---

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# UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, 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, 2008

# 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   000-31151

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,  2008 and
158,571,330 Ordinary Shares, nominal value NIS 0.01  per share, as of June 30, 2009.

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 has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files)*.

Yes o No x

*The registrant has not yet been
phased into the interactive data requirements.

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



---

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

Item  17 o Item 18 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

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

Yes o No x



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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                                                   | 12
|ITEM 4A:   | UNRESOLVED STAFF COMMENTS                                                    | 22
|ITEM 5:    | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 | 22
|ITEM 6:    | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   | 37
|ITEM 7:    | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            | 46
|ITEM 8:    | FINANCIAL INFORMATION                                                        | 50
|ITEM 9:    | THE OFFER AND LISTING                                                        | 51
|ITEM 10:   | ADDITIONAL INFORMATION                                                       | 52
|ITEM 11:   | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                    | 64
|ITEM 12:   | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 64
|PART II    |                                                                              | 65
|ITEM 13:   | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              | 65
|ITEM 14:   | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 65
|ITEM 15:   | CONTROLS AND PROCEDURES                                                      | 65
|ITEM 16:   | [RESERVED]                                                                   | 66
|ITEM 16A:  | AUDIT COMMITTEE FINANCIAL EXPERT                                             | 66
|ITEM 16B:  | CODE OF ETHICS                                                               | 66
|ITEM 16C:  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       | 66
|ITEM 16D:  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   | 67
|ITEM 16E:  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       | 67
|ITEM 16F:  | CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT                                 | 67
|ITEM 16G:  | CORPORATE GOVERNANCE                                                         | 67
|PART III   |                                                                              | 67
|ITEM 17:   | FINANCIAL STATEMENTS                                                         | 67
|ITEM 18:   | FINANCIAL STATEMENTS                                                         | 67
|ITEM 19:   | EXHIBITS                                                                     | 68
|SIGNATURES |                                                                              | 70

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-looking statements. These
statements relate to future events or other future financial performance, and are identified
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 other comparable
terminology. These forward-looking statements are subject to certain risks, uncertainties
and assumptions about us that could cause actual results to differ materially from
those reflected in the forward-looking statements. These forward-looking
statements are based, among other things, on assumptions in connection 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 (including  stock-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 to predict accurately and many of which are beyond our control.
In light of the significant uncertainties  inherent in the forward-looking information
included herein, the inclusion of such information should not be regarded as a
representation by us or any other person that our objectives or plans will be achieved.
Factors  that could cause actual results to differ from our expectations or projections
include the risks and  uncertainties relating to our business described in this annual
report under Item 3.D: Risk Factors,Item  5: Operating and Financial
Review and Prospects and elsewhere in this annual report. Readers are cautioned
 not to place undue reliance on these forward-looking statements, which reflect managements
analysis as of the date hereof. We undertake no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after the date
hereof, except as required by applicable law. In addition  to the disclosure contained
herein, readers should carefully review any disclosure of risks and uncertainties
contained 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, 2007 and 2008 and for each of the years ended
December 31, 2006, 2007 and 2008 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, 2004 and 2005 and for the years ended
December 31, 2004 and 2005 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                                        |                        
|                                                         |                        
|Services                                                 |                        
|                                                         |                        
|Total cost of revenues                                   |                        
|                                                         |                        
|                                                         |                        
|Gross profit                                             |                        
|                                                         |                        
|                                                         |                        
|Operating expenses:                                      |                        
|Sales and marketing                                      |                        
|Research and development                                 |                        
|General and administrative                               |                        
|                                                         |                        
|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) |                   
|Capital Stock                        |                   

2

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# 3B: Capitalization and
Indebtedness

Not applicable

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

Not applicable

# 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
Business

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.

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.

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.

3

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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, Neotys 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.

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.

4

---

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Open source technology
development may create competition with our products.

The nature of open source is that
software is free to use and the source code is provided without charge. 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 open source solutions, potentially reducing the
demand for our solutions. Our Open Source Edition of WebLOAD, which now consists of our
non-proprietary load engine, may be used by competitors to simulate web application loads
in order to build performance testing products that may target our customer market. 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.

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.

We may not be able to
protect our intellectual property rights and we may lose a valuable asset or engage in 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 earlier
Open Source Edition in 2007, we exposed portions of our proprietary technology to the
public which may have led 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.

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.

5

---

---

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.

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.

# Risks Related to Our
Operations

We have had losses since
our inception and might continue to incur losses in the future.

We incurred net losses of $2.7
million in 2006, $4.8 million in 2007 and $0.36 million in 2008. As of December 31, 2008,
we had an accumulated deficit of $67.5 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 2006, $3.5 million in 2007 and $0.6 million in
2008.

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. At the annual shareholders meeting in
December 2008, the shareholders approved the terms of a credit facility for up to $4
million that may be advanced upon the Companys request. Any request for future cash
withdrawals from this facility, except for the $0.5 million discussed below, will be
subject to the discretion of the principal shareholder that granted the facility; the
Company has not made a request under the credit facility to date. 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. The principal shareholder under the 2008 credit
facility has agreed in advance to comply with a request made by the Company for up to $0.5
million within the next twelve months. With the availability of the $0.5 million, as
agreed by the principal shareholder, and cash generated from operations, 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.

6

---

---

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.

Our 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 revenues and operating results
have varied significantly in the past and are likely to continue to vary significantly in
the future. Our future 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.

The deteriorating general
economic outlook may adversely affect our business.

Our business depends on the overall
demand for our products and services and on the economic health of our current and
potential customers. As widely reported, financial markets throughout the world have been
experiencing extreme disruption in recent months, including, among other things, extreme
volatility in security prices, severely diminished liquidity and credit availability,
rating downgrades of certain investments and declining valuations of others, failure and
potential failures of major financial institutions and unprecedented government support of
financial institutions. These developments and the related general economic downturn may
adversely affect our business in a number of additional ways, including impacts beyond
those typically associated with other recent downturns in the U.S. and foreign economies.
The slowdown may adversely affect the budgeting and purchasing behavior of our customers,
which could adversely affect our product sales. The current tightening of credit in
financial markets and the general economic downturn may adversely affect the ability of
our customers, suppliers and channel partners (e.g., testing service providers and
resellers) to obtain financing for significant purchases and operations and to perform
their contractual obligations with us. As a result, we could encounter, among other
adverse effects, a decrease in or cancellation of orders for our products and services,
and an increase in additional reserves for uncollectible accounts receivable being
required.

We are unable to predict the duration
and severity of the current economic downturn and disruption in financial markets or their
effects on our business, but the consequences may be materially adverse and more severe
than other recent economic slowdowns. To the extent that general economic conditions
continue to worsen and information technology spending declines, the demand for our
products and services, and therefore our future revenues, could be materially and
adversely affected.

7

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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.

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.

In addition, under the 2008 credit
facility that may be provided by a principal shareholder, any loans taken by the Company
will be convertible into ordinary shares at any time prior to repayment, at a conversion
price per ordinary share equal to $0.01 and the Company undertook to grant warrants to
acquire ordinary shares in a dollar amount equal to 50% of the principal amount of each
loan. If the Company draws the maximum amount of the credit facility, the shareholder will
be entitled to 400,000,000 ordinary shares upon conversion of the loans and will receive
warrants to purchase 200,000,000 ordinary shares. See Item 4B.  Business
Overview  Recent Financings and Item 7B  Related Party
Transactions for further discussion of the 2008 credit facility.

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, 2009, 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 (but
excluding shares issuable under the 2008 credit facility, no portion of which has been
drawn). 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.

8

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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.

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. In connection with
the 2008 credit facility, we our obligated to issue warrants to purchase our ordinary
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, the warrant under the 2005 credit facility, and the warrants issuable
under the 2008 credit facility, 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.

9

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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. 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 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 addition, the future of the
peace process with the Palestinians is uncertain and has deteriorated due to
Palestinian violence, with the threat of a large-scale attack by Palestinians on Israeli
civilians and key infrastructure remaining a constant concern. The past few years of
renewed terrorist attacks by the Palestinians has severely affected the Israeli economy in
many ways. In June 2007, there was an escalation in violence in the Gaza Strip resulting
in Hamas effectively controlling the Gaza Strip and a further escalation in violence has
occurred during the first few months of 2008. In July 2006, Israel became involved in a
major military conflict with the Hezbollah organization in Lebanon, which subjected the
north of Israel to missile attacks. In December 2008, Israel was involved in a military
conflict with Hamas, which subjected the South of Israel to missile attacks. Ongoing
violence between Israel and the Palestinians as well as tension between Israel and the
neighboring Syria and Lebanon may have a material adverse effect on our business,
financial condition and results of operations. In addition, several countries still
restrict business with Israel and with companies doing business in Israel. We could be
adversely affected by adverse developments in the peace process or by
restrictive laws or policies directed towards Israel or Israeli businesses.

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.

10

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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%. In 2008, the rate of inflation in Israel increased by 3.8% and the value of the
U.S. dollar decreased in relation to the NIS by 1.1%. 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.
| | - | -------------------------------------------------------------------------------------------------------------------

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

We currently receive tax benefits and
were approved for research and development grants for 2007 of up to approximately $460,000
and for 2008 of up to approximately $200,000 under Government of Israel programs, out of
which we have received, as of May 31, 2009, the amount of $409,500 out of the entire grant
from 2007 and approximately $180,000 out of the entire grant from 2008; in order to
receive the full amount of the 2008 grant we are required to submit the Companys
2008 annual report. We have filed an application for a new grant in the amount of $330,000
for 2009, as of the first quarter of 2009, 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.

The Government of Israel has reduced
the benefits available under these programs at various times over past years 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.

11

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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.

# 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.

12

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Our current customers include
approximately 2,000 organizations from all major industries including Best Western,
Citigroup, Deutsche Bank, Macys, Georgia Tech, Morningstar, Symantec, Lockheed
Martin and Motorola.

We provide an integrated suite of
products that comprehensively verifies the performance, scalability, and integrity of web
applications throughout the development lifecycle. Together our innovative products
provide all the technology needed to implement an organized, efficient process for
automated testing through central consoles, seamless script sharing and support for
open-standards. By using our family of products customers can detect and resolve issues
faster and improve the quality of their web applications.

In February 2009, we re-focused our
marketing efforts on our commercial WebLOAD Professional products using the standard
enterprise sales model for our direct sales force and channel partners. The open source
initiative, which we introduced in April 2007, did not yield the anticipated benefits and
therefore, in February 2009, we discontinued a portion of that program and removed the
proprietary components of the open source edition of the product. The Open Source Edition
now offers only our non-proprietary load engine which may attract developers interested in
simulating web application loads, but does not provide a commercial alternative for the
customers to whom we offer WebLOAD Professional.

# 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.

The convertible loan under the August
2006 financing is due to be repaid on August 18, 2009. The investors have agreed to extend
the loan payment date to June 30, 2010 and during the extension period, the loan shall be
non-convertible and without interest.

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).

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.

