 123(R)
  requires the measurement and recognition of compensation expenses based on
  estimated fair value for all shared based payment awards made to employees
  and directors. In March 2005, the Securities and Exchange Commission issued
  Staff Accounting Bulletin No. 107 (SAB 107) relating to SFAS 123(R).
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The Company
  has elected to adopt the provisions of SFAS 123(R) effective January 1, 2005
  following the modified prospective method of adoption. A modified
  prospective method in which compensation cost is recognized beginning with
  the effective date (a) based on the requirements of SFAS 123(R) for all share-based
  payments granted after the effective date and (b)
  based on the requirements of SFAS 123 for all awards granted to employees
  prior to the effective date of SFAS 123(R) that remain unvested on the
  effective date.       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The Company
  recognizes compensation expenses for the value of its awards, which have
  vested based on straight-line method over the requisite service period of
  each of the awards, net of estimated forfeitures.                                                                                                                                                                                                                                                                                                                                               

F-13

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                        
|-------- | ---------------------------------------
|NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.)

| |  |                                                                                                                                                                                                                                                      | 
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| |  | The Company
  has determined the fair value of share-based payments issued after January 1,
  2005 and unvested options granted in prior periods using the Black-Scholes
  option valuation model, using the following weighted-average assumptions:

|                        |  |                         |   |      |         |      |  |         |   | 
|----------------------- |  | ----------------------- | - | ---- | ------- | ---- |  | ------- | - | 
|                        |  | Year Ended December 31, |  
|                        |  |                         |  
|                        |  | 2005                    |   | 2006 |         | 2007 | 
|                        |  |                         |   |      |         |      | 
|                        |  |                         |   |      |         |      |  |         |   | 
|Expected life of option |  | 4 years                 |   |      | 4 years |      |  | 4 years |   | 
|Dividend yield          |  | 0                       | % |      | 0       | %    |  | 0       | % | 
|Expected volatility     |  | 123                     | % |      | 109     | %    |  | 109     | % | 
|Risk-free interest rate |  | 3.9                     | % |      | 4.72    | %    |  | 4.74    | % | 
|Forfeiture rate         |  |                        |   |      | 18.70   | %    |  | 23.74   | % | 

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | Expected volatilities are based on
historical volatility of the Companys Ordinary shares. The Company uses historical
data to estimate option exercises and employee terminations within the valuation model.
The Company determined the expected life of the options according to the simplified
method allowed under SAB107, which is the midpoint between the vesting and the
contractual term of the Companys stock options. The risk-free rate is based on the
U.S. Treasury yield curve.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Share based payments are expensed on a straight-line basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | o. | Basic and
  diluted net loss per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The Company
  applies the two class method as required by EITF No. 03-6, Participating
  Securities and the Two-Class Method under FASB Statement No. 128 (EITF No.
  03-6). EITF No. 03-6 requires the loss per share for each class of shares
  (Ordinary and Preferred shares) to be calculated assuming 100% of the
  Companys earnings are distributed as dividends to each class of shares based
  on their contractual rights. Basic net losses per share are computed based on
  the weighted average number of shares of Ordinary shares outstanding during
  each year. Diluted net losses per share is computed based on the
  weighted-average number of Ordinary shares outstanding during the period,
  plus dilutive potential shares considered outstanding during the period, in
  accordance with Statement of Financial Standard No. 128, Earnings Per
  Share. For the years ended December 31, 2005, 2006 and 2007 all outstanding
  options and warrants were excluded from the calculations of diluted net loss
  per share.

F-14

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                        
|-------- | ---------------------------------------
|NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.)

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

|                               |  |                         |  |      |        |      |  |         |  | 
|------------------------------ |  | ----------------------- |  | ---- | ------ | ---- |  | ------- |  | 
|                               |  | Year Ended December 31, | 
|                               |  |                         | 
|                               |  | 2005                    |  | 2006 |        | 2007 | 
|                               |  |                         |  |      |        |      | 
|                               |  | In thousands            | 
|                               |  |                         |  |      |        |      |  |         |  | 
|Stock options                  |  | 3,033                   |  |      | 6,596  |      |  | 11,138  |  | 
|Warrants                       |  | 2,334                   |  |      | 1,333  |      |  | 1,333   |  | 
|Additional investment rights   |  |                        |  |      | 51,667 |      |  | 75,000  |  | 
|Warrants held by Comerica Bank |  | 353                     |  |      | 353    |      |  | 353     |  | 
|Warrants held by an investor   |  |                        |  |      | 36,250 |      |  | 100,715 |  | 

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | p. | Fair value
  of financial instruments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | SFAS No.
  107, Disclosure about Fair Value of Financial Instruments, requires
  disclosure of an estimate of the fair value of certain financial instruments.
  The Companys financial instruments consist of cash and cash equivalents,
  restricted cash, account receivable, accrued expenses, convertible loans and
  account payable. The estimated fair value of these financial instruments
  approximates their carrying value as of December 31, 2007 and 2006, unless
  otherwise stated. The estimated fair values have been determined through
  information obtained from market sources and management estimates.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | q. | Concentrations
  of credit risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Financial
  instruments that potentially subject the Company to concentrations of credit
  risk consist principally of cash, cash equivalents, restricted cash, and accounts
  receivables.                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Cash, cash
  equivalents and restricted cash are invested mainly in U.S. dollars with
  major banks in Israel and the United States. Such deposits in the United
  States may be in excess of insured limits and are not insured in other jurisdictions.
  Management believes that the financial institutions that hold the Companys
  investments are financially sound and, accordingly, minimal credit risk
  exists with respect to these investments.                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Accounts
  receivable are derived from sales to customers located in the United States,
  Europe, Israel and APAC. The Company performs on-going credit evaluations of
  its customers and to date has not experienced any material losses. An
  allowance for doubtful accounts is maintained with respect to those amounts
  that the Company has determined to be doubtful of collection.                                                                                                                                                                                                                                       

F-15

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                        
|-------- | ---------------------------------------
|NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.)

| |    |                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | The Company
  has no significant off-balance-sheet concentration of credit risk such as
  foreign exchange contracts, option contracts or other foreign hedging
  arrangements.                                                              
| |    |                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | In 2005, one
  customer represented 13% of total revenue and one customer represented 17% of
  total accounts receivable as of December 31, 2005. In 2006, one customer
  represented 12% of total 2006 revenues. No major customers in 2007.
| |    |                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | r. | Reclassification:                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Certain
  figures from prior year were reclassified to conform to current year
  presentation.                                                                                                                                               
| |    |                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | s. | Recently
  issued accounting standards:                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | 1.                                                                                                                                                                                                                                            | In September
  2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS 157
  establishes a single authoritative definition of fair value, sets out a
  framework for measuring fair value, and requires additional disclosures about
  fair value measurements. SFAS 157 applies only to fair value measurements
  that are already required or permitted by other accounting standards. The
  Company will adopt SFAS No. 157 effective on January 1, 2008. The adoption of
  SFAS 157 is not expected to have material effect on the Companys financial
  statements.                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                               | In February
  2008, the FASB issued FASB Staff Position FSP 157-2, Effective Date of FASB
  Statement No. 157 (FSP 157-2). FSP 157-2 delays the
  effective date of SFAS No. 157 for all non-financial assets and
  non-financial liabilities, except for items that are recognized or disclosed
  at fair value in the financial statements on a recurring basis (at least
  annually), until the beginning of the first quarter of fiscal 2009. The
  Company is currently evaluating the impact that SFAS No. 157 will
  have on its consolidated financial statements when it is applied to
  non-financial assets and non-financial liabilities beginning in the first
  quarter of 2009.                                                                                     
| |    |                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | 2.                                                                                                                                                                                                                                            | In February
  2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
  Assets and Financial Liabilities (SFAS No. 159), which permits companies
  to choose to measure certain financial instruments and other items at fair
  value that are not currently required to be measured at fair value which will
  be determined according to SFAS 157 mentioned above. SFAS No. 159 is
  effective for fiscal years beginning after November 15, 2007. The Company
  believes that the adoption of SFAS No. 159 will not have any significant
  effect on the Companys financial statements, results of operations or financial
  position, since the Company will not apply the fair value option for its
  existing assets and liabilities as of January 1st 2008.

