SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549
                                    FORM 20-F

[ ]        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, 2000
                                       or
[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                        For the transition period from   to
                        Commission file number: 000-29871

                                 RADVISION LTD.
              (Exact name of Registrant as specified in its charter
               and translation of Registrant's Name into English)

                                     Israel
                                (Jurisdiction of
                         incorporation or organization)

                24 Raoul Wallenberg Street, Tel Aviv 69719 Israel
                    (Address of principal executive offices)

 Securities registered or to be registered pursuant to Section 12(b) of the Act:

    Title of Each Class                Name of Each Exchange on Which Registered
    -------------------                -----------------------------------------
         None                                               N/A

 Securities registered or to be registered pursuant to Section 12(g) of the Act:

                       Ordinary Shares, NIS 0.1 Par Value
                                (Title of Class)

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

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:
                 Ordinary Shares, par value NIS 0.1 per share
                 as of December 31, 2000..........................19,144,984

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 ____

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

                                Item 17 __ Item 18 X



<PAGE>



                                TABLE OF CONTENTS

                                                                           Page


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.................................................1
             A.  Selected Financial Data.....................................1
             B.  Capitalization and Indebtedness.............................2
             C.  Reasons for the Offer and Use of Proceeds...................2
             D.  Risk Factors................................................2
   ITEM 4.   INFORMATION ON THE COMPANY.....................................13
             A.  History and Development of the Company.....................13
             B.  Business Overview..........................................14
             C.  Organizational Structure...................................30
             D.  Property, Plants and Equipment.............................30
   ITEM 5.   OPERATION AND FINANCIAL REVIEW AND PROSPECTS...................31
             A.  Operating Results..........................................31
             B.  Liquidity and Capital Resources............................42
             C.  Research and Development, Patents and Licenses.............44
             D.  Trend Information..........................................46
   ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.....................47
             A.  Directors and Senior Management............................47
             B.  Compensation...............................................55
             C.  Board Practices............................................56
             D.  Employees..................................................57
             E.  Share Ownership............................................58
   ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..............62
             A.  Major Shareholders.........................................62
             B.  Related Party Transactions.................................64
             C.  Interests of Experts and Counsel...........................68
   ITEM 8.   FINANCIAL INFORMATION..........................................68
             A.  Consolidated Statements and Other Financial Information....68
             B.  Significant Changes........................................69
   ITEM 9.   THE offer and listing..........................................69
             A.  Offer and Listing Details..................................69
             B.  Plan of Distribution.......................................70
             C.  Markets....................................................70
             D.  Selling Shareholders.......................................70
             E.  Dilution...................................................70
             F.  Expense of the Issue.......................................70
   ITEM 10.  ADDITIONAL INFORMATION.........................................70
             A.  Share Capital..............................................70
             B.  Memorandum and Articles of Association.....................70
             C.  Material Contracts.........................................73

                                       -i-

<PAGE>


             D.  Exchange Controls..........................................73
             E.  Taxation...................................................73
             F.  Dividend and Paying Agents.................................84
             G.  Statement by Experts.......................................84
             H.  Documents on Display.......................................84
             I.  Subsidiary Information.....................................85
   ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS.....85
   ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.........86

PART II.....................................................................86

   ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES................86
   ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
             AND USE OF PROCEEDS............................................86
   ITEM 15.  Reserved.......................................................87
   ITEM 16.  Reserved.......................................................88

PART III....................................................................88

   ITEM 17.  FINANCIAL STATEMENTS...........................................88
   ITEM 18.  FINANCIAL STATEMENTS...........................................88
   ITEM 19.  EXHIBITS.......................................................88
   S I G N A T U R E S......................................................90


                                       -ii-

<PAGE>




     The  statements  contained  in this  annual  report  that  are  not  purely
historical are forward-looking  statements. Such forward-looking statements also
include  statements  in  Item 4 -  "Information  on the  Company"  and  Item 5 -
"Operating and Financial Review and Prospects."  These statements  involve risks
and  uncertainties  and actual results could differ materially from such results
discussed in these  statements as a result of the risk factors set forth in this
annual report. All forward-looking statements included in this annual report are
based on  information  available  to us on the date  hereof,  and we  assume  no
obligation to update any such forward-looking statements.



                                     PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

     Not applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable

ITEM 3. KEY INFORMATION

A.   SELECTED FINANCIAL DATA

     The following selected  consolidated  financial data for and as of the five
years  ended  December  31,  2000,  are derived  from our  audited  consolidated
financial  statements which have been prepared in accordance with U.S. GAAP. Our
consolidated  financial statements were examined by Luboshitz Kasierer, a member
of Arthur Andersen,  independent auditors whose report with respect to the three
years ended  December  31, 2000 and as of December  31, 1999 and 1998 appears in
this Report.

<TABLE>
<CAPTION>
                                                     Year ended December 31,
                                      ------------------------------------------------------

                                        1996       1997       1998         1999       2000
                                      -------    -------    -------      -------    --------
                                              (in thousands, except per share data)
<S>                                   <C>        <C>        <C>          <C>        <C>
Consolidated Statement of
Operations Data:
Revenues.........................     $ 1,491    $ 4,899    $ 8,894      $17,550    $ 45,911
Cost of revenues.................         770      1,211      1,412        2,853      11,446
Gross profit.....................         721      3,689      7,482       14,697      34,465
Operating expenses:
Research and development.........       1,775      2,763      4,379        7,667      14,263
Less participation by the Chief
  Scientist......................         497        890      1,140        1,097         353
Research and development, net....       1,278      1,873      3,239        6,570      13,910
Marketing and selling, net.......       1,260      2,384      4,425        9,502      17,358
General and administrative.......         250        494        670        1,426       3,458
Royalties to Chief Scientist.....           -          -          -            -       3,666
Total operating expenses.........       2,788      4,751      8,334       17,498      38,392

</TABLE>


<PAGE>

<TABLE>
<S>                                   <C>        <C>        <C>          <C>        <C>
Operating loss...................      (2,067)    (1,062)      (852)      (2,801)     (3,927)
Financing income (expenses), net.          42          6         23          105       4,176
Net income (loss)................     $(2,025)   $(1,056)   $  (829)     $(2,696)   $    249
Net earnings (loss) per ordinary
  share..........................     $ (0.21)   $ (0.10)   $ (0.08)     $ (0.26)   $  0.014
Weighted average number of
  ordinary shares................       9,499     10,234     10,492       10,538      17,174
Diluted earnings (loss) per
  ordinary share.................           -          -    $ (0.08)     $ (0.26)   $  0.013
Weighted average number of
   ordinary  shares..............           -          -     10,492       10,538      19,873

</TABLE>


<TABLE>
<CAPTION>
                                                           December 31,
                                      ------------------------------------------------------
                                        1996       1997       1998         1999       2000
                                      -------    -------    -------      -------    --------
                                                          (in thousands)
<S>                                   <C>        <C>        <C>          <C>        <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents........     $ 1,349    $   435    $ 3,305      $ 2,605    $ 41,617
Working capital..................       1,071        873      4,318          814      73,659
Total assets.....................       3,073      3,704      9,371       13,261     116,350
Total  bank  debt,   less   current
  maturities......................         23        106        130           67          19
Shareholders' equity.............       1,453      1,363      5,450        3,481      94,345

</TABLE>

B.   CAPITALIZATION AND INDEBTEDNESS

     Not applicable

C.   REASONS FOR THE OFFER AND USE OF PROCEEDS

     Not applicable

D.   RISK FACTORS

     Investing  in our  ordinary  shares  involves  a high  degree  of risk  and
uncertainty. You should carefully consider the risks and uncertainties described
below before  investing in our ordinary  shares.  If any of the following  risks
actually occurs,  our business,  prospects,  financial  condition and results of
operations could be harmed. In that case, the value of our ordinary shares could
decline, and you could lose all or part of your investment.

Risks Relating to Our Business

We have a  history  of  losses  and we cannot  assure  you that we will  operate
profitably in the future.

     We incurred  significant  losses in every  fiscal  year from our  inception
until 1999, and we incurred an operating loss in 2000. We reported net losses of
$829,000 and  $2,696,000 in 1998 and 1999 and incurred an operating  loss before
financing  income of  $3,927,000 in 2000. We may continue to incur losses in the
future.  As of December 31, 2000, our  accumulated  deficit was  $9,028,000.  We
cannot assure you that we will operate profitably in the future.

                                      -2-

<PAGE>




Our  quarterly  financial  performance  is likely to vary  significantly  in the
future.  Our revenues and operating results in any quarter may not be indicative
of our future  performance and it may be difficult for investors to evaluate our
prospects.

     Our quarterly  revenues and operating results have varied  significantly in
the past  and are  likely  to  continue  to vary  significantly  in the  future.
Fluctuations  in our quarterly  financial  performance  may result from the fact
that we may  receive a small  number  of  relatively  large  orders in any given
quarter.  Because these orders generate  disproportionately  large revenues, our
revenues  and the rate of  growth of our  revenues  for that  quarter  may reach
levels that may not be sustained in subsequent  quarters.  In addition,  some of
our products  have lengthy sales cycles.  For example,  it typically  takes from
three to twelve  months  after we first  begin  discussions  with a  prospective
customer  before we receive an order from that customer.  We also have a limited
order backlog, which makes revenues in any quarter substantially  dependent upon
orders we deliver in that quarter.  Because of these  factors,  our revenues and
operating  results  in any  quarter  may  not  meet  market  expectations  or be
indicative  of future  performance  and it may be  difficult  for  investors  to
evaluate our prospects.

Unless our revenues grow in excess of our  increasing  expenses,  we will not be
profitable.

We expect that our operating expenses will increase significantly in the future,
both to finance the planned  expansion of our sales and  marketing  and research
and development  activities and to fund the anticipated  growth in our revenues.
However,  our  revenues  may not grow apace or even  continue  at their  current
level. If our revenues do not increase as anticipated or if expenses increase at
a greater pace than our revenues, we will not be profitable.  Even if we achieve
profitability,  we may not be able to sustain  or  increase  profitability  on a
quarterly or annual basis.

If the use of packet-based  networks as a medium for real-time voice,  video and
data  communications  does not continue to grow, the demand for our products and
technology will slow and our revenues will decline.

     Our  future  success  depends  on the  growth  in the  use of  packet-based
networks,  including  the  Internet  and  other IP  networks,  as a  medium  for
real-time  voice,  video  and data  communications.  If the use of  packet-based
networks does not expand,  the demand for our products and technology  will slow
and our revenues will decline.  Market acceptance of packet-based  networks as a
viable  alternative  to  circuit-switched   networks  for  the  transmission  of
real-time voice and video  communications  is not proven and may be inhibited by
concerns about quality of service and potentially  inadequate development of the
necessary infrastructure.

We must  develop  new  products  and  technology  and  enhancements  to existing
products and technology to remain competitive.  If we fail to do so, we may lose
market share to our competitors and our revenues may decline.