13

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In December 2008, the Board and
shareholders approved the terms of a convertible credit facility that may be provided to
us by Fortissimo, our principal shareholder (the 2008 Credit Facility). Any
future cash withdrawals from this facility, except for the $0.5 million discussed below,
will be subject to the discretion of Fortissimo. The Credit Facility is for an amount up
to $4 million, in one or more loans, to be determined by Fortissimo at its sole discretion
upon our request (each the Loan). Each Loan shall have a 3 year term, which
may be extended for 2 additional one year terms by agreement of Fortissimo and us. The
Loans shall bear interest at 8%, compounded annually, payable together with the repayment
of the principal of the respective Loan. A Loan (or any part thereof) may be repaid at any
time prior to its due date, at our discretion. Each Loan is convertible into Ordinary
Shares, at the option of Fortissimo, at any time prior to repayment, at a conversion price
per ordinary share equal to $0.01, the trading price at the time the 2008 Credit Facility
was approved (the Conversion Price). As security for the repayment of the
Loans, we shall grant Fortissimo (i) a fixed charge on our intellectual property, and (ii)
a floating charge on our tangible and intangible assets, junior to all of our outstanding
charges at the time of the Loan. We have also agreed that upon each draw down of a Loan,
Fortissimo will be issued a warrant to acquire ordinary shares in a dollar amount equal to
50% of the principal amount of the Loan at a purchase price per share equal to the
Conversion Price. Fortissimo has agreed to in advance to comply with a request by the
Company under this 2008 Credit Facility up to $0.5 million within the next twelve months.

# 2008 Product Highlights

In November 2008, we announced the
launch of WebLOAD Professional version 8.3, which includes a new analytical model,
improved support for the WebLOAD IDE, and enhanced productivity.

# 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;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

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| |  | 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------

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.

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. 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; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

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

15

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# 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 Borland. 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 Neotys 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.

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;
| | - | ------------------------------------------

| |  | 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 in connection with the
earlier version of our Open Source Edition, available prior to February 2009, when that
edition contained some of our proprietary features. Although those proprietary features
are no longer available, by its nature the source code of at least a portion of our
technology was 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.

16

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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 market and sell WebLOAD using the standard
enterprise sales model, offering the product via our direct sales force and channel
partners.

Increase Revenues and
Control Costs to Achieve Profitability

Our net loss attributed to ordinary
shares was $2.7 million in 2006, $4.8 million in 2007 and $0.36 million in 2008. 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. The decrease in
net loss in 2008 resulted primarily from an increase in revenues and a decrease in our
operating expenses due to costs reductions and reductions in personnel. 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 2009 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.

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 2008, we introduced WebLOAD
Professional 8.3, with new analysis and reporting tools, improved support for Adobe Flex
rich internet applications and enhancements to the usability and functionality of the
WebLOAD IDE. We will continue to develop WebLOAD Professional, to introduce new add-ons to
support additional protocols and development environments.

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.

Leverage Our Installed
Customer Base

To date, we have licensed our
software to over 2,000 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.

17

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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; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------

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

# 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 Load Engine: the free open source edition of our product which provides a
simple load engine which enables only simulating web application loads, with no user
interface or features for editing or executing the load test script.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | WebRM: an enterprise software
management tool for WebLOAD 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 resources
throughout the application development life cycle.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.

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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.

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.

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 and 2008 we completed the development of add-ons to support Adobe Flex, 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.

19

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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.

# Customers

To date, we have licensed our
software to approximately 2,000 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, 68.8% in 2006 57% in
2007 and 59% in 2008. 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, 18.5% in 2006, 14% in 2007 and 28% in 2008.           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, Banglore, India, 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.

20

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# 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, $1.5 million in 2006, $1.9 million in 2007 and $1.2 million
in 2008. We received approval for a grant in the amount of up to approximately $460,000 in
2007 and up to $200,000 in 2008 from the Office of the Chief Scientist of the Israel
Ministry of Industry, Trade and Labor for participation in our research and development
programs. As of May 31, 2009, we have received the amount of US$409,500 out of the entire
grant for 2007 and $180,000 out of the entire grant for 2008. In order to receive the full
amount of the grant of 2008 we are required to submit the Companys 2008 annual
report. We have filed an application for an additional grant in the amount of $330,000 for
2009, as of the beginning of the year, but we cannot assure that an agreement for such
grant will be concluded.

# 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.

# 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 a site of our sales and support center. We have three inactive wholly-owned
subsidiaries in Europe: RadView Software (UK), RadView GmbH in Germany and RadView AB in
Sweden.

21

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# 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 2010. 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

# 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.

We derive our revenues from licensing the
rights to use our software 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 and 2008, no such revenues were recognized.

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, $2.7 million in 2006, $4.8
million in 2007 and $0.36 million in 2008. 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. The decrease
in our net loss in 2008 resulted primarily from the increase in revenues and decrease in
operational costs. If we are to achieve future profitability, we must continue to increase
our revenues while maintaining lower operating expenses.

Cash used in operating activities was
$1.9 million in 2006, $3.5 million in 2007 and $0.6 million in 2008, attributable
primarily to our net losses, partially offset by noncash charges such as depreciation
expense, stock-based compensation and amortization on debt discount along with changes in
current assets and liabilities. We expect that operating expenses will constitute a
material use of our cash resources

22

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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.

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.

At the annual shareholders meeting in
December 2008, the shareholders approved the terms of a credit facility for up to $4
million that may be advanced upon the Companys request. Any future withdrawals from
this facility, except for the $0.5 million discussed below, will be subject to the
discretion of Fortissimo, the principal shareholder that granted the facility; the Company
has not made a request under the credit facility to date. Fortissimo has agreed in advance
to comply with a request of up to $0.5 million within the next twelve months. With the
availability of the $0.5 million, as agreed by Fortissimo, we expect that we will have
sufficient funds in order to maintain current operations, at least for the next twelve
months.

Our cash balance was $243,000 as of
December 31, 2008. 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, as well as the availability of the $0.5 million in respect of the
2008 credit facility, 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

We generally derive our revenues from
two primary sources:

| |  | Software
products; and
| | - | ----------------------

| |  | Software
maintenance and services and training.
| | - | -----------------------------------------------

We recognize product and licenses revenue
in accordance with Statement of Position (SOP) No. 97-2, Software Revenue
Recognition, as amended by SOP No. 98-9, Modification of
SOP No. 97-2, Software Revenue Recognition, With Respect to Certain
Transactions (collectively, SOP 97-2). We recognize product and license
revenue when persuasive evidence of an arrangement exists, the product has been delivered,
there are no uncertainties surrounding product acceptance, there are no significant future
performance obligations, the license fees are fixed or determinable, and collection of the
license fee is considered probable. Amounts received in advance of meeting these criteria
are deferred. Fees for arrangements with payment terms extending beyond customary payment
terms are considered not to be fixed or determinable, in which case revenue is deferred
and recognized when payments become due from the customer or are actually collected,
providing that all other revenue recognition criteria have been met. As required by
SOP 97-2, we determine the value of the product component of our multiple-element
arrangements using the residual method when vendor specific objective evidence (VSOE) of
fair value exists for the undelivered elements of the support and maintenance agreements.
VSOE is based on the price charged when an element is sold separately or renewed. Under
the residual method, the fair value of the undelivered elements is deferred and the
remaining portion of the arrangement fee is allocated to the delivered elements and is
recognized as revenue.

23

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Our software updates and maintenance
provides customers with rights to unspecified software product upgrades released during
the term of the agreement. Our support services grant our customers telephone access to
technical support personnel during the term of the service. We recognize revenues from
software updates, maintenance and services ratably over the term of the agreement.

# 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.

# Legal contingencies

We  are  not  involved  in  any  legal  proceedings  that  are  material  to  our  business  or  financial
condition.  A former  employee  commenced a proceeding in February  2009 seeking a total of  approximately
NIS920,600 for severance and vacation  payments and certain other claims in connection  with the period of
employment  with the Company.  The Company  responded  to the claims  denying any  liability  and does not
believe the claims will be  successful  or, if so, in a material  amount.  The matter has been referred to
mediation for a possible negotiated resolution.

# 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.

On January 1, 2007, the Company
adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
an Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 contains
a two-step approach to recognizing and measuring uncertain tax positions accounted for in
accordance with SFAS No. 109. The first step is to evaluate the tax position taken or
expected to be taken in a tax return by determining if the weight of available evidence
indicates that it is more likely than not that, on an evaluation of the technical merits,
the tax position will be sustained on audit, including resolution of any related appeals
or litigation processes. The second step is to measure the tax benefit as the largest
amount that is more than 50% likely to be realized upon ultimate settlement. The Company
accrues interest and penalties related to unrecognized tax benefits in its provision for
income tax.

# Equity-based
compensation expense

We account for equity-based
compensation in accordance with SFAS No. 123(R), Share-Based Payment. Under
the fair value recognition provisions of this statement, stock-based compensation cost is
measured at the grant date based on the fair value of the award and is recognized as an
expense over the requisite service periods. Determining the fair value of stock-based
awards at the grant date requires the exercise of judgment, including the amount of
stock-based awards that are expected to be forfeited. If actual forfeitures differ from
our estimates, equity-based compensation expense and our results of operations would be
impacted.

We estimate the fair value of
employee stock options using a Black-Scholes-Merton valuation model. The fair value of an
award is affected by our stock price on the date of grant as well as other assumptions,
including the estimated volatility of our stock price over the expected term of the
awards, and the estimated period of time that we expect employees to hold their stock
options. The risk-free interest rate assumption is based upon United States treasury
interest rates appropriate for the expected life of the awards. We use the historical
volatility of our publicly traded stock options in order to estimate future stock price
trends. In order to determine the estimated period of time that we expect employees to
hold their stock options, we use the Simplified Method as there is no adequate
historical experience to provide other reasonable estimates. Our expected dividend rate is
zero since we do not currently pay cash dividends on our common stock and do not
anticipate doing so in the foreseeable future.

24

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The fair value for options granted in
2006, 2007 and 2008 is estimated at the date of grant using a Black-Scholes-Merton options
pricing model with the following weighted average assumptions:

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

The risk-free interest rate is based
on the yield from U.S. treasury bonds with an equivalent term. The Company has
historically not paid dividends and has no foreseeable plans to pay dividends. 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, 2007 or 2008.

# 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 re-measurement 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) NIS 4.225 at December 31, 2006, US $1.00 to NIS
3.846 on December 31, 2007 and US $1.00 to NIS 3.802 on December 31, 2008.

25

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# 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:                      |                                
|Research and development                 |                                
|Sales and marketing                      |                                
|General and administrative               |                                
|                                         |                                
|Total operating expenses                 |                                
|                                         |                                
|                                         |                                
|Operating loss                           |                                
|                                         |                                
|                                         |                                
|Financial expense, net                   |                                
|                                         |                                
|Deemed dividend                          |                                
|                                         |                                
|Net loss attributable to ordinary shares |                                
|                                         |                                

# Comparison of 2008 and
2007

# Revenues

Total Revenues. Total revenues
were $3.12 million in 2007 and $3.44 million in 2008. Total revenues increased by $0.32
million, or 10.3% due to a $462,000 increase in product revenues and a $141,000 decrease
in services revenues.