F-16

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                        
|-------- | ---------------------------------------
|NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.)

| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 3. | In December
  2007, the FASB issued SFAS 141(R), Business Combinations (SFAS 141(R)).
  This Statement replaces SFAS 141, Business Combinations, and requires an
  acquirer to recognize the assets acquired, the liabilities assumed, including
  those arising from contractual contingencies, any contingent consideration,
  and any noncontrolling interest in the acquiree at the acquisition date,
  measured at their fair values as of that date, with limited exceptions
  specified in the statement. SFAS 141(R) also requires the acquirer in a
  business combination achieved in stages (sometimes referred to as a step
  acquisition) to recognize the identifiable assets and liabilities, as well as
  the noncontrolling interest in the acquiree, at the full amounts of their
  fair values (or other amounts determined in accordance with SFAS 141(R)). In
  addition, SFAS 141(R)s requirement to measure the noncontrolling interest in
  the acquiree at fair value will result in recognizing the goodwill
  attributable to the noncontrolling interest in addition to that attributable
  to the acquirer.                                                                                                                                                                                                                                                                                                                                     
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  |    | SFAS 141(R)
  also amends SFAS No. 109, Accounting for Income Taxes, to require the
  acquirer to recognize changes in the amount of its deferred tax benefits that
  are recognizable because of a business combination either in income from
  continuing operations in the period of the combination or directly in
  contributed capital, depending on the circumstances. It also amends SFAS 142,
  Goodwill and Other Intangible Assets, to, among other things; provide
  guidance on the impairment testing of acquired research and development
  intangible assets and assets that the acquirer intends not to use.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  |    | SFAS 141(R)
  applies prospectively to business combinations for which the acquisition date
  is on or after the beginning of the first annual reporting period beginning
  on or after December 15, 2008. As such, the adoption of SFAS 141R is not
  expected to have any effect on accounting for current subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  |    | In December
  2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated
  Financial Statements (SFAS 160). SFAS 160 amends ARB 51, Consolidated
  Financial Statements, to establish accounting and reporting standards for
  the noncontrolling interest in a subsidiary and for the deconsolidation of a
  subsidiary. It also clarifies that a noncontrolling interest in a subsidiary
  is an ownership interest in the consolidated entity that should be reported
  as equity in the consolidated financial statements. SFAS 160 also changes the
  way the consolidated income statement is presented by requiring consolidated net income to be reported
  at amounts that include the amounts attributable to both the parent and the
  noncontrolling interest. It also requires disclosure, on the face of the
  consolidated statement of income, of the amounts of consolidated net income
  attributable to the parent and to the noncontrolling interest. SFAS 160
  requires that a parent recognize a gain or loss in net income when a
  subsidiary is deconsolidated and requires expanded disclosures in the
  consolidated financial statements that clearly identify and distinguish
  between the interests of the parent owners and the interests of the
  noncontrolling owners of a subsidiary. SFAS 160 is effective for fiscal
  periods, and interim periods within those fiscal years, beginning on or after
  December 15, 2008.

F-17

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                        
|-------- | ---------------------------------------
|NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.)

| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 4. | In December
  2007, the SEC staff issued Staff Accounting Bulletin No. 110 (SAB 110),
  which, effective January 1, 2008. SAB 110 amends and replaces Staff
  Accounting Bulletin No. 107 (SAB 107), Share-Based Payment. SAB 110
  expresses the views of the SEC staff regarding the use of a simplified
  method in developing an estimate of expected term of plain vanilla share
  options in accordance with FASB Statement No. 123(R), Share-Based Payment.
  Under the simplified method, the expected term is calculated as the
  midpoint between the vesting date and the end of the contractual term of the
  option. The use of the simplified method, which was first described in SAB
  107, was scheduled to expire on December 31, 2007. SAB 110 extends the use of
  the simplified method for plain vanilla awards in certain situations. The
  SEC staff does not expect the simplified method to be used when sufficient
  information regarding exercise behavior, such as historical exercise data or
  exercise information from external sources, becomes available. The adoption
  of SAB 110 would not have any effect on the Companys financial statements.
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | 5. | In March
  2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
  and Hedging Activities - an amendment to FASB Statement No. 133. SFAS No.
  161 is intended to improve financial standards for derivative instruments and
  hedging activities byrequiring enhanced disclosures to enable investors to better
  understand their effects on an entitys financial position, financial
  performance, and cash flows. Entities are required to provide enhanced
  disclosures about: (a) how and why an entity uses derivative instruments; (b)
  how derivative instruments and related hedged items are accounted for under
  Statement 133 and its related interpretations; and (c) how derivative
  instruments and related hedged items affect an entitys financial position,
  financial performance, and cash flows. It is effective for financial
  statements issued for fiscal years beginning after November 15, 2008, with
  early adoption encouraged. The Company is currently evaluating the impact of
  SFAS No. 161 on its financial statements.                                                                                                             
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |    | In May 2008,
  the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
  Principles. SFAS 162 identifies the sources of accounting principles and the
  framework for selecting the principles to be used in the preparation of
  financial statements of nongovernmental entities that are presented in conformity
  with generally accepted accounting principles in the United States. It is
  effective 60 days following the SECs approval of the Public Company
  Accounting Oversight Board amendments to AU Section 411, The Meaning of
  Present Fairly in Conformity With Generally Accepted Accounting Principles.
  The Company is currently evaluating the impact of SFAS No. 162 on its
  financial statements, and the adoption of this statement is not expected to
  have a material effect on the Companys financial statements.                                                                                                                                                                                                                                                                                                                             

F-18

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                               
|-------- | ------------------------------
|NOTE 3:- | TECHNOLOGY LICENSE TRANSACTION

| |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | On
  December 7, 2005, the Company and OPNET Technologies, Inc.
  (OPNET) entered into a license and distribution agreement (the License
  Agreement), which granted to OPNET a non-exclusive, non-royalty-bearing,
  perpetual source code license for the Companys WebLOAD and WebFT products.
  In addition, the Company agreed to provide limited engineering support
  services for a period of eight weeks for the purpose of assisting OPNET with
  the use of the source code and up to ten days of training services for OPNET
  s support personnel. OPNET was also granted a right to extend the service
  period for up to an additional eight weeks for an additional fee. The total
  consideration under the agreement of approximately $ 572,000 was payable in
  cash as follows: $ 360,000 paid upon execution of the Agreement; $ 200,000
  paid in bi-weekly installments in varying amounts through January 16,
  2006; and $ 12,000 paid at varying dates as training services are performed.
| |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  | Additionally,
  in accordance with SOP 97-2, if sufficient vendor-specific objective evidence
  of the fair value of the elements does not exist to permit the allocation of
  revenue to the services and the only undelivered element is services, the
  entire arrangement fee should be recognized as the services are performed or
  on a straight-line basis over the service period if no other pattern of
  performance is discernible. Accordingly, the Company recognized the
  arrangement fee, less the value of the deferred future discount described
  above, on a ratable basis over the initial eight-week engineering service
  period from December 2005 to January 2006.                                                                                                                                                                                                                                                                                                                             
| |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  | In January
  2006, OPNET exercised its right to extend the engineering services through
  March 2006 for an additional fee of $ 96,000. The revenues from these
  additional services were also recognized in the first quarter of 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  | Total
  revenues recognized in connection with the License Agreement, including the
  extension of engineering services and $ 31,000 of incremental revenues from
  reimbursable costs, totaled $ 203,000 in the fourth quarter of 2005 and
  $ 496,000 in 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|         |                                          
|-------- | -----------------------------------------
|NOTE 4:- | PREPAID EXPENSES AND OTHER CURRENT ASSETS

|                       |  |                             |     |      |   |     | 
|---------------------- |  | --------------------------- | --- | ---- | - | --- | 
|                       |  | December
  31               |    
|                       |  |                             |    
|                       |  | 2006                        |     | 2007 |  
|                       |  |                             |     |      |  
|                       |  | U.S.
  dollars in thousands |    
|                       |  |                             |    
|                       |  |                             |     |      |   |     | 
|Government authorities |  | $                           | 50  |      | $ | 77  | 
|Prepaid expenses       |  |                             | 52  |      |   | 50  | 
|Other receivables      |  |                             | 64  |      |   | 77  | 
|                       |  |                             |     |      |   |     | 
|                       |  |                             |     |      |   |     | 
|                       |  | $                           | 166 |      | $ | 204 | 
|                       |  |                             |     |      |   |     | 

F-19

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|        |                       
|------- | ----------------------
|NOTE 5: | PROPERTY AND EQUIPMENT

|                                |  |                             |       |      |   |       | 
|------------------------------- |  | --------------------------- | ----- | ---- | - | ----- | 
|                                |  | December
  31               |      
|                                |  |                             |      
|                                |  | 2006                        |       | 2007 |  
|                                |  |                             |       |      |  
|                                |  | U.S.
  dollars in thousands |      
|                                |  |                             |      
|                                |  |                             |       |      |   |       | 
|Equipment                       |  | $                           | 3,627 |      | $ | 3,673 | 
|Office furniture                |  |                             | 221   |      |   | 222   | 
|Leasehold improvements          |  |                             | 202   |      |   | 202   | 
|                                |  |                             |       |      |   |       | 
|                                |  |                             |       |      |   |       | 
|                                |  |                             | 4,050 |      |   | 4,097 | 
|Less  accumulated depreciation |  |                             | 3,948 |      |   | 4,029 | 
|                                |  |                             |       |      |   |       | 
|                                |  |                             |       |      |   |       | 
|                                |  | $                           | 102   |      | $ | 68    | 
|                                |  |                             |       |      |   |       | 

| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Depreciation
  expenses were $99,000 in 2005, $82,000 in 2006 and $81,000 in 2007.

|         |                                  
|-------- | ---------------------------------
|NOTE 6:- | REVOLVING LINE OF CREDIT FACILITY