     The  market for our  products  and  technology  is  characterized  by rapid
technological  change,  new  and  improved  product  introductions,  changes  in
customer  requirements and evolving industry standards.  Our future success will
depend to a substantial extent on our ability to:

                                      -3-

<PAGE>




     o    timely identify new market trends; and

     o    develop,   introduce  and  support  new  and  enhanced   products  and
          technology on a successful and timely basis.

     If we fail to develop and deploy new products and technology or product and
technology  enhancements  on a successful  and timely basis,  we may lose market
share to our competitors and our revenues may decline.

     We are currently developing new products and technology and enhancements to
our existing products and technology.  We may not be successful in developing or
introducing these or any other new products or technology to the market.

We have invested,  and will continue to invest, in products and technology which
comply with those  industry  standards  which we believe have been,  or will be,
broadly  adopted.  If one or more  alternative  standards  were to gain  greater
acceptance than the standards which we believe have or will be broadly  adopted,
sales of our products and technology might suffer.

     Currently, we offer networking products that comply with the H.323 industry
standard  for  real-time  voice,  video  and  data  communications  over  packet
networks.  During 2000, we expanded our enabling  technology  product  family to
include  additional  key IP  protocols.  Our current  suite of IP  communication
protocol  toolkits  include  H.323,  SIP,  MGCP and MEGACO.  We believe  that IP
networks will be designed with components  built around each of these protocols.
If these expectations  ultimately prove to be incorrect,  our investments may be
of little or no value.

We rely on a small number of  marketing  partners  who  distribute  our products
either under our name or as private label products for a significant  portion of
our business.

     We rely in great  measure  on OEMs,  systems  integrators  and value  added
resellers,  or VARs,  to sell  our  products.  Our OEM  customers  purchase  our
products  to  integrate  with  products  that they  developed  in-house to build
complete IP communications  solutions.  Our systems integrator  customers either
purchase  our full suite of products or  integrate  our  individual  products of
other  manufacturers  to build  complete IP  communications  solutions.  Our VAR
customers  purchase our products to resell to end-users as separate units, or as
part of a family of related product offerings,  either under our RADVISION label
or under  their  private  label.  If we are unable to maintain  these  marketing
partners or obtain new marketing partners, our future revenues and profitability
will be affected and we may lose market share.


Competition  in the markets for our products and  technology is intense.  We may
not be able to compete effectively in these markets and we may lose market share
to our competitors.

     The markets for our products and technology are highly  competitive  and we
expect  competition  to intensify  in the future.  We may not be able to compete
effectively  in these  markets and we may lose market share to our  competitors.
The principal competitors in the

                                      -4-

<PAGE>


market for our products  currently  include  Polycom Inc. which acquired  Accord
Networks Inc., First Virtual Communications,  which merged with CUseeMe Networks
Inc.  (formerly  known as White Pine Software Inc.),  Ezenia  (formerly known as
Video-Server),   and  the  in-house  developers  employed  by  manufacturers  of
telecommunications  equipment  and systems.  Our  principal  competitors  in the
market  for our  technology  which is  primarily  sold in the  form of  software
development  kits,  currently  include  DynamicSoft,  Trillium  Digital  Systems
(acquired  by  Intel  in  Q42000)  and  Hughes  Software   Systems.   Additional
competitors may enter each of our markets at any time.  Moreover,  our customers
may seek to develop  internally  the products that we currently sell to them and
compete with us.

Our software  development kit revenues will decrease if our customers  choose to
use source code which is available for free.

     Both Vovida  Networks,  Inc.  (now part of Cisco Systems Inc.) and OpenH323
offer H.323 source code for free. In addition, Vovida offers MGCP and SIP source
code for free.  If our  customers  choose to use the free source code offered by
these organizations instead of purchasing our technology,  our revenues from the
sale of our software development kits will decline.  Other companies,  including
Microsoft may offer similar development kits as part of their product offerings.

Most of our  competitors  have greater  resources than we do. This may limit our
ability  to  compete  effectively  with  them  and  discourage   customers  from
purchasing our products and technology.

     Most  of our  competitors  have  greater  financial,  personnel  and  other
resources  than we do, which may limit our ability to compete  effectively  with
them.  These  competitors may be able to respond more quickly to new or emerging
technologies or changes in customer requirements. These competitors may also:

     o    benefit from greater economies of scale;

     o    offer more aggressive pricing; or

     o    devote greater resources to the promotion of their products.

     Any of these  advantages  may  discourage  customers  from  purchasing  our
products and technology.  If we are unable to compete  successfully  against our
existing or potential competitors, our revenues and margins will decline.

Our agreements with our customers do not have minimum purchase requirements.  If
our customers  decrease or cease  purchasing  our products and  technology,  our
revenues will decline.

     Our agreements with our customers do not have minimum purchase requirements
nor do they require our  customers  to purchase any products  from us. If any or
all of our customers cease to purchase or reduce their purchases of our products
and technology at any time, our revenues will decline. We cannot assure you that
our  customers  will not choose to  independently  develop  for  themselves,  or
purchase from others, products and technology similar to our products and


                                      -5-
<PAGE>


technology.  Moreover,  if our customers do not successfully market and sell the
systems and products into which they  incorporate  our products and  technology,
the demand of these customers for our products and technology will decline.  Our
customers' sales of systems and products  containing our products and technology
may be  adversely  affected by  circumstances  over which we have no control and
over which our customers may have little, if any, control.

We are dependent upon a limited number of suppliers of key components.  If these
suppliers  delay  or  discontinue  manufacture  of  these  components,   we  may
experience  delays in shipments,  increased costs and cancellation of orders for
our products.

     We currently  obtain key components used in the manufacture of our products
from a single  supplier or from a limited  number of  suppliers.  We do not have
long-term  supply  contracts  with our  suppliers.  Any delays in delivery of or
shortages in these  components  could interrupt and delay  manufacturing  of our
products and result in the cancellation of orders for our products. In addition,
these suppliers could  discontinue the manufacture or supply of these components
at any time. We may not be able to identify and integrate alternative sources of
supply in a timely fashion or at all. Any transition to alternate  suppliers may
result in delays in shipment and increased expenses and may limit our ability to
deliver products to our customers.  Furthermore, if we are unable to identify an
alternative  source of supply,  we would have to modify  our  products  to use a
substitute component, which may cause delays in shipments,  increased design and
manufacturing costs and increased prices for our products.

We intend to  manufacture  and maintain an inventory of customized  products for
some customers who will have no obligation to purchase these products.  If these
customers fail to purchase these products, our financial results may be harmed.

     To satisfy  the timing  requirements  of some of our larger  customers,  we
intend to manufacture  and maintain an inventory of some of our products that we
will  customize  to the  specifications  of  these  customers.  The size of this
inventory  will be based upon the  purchasing  history  and  forecasts  of these
customers,  which we currently  estimate to be approximately two months of sales
to these  customers.  These  customers  will have no  obligation to purchase the
inventoried  products at any time.  If the  customers  for whom the  inventoried
products are manufactured do not purchase them, we may be required to modify the
products  for sale to others and we may be unable to find other  purchasers.  In
either case,  the value of the products may be materially  diminished  which may
have a negative impact on our financial results.

Undetected errors may increase our costs and impair the market acceptance of our
products and technology.

     Our products and technology  have  occasionally  contained,  and may in the
future contain, undetected errors when first introduced or when new versions are
released.  Our customers  integrate our products and technology into systems and
products  that they  develop  themselves  or acquire  from other  vendors.  As a
result,  when problems occur in equipment or a system into which our products or
technology have been incorporated,  it may be difficult to identify the cause of
the  problem.  Regardless  of the  source of these  errors,  we must  divert the
attention of our engineering personnel from our research and development efforts
to address the errors.  We cannot assure you that we will not incur  warranty or
repair costs, be subject to liability claims for


                                      -6-
<PAGE>


damages  related to  product  errors or  experience  delays as a result of these
errors in the future.  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 technology or the products of another
vendor, may result in significant  customer relations problems and injury to our
reputation and may impair the market acceptance of our products and technology.

We rely on third  party  technology  licenses.  If we are unable to  continue to
license this  technology on reasonable  terms, we may face delays in releases of
our  products  and may be required to reduce the  functionality  of our products
derived from this technology.

     We rely on  technology  that  we  license  from  third  parties,  including
software that is integrated with internally  developed  software and used in our
products  to  perform  key  functions.   For  example,  we  license  T.120  data
collaboration  software  from Data  Connection  Limited  and  voice  compression
technology  from  Siemens.  If we are unable to  continue to license any of this
software on  commercially  reasonable  terms, we will face delays in releases of
our  products or will be required to reduce the  functionality  of our  products
until  equivalent  technology  can be  identified,  licensed or  developed,  and
integrated into our current products.

Third parties may infringe upon or  misappropriate  our  intellectual  property,
which could impair our ability to compete  effectively and negatively affect our
profitability.

     Our success  depends upon the protection of our  technology,  trade secrets
and trademarks.  Our  profitability  could suffer if third parties infringe upon
our  intellectual  property  rights or  misappropriate  our technology and other
assets.  To  protect  our  rights  to our  intellectual  property,  we rely on a
combination  of  trade  secret   protection,   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.  Failure to  adequately  protect or to  promptly
detect  unauthorized  use  of  our  intellectual   property  could  devalue  our
proprietary  content  and impair our  ability to compete  effectively.  Further,
defending our  intellectual  property  rights could result in the expenditure of
significant  financial and managerial  resources,  whether or not the defense is
successful.

Our products may infringe on the intellectual  property rights of others,  which
could increase our costs and negatively affect our profitability.

     Third parties may assert against us  infringement  claims or claims that we
have  infringed  a  patent,  copyright,  trademark  or other  proprietary  right
belonging  to them.  For example,  in 1998,  Lucent  alleged that some  products
manufactured by us infringed  specified Lucent patents.  See "Item 8A. Financial
Information - Consolidated  Statements and Other  Financial  Information,  Legal
Proceedings." Any infringement  claim, even if not meritorious,  could result in
the  expenditure  of significant  financial and  managerial  resources and could
negatively affect our profitability.


                                      -7-
<PAGE>




Our growth will continue to place a significant strain on our resources and must
be managed  effectively.  If we are unable to manage  our  expanding  operations
effectively,  our revenues may not increase, our cost of operations may rise and
we may remain unprofitable.

     Because  of the  growth in our  revenues,  we are  actively  expanding  our
operations. If we are unable to manage our expanding operations effectively, our
revenues may not  increase,  our cost of  operations  may rise and we may remain
unprofitable.  From January 1, 1998 through December 31, 2000, the number of our
employees increased from 42 to 280. This growth has placed, and will continue to
place,  a  significant  strain  on our  managerial,  operational  and  financial
resources. We cannot assure you that:

     o    we have made  adequate  allowance  for the costs and risks  associated
          with this expansion; or

     o    our systems,  procedures  or controls  will be adequate to support our
          expanding operations.

     Any delay in implementing,  or transitioning  to, new or enhanced  systems,
procedures or controls may seriously  harm our ability to forecast  sales demand
accurately,  manage our product  inventory  and record and report  financial and
management information on a timely and accurate basis.