Software License. Software
license revenues consist primarily of revenues from the license of our software products
to end-users and resellers. Software license revenues were $1.225 million in 2007 and
$1.687 million in 2008. Software license revenues increased by $462,000, or 38%, due to
increase 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 $1.9 million in
2007 and $ 1.8 in 2008. Services revenues decreased by $141,000, or 7%, due to decrease in
support and maintenance renewals.

# Cost of Revenues

Cost of Software
Licenses. Cost of software licenses consists principally of royalties due to the
Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor. Cost
of software licenses was $26,000, or 0.8% of software license revenue in 2007 compared to
$89,000, or 2.6% of software license revenue in 2008. The increase in the cost of software
licenses resulted from increase in royalty-bearing products sales in 2008.

Cost of Services. Cost of
services consists principally of personnel related costs associated with customer
support and training. Cost of services was $66,000, or 2% of service revenues in
2007 compared to $55,000, or 1.6% of service revenues in 2008. This decrease was due to
lower personnel costs for support and maintenance services resulting from reductions in
personnel and salary-related costs in 2008.

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# Operating Expenses

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 $1.9 million, or 60.6% of total revenues in 2007 compared to $1.2 million,
or 35.8% of total revenues in 2008. This decrease resulted primarily from the reduction in
personnel and salary-related costs. We expect that our research and development expenses
will not increase over the next year.

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 $2.7 million, or 86% of total revenues in 2007 compared to $1.1 million, or 30.7% of
total revenues in 2008. The decrease in sales and marketing costs relate to reductions in
personnel and salary-related costs. We expect that our sales and marketing expenses will
not increase over the next year.

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 55.3% of total
revenues in 2007 compared to $1.1 million, or 32.1% of total revenues in 2008. This
decrease resulted primarily fromreductions in personnel and salary-related
costs.We expect that our general and administrative expenses will decrease in 2009
due to a reduction in personnel.

Financial Income (Expense),
Net. Interest expense, net was $312,000 in 2008 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 decrease in the middle of
2009 as a result of completion of the interest and discount amortization of convertible
loan and warrants costs in connection with financings that occurred during 2006.

Currency translation gains and losses
were $70,000 in 2007 and $25,000 in 2008. The decrease resulted from exchange rate
fluctuations between the U.S. dollar and the New Israeli Shekel.

Income Taxes. Income Taxes
expenses were $0.3 million in 2007 due to the companys evaluation for its taxes
exposures according to FIN 48 compared to $0.1 million benefit in 2008 due to release of
its taxes exposures according to FIN 48 with respect to closed tax years.

We have an estimated net operating
loss carry forward for Israeli tax purposes totaling approximately $ 29.3 million through
December 31, 2008 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, 2008. 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 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.

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# 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. Cost of
services consists principally of personnel related costs associated with customer support
and training. 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.

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.

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.

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.

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.

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.

# 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 85.7% in 2006,
80.9% in 2007 and 84.1% in 2008. Expenses denominated in U.S. dollars as a percent of
total expenses were 53.3% in 2006, 35.8% in 2007 and 21% in 2008

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.

28

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# 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, and the 2008 Credit Facility,
we currently do not have any outstanding borrowings or other credit facilities.

# Impact of Recently
Issued Accounting Standards

In December 2007, the FASB issued
SFAS No. 141 (revised 2007), Business Combinations
(SFAS 141R). SFAS 141R establishes principles and requirements for
how an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any non controlling interest in the acquiree and
the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable
the evaluation of the nature and financial effects of the business combination.
SFAS 141R is effective for fiscal years beginning after December 15, 2008.
Earlier adoption is prohibited. The impact of SFAS 141R on the Companys
consolidated results of operations and financial condition will depend on the nature and
size of acquisitions, if any, subsequent to the effective date.

In December 2007, the FASB issued
SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51". SFAS No. 160 establishes accounting and reporting
standards that require that the ownership interests in subsidiaries held by parties other
than the parent be clearly identified, labeled, and presented in the consolidated
statement of financial position within equity, but separate from the parents equity;
the amount of consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated statement of
income; and changes in a parents ownership interest while the parent retains its
controlling financial interest in its subsidiary be accounted for consistently. SFAS
No. 160 is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. The Company is currently evaluating the
potential impact, if any, of the adoption of SFAS No. 160 on its consolidated financial
statement.

In February 2008, the FASB issued
FSP No. FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13
and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of
Lease Classification or Measurement under Statement 13", and FSP No. FAS 157-2,
Effective Date of FASB Statement No. 157". Collectively, the Staff Positions
defer the effective date of Statement 157 to fiscal years beginning after November 15,
2008 for nonfinancial assets and nonfinancial liabilities except for items that are
recognized or disclosed at fair value on a recurring basis at least annually, and amend
the scope of Statement 157. As described in Note 4, the Company adopted Statement 157 and
the related FASB staff positions except for those items specifically deferred under FSP
No. FAS 157-2.

In June 2008, the FASB issued EITF
No. 07-5 Determining Whether an Instrument (or Embedded Feature) Is Indexed to an
Entitys Own Stock (EITF 07-5). EITF 07-5 is effective for
financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Early application is not permitted. Paragraph
11(a) of SFAS No. 133 specifies that a contract that would otherwise meet the definition
of a derivative but is both (a) indexed to the Companys own stock and (b) classified
in shareholders equity in the statement of financial position would not be
considered a derivative financial instrument. EITF 07-5 provides a new two-step model to
be applied in determining whether a financial instrument or an embedded feature is indexed
to an issuers own stock and thus able to qualify for the SFAS 133 paragraph 11(a)
scope exception. The Company believes adopting this statement will have no impact on the
consolidated financial statements.

Effective December 31, 2008, the
Company adopted FASB Staff Position (FSP) APB 14-1. Accounting for Convertible debt
Instruments that may be settled in cash upon conversion. FSP APB 14-1 specifies that
issuers of such instruments should separately account for the liability and equity
components in a manner that will reflect the entitys nonconvertible debt borrowing
rate when interest cost is recognized in subsequent periods. This FSP is effective for
financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Therefore this part of the standard will not be
effective for the Company until our fiscal year ended December 31, 2009, unless the
Company elects early adoption. The Company is currently evaluating the potential impact,
if any, of the adoption of FSP APB 14-1 on its consolidated financial statement.

29

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# 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, 2008, 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.

# 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, 2007 and 2008 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.

30

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# 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.

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.

31

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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, 2009, we have received the amount
of US$409,500 out of the entire grant and there is no further amount expected to be
received in connection with this project. In addition, we have received a participation
grant from the OCS in our Load and Performance Testing project for 2008, in the amount of
up to approximately US$200,000. As of May 31, 2009, we have received the amount of
US$180,000 out of the entire grant. In order to receive the full amount of the grant we
are required to submit the Companys 2008 annual report.  Although a new
application was submitted to the OCS in the first quarter of 2009 for a grant of up to US$
330,000 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 4.5% 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.

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.

32

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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 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 addition, the future of the peace process with the Palestinians is
uncertain and has deteriorated due to Palestinian violence, with the threat of a
large-scale attack by Palestinians on Israeli civilians and key infrastructure remaining a
constant concern. The past few years of renewed terrorist attacks by the Palestinians has
severely affected the Israeli economy in many ways. In June 2007, there was an escalation
in violence in the Gaza Strip resulting in Hamas effectively controlling the Gaza Strip
and a further escalation in violence has occurred during the first few months of 2008. In
July 2006, Israel became involved in a major military conflict with the Hezbollah
organization in Lebanon, which subjected the north of Israel to missile attacks. In
December 2008, Israel was involved in a military conflict with Hamas, which subjected the
South of Israel to missile attacks. Ongoing violence between Israel and the Palestinians
as well as tension between Israel and the neighboring Syria and Lebanon may have a
material adverse effect on our business, financial condition and results of operations. In
addition, several countries still restrict business with Israel and with companies doing
business in Israel. We could be adversely affected by adverse developments in the
peace process or by restrictive laws or policies directed towards Israel or
Israeli businesses.

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.

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.

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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
$229,000 as of December 31, 2006, $880,000 as of December 31, 2007 and $243,000 as of
December 31, 2008. Restricted cash totaled $26,000 as of December 31, 2007 and December
31, 2008.

Cash used in operating activities was
$1.9 million in 2006, $3.5 million in 2007 and $0.6 million in 2008. Cash used
in operating activities has resulted substantially from our reported net losses partially
reduced by noncash items such as depreciation, stock-based compensation and amortization
of debt discount, and changes in current assets and liabilities and deferred revenues.

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.

Cash used in operating activities in
2008 was due primarily to a net loss of $0.36 million, a decrease of $603,000 in accrued
expenses, and a decrease of $290,000 in deferred revenue, partially offset by noncash
items, a decrease of $279,000 in accounts receivable and amortization of debt discount,
long-term convertible loan discount and deferred financing costs of $263,000. Accrued
expenses decreased due to reduction of personnel and tax liabilities. Deferred revenues
decreased due primarily to the recognition of deferred technology license fees during
2008. Accounts receivable decreased as a result of decrease in sales in the last quarter
of 2008.

Cash used in investing activities was
$21,000 in 2006, $52,000 in 2007 and $10,000 in 2008. 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. Cash used in investing activities in 2008 was for the purchase of $10,000 in
property and equipment.

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.

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There was no net cash provided by
financing activities in 2008.

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.

The convertible loan under the August
2006 financing is due to be repaid on August 18, 2009. The investors have agreed to extend
the loan payment date to June 30, 2010 and during the extension period, the loan shall be
non-convertible and without interest.

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.

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.

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In December 2008, the Board and
shareholders approved the terms of a convertible credit facility that may be provided to
us by Fortissimo (the 2008 Credit Facility). Any future cash withdrawals from
this facility, except for the $0.5 million discussed below, will be subject to the
discretion of Fortissimo. The Credit Facility is for an amount up to $4 million, in one or
more loans, to be determined by Fortissimo at its sole discretion upon our request (each
the Loan). Each Loan shall have a 3 year term, which may be extended for 2
additional one year terms by agreement of Fortissimo and us. The Loans shall bear interest
at 8%, compounded annually, payable together with the repayment of the principal of the
respective Loan. A Loan (or any part thereof) may be repaid at any time prior to its due
date, at our discretion. Each Loan is convertible into Ordinary Shares, at the option of
Fortissimo, at any time prior to repayment, at a conversion price per ordinary share equal
to $0.01, the price at which our shares were traded when the 2008 Credit Facility was
approved, (the Conversion Price). As security for the repayment of the Loans,
we shall grant Fortissimo (i) a fixed charge on our intellectual property, and (ii) a
floating charge on our tangible and intangible assets, junior to all of our outstanding
charges at the time of the Loan. We have also agreed that upon each draw down of a Loan,
Fortissimo will be issued a warrant to acquire ordinary shares in a dollar amount equal to
50% of the principal amount of the Loan at a purchase price per share equal to the
Conversion Price. Fortissimo has agreed in advance to comply with a request of up to $0.5
million within the next twelve months.