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On May 27,
  2005, the Company, through RadView Software Inc., the Companys U.S.
  subsidiary (the U.S. Subsidiary), obtained a one-year revolving line of
  credit facility with Comerica Bank for borrowings of up to $ 2.0 million.
  Advances under the facility were limited to the lesser of $ 2.0 million or
  the sum of 75% of eligible accounts receivable plus $ 1.0 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Borrowings
  under the facility bear interest at the banks prime rate (3.68% as of
  December 31, 2005) plus 1.25%. Borrowings under the credit facility were
  secured by substantially all of the assets of the U.S. Subsidiary and
  specified assets of the Company, and guaranteed by the Company and specified
  subsidiaries of the Company. The Company and the U.S. Subsidiary were
  required to maintain compliance with financial covenants including:
  (a) a minimum cash balance of $1.0 million and (b) specified net
  income (loss) levels based on the Companys consolidated operating budget.
  The Company borrowed $ 1.2 million under the line of credit. In December
  2005, an event of default was incurred under the credit facility when the
  borrowings under the credit facility exceeded the collateral base and the
  Company was unable to repay the amount of the overadvance. The bank suspended
  all future borrowings under the facility and demanded repayment of the overadvance.
  The Company and the bank agreed upon a plan of repayment for all outstanding
  borrowings. As of December 31, 2005, outstanding borrowings under the
  revolving line of credit totaled $ 70,000. This amount was fully repaid in
  January 2006 and the revolving line of credit facility was terminated.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | In
  connection with the facility, the Company issued to the bank a warrant to
  purchase 352,941 of the Companys Ordinary shares at an exercise price of $
  0.17 per share. The warrant is exercisable immediately and has a term of
  seven years. The warrants were classified in equity and also provides for
  piggyback registration rights. These warrants are not affected by the early
  termination of the revolving line of credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | At the grant
  date, the fair value of the warrants was determined to be $ 52,000 using the
  Black-Scholes option-pricing model assuming a risk free interest of 3.9%, a
  volatility factor of 120%, dividend yield of 0% and contractual life of seven
  years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-20

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                          
|-------- | -----------------------------------------
|NOTE 6:- | REVOLVING LINE OF CREDIT FACILITY (Cont.)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company
  also incurred financing costs totaling $70,000 consisting of bank fees and
  legal costs, which have been accounted for as deferred financing costs, until
  fully amortized following the repayment of the loan. The warrant costs and
  deferred financing costs were amortized as interest expense over the life of
  the revolving credit facility. Amortization of warrants costs and deferred
  financing costs totaled $122,000 in 2005.

|         |                 
|-------- | ----------------
|NOTE 7:- | ACCRUED EXPENSES

|                                        |  |                             |       |      |   |       | 
|--------------------------------------- |  | --------------------------- | ----- | ---- | - | ----- | 
|                                        |  | December
  31               |      
|                                        |  |                             |      
|                                        |  | 2006                        |       | 2007 |  
|                                        |  |                             |       |      |  
|                                        |  | U.S.
  dollars in thousands |      
|                                        |  |                             |      
|                                        |  |                             |       |      |   |       | 
|Employee compensation and related costs |  | $                           | 543   |      | $ | 602   | 
|Professional
  fees                     |  |                             | 150   |      |   | 132   | 
|Government
  authorities                |  |                             | 182   |      |   | 940   | 
|Accrued
  interest on convertible loan  |  |                             | 38    |      |   | 97    | 
|Royalties
  related to cost of sales    |  |                             | 20    |      |   | 32    | 
|Other
  accrued expenses                |  |                             | 364   |      |   | 344   | 
|                                        |  |                             |       |      |   |       | 
|                                        |  |                             |       |      |   |       | 
|                                        |  | $                           | 1,297 |      | $ | 2,147 | 
|                                        |  |                             |       |      |   |       | 

|        |                                       
|------- | --------------------------------------
|NOTE 8: | COMMITMENTS AND CONTINGENT LIABILITIES

| |    |                                                                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Lease
  Obligations                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                     
| |    | The Company
  operates primarily from leased facilities. Lease agreements expire through
  July 2009. Annual minimum future rental payments due under the lease
  agreements as of December 31, 2007 are as follows:

|                                 |  |                               |     | 
|-------------------------------- |  | ----------------------------- | --- | 
|                                 |  | Amount                        |    
|                                 |  |                               |    
|                                 |  | U.S.
  dollars
  In thousands |    
|                                 |  |                               |    
|                                 |  |                               |     | 
|For the Year Ending December 31, |  |                               |     | 
|2008                             |  | $                             | 199 | 
|2009                             |  |                               | 52  | 
|                                 |  |                               |     | 
|                                 |  |                               |     | 
|                                 |  | $                             | 251 | 
|                                 |  |                               |     | 

| |  |                                                                                                                                               
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | Rent
  expense, net of sublease income and idle-lease restructuring credits, was
  $284,000 in 2005 and $204,000 in 2006 and $182,000 in 2007.

F-21

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|        |                                               
|------- | ----------------------------------------------
|NOTE 8: | COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

| |    |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | --------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | Royalties
| |    |          
| |    | 1.        | In May 2005,
  the Company entered into a distribution agreement with another third party to
  re-brand, market and distribute certain software products of a third party
  also under the Companys private label name of WebLOAD Analyzer. The Company is
  required to pay royalties to the third party based on the Companys selling
  price for end-user revenues from the WebLOAD Analyzer product.                                                                                                                             
| |    |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |           | Royalties
  incurred in connection with these royalty arrangements totaled $88,000 in
  2005, $28,000 in 2006 and $18,000 in 2007, and have been classified as cost
  of license revenues.                                                                                                                                                                                                                                                                                                                                             
| |    |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | 2.        | The Company
  is obligated to pay royalties to the Government of Israel on revenues from
  sales of products generated from Government support of research and
  development activities, up to the amount of the grants received. The
  royalties amount to 3% - 4.5% of the sales. Since January 1, 1999, all grants
  received bear annual interest of LIBOR (as of December 31, 2007  4.22%).
  Total amount of grants received or accrued, net of royalties paid or accrued,
  as of December 31, 2007, is approximately $380,000.

|         |                      
|-------- | ---------------------
|NOTE 9:- | SHAREHOLDERS DEFICIT

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | Authorized
  Ordinary share capital:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | Ordinary
  shares confer upon their holders voting rights, the right to receive dividends
  or bonus shares, if declared, and the right to share in the excess assets
  upon liquidation of the Company after the Preferred A and B shares.                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | b. | Authorized
  Preferred shares:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | Preferred
  Shares confer upon their holders voting rights on an as-converted basis with
  ordinary shares on all matters presented at a general meeting of
  shareholders, a right to nominate a majority of the members of the board of
  directors, priority preference upon liquidation; and protective rights over
  significant corporate actions, such as approval of mergers and acquisitions,
  voluntary liquidation or dissolution, declaration of dividends, amendments to
  the articles of association, sale or transfer of assets, and issuance of
  securities with equal or superior rights.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | c. | Treasury
  shares:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | As of
  December 31, 2007, the Company holds 134,000 of Ordinary shares as treasury
  shares at an aggregate cost of $100,000. Although such shares are legally
  considered outstanding, the Company has no dividend or voting rights associated
  with its treasury shares.                                                                                                                                                                                                                                                                                                                                

F-22

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                              
|-------- | -----------------------------
|NOTE 9:- | SHAREHOLDERS DEFICIT (Cont.)

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | d. | Dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Company
  has never paid cash dividends to shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | e. | Private
  placement 2004:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | In March
  2004, the Company completed a private placement (the Private Placement) of
  its Ordinary shares, additional investment rights to purchase Ordinary shares
  (the Additional Investment Rights) and four series of warrants to purchase
  Ordinary shares (the 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
  the Securities Act of 1933, as amended, and Regulation D promulgated
  thereunder.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | In connection with the Private
Placement from March 2004, the Company issued to the Purchasers Additional Investment
Rights to purchase additional Ordinary shares, exercisable until June 17, 2005. As of
December 31, 2007 none of the Additional Investment Rights were exercised and outstanding.                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Company
  also issued to the Purchasers four series of Warrants of which the following
  series of warrants are outstanding as of December 31, 2007 (in September
  2006, series B and D warrants expired):                                                                                                                                                                                                                                                                                                                                                                         

|                    |  |                         |  |                |      |                           |  |           | 
|------------------- |  | ----------------------- |  | -------------- | ---- | ------------------------- |  | --------- | 
|Series              |  | Term                    |  | Exercise Price |      | Number of Ordinary shares | 
|                    |  |                         |  |                |      |                           | 
|                    |  |                         |  |                |      |                           |  |           | 
|Series A
  warrants |  | Four and a
  half years |  | $              | 0.98 |                           |  | 1,000,000 | 
|                    |  |                         |  |                |      |                           |  |           | 
|Series C
  warrants |  | Four and a
  half years |  | $              | 0.98 |                           |  | 333,332   | 
|                    |  |                         |  |                |      |                           |  |           | 
|                    |  |                         |  |                |      |                           |  |           | 
|                    |  |                         |  |                |      |                           |  | 1,333,332 | 
|                    |  |                         |  |                |      |                           |  |           | 

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Warrants
  were initially exercisable for the number of shares indicated above, subject
  to anti-dilution adjustments and, with respect to the Series C warrants,
  subject to the conditions indicated below. The Series A warrants became
  exercisable beginning September 11, 2004 for a term as noted in the table
  above. One half of the Series C warrants became exercisable on September 20,
  2004, the date the Companys Ordinary shares were delisted from the Nasdaq
  SmallCap Market. Because the Additional Investment Rights were not exercised
  before the delisting event, the other one-half of the Series C warrants are
  not exercisable.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Pursuant to
  an evaluation of the terms of the Purchase Agreement under the provisions of
  EITF 00-19, Accounting for Derivative
  Financial Instruments Indexed to, and Potentially Settled in, a Companys Own
  Stock, the Company has classified all the above derivative
  financial instruments issued in connection with the private placement as
  equity.                                                                                                                                                                                                                                                                                                    

F-23

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                              
|-------- | -----------------------------
|NOTE 9:- | SHAREHOLDERS DEFICIT (Cont.)