We are  dependent  on our senior  management.  Any loss of the  services  of our
senior management could negatively affect our business.

     Our future success  depends to a large extent on the continued  services of
our senior management and key personnel.  We do not carry key-man life insurance
for any of our senior  management.  Any loss of the  services  of members of our
senior management or other key personnel could negatively affect our business.

Our business could be adversely  affected if our senior managers,  including our
new chief executive officer, do not work together effectively as a team.

     Our chief executive  officer joined us in April 2001 and has not previously
worked with us. If our senior  managers do not work  together  effectively  as a
team to  successfully  manage  our  growth,  our  business  could  be  adversely
affected.

Our failure to retain and attract personnel could harm our business,  operations
and product development efforts.

     Our products require sophisticated research and development,  marketing and
sales,  and technical  customer  support.  Our success depends on our ability to
attract,  train and retain  qualified  research and  development,  marketing and
sales  and  technical  customer  support   personnel.   We  intend  to  increase
substantially   the  number  of  our  employees  who  perform  these  functions.
Competition  for  personnel  in all of these  areas is intense and we may not be
able  to  hire  sufficient  personnel  to  achieve  our  goals  or  support  the
anticipated growth in our business. The market for the highly-trained  personnel
we require is very competitive, due to the limited


                                      -8-
<PAGE>


number of people available with the necessary technical skills and understanding
of our  products  and  technology.  If we fail to attract  and retain  qualified
personnel,  our  business,  operations  and product  development  efforts  would
suffer.

Our non-competition agreements with our employees may not be enforceable. If any
of these  employees  leaves  us and joins a  competitor,  our  competitor  could
benefit from the expertise our former employee gained while working for us.

     We currently  have  non-competition  agreements  with our key  employees in
Israel. These agreements prohibit those employees, if they cease to work for us,
from directly  competing with us or working for our  competitors.  Under current
U.S.  and  Israeli  law,  we may not be able to  enforce  these  non-competition
agreements. If we are unable to enforce any of these agreements, our competitors
that employ our former  employees  could  benefit from the  expertise our former
employees   gained  while   working  for  us.  In  addition,   we  do  not  have
non-competition agreements with our employees outside of Israel.

Government  regulation  could delay or prevent product  offerings,  resulting in
decreased revenues.

     Our  products  are  designed  to  operate  with  local  telephone   systems
throughout  the world and  therefore  must  comply with the  regulations  of the
Federal   Communications   Commission  and  other   regulations   affecting  the
transmission of voice, video and data over  telecommunications  and other media.
Each time we  introduce a new  product,  we are  required  to obtain  regulatory
approval  in the  countries  in  which  it is  offered.  In  addition,  we  must
periodically  obtain  renewals of the  regulatory  approvals  for the use of our
products in countries where we have already obtained approval.  We cannot assure
you that  regulatory  approval for our current  products will be renewed or that
regulatory  approval for future  products will be obtained.  If we do not obtain
the necessary  approvals and renewals,  we may be required to delay the sales of
our products in those  countries  until  approval for use is granted or renewed.
This could result in decreased revenues.

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 decrease our revenues.

     We are  incorporated  under  the laws  of,  and our  main  offices  and our
production  facilities  are  located  in, the State of Israel.  We are  directly
affected by the political,  economic and military  conditions  affecting Israel.
Any major  hostilities  involving  Israel or the  interruption or curtailment of
trade  between  Israel and its present  trading  partners  could have a material
adverse effect on our business,  financial  condition and results of operations.
Since the establishment of the State of Israel in 1948, a state of hostility has
existed, varying in degree and intensity, between Israel and the Arab countries.
While  Israel has entered into peace  agreements  with both Egypt and Jordan and
several other countries have announced  their  intentions to establish trade and
other relations with Israel,  Israel has not entered into any peace  arrangement
with Syria or Lebanon.  Moreover,  while Israel is in the process of  conducting
peace  negotiations with the Palestinian  Authority,  since September 2000 there
has been a significant deterioration in the


                                      -9-
<PAGE>


relationship  between  Israel and the  Palestinian  Authority and as a result of
riots in Gaza and the West Bank,  the peace  process  between  the  parties  has
stagnated.  Efforts to resolve the problem have failed to result in an agreeable
solution. Continued hostilities between the Palestinian community and Israel and
any failure to settle the  conflict  may have a material  adverse  effect on our
business and us. Further deterioration of hostilities into a full scale conflict
might require more widespread military reserve service by some of our employees,
which may have a material adverse effect on our business.

Because all of our revenues are  generated in U.S.  dollars or are linked to the
U.S. dollar while a portion of our expenses are incurred in new Israeli shekels,
our results of operations would be adversely  affected if inflation in Israel is
not offset on a timely basis by a devaluation  of the new Israeli shekel against
the U.S. dollar.

     All of our  revenues  are in dollars or are linked to the  dollar,  while a
portion  of  our  expenses,  principally  salaries  and  the  related  personnel
expenses, are in new Israeli shekels, or NIS. As a result, we are exposed to the
risk that the rate of inflation in Israel will exceed the rate of devaluation of
the NIS in  relation to the dollar or that the timing of this  devaluation  lags
behind inflation in Israel.  This would have the effect of increasing the dollar
cost of our  operations.  In 1997 and 1998,  the rate of  devaluation of the NIS
against the dollar exceeded the rate of inflation,  a reversal from prior years.
However,  in 1999 and 2000  while  the rate of  inflation  was low,  there was a
devaluation  of the dollar  against the NIS. We cannot predict any future trends
in the rate of inflation in Israel or the rate of devaluation of the NIS against
the  dollar.  If the dollar  cost of our  operations  in Israel  increases,  our
dollar-measured results of operations will be adversely affected.

The tax benefits that we currently receive from our approved enterprise programs
require  us to  satisfy  specified  conditions.  If we  fail  to  satisfy  these
conditions,  we may be  required  to pay  additional  taxes and would  likely be
denied these benefits in the future.

     The  Investment  Center of the  Ministry of Industry  and Trade has granted
approved  enterprise status to several investment  programs at our manufacturing
facility.  The  portion of our income  derived  from these  approved  enterprise
programs  commencing  when we begin to generate  net income from these  programs
will be  exempt  from tax for a period of two  years  and will be  subject  to a
reduced tax for an additional  five to eight years,  depending on the percentage
of our share capital held by non-Israelis. The benefits available to an approved
enterprise  program are dependent upon the fulfillment of conditions  stipulated
in applicable law and in the certificate of approval.  If we fail to comply with
these  conditions,  in whole or in part,  we may be required  to pay  additional
taxes for the period in which we benefited from the tax exemption or reduced tax
rates and would likely be denied these benefits in the future.

We may be adversely affected by proposed tax reform in Israel.

     On July 26, 2000, the Government of Israel published a legislative proposal
which adopts the  recommendations of a committee chaired by the Director General
of the Israeli  Ministry of Finance  regarding a sweeping  reform in the Israeli
system of taxation.  The proposed reform would  significantly alter the taxation
of individuals  and would also affect  corporate  taxation.  In particular,  the
proposed reform would reduce but not eliminate, the tax benefits available to

                                      -10-

<PAGE>


facilities  that  were  granted  approved   enterprise  status,  such  as  ours.
Implementation  of the reform requires  legislation by Israel's  parliament.  We
cannot be certain whether the proposed  reform will be adopted,  when it will be
adopted or what form any reform will ultimately take or what effect it will have
on our company.

It may be  difficult  to  enforce  a U.S.  judgment  against  us and most of our
officers  and  directors or to assert U.S.  securities  laws claims in Israel or
serve process on most of our officers and directors.

        We are  incorporated  in  Israel.  Most of our  executive  officers  and
directors are  nonresidents of the United States,  and a substantial  portion of
our  assets and the  assets of these  persons  are  located  outside  the United
States.  Therefore,  it may be difficult for an investor, or any other person or
entity,  to  enforce  a U.S.  court  judgment  based  upon the  civil  liability
provisions of the U.S. federal securities laws in an Israeli court against us or
any of those  persons or to effect  service of process upon these persons in the
United States.  Additionally,  it may be difficult for an investor, or any other
person or entity,  to enforce civil  liabilities  under U.S. federal  securities
laws in original actions instituted in Israel.

Risk factors related to our ordinary shares

Holders of our ordinary  shares who are United States  residents face income tax
risks.

     There is a substantial risk that we will be classified as a passive foreign
investment company ("PFIC"). Our treatment as a PFIC could result in a reduction
in the after-tax  return to the holders of our ordinary  shares and would likely
cause a  reduction  in the value of such  shares.  For U.S.  Federal  income tax
purposes,  we will be  classified as a PFIC for any taxable year in which either
(i) 75% or more of our gross income is passive  income,  or (ii) at least 50% of
the average  value of all of our assets for the taxable year produce or are held
for the production of passive income. For this purpose,  passive income includes
dividends,  interest,  royalties,  rents, annuities and the excess of gains over
losses from the disposition of assets which produce  passive income.  If we were
determined to be a PFIC for U.S.  federal  income tax purposes,  highly  complex
rules would apply to U.S. Holders owning ordinary shares.  Accordingly,  you are
urged to consult your tax advisors regarding the application of such rules.

     As a result of our  substantial  cash position and the decline in the value
of our stock,  there is a substantial  risk that we will be classified as a PFIC
under the asset test described in the preceding paragraph.  However, because the
determination  of  whether we are a PFIC is based  upon the  composition  of our
income and assets  from time to time,  this  determination  can not be made with
certainty until the end of the calendar year.

     United  States  residents  should  carefully  read  "Item  10E.  Additional
Information - Taxation,  United States  Federal Income Tax  Consequences"  for a
more complete  discussion of the U.S. federal income tax risks related to owning
and disposing of our ordinary shares.

                                      -11-

<PAGE>




Our share price has been volatile in the past and may decline in the future.

     Our ordinary shares have  experienced  significant  market price and volume
fluctuations in the past and may experience  significant market price and volume
fluctuations in the future in response to factors such as the following, some of
which are beyond our control:

     o    quarterly variations in our operating results;

     o    operating  results  that  vary  from the  expectations  of  securities
          analysts and investors;

     o    changes  in  expectations  as to  our  future  financial  performance,
          including financial estimates by securities analysts and investors;

     o    announcements  of  technological  innovations or new products by us or
          our competitors;

     o    announcements  by us or  our  competitors  of  significant  contracts,
          acquisitions,   strategic  partnerships,  joint  ventures  or  capital
          commitments;

     o    changes in the status of our intellectual property rights;

     o    announcements  by third parties of  significant  claims or proceedings
          against us;

     o    additions or departures of key personnel;

     o    future sales of our ordinary shares; and

     o    stock market price and volume fluctuations.

     Domestic and international stock markets often experience extreme price and
volume  fluctuations.  Market  fluctuations,  as well as general  political  and
economic  conditions,  such as a  recession  or interest  rate or currency  rate
fluctuations or political events or hostilities in or surrounding Israel,  could
adversely affect the market price of our ordinary shares.