We expect that operating expenses
will constitute a material use of our cash resources. We believe that our existing cash
and cash equivalents and cash provided from out ongoing operations, along with the
availability of $0.5 million, as agreed by Fortissimo, 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 and
2010.

# Financial Instruments
and Commitments

Not Applicable

# 5C: Research and
Development

Our research and development expenses
were $1.5 million in 2006, $1.9 million in 2007 and $1.2 million in 2008. 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, 2008, 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(2) |                       
|                    |                       
|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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Uncertain
income tax position under FASB Interpretation No. 48, Accounting
                    for Uncertainty in Income Taxes, (FIN 48) are due
upon                     settlement and we are unable to reasonably estimate the ultimate
amount or                     timing of settlement. See Note 10 of our Consolidated
Financial Statements for                     further information regarding the Companys
liability under FIN 48.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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        | 51  | Chairman of the Board                                  
|Yochai Hacohen     | 43  | Director                                               
|Rami Goraly        | 42  | Chief Executive Officer, Director                      
|Amira Paz          | 43  | Vice President of Finance (Principal Financial Officer)
|Shai Beilis        | 60  | Director                                               
|Hadas Gazit Kaiser | 33  | External Director                                      
|Amir Livne         | 48  | External Director                                      
|Eli Blatt          | 46  | Director                                               
|Merav Davidson     | 42  | 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 and as a Director since
December 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.

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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.

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.

AMIR LIVNE serves as an
External Director of the Company since December 2008. Mr. Livne is Vice President Product
Strategy and Portfolio Management at Siemens PLM, a division of Siemens AG (NYSE:SI).
Previously, Mr. Livne held a similar position at UGS PLM, which was acquired by Siemens in
2007. Between 1997 and 2004, Mr. Livne served as Executive VP of Business Development and
Strategy at Tecnomatix (NASDQ: TCNOF, acquired by UGS in early 2005). Prior to joining
Tecnomatix, between 1994 and 1997, Mr. Livne worked as a Senior Consultant at Booz, Allen
and Hamilton, a management consulting firm. Mr. Livne holds an MBA from the University of
Michigan in Ann Arbor and B.A. and M.A. degrees in Computer Science, both from Tel Aviv
University. Mr. Livne replaced David Assia as an External Director following the
expiration of Mr. Assias term in November 2008.

MERAV DAVIDSON serves as a
Director of the Company since December 2008. Ms. Davidson is currently an independent
consultant to Enterprise Software companies in different stages of development. From 2004
through 2007 Ms. Davidson served in several positions in Mercury Interactive, California,
including Vice President  Business Operations (before and after the acquisition of
Hewlett Packard) and Vice President  Mercury Managed Services. Between the years
1999 and 2004, Ms. Davidson served in several positions with Mercury Interactive, Israel,
including Vice President  Mercury Managed Services, Director  Mercury Managed
Services Operations, and Director  Application Performance and Management R&D.
Between the years 1997 and 1999, Ms. Davidson was Manager of Application Development in
Onset Technologies. Between the years 1991 and 1997, Ms. Davidson served in several
positions in Mercury Interactives support organization in the USA and R&D
organization in Israel. Ms. Davidson holds a B.Sc degree in Electrical Engineering 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.

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# 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. Amir Livne 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. Mr. Rami Goraly is entitled to options from the
Company for his service as an employee director.

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, 2008 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 9 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, was granted 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 was 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.

Rami Goraly has been a director of
the Company since December 2008 and has been CEO since April 2008. In connection with his
services as a director, the Board authorized and the shareholders approved the grant to
Mr. Goraly of options under the Companys Key Employee Share Incentive Plan to
purchase a total of 8,000,000 Ordinary Shares. The option grant will be formally
documented by year end 2009 and when completed, will have the following vesting schedule:
twenty five percent (25%) of the options will be vested as of January 1, 2009 (the
First Vesting Date) and the remaining seventy five percent (75%) of the
options shall vest in 12 equal parts quarterly over a three (3) year period following the
First Vesting Date. The exercise price of the options will be $0.015. Mr. Goraly also
holds options for a total of 500,000 Ordinary Shares which were granted to him in 2007 and
are subject to vesting as follows: 25% to vest as of October 2007, with the remainder to
vest quarterly over three years. The exercise price of the options is $0.06.

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As of December 31, 2008, all
directors and officers as a group (then 9 persons, excluding one director whose term
expired during 2008), held options to purchase 8,415,516 of our ordinary shares (excluding
8,000,000 options which were approved for grant to Rami Goraly and 792,856 options which
were approved for grant to Amir Livne but not yet formally documented). Out of such
options, 955,000 expire in 2011 and 7,460,516 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 8 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.

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.

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# Audit Committee

The Audit Committee of the Board of Directors
currently consists of Shai Beilis, Hadas Gazit Kaiser and Amir Livne who commenced his
services in December 2008. David Assia served as a member of the Audit Committee from his
election in 2002 until the expiration of his second three-year tem in November 2008. Hanna
Lerman served as a member of the Audi Committee from her election 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 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.

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 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 Amir Livne. David Assia served as a member of the
Compensation Committee until the expiration of his term in November 2008. 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.

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# 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, Shai Beilis, Hadas
Gazit Kaiser and Amir Livne. 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 its 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.

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 following the 2006 financing.

# 6D: Employees.

As of December 31, 2008, we had 22
employees (including 1 contractor) worldwide, of whom 11 were employed in research and
development, 4 in sales and marketing, 2 in technical support, and 5 in management and
administration. Out of our employees, 2 are based in the United States, 19 are based in
Israel and 1, a contractor, is based in India. 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.

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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, 2009, the Company had granted options for a total of
21,590,128 ordinary shares (excluding 8,000,000 options which were approved for grant to
Rami Goraly and 792,856 options which were approved for grant to Amir Livne but not yet
formally documented), of which 10,929,356 had been terminated or expired (and thus became
available for future grant) and 2,465,331 had been exercised. As a result, 1,760,981
ordinary shares are available for future grant as of May 31, 2009 (after taking into
account the 8,000,000 options which were approved for grant to Rami Goraly and 792,856
options which were approved for grant to Amir Livne but not yet formally documented).

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 on an 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, 2009, the Company had granted options to purchase
a total of 5,113,855 ordinary shares, of which 3,684,808 had been terminated or expired
(and thus became available for future grant) and 407,547 had been exercised. As a result,
2,520,953 ordinary shares are available for future grant as of May 31, 2009.

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 2006, 2007 and 2008 as no plan was available during those
years. As of May 31, 2009, 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, 2008, 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 30 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.

44

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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, 2009, 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, 2009
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, 2009, 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)                                                        |                                 |                              
|Psagot Provident Fund Ltd. (3)                                                        |                                 |                              
|Tamir Fishman Provident and Education Funds Ltd. (4)                                  |                                 |                              
|Meitav Gemel Ltd. (5)                                                                 |                                 |                              
|                                                                                      |                                 |                              
|Directors and Executive Officers (9):                                                 |                                 |                              
|                                                                                      |                                 |                              
|Rami Goraly(6)                                                                        |                                 |                              
|Jaron Lotan(7)                                                                        |                                 |                              
|Shai Beilis (8)                                                                       |                                 |                              
|Amir Livne                                                                            |                                 |                              
|Hadas Gazit Kaiser (9)                                                                |                                 |                              
|Yochai Hacohen (10)                                                                   |                                 |                              
|Eli Blatt                                                                             |                                 |                              
|Merav Davidson                                                                        |                                 |                              
|All executive officers and Directors as a group (9 persons) (6) (7) (8) (9) (10) (11) |                                 |                              

|
|

|* 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 7,395,834 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; 1,091,968 ordinary shares owned of record by Perfect Central Compensation Fund;
and 10,673,848 ordinary shares owned of record by Perfect Education Fund. On June 1, 2009,
a merger occurred between Altshuler Shaham Provident Funds Ltd. (Altshuler
Shaham) and Perfect. As a result, the above-mentioned funds are managed by Altshuler
Shaham, which is held by Altshuler Shaham Ltd. (which is owned by Kalman Shaham, Gilad
Altshuler and Roni Bar) and Perfect (Y.N.E.) Capital Markets Ltd. (which is held
indirectly by Yair Levinstein, Nir Malka, Orna Brenner and Daniel Brenner. Any economic
interest or beneficial ownership in any of the securities held by Altshuler Shaham are
held for the benefit of the members of the fund. The address of Altshuler Shaham is 19A
Habarzel Street, Tel Aviv, Israel.

(3)     Information
is derived from Schedule 13G, filed on February 9, 2009 by Prisma           Investment
House Ltd. (Prisma), the assets of which were acquired by           Psagot
Provident Fund Ltd. in April 2009, and from records of the Company.           Includes
21,930,000 ordinary shares, beneficially owned by provident funds,           continuing
education funds and compensation funds (Hermon Provident Fund, Aazmon           Provident
Fund, Tavor Provident Fund and Signon Hermon Provident Fund) managed           by Psagot
Provident Fund Ltd., a wholly owned subsidiary of Psagot Investment           House Ltd,
controlled indirectly by James G. Dinan and Daniel A. Schwartz. Any           economic
interest or beneficial ownership in any of the securities held by           Psagot
Provident Fund Ltd. are held for the benefit of the members of the fund.           The
address of Psagot is: Africa Tower, 14 Ahad Haam Street, Tel Aviv,
          Israel.

(4)    
          Information is derived form Schedule 13G, filed on February 16, 2009 by Tamir
          Fishman Provident and Education Funds Ltd. (Tamir Fishman). Includes
          a total of 19,060,400 ordinary shares: 3,063,400 ordinary shares are owned of
          record by Tamir Fishman Severance Pay Fund  General; 6,893,500 ordinary
          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; 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 14,101,678 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; 2,234,161
          ordinary shares owned of record by Meitav Chisachon Gemel; 1,617,339 ordinary
          shares owned of record by Meitav Chisachon Hishtalmut; and 333,500 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
          14,101,678 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)    
          Includes 2,500,000 options that are vested and 500,000 options that are
          exercisable within 60 days of May 31, 2009 in accordance with the vesting
          schedule for the options approved for grant but not yet formally documented.
          Also includes 31,250 options exercisable within 60 days of May 31, 2009 from a
          previous grant.

(7)     Includes
94,854 options exercisable within 60 days of May 31, 2009.

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(8)    
          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.

(9)    
          Includes 49,553 options exercisable within 60 days of May 31, 2009.

(10)    
          Includes 296,875 options exercisable within 60 days of May 31, 2009.

(11)    
          Excludes former directors who served on the Board of Directors for all or a
          portion of 2008 and who held no beneficial ownership of the Companys
          ordinary shares as of May 31, 2009, and former Executive Officers.