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | f. | Private
  placement 2006:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | On April 4,
  2006, the Company signed definitive agreements for a financing with an
  external investor on behalf of several limited partnerships in which it
  serves as general partner and other potential co-investors including one of
  the Companys directors and two existing shareholders (the Investors). On
  August 18, 2006, the Companys shareholders approved the abovementioned
  agreement and the Company closed the financing, receiving $1.5 million to
  purchase 25,000,000 convertible Preferred A shares (the Preferred shares),
  and a convertible loan. The convertible loan bears interest at 8.0% per
  annum. The convertible loan plus any accrued interest thereon is convertible
  into Preferred shares at a conversion price of $ 0.03 per share, at the
  election of the Investors. The convertible loan matures three years from the
  closing date and, if not converted by such date, would become due and payable
  30 days thereafter. The convertible loan is secured by a fixed charge on the
  Companys accounts receivable and intellectual property and a floating
  charge on all of its assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | The Private Placement also provides
additional investment rights, at the option of the Investors, to invest up to an
additional $ 2.25 million of Preferred A shares at a price of $ 0.03 per share for a
period of 18 months after the closing of the initial investment (Additional
Investment Rights). Each Preferred A share is convertible into one of the
Companys Ordinary shares, subject to adjustment for anti-dilution events. Each
Preferred A share receives the same voting rights as Ordinary shares, except Preferred
shares are entitled to elect the majority of the Companys board of directors and
have approval rights over specified actions. Each Preferred share is entitled to a
preference in liquidation over Ordinary shares. The Investors also received warrants to
purchase 18,750,000 Preferred B shares with respect to the initial investment and would
receive warrants for up to 56,250,000 Preferred B shares with respect to the exercise of
Additional Investment Rights, each at an exercise price of $ 0.04 per share for a period
of five years from date of issuance. The consideration of $1.5 million
from the initial investment was allocated based on the relative fair value of the
convertible preferred A shares, convertible loan, the warrants and the Additional
Investment Right in accordance with APB 14 Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants. The total amount of the discount on the
convertible loan and the beneficial conversion feature calculated based on the guidance in
EITF 98-5 Accounting for Convertible Securities with Beneficial Conversion Features
or Contingently Adjustable Conversion Ratios and EITF 00-27 Application of
Issue No. 98-5 to certain convertible instruments amounting to $750,000, is
amortized as interest expenses over the term of the convertible loan. At December 31,
2007, the unamortized balance on the discount on convertible loan was $406,000. The
Company also calculated the beneficial conversion feature on the preferred A issued in
accordance with EITF 98-5 and EITF 00-27 and recorded $212,000 as a deemed dividend.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | In November and December 2006, the
investors exercised Additional Investment Rights pursuant to the Share Purchase Agreement
dated April 4, 2006, described above, in the Company in the amount of $ 700,000. The
additional investment was pursuant to the Share Purchase Agreement dated April 4, 2006,
described above. In consideration of the additional investment, the Company issued to the
Investors a total of 23,333,334 Preferred A shares and Warrants to purchase 17,500,000
Preferred B shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F-24

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                              
|-------- | -----------------------------
|NOTE 9:- | SHAREHOLDERS DEFICIT (Cont.)

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | The Company
  calculated the deemed distribution on the Preferred shares resulted from the
  exercise of the Additional Investment Rights and the issuance of the warrants
  in 2006 in accordance with the guidance of EITF 98-5 and EITF 00-27 and
  recorded an additional amount of $ 670,000 as a deemed dividend.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | In February 8, 2007 and March 20,
2007, the Investors exercised Additional Investment Rights pursuant to the Share Purchase
Agreement dated April 4, 2006, described above, in a total amount of $ 1,000,000. The
additional investments were made pursuant to the Share Purchase Agreement entered into by
the parties on April 4, 2006, described above. In consideration of the additional
investments, the Company issued to the investor a total of 33,333,334 Preferred A shares
and Warrants to purchase 25,000,000 Preferred B shares.                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The company
  calculated the deemed distribution on the preferred shares resulted from the
  additional right and the issuance of the warrants in accordance to the guidance
  of  EITF 00-27 and recorded an additional amount of
  approximately $850,000 as a deemed dividend.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | In December 2006, and in February and
March 2007, respectively, three addendum to the Share Purchase Agreement dated April 4,
2006 were signed concurrently with the respective Additional Investment (and were approved
by the Company General Meeting in October 2007) according to which the Company would issue
to the Investors for no further consideration a new option under each addendum that would
provide the Investors upon the exercise of the Additional Investment Rights the right to
acquire an identical amount of shares and warrants as were available to the Investors
before each exercise (Additional shares and warrants).                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The addendum also included the right
of the Company, for a period of twelve months from the date of each new option was issued,
to buy back any shares purchased on the respective exercise of the Additional Investment
Rights at the same price at which such securities were acquired plus 8% interest per
annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | g. | Private
  placement 2007:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | On March 29,
  2007 and May 10, 2007, the Company issued in a private placement to investors
  in Israel in consideration for $1,974,420 and $1,408,319, respectively net of
  issuance expenses of $118,000 and $85,000, respectively 32,907,000 and
  23,471,980, respectively of its Ordinary shares and warrants to purchase up
  to 23,034,400 and 16,430,386 Ordinary shares, respectively at an exercise
  price per share of $0.06. The warrants are exercisable for five years from
  the closing date of the private placements. According to the agreements, the
  investors do not have the right to receive payment for liquidated damages if
  a registration statement on form F-3 is not declared effective. As of
  December 31, 2007 none of the shares were registered.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Pursuant to
  an evaluation of the terms of the Purchase Agreement under the provisions of
  EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and
  Potentially Settled in, a Companys Own Stock, the Company has classified all
  above derivative financial instruments issued in connection with the private
  placement as equity.                                                                                                                                                                                                                                                                                                                                                                                                                            

F-25

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                              
|-------- | -----------------------------
|NOTE 9:- | SHAREHOLDERS DEFICIT (Cont.)

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                      
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | h. | Employee
  share purchase plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                      
| |    | In November
  2002, the Company established an employee share purchase plan (the ESPP)
  which permits the eligible employees of the Company to purchase shares of the
  Companys Ordinary shares at 85% of the closing market price on either the
  first day or the last day of the applicable three-month period, whichever is
  lower. Employees may participate in the ESPP through regular payroll
  deductions of up to 10% of their pre-tax gross salary. Subject to adjustment
  for stock splits, stock dividends and similar events, a maximum of 1,500,000
  Ordinary shares may be issued under the ESPP. No Ordinary shares were issued
  in connection with the ESPP in 2005, 2006 and 2007. As of December 31, 2007,
  there are 1,491,791 Ordinary shares available for future issuance under the
  ESPP.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                      
| | i. | Stock option
  plans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                      
| |    | The Company
  has approved for issuance an aggregate of 25,239,849 Ordinary shares for the
  issuance of stock options under three stock option plans as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                      
| |    | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 21,214,609
  Ordinary shares approved for issuance under a key employee share incentive
  plan (the 1996 Option Plan) adopted in 1996 and amended in 2001 and 2003;
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                      
| |    | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 75,240
  Ordinary shares approved for issuance under an affiliate stock option plan
  (the 1997 Option Plan) adopted in 1997; and                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                      
| |    | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 3,950,000
  Ordinary shares approved for issuance under the United States Share Incentive
  Plan (the 2000 Option Plan) adopted in 2000 and amended in 2001.       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                      
| |    | The 1996
  Option Plan provides for the grant by the Company of option awards to
  officers and employees of the Company and its subsidiaries and to
  non-employees. The options granted under the 1996 Option Plan vest ratably
  over vesting periods ranging from three to five years of employment and
  expire 62 months from the date of issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                      
| |    | The 2000
  Option Plan provides for the grant by the Company of option awards to
  officers and employees of its U.S. subsidiary. Options granted under the 2000
  Option Plan vest ratably over three to four years of employment and expire 10
  years from the date of issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-26

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                              
|-------- | -----------------------------
|NOTE 9:- | SHAREHOLDERS DEFICIT (Cont.)