     In the past,  securities  class  action  litigation  has often been brought
against a company  following  periods of  volatility  in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert  management's  attention
and resources.

Anti-takeover provisions could negatively impact our shareholders.

     The new Israeli  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 25%  shareholder of the company.  This
rule does not apply if there is already  another 25% shareholder of the company.
Similarly, the Israeli 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 45% shareholder of the company.  There
is an


                                      -12-
<PAGE>


exception to this provision,  if someone else is already a majority  shareholder
of the company.  Regulations  under the Companies Law provide that the Companies
Law's  tender  offer rules do not apply to a company  whose  shares are publicly
traded outside of Israel, if pursuant to the applicable  foreign securities laws
and stock exchange rules there is a restriction on the  acquisition of any level
of control of the company,  or if the acquisition of any level of control of the
company   requires  the   purchaser  to  make  a  tender  offer  to  the  public
shareholders.

     Finally,   Israeli  tax  law  treats  certain  acquisitions,   particularly
stock-for-stock  swaps between an Israeli  company and a foreign  company,  less
favorably than United States tax law. Israeli tax law may, for instance, subject
a  shareholder  who  exchanges  his  company  shares  for  shares  in a  foreign
corporation to immediate taxation.

We do not intend to pay dividends.

     We have never declared or paid any cash  dividends on our ordinary  shares.
We  currently  intend to retain any future  earnings to finance  operations  and
expand our business  and,  therefore,  do not expect to pay any dividends in the
foreseeable future.

ITEM 4. INFORMATION ON THE COMPANY

A.   HISTORY AND DEVELOPMENT OF THE COMPANY

     Our legal and commercial name is RADVISION LTD. We were incorporated  under
the  laws of the  State  of  Israel  in 1992 for an  indefinite  term and  began
operations  in October  1992.  Our  registered  office and  principal  executive
offices are located at 24 Raoul  Wallenberg St., Tel Aviv 69719,  Israel and our
telephone  number  is  011-972-3-645-5220.   Our  address  on  the  internet  is
www.radvision.com.  The  information  on  our  website  is not  incorporated  by
reference into this annual report.

     From our  inception  until our initial  public  offering in March 2000,  we
financed our  operations  through cash generated by operations and a combination
of private placements of our share capital and borrowings under lines of credit.
Through December 31, 1999, we raised a total of  approximately  $12.2 million in
aggregate  net  proceeds in four  private  placements.  In March  2000,  we sold
4,370,000  of our  ordinary  shares in an initial  public  offering  and 590,822
ordinary shares in a private  placement to Samsung Electro Mechanics and Samsung
Venture  Investment  Corporation,  members of the  Samsung  group,  and  Siemens
Aktiengesellschraft.  We received net proceeds of $89.2  million from the public
offering and private  placement.  As of December 31, 2000, we had  approximately
$41.6 million in cash and cash  equivalents,  $39.5 million in short-term liquid
investments and $15.9 in long-term liquid investments  totaling $97.0 million in
cash and liquid  investments.  Our working capital at year-end was approximately
$73.7 million.  For a discussion of our capital  expenditures and  divestitures,
see "Item 5-Operating and Financial Review and  Prospects-Liquidity  and Capital
Resources."

     We  are  a  leading  designer,  developer  and  supplier  of  products  and
technology  that enable  real-time  voice,  video and data  communications  over
packet networks, including the Internet and other networks based on the Internet
protocol or IP. Our products and technology are used by our customers to develop
systems that enable  enterprises  and service  providers to use next  generation
packet networks for real-time IP communications. We have approximately 400

                                      -13-

<PAGE>


customers  worldwide  including  Alcatel,  Bosch,  Cisco, NTT, Nortel,  Philips,
Panasonic, Samsung, Shanghai Bell, Siemens and Sony.

     In the  latter  part of  2000,  we  created  two  separate  business  units
corresponding  to our two product  lines to enable our product  development  and
product  marketing  teams to respond  quickly to evolving  market needs with new
product   introductions.   The  "Networking"  business  unit  (NBU)  focuses  on
networking  products,  and it is responsible for developing  networking products
for IP-centric  voice,  video and data  conferencing  services.  Enterprises and
service providers of all sizes use our family of innovative, scalable and market
proven IP-centric  networking solutions for migrating from traditional telephony
to converged networks.  The "Technology" business unit (TBU) focuses on creating
developer  toolkits for the  underlying IP  communication  protocols  needed for
real-time  voice and video  over IP.  Industry  giants and  emerging  technology
companies use our family of IP communication  protocol  toolkits to reduce their
time to market for developing interoperable, standards-compliant V2oIP products,
applications and services. Today you may find RADVISION protocols implemented in
a wide range of  environments  from  chipsets,  to simple user  devices  like IP
phones and video systems,  through  carrier class network devices like gateways,
switches and softswitches.

     The new organizational structure allows us to be more nimble and responsive
to the different market dynamics and product  requirements  that derive from the
development of our enabling  technologies  for developers and the development of
our networking solutions for customers who are deploying IP-centric networks.

B.   BUSINESS OVERVIEW

Industry Background

Growth in Communications

     In recent years,  communications  networks have experienced dramatic growth
in traffic.  This  growth is  expected  to continue  due to a number of factors,
including:

     o    an increasing  need for enterprises to expand their networks to enable
          them to send, access and receive information quickly, economically and
          globally;

     o    an  increasing  use of the  Internet  and other  packet  networks  for
          communicating and engaging in commercial transactions;

     o    an increase in available bandwidth at declining prices; and

     o    the introduction of new voice, video and data communications  services
          and applications.

Limitations of Traditional Networks

     Traditionally, circuit-switched networks have been the principal medium for
the  transmission of  communications.  Circuit-switched  technology  dedicates a
circuit  with a fixed amount of  bandwidth  for the duration of the  connection,
regardless of a user's actual bandwidth

                                      -14-

<PAGE>


usage. The recent growth in data communications traffic, particularly the growth
in the number of Internet users, has placed significant  strains on the capacity
of  traditional   circuit-switched  networks.   Circuit-switched  networks  were
initially deployed to handle only voice communications.  These networks were not
designed  to handle  data  efficiently  and  cannot  scale  cost-effectively  to
accommodate the growth in data traffic. Moreover, circuit-switched networks were
built  based on  proprietary,  complex  technologies,  which  have  historically
limited  the  entrance of new  competitors  and  hindered  the  development  and
introduction of new services.

Advantages of Packet-based Networks

     While circuit-switched  networks were principally designed to handle analog
voice traffic,  packet-based networks were principally designed for transmitting
digital  information.  Packet-based  networks,  including IP networks,  transmit
voice,  video and data  information in the form of small digital packages called
packets.  Voice,  video  and  data  packets  are  sent  over  a  single  network
simultaneously and reassembled at the destination. Packet switching enables more
efficient  utilization of available  network  bandwidth than  circuit-switching,
allowing  more  calls to  travel  through  a packet  network  at the same  time.
Moreover,  packet networks allow for the cost-efficient expansion of capacity as
communications traffic increases.  In addition,  packet networks are built using
open standards, like IP, which promote competition by allowing different vendors
to build products and applications  that can interoperate  with one another.  By
using packet technologies based on open standards,  new services can be deployed
rapidly and economically.

The Need for Industry Standards for Real-time IP Communications

     Originally,  enterprises  and  communications  service  providers  deployed
packet  networks  primarily  for handling  data traffic and not for real-time IP
communications. Technical barriers initially hampered the use of packet networks
for real-time communications.  For example, packet networks were not designed to
guarantee  the  sequential  delivery of packets and  packets  could be lost.  In
addition,  the time of  delivery  of packets  was  dependent  upon the amount of
packet traffic being transmitted over the network. For real-time communications,
it is  critical  that the  packets  associated  with a  specific  voice or video
communication  be  transmitted  in the correct  sequence and in a timely manner.
Early attempts at real-time IP communications solved these technical problems by
using  proprietary   solutions   developed  by  individual   vendors.   However,
proprietary  solutions  from  different  vendors  meant  that  different  vendor
products could not inter-operate with one another.

     To enable the global  deployment of real-time IP  communications  networks,
industry standards and protocols were developed to promote  interoperability  of
real-time  communications  over packet  networks.  H.323 is  currently  the most
widely deployed  industry-wide  protocol for real-time IP communications.  H.323
was developed by a team of computing, telephony and networking experts under the
direction and auspices of the International  Telecommunications Union, or ITU-T,
a United Nations organization, with the goal of specifying a universal real-time
standard that would ensure  interoperability  of all  packet-based  networks and
products.    H.323    provides   the   technical    framework   for   developing
standards-compliant   products  and  systems  for  real-time   voice  and  video
communication  over  packet  networks.  All  components  of an  H.323  compliant
network,  including terminals,  gateways,  gatekeepers and conferencing bridges,
use the H.323 protocol to communicate.

                                      -15-

<PAGE>




     Today,  H.323 is the  standard of choice for the  builders of  real-time IP
communications  solutions for enterprises.  The ITU-T is continuously  enhancing
H.323 and publishing new versions to support the evolving  requirements  of next
generation packet networks. Other emerging standards like MGCP, or Media Gateway
Control  Protocol,  and SIP,  or  Session  Initiation  Protocol,  are also being
developed to address the complex requirements of multi-protocol packet networks.
The   widespread   acceptance  of  industry   protocols  and  standards  for  IP
communications  has enabled the  deployment  of packet  networks  for  real-time
communications by ensuring interoperability and is facilitating the migration to
IP communications.

Growth in Real-time Voice and Video IP Communications

     Due to the  inherent  benefits  of packet  networks  and the  advent of new
technologies and standards that have enabled real-time communications over these
networks,  the use of  packet  networks  for  real-time  voice,  video  and data
communications  is expected to grow  dramatically.  ICM Global  Intelligence,  a
market research firm,  forecasts that revenues for network equipment  associated
with voice-over-IP, or IP telephony, will grow from $477 million in 1999 to $7.1
billion in 2004.  Perey  Research &  Consulting,  an industry  consulting  firm,
forecasts revenues for network equipment associated with IP video communications
to grow from $22 million in 1999 to more than $643 million in 2003.

     This anticipated  growth in real-time IP  communications  is expected to be
driven primarily by enterprises and communications  service providers  migrating
to packet  networks.  As  enterprises  move from  centralized  organizations  to
distributed networks of employees,  customers,  suppliers and business partners,
they  require  more  effective  communications  capabilities  to  support  their
operations  and remain  competitive  in a global and  rapidly  changing  market.
Packet networks are well-suited for enterprises because they provide enterprises
with the following advantages:

     o    cost-effective increases in capacity to meet increasing communications
          traffic demands;

     o    support for new communications  applications,  like video conferencing
          and data collaboration, for improved workforce productivity;

     o    interoperability  with  different  network   configurations  of  their
          customers, suppliers and partners; and

     o    cost savings associated with simplified  network management  resulting
          from creating a single network that handles all communications, rather
          than having to maintain separate telephone and computer networks.