As of May 31, 2009, there were 138
record holders of ordinary shares, of which 86 were registered with addresses in the
United States, representing approximately 12% 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 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. The convertible loan under the August 2006 financing is due to be repaid on
August 18, 2009. The investors have agreed to extend the loan payment date to June 30,
2010 and during the extension period, the loan shall be non-convertible and without
interest.

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).

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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. 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.

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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.

In December 2008, the Board and
shareholders approved the Credit Facility to be provided to us by Fortissimo, at the
discretion of Fortissimo. See Item 4B.  Business Overview  Recent
Financings for a further description of the Credit Facility. Fortissimo is an entity
affiliated with two of the Companys directors, Mr. Yochai Hacohen and Eli Blatt.

As described above, the 2008 Credit Facility is for an amount up to $4 million, in one or more
loans (each a Loan).  Any request for future cash withdrawals from this facility, except for the $0.5
million discussed below, will be subject to the discretion of Fortissimo.  Each Loan shall have a 3 year
term, which may be extended for 2 additional one year terms by agreement of Fortissimo and us.  The
Loans shall bear interest at 8%, compounded annually, payable together with the repayment of the
principal of the respective Loan.  A Loan (or any part thereof) may be repaid at any time prior to its
due date, at our discretion.  Each Loan is convertible into Ordinary Shares, at the option of
Fortissimo, at any time prior to repayment, at a conversion price per Ordinary Share equal to $0.01, the
trading price at the time the 2008 Credit Facility was approved (the Conversion Price).  As security
for the repayment of the Loans, we shall grant Fortissimo (i) a fixed charge on our intellectual
property, and (ii) a floating charge on our tangible and intangible assets, junior to all of our
outstanding charges at the time of the Loan.  We have also agreed that upon each draw down of a Loan,
Fortissimo will be issued a warrant to acquire Ordinary Shares in a dollar amount equal to 50% of the
principal amount of the Loan at a purchase price per share equal to the Conversion Price.  Fortissimo
has agreed in advance to comply with our request, if needed, for up to $0.5 million within the next
twelve months.

To date, we have not drawn on the
2008 Credit Facility.

# 7C: Interests of Experts
and Counsel

Not applicable.

# Item 8: Financial
Information.

# 8A: Consolidated
Statements and Other Financial Information

See Item 18.

# Legal Proceedings

A former employee commenced a
proceeding in February 2009 seeking a total of approximately NIS 920,600 for severance and
vacation payments and certain other claims in connection with the period of employment
with the Company. The Company responded to the claims denying any liability and does not
believe the claims will be successful or if so, in a material amount. The matter has been
referred to mediation for a possible negotiated resolution.

# 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.

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# 8B: Significant Changes

Not applicable.

# Item 9: The Offer and
Listing

# 9A: Offer and Listing Details
TO BE UPDATED

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

|     |  | OTCBB
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|2006 |  |      
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|2007 |  |      
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|2008 |  |      
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|2009 |  |      
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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.

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# 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.

(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.

52

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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).

(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).

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(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).

(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.

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(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).

|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.

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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.

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.

56

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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, (iii)
the private placements led by Meitav, copies of which were filed as exhibits to the 2006
Annual Report, and (iv) the Credit Facility provided by Fortissimo. 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).

# 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.

57

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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.

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, 2008, 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.

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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.

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.

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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).

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.

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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.

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.

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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.

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.

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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
U.S. Shareholders tax basis in the ordinary shares. Such gain or loss
generally will be long-term capital gain or loss if the U.S. 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 US source 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 U.S.
foreign tax credit purposes. U.S. Shareholders 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.

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  of U.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.

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# 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. At December 31, 2008, a 10%
strengthening of the U.S. dollar versus other currencies would have resulted in an
increase of approximately $49,000 in our net assets position, while a 10% weakening of the
dollar versus all other currencies would have resulted in a decrease of approximately
$49,000.

# 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.

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# 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, 2008, under the
supervision and with the participation of our management, including our Chief Executive
Officer 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 as of the end of the period covered by
this report.  Based on that evaluation, our Chief Executive Officer and Vice
President of Finance concluded that the Companys disclosure controls and procedures
were effective as of the end of the period covered by this report.

(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, 2008. 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, 2008, our internal control over financial reporting is effective based
on those criteria. 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 the Companys registered public accounting firm regarding
internal control over financial reporting. Managements report was not subject to
attestation by the Companys registered public accounting firm pursuant to temporary
rules of the SEC that permit the Company to provide only managements report in this
Annual Report.

(c)     Change
in Internal Control over Financial Reporting.

There were changes in the
Companys internal controls over financial reporting that occurred during the fiscal
year ended December 31, 2008. As of December 31,2007 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. In order to remediate
previous year material weaknesses the management has recruited additional personnel and
redesigned processes and documentation.

(d)    Other.

The Company believes that a control
system, no matter how well designed and operated, can not provide absolute assurance that
the objectives of the control system are met, and no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, with the
Company have been determined.

65

---

---

# Item 16: [Reserved]

# Item 16A: Audit
Committee Financial Expert

The Audit Committee of the Board of
Directors currently consists of Shai Beilis, Hadas Gazit Kaiser and Amir Livne.

The Board of Directors has determined
that Shai Beilis and Hadas Gazit Kaiser 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.

# Item 16C: Principal
Accountant Fees and Services

The Companys consolidated
financial statements at December 31, 2008 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, 2008. 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 2007 and 2008.

|                   | 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 20-F for years 2007 forwards.

# 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.

66

---

---

# 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 2007 and 2008, 100% of the audit,
audit-related and tax fees were pre-approved by the Audit Committee.

# 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.

# Item 16F: Change in
Registrants Certifying Accountant

Not applicable.

# Item 16G: Corporate Governance

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:

67

---

---

# RADVIEW SOFTWARE, LTD.
AND ITS SUBSIDIARIES

# CONSOLIDATED FINANCIAL STATEMENTS

# AS OF DECEMBER 31, 2008

# 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-31



---

---

# 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, 2007 and 2008 and the
related consolidated statements of operations, shareholders deficit and cash flows
for each of the three years in the period ended December 31, 2008. 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, 2007 and 2008 and the consolidated results of their
operations and their cash flows for each of the three years in the period ended December
31, 2008 in conformity with U.S. generally accepted accounting principles.

|                 |                                 
|---------------- | --------------------------------
|
|
|
|
|Tel-Aviv, Israel | KOST FORER GABBAY & KASIERER    
|June 30, 2009    | A Member of Ernst & Young Global

F - 2

---

---

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

|                                                                       |  | December 31,
|---------------------------------------------------------------------- |  | ------------
|
|
|
|
|ASSETS                                                                 |  |             
|                                                                       |  |             
|CURRENT ASSETS:                                                        |  |             
|Cash and cash equivalents                                              |  |             
|Restricted cash                                                        |  |             
|Accounts receivable (net of allowance for doubtful accounts of $ 46 as |  |             
|of December 31, 2007 and $89 as of December 31, 2008)                  |  |             
|Prepaid expenses and other current assets                              |  |             
|                                                                       |  |             
|                                                                       |  |             
|Total current assets                                                   |  |             
|                                                                       |  |             
|                                                                       |  |             
|LONG-TERM INVESTMENTS:                                                 |  |             
|Operating lease deposit                                                |  |             
|Severance pay funds                                                    |  |             
|                                                                       |  |             
|                                                                       |  |             
|Total long-term investments                                            |  |             
|                                                                       |  |             
|                                                                       |  |             
|PROPERTY AND EQUIPMENT, NET                                            |  |             
|                                                                       |  |             
|                                                                       |  |             
|DEFERRED FINANCING COSTS RELATED TO CONVERTIBLE LOAN                   |  |             
|                                                                       |  |             
|                                                                       |  |             
|Total assets                                                           |  |             
|                                                                       |  |             

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

F - 3

---

---

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

|                                                                     |  | December 31,
|-------------------------------------------------------------------- |  | ------------
|
|
|
|
|LIABILITIES AND SHAREHOLDERS' DEFICIENCY                             |  |             
|CURRENT LIABILITIES:                                                 |  |             
|                                                                     |  |             
|Accounts payable                                                     |  |             
|Accrued expenses                                                     |  |             
|Deferred revenues                                                    |  |             
|Convertible loan                                                     |  |             
|                                                                     |  |             
|                                                                     |  |             
|Total current liabilities                                            |  |             
|                                                                     |  |             
|                                                                     |  |             
|CONVERTIBLE LOAN                                                     |  |             
|                                                                     |  |             
|                                                                     |  |             
|ACCRUED SEVERANCE PAY                                                |  |             
|                                                                     |  |             
|                                                                     |  |             
|COMMITMENTS AND CONTINGENT LIABILITIES                               |  |             
|                                                                     |  |             
|SHAREHOLDERS' DEFICIT:                                               |  |             
|Ordinary shares, NIS 0.01 par value -                                |  |             
|Authorized: 550,000,000 shares as of December 31, 2007 and December  |  |             
|31, 2008; Issued: 77,038,662 shares as of December 31, 2007 and      |  |             
|December 31, 2008; Outstanding: 76,904,662 shares as of December     |  |             
|31, 2007 and 2008.                                                   |  |             
|Preferred A shares, NIS 0.01 par value -                             |  |             
|Authorized: 225,000,000 shares as of December 31, 2007 and           |  |             
|December 31, 2008; Issued and outstanding: 81,666,668 shares as of   |  |             
|December 31, 2007 and December 31, 2008;                             |  |             
|Preferred B shares, NIS 0.01 par value -                             |  |             
|Authorized: 150,000,000 shares as of December 31, 2007 and           |  |             
|December 31, 2008; Issued: None as of December 31, 2007 and          |  |             
|December 31, 2008                                                    |  |             
|Treasury shares, at cost: 134,000 shares as of December 31, 2007 and |  |             
|December 31, 2008                                                    |  |             
|Additional paid-in capital                                           |  |             
|Accumulated deficit                                                  |  |             
|                                                                     |  |             
|                                                                     |  |             
|Total shareholders' deficit                                          |  |             
|                                                                     |  |             
|                                                                     |  |             
|Total liabilities and shareholders' deficit                          |  |             
|                                                                     |  |             