| |  |                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Under all
  option plans, any options that are cancelled or forfeited before expiration
  become available for future grants. As of December 31, 2007, there were
  9,104,801 options available for future grant under the 1996 Option Plan Transactions
  related to the Companys stock option plans for each of the three years in
  the period ended December 31, 2007 are summarized as follows:

|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|----------------------------------- |  | ------------------- | ---------- | ----------------------------------------- | - | ------------------------------------------------------ |  | ------------------------- | ---- |  | - | ------ | 
|                                    |  | Options outstanding |            | Weighted average exercise price per share |   | Weighted average remaining contractual term (in years) |  | Aggregate intrinsic value |     
|                                    |  |                     |            |                                           |   |                                                        |  |                           |     
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|Outstanding,
  December 31, 2004    |  |                     | 3,263,578  |                                           | $ | 0.85                                                   |  |                           | 5.02 |  | $ | 58,000 | 
|Granted                             |  |                     | 1,101,055  |                                           | $ | 0.21                                                   |  |                           |      |  |   |        | 
|Exercised                           |  |                     |           |                                           | $ |                                                       |  |                           |      |  |   |        | 
|Forfeited,
  cancelled or expired   |  |                     | (1,331,753 | )                                         | $ | 1.44                                                   |  |                           |      |  |   |        | 
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|Outstanding,
  December 31, 2005*)  |  |                     | 3,032,880  |                                           | $ | 0.36                                                   |  |                           | 5.71 |  | $ |       | 
|Granted (1)                         |  |                     | 5,613,333  |                                           | $ | 0.06                                                   |  |                           |      |  |   |        | 
|Exercised                           |  |                     |           |                                           | $ |                                                       |  |                           |      |  |   |        | 
|Forfeited,
  cancelled or expired   |  |                     | (2,050,612 | )                                         | $ | 0.36                                                   |  |                           |      |  |   |        | 
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|Outstanding,
  December 31, 2006 *) |  |                     | 6,595,601  |                                           | $ | 0.11                                                   |  |                           | 5.01 |  | $ |       | 
|Granted (1)                         |  |                     | 9,865,039  |                                           | $ | 0.07                                                   |  |                           |      |  |   |        | 
|Exercised                           |  |                     |           |                                           |   |                                                        |  |                           |      |  |   |        | 
|Forfeited,
  cancelled or expired   |  |                     | (5,322,195 | )                                         | $ | 0.06                                                   |  |                           | 4.36 |  | $ |       | 
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|Outstanding,
  December 31, 2007 *) |  |                     | 11,138,445 |                                           |   |                                                        |  |                           |      |  |   |        | 
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|Exercisable,
  December 31, 2005    |  |                     | 1,866,508  |                                           | $ | 0.43                                                   |  |                           |      |  | $ |       | 
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|Exercisable,
  December 31, 2006    |  |                     | 1,028,417  |                                           | $ | 0.32                                                   |  |                           |      |  | $ |       | 
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 
|Exercisable,
  December 31, 2007    |  |                     | 2,465,331  |                                           | $ | 0.12                                                   |  |                           |      |  |   |        | 
|                                    |  |                     |            |                                           |   |                                                        |  |                           |      |  |   |        | 

| |    |                                                                                                                                 
| | -- | --------------------------------------------------------------------------------------------------------------------------------
| | *) | Includes
  35,000 outstanding and exercisable options to consultants at a weighted
  average exercise price of $0.945 per share.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
  aggregate intrinsic value in the table above represents the total intrinsic
  value (the difference between the Companys stock price on December 31, 2007 and
  the exercise price, multiplied by the number of in-the-money options) that
  would have been received by the option holders had all option holders
  exercised their options on December 31, 2007. These amount changes are based
  on the value of the Companys stock. Total intrinsic value of options
  exercised for the year ended December 31, 2007 is zero.

F-27

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                              
|-------- | -----------------------------
|NOTE 9:- | SHAREHOLDERS DEFICIT (Cont.)

| |                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)                                                                                                            | During 2006, the Company granted to
the chairman of the Companys board an option to purchase 455,000 ordinary shares
equivalent to 1% of the Companys issued and outstanding Ordinary and preferred
shares on an as converted basis. In addition as a form of anti-dilution protection as the
investors exercise their additional investment rights, if at all, to purchase up to an
addition 75,000,000 convertible preferred shares as provided in the Share Purchase
Agreement dated April 4, 2006 (see Note 9 f), the chairman of the Companys board
will be granted at each closing an additional option to purchase one percent of the
incremental number of issued and outstanding Ordinary and preferred shares (on an as
converted basis) following each subsequent closing. During 2006 and 2007, pursuant to the
exercise of the additional investment rights by the investor (see Note 9) and pursuant to
the anti-dilution provision described above, the chairman of the Companys board was
granted an option for an additional 566,666 Ordinary shares. The exercise price of such
additional options shall be equal to the then market price at the time of grant. The
options shall vest as follows: 50% of the granted options shall vest over 6 months from
their grant date and the remaining 50% shall vest on the first anniversary of their grant
date provided that the chairman of the Companys board continues to serve as the
chairman of the board. A new vesting period began for each portion of options granted
following exercise of the Additional Investment Rights.
| |                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                | In addition, the chairman of the
Companys Board of Directors is entitled to an option to acquire 1% of the
Companys issued and outstanding Ordinary shares and preferred shares (on an
as-converted basis) as a bonus for 2007. The milestone was fulfilled in April 2007 and the
chairman was granted an option to acquire 1,350,994 ordinary shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                | The Company granted its director and
previous Chief Executive Officer option to purchase 4,750,000 Ordinary Shares , at an
exercise price per share of the fair market price on the date of the grant. The options
shall vest over a four year period in equal quarterly installments. The options shall be
exercisable, in accordance with the terms of the stock options plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                | Compensation
  expenses recorded with respect to the chairman of the Companys board is
  according to the provision of SFAS No. 123(R) Share-Based Payment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The
  following table summarizes information about options outstanding and
  exercisable at December 31, 2007:

|                  |  |                                         |            |                                                      |      |                                 |  |                                         |      |                                 |  |           |  |   |      | 
|----------------- |  | --------------------------------------- | ---------- | ---------------------------------------------------- | ---- | ------------------------------- |  | --------------------------------------- | ---- | ------------------------------- |  | --------- |  | - | ---- | 
|                  |  | Options Outstanding                     |            | Options Exercisable                                  |     
|                  |  |                                         |            |                                                      |     
|Exercise
  price  |  | Number outstanding at December 31, 2007 |            | Weighted average remaining contractual life in years |      | Weighted average exercise price |  | Number outstanding at December 31, 2007 |      | Weighted average exercise price | 
|                  |  |                                         |            |                                                      |      |                                 |  |                                         |      |                                 | 
|                  |  |                                         |            |                                                      |      |                                 |  |                                         |      |                                 |  |           |  |   |      | 
|$0.05 - $0.055    |  |                                         | 996,666    |                                                      | 4.7  |                                 |  | $                                       | 0.05 |                                 |  |          |  |   |     | 
|$0.06 - $0.065    |  |                                         | 8,753,373  |                                                      | 4.33 |                                 |  | $                                       | 0.06 |                                 |  | 1,570,834 |  | $ | 0.06 | 
|$0.07             |  |                                         | 133,333    |                                                      | 4.07 |                                 |  | $                                       | 0.07 |                                 |  | 133,333   |  | $ | 0.07 | 
|$0.08             |  |                                         | 930,000    |                                                      | 5.4  |                                 |  | $                                       | 0.08 |                                 |  | 455,000   |  | $ | 0.08 | 
|$0.155 -
  $0.945 |  |                                         | 250,073    |                                                      | 1.8  |                                 |  | $                                       | 0.33 |                                 |  | 231,164   |  | $ | 0.34 | 
|$0.95             |  |                                         | 75,000     |                                                      | 0.2  |                                 |  | $                                       | 0.95 |                                 |  | 75,000    |  | $ | 0.95 | 
|                  |  |                                         |            |                                                      |      |                                 |  |                                         |      |                                 |  |           |  |   |      | 
|                  |  |                                         |            |                                                      |      |                                 |  |                                         |      |                                 |  |           |  |   |      | 
|                  |  |                                         | 11,138,445 |                                                      |      |                                 |  | $                                       | 0.07 |                                 |  | 2,465,331 |  | $ | 0.11 | 
|                  |  |                                         |            |                                                      |      |                                 |  |                                         |      |                                 |  |           |  |   |      | 

F-28

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                              
|-------- | -----------------------------
|NOTE 9:- | SHAREHOLDERS DEFICIT (Cont.)

| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | Stock-based
  compensation expenses included in the reported net loss totaled $116,000 in
  2005, $128,000 in 2006 and $131,000 in 2007, as follows:

|                                       |  |                         |  |      |  |         |  |  |         | 
|-------------------------------------- |  | ----------------------- |  | ---- |  | ------- |  |  | ------- | 
|                                       |  | Year ended December 31, | 
|                                       |  |                         | 
|                                       |  | 2005                    |  | 2006 |  | 2007    | 
|                                       |  |                         |  |      |  |         | 
|                                       |  |                         |  |      |  |         |  |  |         | 
|Research and development               |  | 30,000                  |  |      |  | 10,000  |  |  | 14,000  | 
|Selling and marketing                  |  | 32,000                  |  |      |  | 13,000  |  |  | 10,000  | 
|General and administrative             |  | 54,000                  |  |      |  | 105,000 |  |  | 107,000 | 
|                                       |  |                         |  |      |  |         |  |  |         | 
|                                       |  |                         |  |      |  |         |  |  |         | 
|Total stock-based compensation expense |  | 116,000                 |  |      |  | 128,000 |  |  | 131,000 | 
|                                       |  |                         |  |      |  |         |  |  |         | 

| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Additional
  information related to our stock-based compensation awards is presented below
  along with the additional disclosures required by SFAS 123(R).
| |                                                                                                                                                            
| | The
  following table summarizes the weighted average fair value of options granted
  for each of the three years in the period ended December 31, 2007:   

|                                            |  |   |      | 
|------------------------------------------- |  | - | ---- | 
|For the Year Ended:                         |  |   |      | 
|                                            |  |   |      | 
|December 31, 2005:                          |  |   |      | 
|Weighted
  average exercise price           |  | $ | 0.21 | 
|Weighted average
  fair value on grant date |  | $ | 0.16 | 
|                                            |  |   |      | 
|December 31, 2006:                          |  |   |      | 
|Weighted
  average exercise price           |  | $ | 0.07 | 
|Weighted
  average fair value on grant date |  | $ | 0.06 | 
|                                            |  |   |      | 
|December 31, 2007:                          |  |   |      | 
|Weighted
  average exercise price           |  | $ | 0.07 | 
|Weighted
  average fair value on grant date |  | $ | 0.07 | 

| |  |                                                                                                                                                                                                                                                                                                                                
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | As of
  December 31, 2007, there was $591,000 of total unrecognized compensation cost
  related to unvested stock options. Unrecognized compensation cost is expected
  to be recognized over a weighted average period of 3.7 years. Total fair
  value of shares vested during the year ended December 31, 2007 was $144,000.

|          |                        
|--------- | -----------------------
|NOTE 10:- | FINANCIAL EXPENSES, NET

|                                                |  |                         |     |      |   |      |  |   |     | 
|----------------------------------------------- |  | ----------------------- | --- | ---- | - | ---- |  | - | --- | 
|                                                |  | Year ended December 31, |    
|                                                |  |                         |    
|                                                |  | 2005                    |     | 2006 |   | 2007 | 
|                                                |  |                         |     |      |   |      | 
|                                                |  |                         |     |      |   |      |  |   |     | 
|Financial
  expenses:                           |  |                         |     |      |   |      |  |   |     | 
|Interest
  expenses, net                        |  | $                       | 177 |      | $ | 160  |  | $ | 288 | 
|Foreign
  currency translation adjustments, net |  |                         | 11  |      |   | 50   |  |   | 70  | 
|                                                |  |                         |     |      |   |      |  |   |     | 
|                                                |  |                         |     |      |   |      |  |   |     | 
|                                                |  | $                       | 188 |      | $ | 210  |  | $ | 358 | 
|                                                |  |                         |     |      |   |      |  |   |     | 

F-29

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                
|-------- | ---------------
|NOTE 11: | TAXES ON INCOME

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | Measurement
  of taxable income under the Income Tax (Inflationary Adjustments) Law, 1985:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Results for
  tax purposes of RadView Software Ltd. are measured and reflected in
  accordance with the change in the Israeli Consumer Price Index (CPI). As
  described elsewhere, the Companys consolidated financial statements are
  presented in U.S. dollars. The difference between the change in the Israeli
  CPI and the exchange rate between the U.S. dollar and the NIS causes a
  difference between taxable income or loss and the income or loss before taxes
  reflected in the consolidated financial statements. In accordance with SFAS
  No. 109, the Company has not provided deferred income taxes on this
  difference between the reporting currency and the tax bases of assets and
  liabilities.                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Subsequent
  to the balance sheet date the Knesset passed a law that limits the
  inception of the Income Tax (Inflationary Adjustments) law, 1985, from the
  fiscal year 2008 and onwards. In accordance with the new law, certain tax
  adjustments will be made based on changes in the Israeli CPI for the period
  ended December 31, 2007. Starting January 1, 2008 the financial results for
  tax purposes will be measured in nominal amounts.                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | b. | Tax benefits
  under the Law for the Encouragement of Capital Investments, 1959 (the Law)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | In 1998, the
  Companys investment program totaling $66,000 was granted Approved Enterprise
  status under the Law. The Company elected to adopt the Alternative Benefits
  track This track entitles the Company to a benefit period of seven years on
  income derived from this program as follows: (a) a full income tax exemption
  for the first two years and (b) a reduced income tax rate of 25%, instead of
  the regular rate for the remaining five-year period. Depending on the level
  of non-Israel investments in the Company, the period for which the Company is
  entitled to a reduced tax rate of 25% can be extended to eight years. The
  period of the benefit is limited to 12 years from commencement of production or
  14 years from the date of approval. As the Company has not yet reported any
  taxable income, the benefit period has not yet commenced.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The benefits
  from the Companys approved enterprise programs are dependent upon the
  Company fulfilling the conditions stipulated by the Law for Encouragement of
  Capital Investments, 1959 and the regulations published under this law, as
  well as the specific criteria in the Companys approved enterprise programs.
  If the Company does not comply with these conditions, the tax benefits may be
  canceled, and the Company may be required to refund the amount of the
  canceled benefits, with the addition of linkage differences and interest. As
  of the date of these financial statements, the Company believes it complies
  with these conditions.                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | If the
  Company distributes a cash dividend out of retained earnings which were tax
  exempt due to its approved enterprise status, the Company would have to pay a
  25% corporate tax on the amount distributed, and a further 15% withholding tax
  would be deducted from the amounts distributed to the recipients.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

F-30

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                        
|-------- | -----------------------
|NOTE 11: | TAXES ON INCOME (cont.)

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | As of
  December 31, 2007, the Company does not have retained earnings and
  accordingly, no tax-exempt income. Tax-exempt income attributable to the
  Approved Enterprise cannot be distributed to shareholders without subjecting
  the Company to taxes except upon a complete liquidation of the Company. If
  the retained tax-exempt income is distributed in a manner other than upon the
  complete liquidation of the Company, it would be taxed at the corporate tax
  rate applicable to such profits as if the Company had not elected alternative
  tax benefits. The Companys board of directors does not intend to distribute
  any amounts of its undistributed tax-exempt income as dividends.      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | On April 1,
  2005, an amendment to the Investment Law came into effect (the Amendment)
  and has significantly changed the provisions of the Investment Law. The
  Amendment limits the scope of enterprises which may be approved by the
  Investment Center by setting criteria for the approval of a facility as a
  Beneficiary Enterprise, such as provisions generally requiring that at least
  25% of the Beneficiary Enterprises income will be derived from export.
  Additionally, the Amendment enacted major changes in the manner in which tax
  benefits are awarded under the Investment Law so that companies no longer
  require Investment Center approval in order to qualify for tax benefits.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | In addition,
  the Investment Law provides that terms and benefits included in any
  certificate of approval already granted will remain subject to the provisions
  of the law as they were on the date of such approval. Therefore, the Companys
  existing Approved Enterprise will generally not be subject to the provisions
  of the Amendment.                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | As a result
  of the Amendment, tax-exempt income generated under the provisions of the new
  law will subject the Company to taxes upon distribution or liquidation and
  the Company may be required to record a deferred tax liability with respect
  to such tax-exempt income.                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Income from
  sources other than the Approved Enterprise during the benefit period will be
  subject to tax at the regular corporate tax rate. Israeli companies are
  subject to income tax at the corporate tax rate of 31% for the 2006 tax year.
  On July 25, 2005, the Knesset (Israeli Parliament) passed the Law for the
  Amendment of the Income Tax Ordinance (No. 147), 2005, which prescribes,
  among others, a gradual decrease in the corporate tax rate in Israel to the
  following tax rates: 31% in 2006, 29% in 2007, 27% in 2008, 26% in 2009and
  25% in 2010 and years thereafter.                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | By virtue of
  this law, the Company is entitled to claim accelerated depreciation on
  equipment used by the Approved Enterprise during five tax years. The Company
  has received final approval in respect to the investment program.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | c. | Tax benefits
  under Israels Law for the Encouragement of Industry (Taxation), 1969:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | The Company
  currently qualifies as an Industrial Company under the Law for
  Encouragement of Industry (Taxes), 1969 and is therefore entitled to tax
  benefits, mainly accelerated depreciation of machinery and equipment and
  deduction of expenses incurred in connection with a public offering.                                                                                                                                                                                                                                                                                                                                                                                                            

F-31

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                        
|-------- | -----------------------
|NOTE 11: | TAXES ON INCOME (cont.)