     Communications  service providers have also begun to deploy packet networks
in an effort  to  compete  more  effectively  in a  deregulated  market.  Global
deregulation and rapid technological  advances have resulted in the emergence of
many  new  communications   service  providers,   increased   competition  among
traditional  telecommunications  carriers, lower prices,  innovative new product
and service offerings and accelerated customer turnover. To remain

                                      -16-

<PAGE>


competitive,  communications  service  providers  must be able  to  develop  and
introduce new services to differentiate themselves in the market and attract and
maintain  customers.   Packet  networks  are  well-suited  to  accomplish  these
objectives  because they enable the rapid  deployment of new and  differentiated
solutions. In addition,  packet-based technology allows new competitors to enter
the market quickly without substantial investment in infrastructure.

Key Attributes of Real-time Voice and Video IP Communications Solutions

     To  migrate  their  voice and  video  communications  to  packet  networks,
enterprises  and  communications   service  providers  require  a  real-time  IP
communications solution that provides:

     o    reliable real-time voice, video and data communications functionality;

     o    interoperability with the existing  circuit-switched  networks as well
          as with other IP equipment and systems;

     o    applications, features and functionality comparable to those available
          over  traditional   telephone   networks,   including  call  transfer,
          conferencing and caller identification;

     o    scalability  to permit  cost-effective  increases  in capacity to meet
          demand;

     o    standards compliance, so that products from different vendors can work
          together in one network; and

     o    flexibility  to adapt to  rapidly  changing  network  environments  in
          response to the evolving  needs of  enterprises  and to  accommodate a
          mobile business environment.

Our Solution

     We provide  standards-based  IP-centric  networking  products for real-time
voice,  video and data  communications  over packet networks for enterprises and
service providers.  We also provide enabling  technology in the form of software
toolkits  for  key IP  communications  protocols  that  are  needed  to  develop
standards-based  IP-centric  products and services for real time voice and video
communication. Our networking products and software toolkits offer the following
benefits:

     Real-time Voice, Video and Data Communications Functionality. We are one of
the few  companies  that offer IP  communications  products  which  support both
voice-only, as well as combined voice, video and data communications. We believe
that this dual  functionality is attractive to enterprises and service providers
that seek a flexible IP  communications  solution,  which can  provide  enhanced
multimedia  functionality in addition to IP telephony  capabilities.  We believe
our products enable developers of IP communications  solutions to offer features
and functions generally unavailable in competitive solutions.

     Market Leading  Technology for Standards Based Real-time IP Communications.
We were one of the original five members of the ITU-T committee  responsible for
defining the


                                      -17-
<PAGE>


H.323  standard,  which has been adopted  worldwide for  real-time  packet-based
communications.  We believe our  technology is recognized as the  market-leading
implementation  of the H.323 industry  standard for real-time  voice,  video and
data communications over packet networks.  We have been actively involved in the
development of protocols for real-time communications since the inception of the
industry  in 1994 and believe  that we were the  first-to-market  with  enabling
products  and  technology  for  voice,  video  and data  communications  over IP
networks.  We continue to be actively  involved in the specification of evolving
IP  communications  protocols  and offer a complete  suite of IP  communications
software  toolkits  to  developers  of  IP-centric  products,  applications  and
services.  We believe that our  technology  has become the  technology of choice
among developers of  standards-compliant IP communications  systems.  Because we
were first to market and have achieved broad market  penetration,  our customers
benefit  from our  ability to develop  and provide  them  market-tested,  proven
products and technology.  Using our products and  technology,  our customers can
develop unique capabilities with increased functionality that will differentiate
their IP communications solutions in the market. We believe that the accumulated
knowledge  that we have  gained  participating  in the  development  of industry
standards provides us with a competitive  advantage and positions us to be among
the first to market  products and technology  based on the latest  technological
advances.

     Interoperability.  We provide our customers  with  products and  technology
that are interoperable  across a broad range of IP communications  systems.  Our
products and technology  have been  integrated  into IP  communications  systems
developed  by  hundreds  of  communications  equipment  providers.  Because  our
products and technology are broadly  deployed across various  segments of the IP
communications  industry,  we believe that the  interoperability of our products
and technology  with products from different  vendors is virtually  assured.  We
believe that our  long-standing  involvement  in the definition of standards and
accumulated  experience with product  development across our broad customer base
provides us with a competitive advantage in addressing  interoperability  needs.
We continue to participate  actively in defining  industry  standards by working
closely  with  industry  consortia  on a  broad  spectrum  of IP  communications
protocols to ensure  continued  interoperability  of our products and technology
across multiple protocols.

     Improved Time to Market.  Our customers rely on our  accumulated  expertise
with IP  communications  standards and core technology to  significantly  reduce
their  development  cycle and improve time to market.  Communications  equipment
providers seeking to market standards-compliant  systems for real-time voice and
video communications over packet networks require  standards-compliant  building
blocks to develop their products.  Implementing standards as deployable products
and technology is a complex task that requires  significant  technical knowledge
and expertise as well as  substantial  investments  of time and  resources.  Our
products and  technology  enable our customers to shorten their own  development
time by  integrating  our proven  enabling  products and  technology  into their
solutions.  Rather than dedicate  in-house  resources to  implementing  industry
standards,  these developers can use our products and technology and focus their
core competencies on building enhanced systems, products and applications.

     Broad Range of Product  Environments.  Our products and technology  provide
our customers with flexibility to design individual products and applications or
complete  systems.  Our  customers  can build a complete  network  solution  for
real-time IP communications using our

                                      -18-

<PAGE>


full suite of products or integrate  RADVISION  products with their own products
or other  vendor  products  into their  real-time  IP  communications  solution.
Similarly, our technology has been designed to enable the development of a broad
range of products and  applications,  from those that can service  single users,
including hand held devices and residential IP phones,  to multi-user  products,
like highly  complex,  powerful  carrier class  gateways.  Taken  together,  our
products and technology provide all of the key network  components  necessary to
build a real-time IP communications solutions.

     Distributed  Architecture.  We designed our products based on a distributed
architecture.  With a distributed  architecture,  the core functions  needed for
real-time IP communications are dispersed  throughout the network at the site of
each gateway, IP conferencing bridge and gatekeeper, rather than aggregated at a
single centralized location. This distributed approach offers several advantages
compared to a traditional centralized architecture. The distributed architecture
of our  products  enables  better  utilization  of  network  bandwidth,  because
communications need not be routed through a centralized  location but rather can
be routed over the shortest path to minimize  bandwidth  usage.  Similarly,  our
distributed  architecture is a scalable solution,  allowing a network manager to
add network  resources at  distributed  locations  incrementally  as the network
grows. Our distributed architecture also provides redundancy and increased fault
tolerance and reliability because, unlike a centralized architecture, failure at
one location will not compromise the entire network.

Our Strategy

     Our  goal  is to  be  the  leading  provider  of  innovative  products  and
technology  that enable  real-time  voice and video  communications  over packet
networks.  The  combination  of  offering  IP-centric  networking  products  and
software  toolkits  uniquely  positions us in the center of the IP communication
revolution.  Both of our product  lines are  essential  for building IP networks
that  support  real time  voice and video  communication.  Key  elements  of our
strategy include the following:

     o    Maintain and Extend our Technology Leadership. We believe that we have
          established   ourselves   as  a   technology   leader   in   providing
          core-enabling  technology  for a  broad  range  of  IP  communications
          products and services.  We have  accumulated  extensive  knowledge and
          expertise as  designers  and  developers  of  commercial  products and
          technology  for  real-time  packet-based   communications.   We  place
          considerable  emphasis  on  research  and  development  to expand  the
          capabilities of our existing products,  to develop new products and to
          improve our existing technology and capabilities.  We believe that our
          future   success   will  depend  upon  our  ability  to  maintain  our
          technological  leadership,  to enhance our  existing  products  and to
          introduce  on  a  timely  basis  new   commercially   viable  products
          addressing the needs of our customers. We intend to continue to devote
          a significant  portion of our  personnel  and  financial  resources to
          research and development.

     o    Strengthen and expand our  relationships  with OEM customers.  We have
          established   and   continue   to   maintain   collaborative   working
          relationships  with  many  OEMs  in  the  IP  communications   market,
          including Alcatel, Bosch, Cisco,

                                      -19-

<PAGE>


           NTT, Nortel, Philips, Panasonic,  Samsung, Shanghai Bell, Siemens and
           Sony.  We work  closely  with  our OEM  customers  to  integrate  our
           products  and  core  technology  into  their   solutions.   Our  core
           technology and our system design  expertise enable us to assist these
           customers  in the  development  of complete  solutions  that  contain
           enhanced   features  and   functionality   compared  to   competitive
           alternatives.  We have generally established long-term  relationships
           with  our  OEM   customers  by  starting  with  a  few  products  and
           subsequently  expanding these  relationships by increasing the number
           and range of products  sold to these  customers.  We intend to expand
           the  depth  and  breadth  of our  existing  OEM  relationships  while
           initiating similar new relationships with leading OEMs focused on the
           IP communications market.

     o    Continue to offer new and enhanced  products and features.  We believe
          we have  consistently been either first, or among the first, to market
          products that support real-time voice,  video and data  communications
          over  packet  networks.  We were the first to market  with IP gateways
          that provide combined voice, video and data  functionality,  and first
          to  market  with  software  development  kits for the  development  of
          H.323-compliant IP communications products and applications. We intend
          to  utilize  our  technological   expertise  as  a  basis  for  market
          leadership by continuing to be  first-to-market  with new and enhanced
          products and  features  that  address the  increasingly  sophisticated
          needs  of our  customers  and the  evolving  markets  they  serve.  In
          addition,  we  believe  that  our  participation  in the  drafting  of
          industry  standards gives us the ability to quickly identify  emerging
          trends  to  develop  new  products  and  technologies  that are at the
          forefront  of  technological   evolution  in  the  IP   communications
          industry.

           In 2000, the Technology  business unit expanded its product  offering
           to  include  a  complete  suite  of  key IP  communications  protocol
           toolkits for voice and video over IP. RADVISION  toolkits now include
           SIP, MGCP, MEGACO and H.323. The introduction of SIP, MGCP and MEGACO
           moves us  closer  to  achieving  our goal of  becoming  the  premier,
           one-stop-shop  for all voice and video  technologies  and  reinforces
           RADVISION's  leadership position as the V2oIP technology experts. For
           our networking products,  the Networking Business Unit introduced the
           viaIP  multi-function  platform for deploying IP-centric voice, video
           and data conferencing services over large-scale  networks.  The viaIP
           product  family  complements  our  OnLAN  product  family,  which was
           designed for small to medium size networks. We now have a broad range
           of product  offerings that address the IP communication  requirements
           of  small,  medium  and  large  scale  networks  in  the  enterprise,
           government and service provider markets.