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

F - 4

---

---

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

|                                                          |  | Year Ended December 31,
|--------------------------------------------------------- |  | -----------------------
|
|
|
|
|Revenues:                                                 |  |                        
|Software licenses                                         |  |                        
|Services and maintenance                                  |  |                        
|                                                          |  |                        
|                                                          |  |                        
|Total revenues                                            |  |                        
|                                                          |  |                        
|                                                          |  |                        
|Cost of revenues:                                         |  |                        
|Software licenses                                         |  |                        
|Services and maintenance                                  |  |                        
|                                                          |  |                        
|                                                          |  |                        
|Total cost of revenues                                    |  |                        
|                                                          |  |                        
|                                                          |  |                        
|Gross profit                                              |  |                        
|                                                          |  |                        
|                                                          |  |                        
|Operating expenses:                                       |  |                        
|Research and development, net                             |  |                        
|Sales and marketing                                       |  |                        
|General and administrative                                |  |                        
|                                                          |  |                        
|                                                          |  |                        
|Total operating expenses                                  |  |                        
|                                                          |  |                        
|                                                          |  |                        
|Operating loss                                            |  |                        
|Financial expenses, net                                   |  |                        
|Income tax  (benefit)                                     |  |                        
|                                                          |  |                        
|                                                          |  |                        
|Net loss                                                  |  |                        
|                                                          |  |                        
|                                                          |  |                        
|Deemed dividend on Preferred A shares and exercise of     |  |                        
|additional investment rights during the year              |  |                        
|                                                          |  |                        
|                                                          |  |                        
|Net loss attributed to Ordinary shares                    |  |                        
|                                                          |  |                        
|                                                          |  |                        
|Basic and diluted net loss per Ordinary share             |  |                        
|                                                          |  |                        
|Weighted average number of shares used in computing basic |  |                        
|and diluted net loss per Ordinary share (in thousands)    |  |                        
|                                                          |  |                        

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

F - 5

---

---

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

|                                                | Preferred A shares | Ordinary shares | Treasury shares | Additional
paid-in
capital | Accumulated
deficit | Total
shareholders
deficit
|----------------------------------------------- | ------------------ | --------------- | --------------- | -------------------------- | ------------------- | --------------------------
|
|
|
|
|Balance, January 1, 2006                        |                    |                 |                 | -                          |                     | $                         
|                                                |                    |                
|Stock-based compensation                        |                    |                 |                 | -                          |                     |                           
|Proceeds from private placement of Preferred A  |                    |                
|shares and warrants, net of issuance costs      |                    |                
|of $ 188                                        |                    |                 |                 | 48,333,334                 |                     |                           
|Deemed dividend on convertible Preferred shares |                    |                
|and an exercise of additional investment rights |                    |                
|during the year                                 |                    |                 |                 | -                          |                     |                           
|Net loss                                        |                    |                 |                 | -                          |                     |                           
|                                                |                    |                 |                 |                            |                     |                           
|                                                |                    |                
|Balance, December 31, 2006                      |                    |                 |                 | 48,333,334                 |                     |                           
|                                                |                    |                
|Proceeds from exercise of additional investment |                    |                
|rights                                          |                    |                 |                 | 33,333,334                 |                     |                           
|Proceeds from private placement of Ordinary     |                    |                
|shares and warrants, net of issuance costs      |                    |                
|of $ 203                                        |                    |                 |                 | -                          |                     |                           
|Stock-based compensation                        |                    |                 |                 | -                          |                     |                           
|Deemed dividend on exercise of additional       |                    |                
|investment rights during the year               |                    |                 |                 | -                          |                     |                           
|Cumulative effect of FIN 48 adoption            |                    |                 |                 | -                          |                     |                           
|Net loss                                        |                    |                 |                 | -                          |                     |                           
|                                                |                    |                 |                 |                            |                     |                           
|                                                |                    |                
|Balance, December 31, 2007                      |                    |                 |                 | 81,666,668                 |                     |                           
|                                                |                    |                
|Stock-based compensation                        |                    |                 |                 | -                          |                     |                           
|Net loss                                        |                    |                 |                 | -                          |                     |                           
|                                                |                    |                 |                 |                            |                     |                           
|                                                |                    |                
|Balance, December 31, 2008                      |                    |                 |                 | 81,666,668                 |                     | $                         
|                                                |                    |                 |                 |                            |                     |                           

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,
|-------------------------------------------------------------- | -----------------------
|
|
|
|
|Cash flows from operating activities:                          |                        
|Net loss                                                       |                        
|Adjustments required to reconcile net loss to net cash used in |                        
|operating activities:                                          |                        
|Depreciation                                                   |                        
|Stock-based compensation                                       |                        
|Amortization of debt discount, long-term convertible loan      |                        
|discount and deferred financing costs                          |                        
|Accrued interest of loan-term convertible loan                 |                        
|Severance pay, net                                             |                        
|Decrease (increase) in accounts receivable                     |                        
|Increase in prepaid expenses and other current assets          |                        
|Decrease in accounts payable                                   |                        
|Increase (decrease) in accrued expenses                        |                        
|Increase (decrease) in deferred revenue                        |                        
|                                                               |                        
|                                                               |                        
|Net cash used in operating activities                          |                        
|                                                               |                        
|                                                               |                        
|Cash Flows from investing activities:                          |                        
|Purchases of property and equipment                            |                        
|Restricted cash                                                |                        
|                                                               |                        
|                                                               |                        
|Net cash used in investing activities                          |                        
|                                                               |                        
|                                                               |                        
|Cash flows from financing activities:                          |                        
|Repayments under revolving line of credit                      |                        
|Proceeds from private placements of Ordinary shares and        |                        
|warrants, net                                                  |                        
|Proceeds from private placement of convertible loan, Preferred |                        
|A shares and warrants, net                                     |                        
|Proceeds from exercise of additional investment rights         |                        
|                                                               |                        
|                                                               |                        
|Net cash provided by financing activities                      |                        
|                                                               |                        
|                                                               |                        
|Increase (decrease) in cash and cash equivalents               |                        
|Cash and cash equivalents at the beginning of the year         |                        
|                                                               |                        
|                                                               |                        
|Cash and cash equivalents at the end of the year               |                        
|                                                               |                        
|                                                               |                        
|Cash paid during the year for interest and taxes               |                        
|                                                               |                        

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

F - 7

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|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 approximately $ 1.8 million in 2006, approximately $ 4
million in 2007 and approximately $ 0.4 million in 2008, and had an accumulated
deficit of approximately $ 67.6 million as of December 31, 2008. The Company has funded
these losses principally from equity and debt financing proceeds including an initial
public offering in August 2000, private placements in March 2005, August 2006 and during
2007, as well as proceeds from technology license arrangement.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company believes that it will have sufficient liquidity in order to maintain is current
operations, at least for the next twelve months. The Company based its assessment on the
expected collections from sales and based on a commitment from its controlling
shareholder to support the Company by providing financing to allow the coverage of any
budget deficit through the second quarter of 2010 up to an amount of $ 500 thousand. In
case that the above will not result in sufficient liquidity resources the Company is also
committed to take measures to reduce its operating costs in order to support its
operations at least through December 31, 2009. Therefore, these financial statements do
not include any adjustments that may be required should the Company will not be able to
continue as a going concern.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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 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 and its subsidiaries operate. 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 re-measured 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 8

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

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

| | 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 = NIS 4.225 at December 31, 2006, NIS 3.846
at December 31, 2007 and NIS 3.802 at December 31, 2008.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 for
leased facilities. The deposit is in NIS and bears interest at an average rate of 3%.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 collectability 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,
| | -------------------------------- | -----------------------
|
|
|
|
| | Balance at the beginning of year |                        
| | Provision                        |                        
| | Write-offs                       |                        
| |                                  |                        
| |                                  |                        
| | Balance at the end of year       |                        
| |                                  |                        

| | f. | Property
and equipment:
| | -- | -----------------------

| | 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   
| | ------------------------------ | ------------------------
|
|
|
|
| | Computers and equipment        | 3                       
| | Office furniture and equipment | 3 to 6                  
| | Leasehold improvements         | Over the shorter of the 
| |                                | term of the lease or the
| |                                | life of the asset       

F - 9

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

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

| | 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 2006, 2007 and 2008, no impairment losses
have been identified.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | h. | Severance
pay:
| | -- | --------------

| | In
accordance with Israels 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 $ 116,000 in 2006, $ 62,000 in 2007 and $ 100,000 in 2008.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 Israels 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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,from training . 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, 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 10

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

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

| | 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 licenses, 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 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | j. | 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | k. | Advertising
expenses:
| | -- | ---------------------

| | Advertising
expenses are charged to the consolidated statements of operations as they are incurred.
Advertising expenses totaled $ 290,000 in 2006, $ 94,000 in 2007 and $ 30,000 in 2008.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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
reduction in research and development costs.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Research
and development grants received or accrued by the Company in 2006, 2007 and 2008,
accumulated to approximately $0, $ 388,000 and $ 192,000, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 11

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

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

| | 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. | On
January 1, 2007, the Company adopted FASB Interpretation No. 48,
               Accounting for Uncertainty in Income Taxes, an Interpretation of
FASB                Statement No. 109 (FIN 48). FIN 48 contains a
two-step                approach to recognizing and measuring uncertain tax positions
accounted for in                accordance with SFAS No. 109. The first step is to
evaluate the tax position                taken or expected to be taken in a tax return by
determining if the weight of                available evidence indicates that it is more
likely than not that, on an                evaluation of the technical merits, the tax
position will be sustained on audit,                including resolution of any related
appeals or litigation processes. The second                step is to measure the tax
benefit as the largest amount that is more than 50%                likely to be realized
upon ultimate settlement. The  Company
accrues interest and penalties related to unrecognized tax benefits in its provision for
income tax.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | n. | Stock-based
compensation:
| | -- | -------------------------

| | The
Company accounts for stock-based compensation in accordance with SFAS No. 123 (revised
2004), Share-Based Payment (SFAS No. 123(R)). SFAS No. 123(R)
requires companies to estimate the fair value of equity-based payment awards on the date
of grant using an option-pricing model. The value of the portion of the award that is
ultimately expected to vest is recognized as an expense over the requisite service
periods in the Companys consolidated income statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company recognizes compensation expenses for the value of its awards granted based on the
straight line method over the requisite service period of each of the awards, net of
estimated forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time
of grant and revised, if necessary, in subsequent periods if actual forfeitures differ
from those estimates. Estimated forfeitures are based on actual historical pre-vesting
forfeitures.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | SFAS
No. 123(R) requires the cash flows resulting from the tax deductions in excess of the
compensation costs recognized for those stock options to be classified as financing cash
flows.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company selected the Black-Scholes-Merton option pricing model as the most appropriate
fair value method for its stock-options awards and values restricted stock based on the
market value of the underlying shares at the date of grant. The option-pricing model
requires a number of assumptions, of which the most significant are the expected stock
price volatility and the expected option term.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 12