| |    |                                   
| | -- | ----------------------------------
| | d. | Income
  (Loss) before income tax:

|                |  |                           |        |      |   |        |   |   |        |  
|--------------- |  | ------------------------- | ------ | ---- | - | ------ | - | - | ------ | -
|                |  | Year ended December 31,   |       
|                |  |                           |       
|                |  | 2005                      |        | 2006 |   | 2007   |  
|                |  |                           |        |      |   |        |  
|                |  | U.S. dollars in thousands |       
|                |  |                           |       
|                |  |                           |        |      |   |        |   |   |        |  
|Israel          |  | $                         | 507    |      | $ | 334    |   | $ | (2,044 | )
|United
  States |  |                           | (2,972 | )    |   | (2,132 | ) |   | (1,592 | )
|                |  |                           |        |      |   |        |   |   |        |  
|                |  |                           |        |      |   |        |   |   |        |  
|                |  | $                         | (2,465 | )    | $ | (1,798 | ) | $ | (3,636 | )
|                |  |                           |        |      |   |        |   |   |        |  

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | e. | Net
  operating losses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | As of December 31, 2007, the
Companys net operating loss carry forwards for Israeli tax purposes amounted to
approximately $ 23.5 million. These net operating losses may be carried forward
indefinitely and offset against future taxable business income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The
  Companys U.S. subsidiarys tax losses through December 31, 2007 totaled
  approximately $37.2 million. These losses are available to offset future U.S.
  taxable income of the U.S. subsidiary subject to the limitation under rule
  382 of the Internal Revenue Service, see below, and will expire between the
  years 2012 and 2026. Utilization of U.S. net operating  losses may be subject to substantial  annual  limitation due to Change
in  ownership  provision of the Internal  Revenue Code of 1986 and similar state  provisions.  The annual
limitation may result in the expiration of net operating losses before utilization.The Company and its subsidiary
provide a valuation allowance on the entire deferred tax asset in respect of the
carryforward losses, due to the uncertainty regarding future realization. Management
currently believes that since the Company has a history of losses, it is more likely than
not that the deferred tax regarding the loss carryforward will not be realized in the
foreseeable future. Deferred taxes in respect of other temporary differences are
immaterial.

F-32

---

---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                        
|-------- | -----------------------
|NOTE 11: | TAXES ON INCOME (cont.)

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | The main
  reconciling items between the statutory tax rate of the Company and the
  effective tax rate are the non-recognition of tax benefits from accumulated
  net operating losses carry forward among the various subsidiaries worldwide
  due to the uncertainty of the realization of such tax benefits and the effect
  of approved enterprise.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | f. | Final tax
  assessments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The Company
  has received final tax assessments in Israel regarding tax years through the
  end of 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | g. | Taxes on income in 2007 are comprised
from current losses in the amount of $115,000 and from an increase in the tax provision
recorded in accordance with FIN 48.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | h. | Adoption of
  FIN 48                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | Effective
  January 1, 2007, the Company adopted FIN 48, which prescribes a
  comprehensive model for how a company should recognize, measure, present and
  disclose in its financial statements uncertain tax positions that the company
  has taken or expects to take on a tax return. Though the validity of any tax
  position is a matter of tax law, the body of statutory, regulatory and
  interpretive guidance on the application of the law is complex and often
  ambiguous. Because of this, whether a tax position will ultimately be
  sustained may be uncertain. Prior to January 1, 2007, the impact of an
  uncertain tax position that did not create a difference between the financial
  statement basis and the tax basis of an asset or liability was included in
  our income tax provision if it was probable the position would be sustained
  upon audit. The benefit of any uncertain tax position that was temporary was
  reflected in our tax provision if it was more likely than not that the
  position would be sustained upon audit.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | Under
  FIN 48, the impact of an uncertain tax position that is more likely than
  not of being sustained upon audit by the relevant taxing authority must be
  recognized at the largest amount that is more likely than not to be sustained.
  No portion of an uncertain tax position will be recognized if the position
  has less than a 50% likelihood of being sustained. Also, under FIN 48,
  interest expense is recognized on the full amount of deferred benefits for
  uncertain tax positions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The Company
  adopted the provisions of FIN 48 as of January 1, 2007. The accumulated
  effects of applying FIN 48 have been recorded as an increase of $411,000 of
  the accumulated deficit and of income tax payable as of January 1, 2007, of
  which approximately $55,000 related to interest and penalties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-33

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|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                        
|-------- | -----------------------
|NOTE 11: | TAXES ON INCOME (cont.)

| |  |                                                                                                                               
| |  | ------------------------------------------------------------------------------------------------------------------------------
| |  | A   reconciliation of the beginning and ending balances of the total amounts of
  the unrecognized tax benefits is as follows:

|                                                                   |  |                           |         | 
|------------------------------------------------------------------ |  | ------------------------- | ------- | 
|                                                                   |  | Unrecognized tax benefits |        
|                                                                   |  |                           |        
|                                                                   |  |                           |         | 
|Balance at
  January 1, 2007                                       |  | $                         | 411,000 | 
|Additions
  based on tax positions related to the current year (*) |  | $                         | 222,000 | 
|Additions
  for tax positions of prior years                       |  |                           |        | 
|Reductions
  for tax positions of prior years                      |  |                           |        | 
|Settlements                                                        |  |                           |        | 
|                                                                   |  |                           |         | 
|                                                                   |  |                           |         | 
|Balance at
  December 31, 2007                                     |  | $                         | 633,000 | 
|                                                                   |  |                           |         | 

| |  |                                                                        
| |  | -----------------------------------------------------------------------
| |  | (*)
  Including approximately $6,000 related to interest and penalties.

| |  |                                                                                                                                   
| |  | ----------------------------------------------------------------------------------------------------------------------------------
| |  | The Company
  does not believe there will be any material changes in its unrecognized tax
  positions over the next twelve months.

| |  |                                                                                                                                                                                                                                                  
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company and its subsidiaries file
income tax returns in Israel and in the USA. As of December 31, 2007, the Israeli tax
returns of the Company are open to examination by the Israeli tax authorities for the tax
years of 2004 through 2007.

|         |                                        
|-------- | ---------------------------------------
|NOTE 12: | RELATED PARTY BALANCES AND TRANSACTIONS

| |                                                            
| | -----------------------------------------------------------
| | Balances
  with related parties consisted of the following:

|                                        |  |                             |   |      |   |   | 
|--------------------------------------- |  | --------------------------- | - | ---- | - | - | 
|                                        |  | December
  31               |  
|                                        |  |                             |  
|                                        |  | 2006                        |   | 2007 |  
|                                        |  |                             |   |      |  
|                                        |  | U.S.
  dollars in thousands |  
|                                        |  |                             |  
|                                        |  |                             |   |      |   |   | 
|Accounts
  receivable                   |  | $                           | 3 |      | $ | 4 | 
|Accounts
  payable and accrued expenses |  | $                           | 9 |      | $ | 3 | 

| |                                                                
| | ---------------------------------------------------------------
| | Transactions
  with related parties consisted of the following:

|                             |  |                           |    |      |   |      |  |   |     | 
|---------------------------- |  | ------------------------- | -- | ---- | - | ---- |  | - | --- | 
|                             |  | Year ended December 31,   |   
|                             |  |                           |   
|                             |  | 2005                      |    | 2006 |   | 2007 | 
|                             |  |                           |    |      |   |      | 
|                             |  | U.S. dollars in thousands |   
|                             |  |                           |   
|                             |  |                           |    |      |   |      |  |   |     | 
|Sales and
  marketing        |  | $                         | 4  |      | $ | 6    |  | $ | 3   | 
|Research and
  development   |  |                           | 32 |      |   | 26   |  |   | 11  | 
|General and
  administrative |  |                           | 6  |      |   | 33   |  |   | 55  | 
|Financial
  expenses, net    |  |                           |   |      |   | 136  |  |   | 322 | 
|                             |  |                           |    |      |   |      |  |   |     | 
|                             |  |                           |    |      |   |      |  |   |     | 
|Total costs
  and expenses   |  | $                         | 42 |      | $ | 201  |  | $ | 391 | 
|                             |  |                           |    |      |   |      |  |   |     | 

| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | Management
  believes that all related party transactions have been conducted on an
  arms-length basis.