           We will  continue to introduce  new or enhanced  products in 2001. We
           plan to  introduce  upgrades to our  software  toolkits  that include
           added functionality defined by new versions of the standards that are
           ratified by the various  international  standards bodies  responsible
           for  the  different  IP   communications   protocols.   In  2000,  we
           demonstrated   prototype   software  for  H.323-SIP  and   H.323-MGCP
           interworking.  For our  networking  products  we plan to upgrade  our
           OnLAN  family  of  standalone  gateways  and  conferencing  to a  new
           architecture based on the design of our recently

                                      -20-

<PAGE>


           introduced multi-function chassis-based viaIP product family. We will
           be  introducing  new plug-in  boards for viaIP  platform  such as our
           V2oIP  gateway  card.  We are  also  developing  an  enhanced  "media
           processing" capabilities for higher quality voice and video that will
           be integrated into our IP-centric conferencing solutions.


     o    Expand  the  distribution  channels  for our  products.  We  intend to
          continue to focus our sales and  marketing  efforts on  expanding  our
          distribution  channels,  including  broadening  the  number of channel
          partners that  distribute our products.  Channel  partners  provide us
          feedback from their  customers,  the end-users of our products,  which
          gives us valuable  insight into evolving  industry trends and customer
          requirements.   OEMs,   resellers  and  systems  integrators  are  all
          important  channel  partners  for our  products.  They provide us with
          increased market presence through their distributor  relationships and
          existing  customer  base.  In  addition,  endorsements  by key channel
          partners strengthen our brand name awareness.

     o    Continue our active  involvement in shaping industry  standards for IP
          communications.  We  actively  participate  in and  contribute  to the
          formulation of standards for IP communications.  We intend to continue
          our active  involvement in the organizations that define the standards
          for real-time communications over next generation packet networks. Our
          knowledge and expertise  gained in participating in the development of
          these industry standards enable us to be among the first to market our
          Products and Technology  products based on new standards  adopted.  We
          are continually improving, enhancing and expanding our core competency
          in real time IP  communications  protocols  including H.323, SIP, MGCP
          and  MEGACO.   Because  of  our   involvement  in  defining  these  IP
          communications standards, we believe we are well-positioned to quickly
          develop  enhanced  functionality  and new  products  based on multiple
          protocols.

Our Products and Technology

     RADVISION  networking  and  technology  products  provide the core building
blocks needed for standards-based real-time voice, video and data communications
over  packet  networks.  Our  customers  can deploy our  products  as a complete
network solution for IP communications, integrate our products into their own IP
communications   systems   or  use   our   technology   to   build   their   own
standards-compliant  IP  communications  products,  systems and applications for
enterprises and service providers.

     Our networking  products developed by our Networking  Business Unit consist
of:

     o    RADVISION    gateways,    which    interface    between    traditional
          circuit-switched networks and IP networks;

     o    RADVISION  gatekeepers,  which control,  manage and monitor  real-time
          voice, video and data traffic over packet networks;

                                      -21-

<PAGE>




     o    RADVISION IP  conferencing  bridges,  which enable voice or multimedia
          conferencing  over packet  networks among three or more  participants;
          and

     Our software toolkits developed by our Technology Business Unit consist of:

     o    RADVISION's complete suite of key IP communications  protocols (H.323,
          SIP, MGCP and MEGACO) for building interoperable,  standards-compliant
          products,  systems  and  applications  for  real-time  voice and video
          communication over packet networks.

NBU Networking Products

RADVISION Gateways and Conferencing Bridges

     To  achieve  the  successful  deployment  of IP  communications  systems by
enterprises  and service  providers,  users who are connected to packet networks
must be able to  communicate  with users who are  connected to  circuit-switched
telephone networks.  RADVISION gateways provide an interface between traditional
circuit-switched telephone networks and the new packet-based networks. A gateway
converts voice, video and data signals received from a circuit-switched  network
into packets,  that it then transmits in real-time over a packet-based  network.
When the direction of the  communication  is reversed,  the gateway converts the
packets back into circuit-switched signals.

     Our IP-centric  networking  solutions  include V2oIP  multimedia  gateways,
which support  real-time voice,  video and data  communications.  Our standalone
OnLAN  gateways  were designed for small to medium sized  networks.  Our plug-in
viaIP gateway boards for our new viaIP chassis-based  platform were designed for
large scale networks.

     Conferencing  Bridges (sometimes called MCUs) are networking  products that
connect  multiple  callers into a single  conference that allows them to talk to
each other. Our conferencing bridges support voice, video and data, allowing the
callers to see each other, and also share data.

RADVISION V2oIP Multimedia Gateways

     Our OnLAN RADVISION multimedia gateways can support up to 16 voice calls or
8 multimedia calls simultaneously in a 1U, 19" system. Our viaIP gateway boards,
which we began selling  during the first  quarter of 2001,  can support up to 60
voice  calls or 30  multimedia  calls  simultaneously.  A single  2U,  19" viaIP
chassis can be configured  for high capacity  with 4 gateway  boards,  which can
support 240 voice calls or 120 multimedia  calls  simultaneously.  We sell these
gateways principally to systems integrators and OEMs who offer IP communications
solutions to enterprises for next generation  networks.  These gateways  provide
the following benefits:

     o    Real-time  voice,  video  and  data  communications.   Our  multimedia
          gateways support real-time voice and video calls,  data  collaboration
          as well as voice-only calls.

                                      -22-

<PAGE>




     o    Interoperability.  Our multimedia gateways are H.323 compliant and are
          designed to be fully interoperable with other IP network components.

     o    Embedded gatekeeper.  Our standalone OnLAN multimedia gateways contain
          an  embedded   gatekeeper  that  provides  the  gateway  with  similar
          functionality  to that of a  corporate  telephone  system,  known as a
          private branch exchange, or PBX, including call and network management
          capabilities such as controlling how calls are routed, who may use the
          networks and how bandwidth is allocated.  This embedded  gatekeeper is
          offered  free to the  customer who may choose to use it or disable it.
          Customers  who  disable  the  embedded   gatekeeper   can  purchase  a
          standalone  Microsoft  Windows  NT-based  gatekeeper  application that
          provides advanced gatekeeper  functionality from us or they may choose
          to use a gatekeeper from another vendor.

     o    Advanced  call  functionality.  Our  multimedia  gateways  can support
          advanced   PBX-like   functions   including  call  transfer  and  call
          forwarding.

RADVISION Video Interface Units

     Enterprises  have invested  significant  resources in outdated,  or legacy,
videoconferencing   equipment   that  are   designed  to   function   only  over
circuit-switched networks. Our RADVISION OnLAN video interface unit was designed
to  extend  the life of this  equipment  by  allowing  legacy  videoconferencing
systems  to  be  connected   directly  to  a  packet  network  rather  than  the
circuit-switched   network.  Our  RADVISION  OnLAN  video  interface  units  are
affordable,  single user gateways designed  specifically to interconnect  legacy
video equipment with packet networks. Because most new videoconferencing systems
are designed to connect directly to packet  networks,  we expect that the market
for  these  units  will  decrease  significantly  over  time.  We  have  stopped
development  of our VIU and do not expect to record  meaningful  revenues in the
coming years.

RADVISION Gatekeepers

     Gatekeepers  perform the  essential  network  function of  controlling  and
managing  real-time  voice,  video  and data  communications  on a  packet-based
network.   Gatekeepers   define  and  control  how  traffic  is  routed  over  a
packet-based  network by identifying the IP destination  address and routing the
traffic  to that  destination.  Gatekeepers  also  enable  the  provisioning  of
advanced PBX-like functions, including call forwarding, multi-point conferencing
and call transfer.  Network  managers use gatekeepers to configure,  monitor and
manage the voice and video call activity on a packet  network to ensure  optimal
implementation  of the  network.  Gatekeepers  log and track call  activity  and
maintain details of network activity which permit the network manager to monitor
IP communications activity on the network,  including number of calls, number of
users and bandwidth usage.

     We provide a free embedded  gatekeeper  in our OnLAN  gateways that provide
basic  gatekeeper  functionality.  For our  viaIP  multi-function  chassis-based
system,  we sell an  Enhanced  Communication  Server  ("ECS")  application  that
provides advanced gatekeeper  functionality.  The ECS application is a Microsoft
Windows NT-based application that was

                                      -23-

<PAGE>


designed  to  run  as  an  embedded  viaIP  application  on a  Windows  NT-based
"application  server"  card.  We also  sell  versions  of our  Windows  NT-based
gatekeeper  application as a standalone application that can be installed on any
computer that supports the Microsoft  Windows NT operating  system. We sell this
off-the-shelf  application to systems integrators as a complementary  product to
both our OnLAN and viaIP product  families.  These customers  combine  RADVISION
gatekeeper  application  software  with  other IP  network  components  to build
complete IP communications solutions.

     We also sell gatekeeper technology in the form of software development kits
that  enable  our OEM  customers  to build and  customize  their own  gatekeeper
applications.  Our  gatekeeper  software  development  kit offers  the  software
developer  full  control  over a wide  range  of  gatekeeper  functions  and the
flexibility to customize and further  differentiate the gatekeeper to respond to
the needs of their particular  market. By using RADVISION  software  development
kits,  our  customers  can build  upon our  proven  technology  and bring  their
gatekeeper products to market quickly.

RADVISION IP Conferencing Bridges

     While   communications   between   two  parties   involves   point-to-point
connections,   conferencing   between  multiple   parties  involves   multipoint
communications among three or more participants. In traditional circuit-switched
networks,  conferencing  bridges connect callers to each other through a central
bridge that  conducts the  conference  call.  As  enterprises  migrate to packet
networks,  IP conferencing  bridges are needed to conduct  conference calls over
these next generation networks. We were one of the first and remain one of a few
companies to offer IP conferencing bridges for multipoint communications.

     Traditionally,  voice or video  conferencing  required the conference to be
arranged  in  advance  by a network  administrator  and  remain  attended  by an
operator  for the duration of the  conference.  Our  RADVISION  IP  conferencing
bridges allow voice or video  conferencing  among multiple  participants over IP
networks  without any advance  arrangements  or the  assistance  of an operator.
Participants  simply  dial a number and the  conferencing  bridge  automatically
arranges the conference  call.  Additional  participants can join the conference
while it is in progress or by being added to the conference by any party already
participating in the conference. Traditional conferencing bridges were primarily
built as large  complex  carrier  class  bridges that were not  appropriate  for
installation  within an  enterprise,  requiring  enterprises  to  contract  with
external service providers to conduct conference calls. Our RADVISION standalone
OnLAN IP conferencing  bridges can support up to 15 simultaneous voice and video
calls or 24  voice-only  calls.  Our  multi-service  viaIP  platform  supports 3
different  capacity  MCU boards  ranging  from 45 voice  calls or 30  multimedia
calls,  to 150 voice  calls or 100  multimedia  calls.  A single  2U,  19" viaIP
chassis can be configured for high capacity with 4 MCU boards, which can support
600 voice calls or 400 multimedia calls simultaneously.  Like our gateways,  our
conferencing   bridges   include  an  embedded   gatekeeper.   Our   distributed
conferencing  architecture  provides a highly  scalable  solution  that  enables
multiple  conferencing  bridges to be linked  together to provide a solution for
very large conferences, allowing for multiple conference panels with many remote
viewers.