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

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

| | The
computation of expected volatility is based on realized historical stock price volatility
of the Company. The interest rate for period within the contractual life of the award is
based on the U.S. Treasury yield curve in effect at the time of grant. The Company has
historically not paid dividends and has no foreseeable plans to pay dividends. The
options expected life represent the period the Companys stock options expected to
be outstanding and was determined based on the Simplified Method permitted by SAB 107 and
extended by SAB 110 by the average of the vesting period and the contractual term. The
Company currently using the Simplified Method as there no adequate historical experience
available to provide other reasonable estimate. The company adopted SAB 110 effective
January 1, 2008 and will continue to apply the Simplified Method since there is not
enough historical experience of exercises at least for three years to provide reasonable
estimate of the expected term for stock options grants.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
fair value for options granted in 2006, 2007 and 2008 is estimated at the date of grant
using a Black-Scholes-Merton options pricing model with the following weighted average
assumptions:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                         | Year ended December 31,
| | ----------------------- | -----------------------
|
|
|
|
| | Expected life of option | 4 years                
| | Dividend yield          | 0%                     
| | Expected volatility     | 109%                   
| | Risk-free interest rate | 4.72%                  

| | Share
based payments are expensed on a straight-line basis.
| | -----------------------------------------------------------

| | o. | Fair
value of financial instruments:
| | -- | ------------------------------------

| | The
carrying amounts of our financial instruments, including cash and cash equivalents,
restricted cash, deposits, accounts receivable, accounts payable and accrued liabilities,
approximate fair value because of their generally short maturities.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Effective
January 1, 2008, the Company adopted SFAS 157, Fair Value Measurementsand,
effective October 10, 2008, adopted FSP No. SFAS 157-3, Determining the Fair
Value of a Financial Asset When the Market for That Asset Is Not Active, except as
it applies to the nonfinancial assets and nonfinancial liabilities subject to FSP 157-2.
SFAS 157 clarifies that fair value is an exit price, representing the amount that would
be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants. As such, fair value is a market-based measurement that
should be determined based on assumptions that market participants would use in pricing
an asset or a liability. As a basis for considering such assumptions, SFAS 157
establishes a three-tier value hierarchy, which prioritizes the inputs used in the
valuation methodologies in measuring fair value:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |         |   |                                                                                                                                    
| | ------- | - | -----------------------------------------------------------------------------------------------------------------------------------
| | Level 1 |  | Observable  inputs that reflect  quoted  prices  (unadjusted)  for identical
assets or liabilities in active markets.              
| | Level 2 |  | Includes  other inputs that are  directly or  indirectly  observable  in the
marketplace.                                          
| | Level 3 |  | Unobservable  inputs  which are  supported  by little or no market  activity
and significant to the overall fair value measurement.

| | The
fair value hierarchy also requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 13

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

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

| | p. | 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 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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,
| | ------------------------------ | -----------------------
|
|
|
|
| | Stock options                  |                        
| | Warrants                       |                        
| | Additional investment rights   |                        
| | Warrants held by Comerica Bank |                        
| | Warrants held by an investor   |                        

| | q. | Concentrations
of credit risk:
| | -- | ------------------------------

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

| | Cash
and cash equivalents, deposit 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. Generally,
these deposits may be redeemed upon demand and, therefore, bear minimal risk.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
2006, one customer represented 12% of total 2006 revenues. There were no major customers
in 2007 or 2008.
| | ------------------------------------------------------------------------------------------------------------

F - 14

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

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

| | r. | Impact
of recently issued accounting standards:
| | -- | -----------------------------------------------

| | In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations (SFAS 141R). SFAS 141R establishes principles
and requirements for how an acquirer recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, any non controlling interest
in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure
requirements to enable the evaluation of the nature and financial effects of the business
combination. SFAS 141R is effective for fiscal years beginning after December 15,
2008. Earlier adoption is prohibited. The impact of SFAS 141R on the Companys
consolidated results of operations and financial condition will depend on the nature and
size of acquisitions, if any, subsequent to the effective date.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an Amendment of ARB No. 51". SFAS No. 160
establishes accounting and reporting standards that require that the ownership interests
in subsidiaries held by parties other than the parent be clearly identified, labeled, and
presented in the consolidated statement of financial position within equity, but separate
from the parents equity; the amount of consolidated net income attributable to the
parent and to the noncontrolling interest be clearly identified and presented on the face
of the consolidated statement of income; and changes in a parents ownership
interest while the parent retains its controlling financial interest in its subsidiary be
accounted for consistently. SFAS No. 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008. The
Company is currently evaluating the potential impact, if any, of the adoption of SFAS No.
160 on its consolidated financial statement.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
February 2008, the FASB issued FSP No. FAS 157-1, Application of FASB
Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or Measurement
under Statement 13", and FSP No. FAS 157-2, Effective Date of FASB
Statement No. 157". Collectively, the Staff Positions defer the effective date
of Statement 157 to fiscal years beginning after November 15, 2008 for nonfinancial
assets and nonfinancial liabilities except for items that are recognized or disclosed at
fair value on a recurring basis at least annually, and amend the scope of Statement 157.
As described in Note 4, the Company adopted Statement 157 and the related FASB staff
positions except for those items specifically deferred under FSP No. FAS 157-2.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2008, the FASB issued EITF No. 07-5 Determining Whether an Instrument (or
Embedded Feature) Is Indexed to an Entitys Own Stock (EITF 07-5).
EITF 07-5 is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early application is
not permitted. Paragraph 11(a) of SFAS No. 133 specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to the Companys
own stock and (b) classified in shareholders equity in the statement of financial
position would not be considered a derivative financial instrument. EITF 07-5 provides a
new two-step model to be applied in determining whether a financial instrument or an
embedded feature is indexed to an issuers own stock and thus able to qualify for
the SFAS 133 paragraph 11(a) scope exception. The Company believes adopting this
statement will have no material impact on the consolidated financial statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 15

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

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

| | Effective
December 31, 2008, the Company adopted FASB Staff Position (FSP) APB 14-1. Accounting
for Convertible debt Instruments that may be settled in cash upon conversion. FSP
APB 14-1 specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entitys
nonconvertible debt borrowing rate when interest cost is recognized in subsequent
periods. This FSP is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. Therefore this
part of the standard will not be effective for the Company until our fiscal year ended
December 31, 2009, unless the Company elects early adoption. The Company is currently
evaluating the potential impact, if any, of the adoption of FSP APB 14-1 on its
consolidated financial statement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NOTE 3: |  | PREPAID
EXPENSES AND OTHER CURRENT ASSETS
|------- | - | -----------------------------------------

| |                        | December 31
| | ---------------------- | -----------
|
|
|
|
| | Government authorities |            
| | Prepaid expenses       |            
| | Other receivables      |            
| |                        |            
| |                        |            
| |                        |            
| |                        |            

|NOTE 4: |  | PROPERTY
AND EQUIPMENT, NET
|------- | - | ---------------------------

| |                                 | December 31
| | ------------------------------- | -----------
|
|
|
|
| | Computers and equipment         |            
| | Office furniture and equipment  |            
| | Leasehold improvements          |            
| |                                 |            
| |                                 |            
| |                                 |            
| | Less - accumulated depreciation |            
| |                                 |            
| |                                 |            
| |                                 |            
| |                                 |            

| | Depreciation
expenses were $ 82,000 in 2006, $ 81,000 in 2007 and $ 43,000 in 2008.
| | -----------------------------------------------------------------------------------

F - 16

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 5: |  | ACCRUED
EXPENSES
|------- | - | ----------------

| |                                            | December 31
| | ------------------------------------------ | -----------
|
|
|
|
| | Employee compensation and related accruals |            
| | Professional fees                          |            
| | Government authorities                     |            
| | Accrued interest on convertible loan       |            
| | Royalties related to sales                 |            
| | Other accrued expenses                     |            
| |                                            |            
| |                                            |            
| |                                            |            
| |                                            |            

|NOTE 6: |  | COMMITMENTS
AND CONTINGENT LIABILITIES
|------- | - | --------------------------------------

| | a. | Lease
obligations
| | -- | -----------------

| | The
Company operates primarily from leased facilities. Lease agreements expire through July
2009 and December, 2010. Annual minimum future rental payments due under the lease
agreements as of December 31, 2008 are approximately as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                  | Amount | 
| | -------------------------------- | ------ | 
|
|
|
|
| | For the year ending December 31, |        | 
| |                                  |        | 
| | 2009                             |        | 
| | 2010                             |        | 
| |                                  |        | 
| |                                  |        | 
| |                                  |        | 
| |                                  |        | 

| | Rent
expense, net of sublease income was $ 204,000 in 2006, $ 182,000 in 2007 and $ 110,000 in
2008.
| | ----------------------------------------------------------------------------------------------------

| | 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, $ 28,000 in 2006 and $
18,000 in 2007, and have been classified as cost of license revenues. No royalties
incurred in 2008.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 17

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 6: |  | COMMITMENTS
AND CONTINGENT LIABILITIES (Cont.)
|------- | - | ----------------------------------------------

| | 2. | The
Company participated in programs sponsored by the Israeli Government for the
               support of research and development activities. The Company is obligated
to pay                royalties to the Office of the Chief Scientist of Israels
Ministry of                Industry, Trade and Labor (the OCS) amounting to
3%-4.5% of the                sales of the products and other related revenues generated
from such activities                sponsored, up to 100% of the grants received, linked
to the U.S. dollar and bear                interest at the rate of LIBOR (as of December
31, 2008  2.19%). Total                amount of grants received or accrued, net of
royalties paid or accrued, as of                December 31, 2008, is approximately $ 580,000.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | As
of December 31, 2007 and 2008, the Company has an outstanding contingent
               obligation to pay royalties in the amount of approximately $ 31,000
and $                96,000, respectively, in respect of these grants.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NOTE 7: |  | 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, 2008, the Company holds 134,000 of its Ordinary shares as treasury shares
at an aggregate cost of approximately $ 100,000. Although such shares are legally
considered outstanding, the Company has no dividend or voting rights associated with its
treasury shares.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d. | Dividends
| | -- | ---------

| | The
Company has never paid cash dividends to shareholders.
| | ----------------------------------------------------------

F - 18

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 7: |  | SHAREHOLDERS DEFICIT
(Cont.)
|------- | - | -----------------------------

| | 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. There were no exercises of Additional Investment Rights.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company also issued to the Purchasers four series of Warrants of which the following
series of warrants are outstanding as of December 31, 2008 (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    
| |                   |      |               
| | Series C warrants |      |                | Four and a half years    
| |                   |      |                |                          
| |                   |      |               
| |                   |      |                |                          
| |                   |      |                |                          

| | 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 - 19

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 7: |  | SHAREHOLDERS DEFICIT
(Cont.)
|------- | - | -----------------------------

| | f. | Private
placement 2006:
| | -- | -----------------------

| | On
April 4, 2006, the Company signed definitive agreements for 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 in consideration for 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 Iinvestment 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
that the 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, 2008, the unamortized balance on the discount on convertible loan was $
157,000. 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 - 20

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 7: |  | 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 resulting 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s 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 of $ 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, 2008, 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 - 21

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 7: |  | 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 2006, 2007 and 2008 as no plan was available
to employees during these years. As of December 31, 2008, 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;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under
all option plans, any options that are cancelled or forfeited before expiration become
available for future grants. As of December 31, 2008, there are 10,553,837 options
available for future grant under the 1996 Option Plan and 2,520,953 under 2000 option plan
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revolving
line of credit facility:
| | ----------------------------------

| | In
connection with an old facility which was terminated in January 2006, 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 as 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 - 22