F-34

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---

|                                      
|--------------------------------------
|RADVIEW SOFTWARE LTD. AND SUBSIDIARIES
|                                      
|NOTES TO FINANCIAL STATEMENTS         
|                                      
|U.S. dollars                          

|         |                                            
|-------- | -------------------------------------------
|NOTE 13: | DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE

| |                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company
  has adopted SFAS No. 131, Disclosures about Segments of an Enterprise and
  Related Information. The Company operates in one reportable
  segment (see Note 1 for a brief description of the Companys business). The
  total revenues are attributed to geographic areas based on the location of
  the end-user customer.
| |                                                                                                                                                                                                                                                                                                                                          
| | The
  Companys revenues by its customers geographic locations are as follows:                                                                                                                                                                                                                                                          

|                |  |                           |       |      |   |       |  |   |       | 
|--------------- |  | ------------------------- | ----- | ---- | - | ----- |  | - | ----- | 
|                |  | Year ended December 31,   |      
|                |  |                           |      
|                |  | 2005                      |       | 2006 |   | 2007  | 
|                |  |                           |       |      |   |       | 
|                |  | U.S. dollars in thousands |      
|                |  |                           |      
|                |  |                           |       |      |   |       |  |   |       | 
|United
  States |  | $                         | 3,875 |      | $ | 3,096 |  | $ | 1,879 | 
|Europe          |  |                           | 895   |      |   | 714   |  |   | 186   | 
|Israel          |  |                           | 515   |      |   | 142   |  |   | 704   | 
|Other           |  |                           | 360   |      |   | 331   |  |   | 351   | 
|                |  |                           |       |      |   |       |  |   |       | 
|                |  |                           |       |      |   |       |  |   |       | 
|                |  | $                         | 5,645 |      | $ | 4,283 |  | $ | 3,120 | 
|                |  |                           |       |      |   |       |  |   |       | 

| |                                                                         
| | ------------------------------------------------------------------------
| | The
  Companys long-lived assets by geographic location are as follows:

|                |  |                             |     |      |   |    | 
|--------------- |  | --------------------------- | --- | ---- | - | -- | 
|                |  | December
  31               |    
|                |  |                             |    
|                |  | 2006                        |     | 2007 |  
|                |  |                             |     |      |  
|                |  | U.S.
  dollars in thousands |    
|                |  |                             |    
|                |  |                             |     |      |   |    | 
|United
  States |  | $                           | 20  |      | $ | 8  | 
|Europe          |  |                             | 1   |      |   |   | 
|Israel          |  |                             | 81  |      |   | 60 | 
|                |  |                             |     |      |   |    | 
|                |  |                             |     |      |   |    | 
|Total           |  | $                           | 102 |      | $ | 68 | 
|                |  |                             |     |      |   |    | 

F-35

---

---

# Item 19: Exhibits

The following exhibits are filed as
part of this Annual Report:

|Exhibit No. | Description
|----------- | -----------

|1.1 | Memorandum
of Association of Registrant (English translation) (filed as Exhibit 3.1 to the Company's
              Registration Statement on Form F-1, No. 333-41526, and incorporated herein
by reference)
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|1.2 | Amended
and Restated Form of Articles of Association of Registrant (filed as Appendix B to the
Company's               Proxy Statement for the Year Ended December 31, 2005, on Form DEF
14A, No. 000-31151 and incorporated herein               by reference)
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|1.3 | Form
of Ordinary Share Certificate (filed as Exhibit 4.1 to the Company's Registration
Statement on Form               F-1, No. 333-41526, and incorporated herein by reference)
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.1 | Registration
Rights Agreement (filed as Appendix E to the Company's Proxy Statement for the year ended
              December 31, 2005 on Form DEF 14A, No. 000-31151, and incorporated herein
by reference)
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.1 | Amended
and Restated Key Employee Share Incentive Plan (1996) (filed as Exhibit 99.1 to the
Company's               Registration Statement on Form S-8, No. 333-67086, and
incorporated herein by reference)
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.2 | Amended
and Restated United States Share Incentive Plan (2000) (filed as Exhibit 99.2 to the
Company's               Registration Statement on Form S-8, No. 333-67086, and
incorporated herein by reference)
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.3 | Employee
Share Purchase Plan (filed as Exhibit 10.1 to the Companys Form 10-Q for the
quarterly period ended September 30, 2002, and incorporated herein by reference)
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.4 | Development,
Publishing and Distribution Agreement, dated as of February 7, 2003, between Ixia and
RadView Software Ltd. (filed as Exhibit 10.1 to the Companys Report on Form 8-K
filed on July 7, 2004 and incorporated herein by reference) **
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.5 | Amendment
Number One to the Development, Publishing and Distribution Agreement, dated July 7, 2004,
between               Ixia and RadView Software Ltd. (filed as Exhibit 10.2 to the
Company's Report on Form 8-K filed on July 7,               2004 and incorporated herein
by reference) **
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.6 | License
and Distribution Agreement between OPNET Technologies Inc and RadView Software Ltd.,
dated as of               December 7, 2005 (filed as Exhibit 10.13 to the Company's Form
10-K for the year ended December 31, 2005,               and incorporated herein by
reference)
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.7 | Loan
and Security Agreement between RadView Software Inc. and Comerica Bank dated May 25, 2005
(filed as               Exhibit 10.1 to the Company's Form 10-Q for the quarterly period
ended June 30, 2005, and incorporated               herein by reference)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.8 | Third
Party Security Agreement between RadView Software Ltd. and Comerica Bank dated May 25,
2005. (filed as               Exhibit 10.1 to the Company's Form 10-Q for the quarterly
period ended June 30, 2005, and incorporated               herein by reference)
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.9 | Loan
Payoff and Termination Agreement between RadView Software, Inc. and Comerica Bank dated
January 13,               2006 (filed as Exhibit 10.16 to the Company's Form 10-K for the
year ended December 31, 2005, and               incorporated herein by reference)
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.10 | Bridge
Loan Agreement between Fortissimo Capital Fund GP, L.P., and RadView Software Ltd., dated
as of               January 26, 2006 (filed as Exhibit 10.17 to the Company's Form 10-K
for the year ended December 31, 2005,               and incorporated herein by reference)
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.11 | Share
Purchase Agreement between RadView Software Ltd. and Fortissimo Capital Fund GP, L.P. and
certain               other investors, dated as of April 4, 2006 (filed as Exhibit 10.18
to the Company's Form 10-K for the year               ended December 31, 2005, and
incorporated herein by reference)
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

70

---

---

|4.12 | Form
of Warrant Issued to Fortissimo Capital Fund GP, L.P. and certain other investors, in
connection with the Share Purchase Agreement identified in Exhibit 4.11 above and in
connection with the Addendums identified in Exhibits 4.13, 4.14 and 4.15 below (filed as
Exhibit 4.12 to the Companys Form 20-F for the year ended December 31, 2006, and
incorporated herein by reference).
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.13 | Addendum
Number One to Share Purchase Agreement between RadView Software Ltd. and Fortissimo
Capital Fund GP, L.P., dated as of December 24, 2006 (filed as Exhibit 4.13 to the Companys
Form 20-F for the year ended December 31, 2006, and incorporated herein by reference).
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.14 | Addendum
Number Two to Share Purchase Agreement between RadView Software Ltd. and Fortissimo
Capital Fund               GP, L.P., dated as of February 7, 2007 (filed as Exhibit 4.14
to the Company's Form 20-F for the year ended               December 31, 2006, and
incorporated herein by reference).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.15 | Addendum
Number Three to Share Purchase Agreement between RadView Software Ltd. and Fortissimo
Capital Fund               GP, L.P., dated as of March 20, 2007 (filed as Exhibit 4.15 to
the Company's Form 20-F for the year ended               December 31, 2006, and
incorporated herein by reference).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.16 | Convertible
Loan Agreement between RadView Software Ltd. and Fortissimo Capital Fund GP, L.P. and
certain               other investors, dated as of April 4, 2006  (filed as Exhibit 10.19
to the Company's Form 10-K for the year ended
December 31, 2005, and incorporated herein by reference)
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.17 | Form
of Indemnification Agreement (filed as Appendix G to the Company's Proxy Statement for
the year ended               December 31, 2005 on Form DEF 14A, No. 000-31151, and
incorporated herein by reference)
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.18 | Managements
Services Agreement between RadView Software Ltd. and Fortissimo Capital Fund GP, L.P.
(filed as               Appendix F to the Company's Proxy Statement for the year ended
December 31, 2005 on Form DEF 14A, No.               000-31151, and incorporated herein
by reference)
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.19 | Form
of Subscription  Agreement for Private Placements led by Meitav Underwriting Ltd. in
March and May  2007               (filed as Exhibit 4.19 to the  Company's  Form 20-F for
the year ended  December 31, 2006,  and  incorporated               herein by reference).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.20 | Form
of Warrant issued in connection with the Subscription Agreement identified in Exhibit
4.19 above (filed as Exhibit 4.20 to the Companys Form 20-F for the year ended
December 31, 2006, and incorporated herein by reference).
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8.1 | Subsidiaries
of the Registrant (filed as Exhibit 21.1 to the Company's Form 10-K for the year ended
              December 31, 2001, and incorporated herein by reference)
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11.1 | Code
of Ethics and Business Conduct (filed as Exhibit 11.1 to the Companys Form 20-F for the year ended December 31, 2006, and incorporated
herein by reference).
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|12.1* | Certification
by Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934.
|----- | -----------------------------------------------------------------------------------------------------------------------------

|12.2* | Certification
by Vice President of Finance pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934.
|----- | -------------------------------------------------------------------------------------------------------------------------------

|13.1* | Certification
by Chief Executive Officer and Vice President of Finance pursuant to Rule 13a-14(b) or Rule
15d-14(b) of the Securities Exchange Act of 1934.
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|23.1* | Consent
of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global.
|----- | --------------------------------------------------------------------------

|
|
|
|

|* | Filed
herewith
|- | --------------

|** | A
request for confidential treatment was filed for certain portions of the indicated
document. Confidential portions have been omitted and filed separately with the
Commission as required by Rule 406.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

71

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---

# Signatures

The Registrant hereby certifies that
it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this annual report on its behalf.

RadView Software Ltd.

|By: /s/ Rami Goraly
Rami GoralyChief Executive Officer |  | By: /s/ Amira Paz
Amira PazVice President of Finance(Principal Financial Officer)
|-------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------

Date: July 15, 2008

72

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---