                                      -24-

<PAGE>




RADVISION Carrier Class Gatekeepers.

     Gatekeepers are generally designed to manage hundreds of simultaneous voice
calls. Large packet networks operated by telecommunications carriers and service
providers require gatekeepers that can support a practically unlimited number of
calls.  Our family of standalone ECS applications  provide  advanced  gatekeeper
functionality  and support large numbers of  simultaneous  calls and  registered
users.  We have enhanced our  gatekeeper  toolkit to provide core  functionality
necessary for large IP communications  networks  operated by  telecommunications
carriers  and  services   providers.   Our  carrier  class  gatekeeper  software
development kit release will support high performance, high reliability, carrier
class platforms,  including  network  platforms  developed by Cisco,  Compaq and
Hewlett-Packard.

TBU Technology Products

     As  a  driving  force  behind  evolving   technologies   for  real-time  IP
communications,  RADVISION  is in a unique  position  to deliver one of the most
complete set of V2oIP enabling technology.  We sell the core enabling technology
for  real-time  IP  communications  in the form of  software  development  kits.
Communications  equipment  providers and developers  seeking to market  industry
standard   compliant  IP  telephony  and   multimedia   products,   systems  and
applications  need core IP  communication  protocol  software  to develop  their
IP-centric solutions. Rather than dedicate in-house resources to developing this
core  technology,  these  providers  seek to  build  upon  our  proven  enabling
technologies.  RADVISION  toolkits  enables our customers to focus on their core
competencies  and dramatically  reduces the time to market of industry  standard
compliant IP communications products, systems and applications.

RADVISION SIP Software Development Kit

     The Session  Initiation  Protocol  (SIP) is a new  signaling  protocol  for
initiating,  managing and  terminating  voice and video  sessions  across packet
networks. RADVISION's complete SIP solution includes the Express SIP toolkit and
the  Universal  SIP toolkit.  Express SIP was  designed,  from  conception,  for
building high performance, compact SIP user agents. This optimized design offers
superior  functionality  to other "reduced  function"  implementations  that are
derived by simply eliminating features from other fuller  implementations.  This
"nuclear  SIP  toolkit"  is ideal for  developing  products  that  require  full
user/agent  functionality,  but are limited in resources,  particularly  memory,
such as  wireless  IP phones and PDAs,  web  clients  and video  terminals.  The
Universal SIP Toolkit is designed to provide high scalability and  extensibility
for both small and large-scale  projects. It is ideal for implementing all types
of feature rich SIP entities such as application servers, softswitches, IP-PBXs,
gateways and conferencing bridges.

RADVISION H.323 Software Development Kit

     H.323 is  currently  the most widely  deployed  standard  for  real-time IP
communications.   All  components  of  an  H.323-compliant  network,   including
terminals,  gateways,  gatekeepers  and  conferencing  bridges,  use  the  H.323
protocol to communicate.  Our RADVISION H.323 software  development kits provide
developers   with  the  core   software   building   blocks  needed  to  develop
H.323-compliant products, systems and applications. Our RADVISION H.323 software
development  kit is an  integrated  set of software  programs  which execute the
H.323 protocol and

                                      -25-

<PAGE>


perform the functions necessary to establish and maintain real-time voice, video
and data communications over packet-based networks. Our RADVISION H.323 software
development kits can be used to develop a broad spectrum of products,  including
gateways,   gatekeepers,   conferencing   bridges,   IP  telephones   and  other
H.323-compliant products.

RADVISION MGCP Software Development Kits.

     Media gateway  control  protocol,  commonly  referred to as MGCP,  provides
functions that complement H.323 and has been developed for large packet networks
operated by  telecommunications  carriers  and service  providers  that  require
gateways that can support a practically  unlimited number of calls.  MGCP is the
protocol  by  which a  centralized  gateway  controller  communicates  with  and
controls  the  numerous  gateways  throughout  a packet  network and manages the
network  traffic  through  those  gateways.  MGCP  has  been  adopted  by  large
telecommunications  companies and Internet service providers as well as by cable
television  companies building IP communications  solutions over their networks.
Our RADVISION  MGCP  software  development  kit is used to build MGCP  compliant
media gateways controllers and media gateways

RADVISION MEGACO Software Development Kits.

     MEGACO/H.248  is the  official  industry  standard  media  gateway  control
protocol for large scale IP-centric  communication networks. Like MGCP, it is an
internal protocol used between "intelligent" centralized gateway controllers and
numerous  "dumb" media gateways that handle voice and video media  streams.  The
standard is the result of unique  collaborative  effort between the IETF and ITU
standards  organizations.  Derived from MGCP,  MEGACO/H.248  offers  several key
enhancements  including support for multimedia and conferencing calls,  improved
handling of protocol  messages and a formal  process for creating  extensions to
support  advanced  functionality.  RADVISION's  MEGACO/H.248  Toolkit includes a
unique Media Device  Manager to greatly  simplify  application  development  and
reduce  development time by eliminated the need for developers to write code for
interpreting MEGACO/H.248 messages.

Products and Technology Under Development

     We intend to capitalize upon our  technological  leadership in real-time IP
communications  to develop new  products and  technology  that meet the evolving
needs  of the IP  communications  market.  Our  future  product  and  technology
offerings  are  expected  to include  platforms  and tools  needed for  creating
value-added IP-centric enhanced services.

Customers

     We  sell  our  products  to  OEMs,  systems  integrators  and  value  added
resellers,  or VARs.  Our OEM customers  purchase our products to integrate with
products  that they  developed  in-house  to build  complete  IP  communications
solutions.  Our systems  integrator  customers either purchase our full suite of
products  or  integrate   our   individual   products  with  products  of  other
manufacturers to build complete IP communications  solutions.  Our VAR customers
purchase our products to resell to end-users as separate  units, or as part of a
family of related product  offerings,  either under our RADVISION label or under
their private label.

                                      -26-

<PAGE>




     We  sell  our  technology  in the  form  of  software  development  kits to
developers  of  IP  communications   products,   systems  and  applications  for
developing  their own IP  communications  solutions  based on our core  enabling
technology.

     The following is a representative  list of our customers who purchased more
than $225,000 of our products or technology during the year 2000:

        NETWORKING PRODUCTS:
        -------------------

        Cisco Systems
        M2Networks
        Nortel Networks
        Philips
        PictureTel Corp.
        Polycom, Inc.
        Siemens
        VCON, Israel
        VOGT electronic Witten GmbH
        Vtel Corp
        Wire One
        Zydacron, Inc.

        TECHNOLOGY PRODUCTS:
        -------------------

        Accord
        Audio Codes
        CCL-ITRI
        Cisco Systems
        Cosmobridge Co., Ltd.
        Hewlett Packard - France
        Human Technology Ltd.
        IMAG Industries
        LG
        Mitel Corporation
        Nortel
        Nortel Networks
        NTT - ME Corp
        Polycom Inc.
        Siemens
        U & I Corporation
        Virdais, Inc.

Sales and Marketing

     Sales  organization.  We  market  and sell our  products  through  multiple
channels  in North  America,  Europe,  the Far East and Israel.  Our  networking
products are sold to end-users  principally  through indirect  channels by OEMs,
system integrators and value added resellers.

                                      -27-

<PAGE>


We market and sell our  technology  products,  primarily in the form of software
development  kits,  directly to  developers  of IP  communications  products and
applications.  In Taiwan, Korea and Japan, we sell our software development kits
indirectly through local sales representatives.

     We  currently  have  sales  offices in the  United  States in: New  Jersey,
California,  Maryland and Texas. We also have sales offices in Tel Aviv, Israel,
in Hong Kong, and in the United Kingdom.  The geographic  breakdown of our total
sales for the year ended  December  31, 2000 was: 63% in North  America,  26% in
Europe, the Middle East and Africa and 11% in Asia Pacific.

     We have dedicated  sales teams to support our large  strategic  accounts as
well as to identify potential  strategic customers who would deploy our products
on large scales and generate significant revenues for us.

     Marketing organization.  Our marketing organization develops strategies and
implements  programs to support the sale of our products and  technology  and to
support  and enhance our market  position  as an  industry  leader.  Our current
marketing efforts include various sales and channel support programs designed to
drive sales, and marketing  communication programs designed to increase industry
visibility,  including  press/analyst  tours,  trade shows and events,  speaking
engagements  and  ongoing  interaction  with  analysts  and the media as well as
targeted  marketing  programs.  Additional  programs include technical  seminars
where  customers and other  industry  participants  are educated in real-time IP
communications  technology and the benefits of our products and  technology.  We
also  view  our web site as an  important  marketing  tool for lead  generation,
customer  relations  and to support  our market  position  as the V2oIP  experts
through  quality  content  including  providing  information  related  to issues
relevant to the IP  communications  industry,  as well as important  product and
market trends.

     To reinforce  and further  strengthen  our market  position as a technology
leader in the field of real-time IP communications,  we actively  participate in
key industry  consortia and standards bodies. We are also active in defining and
reviewing  evolving IP  communications  standards  that are being  developed  by
international standards bodies including:

          o    the ITU-T, which has published the H.323 and MEGACO standards;

          o    the Internet Engineering Task Force, or IETF, which has published
               the SIP and MEGACO standards;

          o    CableLabs, an organization of cable operators, which is currently
               working on defining the MGCP standard; and

          o    IMTC, a global organization to promote  interoperable  multimedia
               communications solutions based on international standards.

     We regularly participate in IMTC-sponsored InterOP events, a vendor-neutral
forum where IMTC members test the interoperability of their products.

                                      -28-

<PAGE>




Customer Care and Support

     Our ability to provide our customers with responsive and qualified customer
care and support services globally is essential to attract and retain customers,
build brand  loyalty and  maintain  our  leadership  position in the market.  We
believe our customer  care and support  organizational  structure  enables us to
provide  superior  technical  support  and  customer  service  on  a  cost-  and
time-efficient basis.

     We  provide  global   customer  care  and  support  for  our  products  and
technology.  Our customer  care and  technical  support teams are located in Tel
Aviv, Israel, Mahwah, New Jersey, Sunnyvale, California, Hong Kong and China. We
assist our customers  with the initial  installation,  set-up and  training.  In
addition,  our  technical  support team trains and  certifies  our  customers to
provide  local support in each of the  geographical  areas in which our products
are sold. We also provide customers the option of obtaining, for a fee, 24 hours
a day, 7 days a week help-desk support.

     In addition, customers who purchase our software development kits generally
request that we provide  them with ongoing  engineering  and  technical  support
services  to  integrate  our  technology  into their  products,  although  these
services are not essential  for the use of our software  development  kits.  Our
standard  software  development  kit  contract  provides for one year of support
services,  renewable  annually  at the  customer's  option.  Customers  who have
contracted  for support  services  receive  all  relevant  software  updates and
enhancements as well as access to our customer care and technical support teams.