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 7: |  | SHAREHOLDERS DEFICIT
(Cont.)
|------- | - | -----------------------------

| | Transactions
related to the Companys stock option plans for each of the three years in the
period ended December 31, 2008 are summarized as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------

| |                                   | Options
outstanding | Weighted
average
exercise
price per
share | Weighted
average
remaining
contractual
term (in
years) | Aggregate
intrinsic value
| | --------------------------------- | ------------------- | ----------------------------------------- | ------------------------------------------------------ | -------------------------
|
|
|
|
| | Outstanding, January 1, 2006*)    |                     |                                           |                                                        | 3,032,880                
| | Granted                           |                     |                                           |                                                        | 5,613,333                
| | Forfeited, cancelled or expired   |                     |                                           |                                                        | (2,050,612               
| |                                   |                     |                                           |                                                        |                          
| |                                   |                     |                                          
| | Outstanding, January 31, 2007 *)  |                     |                                           |                                                        | 6,595,601                
| | Granted (1)                       |                     |                                           |                                                        | 9,865,039                
| | Forfeited, cancelled or expired   |                     |                                           |                                                        | (5,322,195               
| |                                   |                     |                                           |                                                        |                          
| |                                   |                     |                                          
| | Outstanding, January 1, 2008 *)   |                     |                                           |                                                        | 11,138,445               
| | Granted                           |                     |                                           |                                                        | 1,640,000                
| | Forfeited, cancelled or expired   |                     |                                           |                                                        | (2,117,673               
| |                                   |                     |                                           |                                                        |                          
| |                                   |                     |                                          
| | Outstanding, December 31, 2008 *) |                     |                                           |                                                        | 10,660,772               
| |                                   |                     |                                           |                                                        |                          
| |                                   |                     |                                          
| | Exercisable, December 31, 2006    |                     |                                           |                                                        | 1,028,417                
| |                                   |                     |                                           |                                                        |                          
| | Exercisable, December 31, 2007    |                     |                                           |                                                        | 2,465,331                
| |                                   |                     |                                           |                                                        |                          
| | Exercisable, December 31, 2008    |                     |                                           |                                                        | 5,025,240                
| |                                   |                     |                                           |                                                        |                          

| | *) | 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, 2008 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, 2008.
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, 2008 is zero.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (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 additional 75,000,000 convertible Preferred shares as
provided in the                Share Purchase Agreement dated April 4, 2006 (see f
above), the Chairman of the                Companys board will be granted at each
closing an additional option to                purchase 1% of the incremental number of
issued and outstanding Ordinary and                Preferred shares (on an as converted
basis) following each subsequent closing.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 23

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 7: |  | SHAREHOLDERS DEFICIT
(Cont.)
|------- | - | -----------------------------

| | During
2006 and 2007, pursuant to the exercise of the additional investment rights by the
investor 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock-based
compensation expenses included in the reported net loss totaled $ 128,000 in 2006, $ 131,000
in 2007 and $ 95,000 in 2008, as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------

| |                            | Year ended December 31,
| | -------------------------- | -----------------------
|
|
|
|
| | Research and development   |                        
| | Selling and marketing      |                        
| | General and administrative |                        
| |                            |                        
| |                            |                        
| | Total stock-based          |                        
| | compensation expense       |                        
| |                            |                        

| | Additional
information related to the Companys stock-based compensation awards is presented
below, along with the additional disclosures required by SFAS 123(R).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 24

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 7: |  | SHAREHOLDERS DEFICIT
(Cont.)
|------- | - | -----------------------------

| | The
following table summarizes the weighted average fair value of options granted for each of
the three years in the period ended December 31, 2008 at market price on date of grant:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For the Year Ended:                       | 
| | ----------------------------------------- | 
|
|
|
|
| | December 31, 2006:                        | 
| | Weighted average exercise price           | 
| | Weighted average fair value on grant date | 
| |                                           | 
| | December 31, 2007:                        | 
| | Weighted average exercise price           | 
| | Weighted average fair value on grant date | 
| |                                           | 
| | December 31, 2008:                        | 
| | Weighted average exercise price           | 
| | Weighted average fair value on grant date | 

| | As
of December 31, 2008, 5,025,240 options were vested and 5,633,032 options are expected to
vest. As of December 31, 2008, there was $ 412,000 of total unrecognized
compensation cost related to unvested stock options. Unrecognized compensation cost is
expected to be recognized over a weighted average period of 3.47 years. Average fair
value of shares vested during the year ended December 31, 2008 was $ 0.069.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NOTE 8: |  | RESEARCH
AND DEVELOPMENT, NET
|------- | - | -----------------------------

| |                                          | Year ended
December 31,
| | ---------------------------------------- | -----------------------
|
|
|
|
| | Research and development costs, net:     |                        
| |                                          |                        
| | Salaries and social benefits             |                        
| | Subcontractors and materials             |                        
| | Other expenses                           |                        
| |                                          |                        
| |                                          |                        
| |                                          |                        
| | Less - participation of Government funds |                        
| |                                          |                        
| |                                          |                        
| |                                          |                        
| |                                          |                        

F - 25

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 9: |  | FINANCIAL
EXPENSES, NET
|------- | - | -----------------------

| |                                          | Year ended December 31,
| | ---------------------------------------- | -----------------------
|
|
|
|
| | Financial expenses :                     |                        
| | Interest income                          |                        
| | Interest expenses                        |                        
| | Foreign currency translation adjustments |                        
| |                                          |                        
| |                                          |                        
| |                                          |                        
| |                                          |                        

|NOTE 10: |  | 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under
the Income Tax (Inflationary Adjustments) Law, 1985 (the Israeli law),
results for tax purposes in Israel are measured in real terms, in accordance with the
changes in the Israeli Consumer Price Index (Israeli CPI). Accordingly, until
2007, results for tax purposes were measured
in terms of earnings in NIS after certain adjustments for increases in the Israeli CPI.
Beginning January 1, 2008, the Inflationary Adjustments Law was repealed and 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 26

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 10: |  | TAXES
ON INCOME (cont.)
|-------- | - | -----------------------

| | 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, 2008, 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 letter 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 2009
and 25% in 2010 and 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 - 27

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 10: |  | TAXES
ON INCOME (cont.)
|-------- | - | -----------------------

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

| |               | Year ended December 31,
| | ------------- | -----------------------
|
|
|
|
| | Israel        |                        
| | United States |                        
| |               |                        
| |               |                        
| |               |                        
| |               |                        

| | e. | Taxes
on income are comprised of the following:
| | -- | -----------------------------------------------

| |          | Year ended December 31,
| | -------- | -----------------------
|
|
|
|
| | Foreign  |                        
| | Domestic |                        
| |          |                        
| |          |                        
| |          |                        
| |          |                        

| | f. | Net
operating losses:
| | -- | ---------------------

| | As
of December 31, 2008, the Companys net operating tax loss carry forwards in Israel
amounted to approximately $ 29.3 million. These net operating tax 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, 2008 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 - 28

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 10: |  | TAXES
ON INCOME (cont.)
|-------- | - | -----------------------

| | g. | Deferred
income taxes:
| | -- | ----------------------

| | Deferred
income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Companys deferred tax assets
are as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                   | December 31,
| | ------------------------------------------------- | ------------
|
|
|
|
| | Operating loss carryforward and deductions        |             
| | Reserves and allowances                           |             
| |                                                   |             
| |                                                   |             
| | Net deferred tax asset before valuation allowance |             
| | Valuation allowance                               |             
| |                                                   |             
| |                                                   |             
| | Net deferred tax asset                            |             
| |                                                   |             

| | As
of December 31, 2008, the Company has provided valuation allowance of $ 7,696
in respect of deferred tax assets resulting from tax loss carryforward and other
temporary differences. 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 and other temporary differences will not be realized in the foreseeable
future.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | h. | Final
tax assessments:
| | -- | ----------------------

| | The
Company has received final tax assessments in Israel and in the US, regarding tax years
through the end of 2004.
| | --------------------------------------------------------------------------------------------------------------------

| | i. | Reconciliation
of the tax expenses to the actual tax expenses:
| | -- | --------------------------------------------------------------

| | The
main reconciling items of the statutory tax rate of the Company (2006  31%, 2007
 29%,2008  27%) to the effective tax rate (0%) are valuation allowances
provided for deferred tax assets (in all reported periods) .
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | j. | 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 the Companys 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 the Companys tax provision if it was
more likely than not that the position would be sustained upon audit.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 29

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 10: |  | TAXES
ON INCOME (cont.)
|-------- | - | -----------------------

| | 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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, 2008                                    |                          
| | Reductions based on tax positions related to the current year |                          
| | Additions for tax positions of prior years                    |                          
| | Reductions for tax positions of prior years                   |                          
| |                                                               |                          
| |                                                               |                          
| | Balance at December 31, 2008                                  |                          
| |                                                               |                          

| | 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, 2008, the Israeli tax returns of the Company are open to examination by the
Israeli tax authorities for the tax years of 2005 through 2008.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NOTE 11: |  | RELATED
PARTY BALANCES AND TRANSACTIONS
|-------- | - | ---------------------------------------

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

| |                                       | December 31
| | ------------------------------------- | -----------
|
|
|
|
| | Accounts receivable                   |            
| | Accounts payable and accrued expenses |            

F - 30

---

---

|RADVIEW SOFTWARE LTD. AND ITS SUBSIDIARIES
|------------------------------------------
|                                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                          
|                                          

|NOTE 11: |  | RELATED
PARTY BALANCES AND TRANSACTIONS (Cont.)
|-------- | - | -----------------------------------------------

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

| |                            | Year ended December 31,
| | -------------------------- | -----------------------
|
|
|
|
| | Sales and marketing        |                        
| | Research and development   |                        
| | General and administrative |                        
| | Financial expenses, net    |                        
| |                            |                        
| |                            |                        
| | Total costs and expenses   |                        
| |                            |                        

|NOTE 12: |  | 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,
| | ------------- | -----------------------
|
|
|
|
| | United States |                        
| | Europe        |                        
| | Israel        |                        
| | Other         |                        
| |               |                        
| |               |                        
| |               |                        
| |               |                        

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

| |               | December 31
| | ------------- | -----------
|
|
|
|
| | United States |            
| | Israel        |            
| |               |            
| |               |            
| | Total         |            
| |               |            

|NOTE 13: |  | SUBSEQUENT
EVENT
|-------- | - | ----------------

| | In
February, 2009, a former employee commenced a proceeding for severance and vacation
payments and certain other claims in connection with the period of employment with the
Company. The Company denies all claims and any liability made by the former employee.
Based on management estimation and the opinion of its legal counsel, no provision was
recorded with respect to this claim.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 31

---

---

# 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 |  | 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)
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.6 |  | 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).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.7 |  | 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).
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.8 |  | 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).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.9 |  | 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).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.10 |  | 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)
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.11 |  | 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)
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

68

---

---

|4.12 |  | 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)
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.13 |  | 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).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.14 |  | 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.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

69

---

---

# 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: June 30, 2009

70

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