Intellectual Property

     We rely on  copyright,  trademark  and trade secret  laws,  confidentiality
agreements and other contractual  arrangements  with our customers,  third-party
distributors, employees and others to protect our intellectual property.

     Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy  aspects of our products  and  technology  or obtain and use
information  that we regard as  proprietary.  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  products  do not
protect  our  proprietary  rights  to as great an  extent  as do the laws of the
United  States.  Our  means of  protecting  our  proprietary  rights  may not be
adequate and our  competitors  may  independently  develop  similar  technology,
duplicate our products or design around our intellectual property.

     We rely on  technology  that  we  license  from  third  parties,  including
software that is integrated with internally  developed  software and used in our
products  to  perform  key  functions.   For  example,  we  license  T.120  data
collaboration  software  from Data  Connection  Limited  and  voice  compression
technology  from  Siemens.  If we are unable to  continue to license any of this
software on  commercially  reasonable  terms, we will face delays in releases of
our  products or will be required to reduce the  functionality  of our  products
until  equivalent  technology  can be  identified,  licensed or  developed,  and
integrated into our current products.

                                      -29-

<PAGE>




Competition

     We compete in a new, rapidly evolving and highly competitive and fragmented
market.  We expect  competition to intensify in the future.  We believe that the
main  competitive  factors in our market  are time to market,  product  quality,
features, cost, technological performance, scalability, compliance with industry
standards and customer relationships.

     The  principal  competitors  in the market for our  products  and  software
development kits currently include:

          Products                         Software development kits
--------------------------------      -----------------------------------------

                                      o   DataBeam,    a   subsidiary    of
o  Ezenia!, formerly known                Lotus/IBM
   as Video-Server                    o   DynamicSoft
o  CUseeMe Networks Inc.              o   Elemedia, a subsidiary of Lucent
   (formerly known                    o   Trillium     Digital     Systems,
   as White Pine Software                 acquired by Intel Corp.
   Inc., merged with                  o   Hughes Software Systems
   First Virtual Communications)      o   In-house  developers  employed by
o  Accord (acquired by Polycom)           manufacturers  of  telecommunications
                                          equipment and systems

     Additional competitors may enter any of our markets at any time.

     Both Vovida Networks (now part of Cisco  Systems),  Inc. and OpenH323 offer
H.323 source code for free. In addition,  Vovida offers MGCP and SIP source code
for free. If our  customers  choose to use the free source code offered by these
organizations  instead of purchasing our technology,  our revenues from the sale
of our software development kits will decline.

C.   ORGANIZATIONAL STRUCTURE

     Our wholly owned subsidiaries in the United States, the Netherlands, United
Kingdom and Hong Kong,  RADVISION Inc.,  Radvision B.V,  RADVISION (UK) LTD. and
RADVision  (HK) Limited,  respectively,  act as marketing  and customer  service
organizations in those countries and for neighboring countries.

D.   PROPERTY, PLANTS AND EQUIPMENT

     Our headquarters and principal administrative, finance, sales and marketing
and  promotion  operations  are located in  approximately  60,079 square feet of
leased  office  space in Tel  Aviv,  Israel  at an  approximate  rental  cost of
$806,000 in 2000. The lease for our principal  offices  expires in June 2005. In
the United  States,  we lease  approximately  11,000 square feet in Mahwah,  New
Jersey  expiring in May 2002 and  approximately  1,232 square feet in Sunnyvale,
California  expiring in December  2002.  In April 2001,  we leased 24,077 square
feet in Paramus,  New Jersey under a lease  expiring in March 2006. We expect to
vacate one of our New Jersey premises in 2001. We also lease approximately 1,246
square feet in Hong Kong expiring in June 2002 and approximately 872 square feet
in China expiring in April 2003.

                                      -30-

<PAGE>




     The aggregate  annual rent for our sales and service  offices in the United
States, Hong Kong and China was approximately $209,000 in 2000.

ITEM 5. OPERATION AND FINANCIAL REVIEW AND PROSPECTS

A.   OPERATING RESULTS

     The following  discussion of our operating  results of operations should be
read together with our consolidated  financial statements and the related notes,
which appear elsewhere in this annual report. The following  discussion contains
forward-looking statements that reflect our current plans, estimates and beliefs
and involve risks and  uncertainties.  Our actual results may differ  materially
from those discussed in the forward-looking statements. Factors that could cause
or contribute to such differences include those discussed below and elsewhere in
this annual report.

     All of our  revenues  are  generated  in U.S.  dollars or are linked to the
dollar and a majority of our expenses are incurred in dollars.  Consequently, we
use the dollar as our functional  currency.  Transactions  and balances in other
currencies are converted  into dollars  according to the principles in Financial
Accounting  Standards  Board  Statement  No. 52.  Gains and losses  arising from
conversion are recorded as interest income or expense, as applicable.

Overview

     We  are  a  leading  designer,  developer  and  supplier  of  products  and
technology  that enable  real-time  voice,  video and data  communications  over
packet networks, including the Internet and other IP networks.

     We were incorporated in January 1992,  commenced operations in October 1992
and commenced  sales of our products in the fourth quarter of 1994.  Before that
time,  our  operations  consisted  primarily  of research  and  development  and
recruiting  personnel.  In 1995, we established a wholly owned subsidiary in the
United States, RADVISION Inc., which conducts our sales and marketing activities
in North America.

Revenues

     We  generate  revenues  from  sales  of our  networking  products  that are
primarily sold in the form of stand-alone products,  and our technology products
that are  primarily  sold in the form of software  development  kits, as well as
related  maintenance and support services.  We generally recognize revenues from
the sale of our products upon shipment and when collection is probable. Revenues
generated  from  maintenance  and support  services are deferred and  recognized
ratably over the period of the term of service. We price our networking products
on a per unit basis,  and grant discounts based upon unit volumes.  We price our
software  development  kits on the  basis of a  fixed-fee  plus  royalties  from
products developed using the software development kits. We sell our products and
technology  through direct sales and various indirect  distribution  channels in
North America,  Europe, the Far East and Israel. For the year ended December 31,
2000, approximately 62.8% of our revenues were generated in the United States.

                                      -31-

<PAGE>




Significant Costs and Expenses

     Cost of revenues.  Our cost of revenues  consists of component and material
costs, direct labor costs, subcontractor fees, overhead related to manufacturing
and depreciation of manufacturing equipment. Our gross margin is affected by the
selling  prices  for our  products  as well as the  proportion  of our  revenues
generated from the sale of our technology products as compared to our networking
products.  Our revenues  from the sale of our  technology  products  have higher
gross margins than our revenues from the sale of our networking  products and we
offer  greater  discounts  to our high  volume OEM  customers.  As the  relative
proportion  of  our  revenues  from  our  networking  products  increases  as  a
percentage  of our total  revenues  and we generate a higher  percentage  of our
revenues  from sales to our high volume OEM  customers,  our gross  margins will
decline.

     Research and  development  expenses,  net.  Our  research  and  development
expenses  consist  primarily of compensation  and related costs for research and
development  personnel,  expenses for testing  facilities  and  depreciation  of
equipment.  All of our research and development  costs are expensed as incurred.
Historically  our  research  and  development  expenses  were  presented  net of
payments  received  from the  Chief  Scientist.  In 2000 we  voluntarily  repaid
$3,666,000  in royalty  payments to the Chief  Scientist  and  discontinued  our
relationship with the Chief Scientist in order to reduce certain restrictions on
our  business  and to avoid  paying  increased  interest  rates in the future on
royalty payments.  We do not currently intend to apply for grants from the Chief
Scientist  in the future.  However,  we expect to  continue to make  substantial
investments in research and development.

     Marketing and selling  expenses,  net. Our  marketing and selling  expenses
consist  primarily  of  compensation  and  related  costs for  sales  personnel,
marketing personnel,  sales commissions,  marketing programs,  public relations,
promotional  materials,   travel  expenses,  trade  show  exhibit  expenses  and
royalties paid to the government of Israel. Marketing and selling expenses until
December  31, 1999 are  presented  net of  marketing  grants  received  from the
government of Israel. We do not intend to apply for any grants from the Fund for
the Encouragement of Marketing Activities in the future.

     General  and  administrative   expenses.  Our  general  and  administrative
expenses  consist  primarily  of salaries and related  expenses  for  executive,
accounting and human  resources  personnel,  professional  fees,  provisions for
doubtful accounts and other general corporate expenses.

     Operating expenses also include  amortization of stock-based  compensation,
which is  allocated  among  research and  development  expenses,  marketing  and
selling expenses and general and  administrative  expenses based on the division
in which  the  recipient  of the  option  grant  is  employed.  Amortization  of
stock-based  compensation results from the granting of options to employees with
exercise prices per share determined to be below the fair market value per share
of our ordinary shares on the dates of grant.  The  stock-based  compensation is
being amortized to operating  expenses over the vesting period of the individual
options.

     Financing income,  net. Our financing income consists primarily of interest
earned on bank deposits and other liquid investments,  gains and losses from the
conversion of monetary

                                      -32-

<PAGE>


balance  sheet items  denominated  in  non-dollar  currencies  into  dollars and
interest expense incurred on outstanding debt.

     Taxes.  Israeli  companies  are  generally  subject  to  income  tax at the
corporate tax rate of 36%.  However,  several of our investment  programs at our
manufacturing  facility in Tel Aviv have been granted approved enterprise status
and, therefore,  we are eligible for the reduced tax benefits described later in
this  annual  report  in "Item 10 -  Additional  Information,  Taxation."  These
benefits should result in income recognized by us being tax exempt or taxed at a
lower rate for a specified  period after we begin to report  taxable  income and
exhaust any net operating loss carry-forwards.  However,  these benefits may not
be applied to reduce the tax rate for any income derived by our U.S. subsidiary.

Results of Operations

     The following  discussion of our results of operations  for the years ended
December 31, 1998, 1999 and 2000, including the percentage data in the following
table,  is based upon our  statements of  operations  contained in our financial
statements  for those periods,  and the related  notes,  included in this annual
report:

                                             1998       1999      2000
                                             ----       ----      ----
Revenues                                    100.0%     100.0%    100.0%
Cost of revenues.........................    15.9       16.3      24.9
Gross profit.............................    84.1       83.7      75.1
Operating expenses:
  Research and development...............    49.2       43.7      31.1
  Less participation by the Chief            12.8        6.3       0.8
    Scientist............................
  Research and development, net..........    36.4       37.4      30.3
  Marketing and selling, net.............    49.8       54.1      37.8
  General and administrative.............     7.5        8.1       7.5
  Repayment of future royalties..........     -          -         8.0
 Total operating expenses................    93.7       99.6      83.6
Operating loss...........................    (9.6)     (15.9)     (8.5)
Financing income, net....................     0.3        0.6       9.1
Net income (loss)........................    (9.3)%    (15.3)%     0.6%
                                            ======     ======    =====

Year Ended December 31, 2000 as Compared with Year Ended December 31, 1999

     Revenues. Revenues increased from $17.5 million for the year ended December
31, 1999 to $45.9  million for the year ended  December 31, 2000, an increase of
$28.4 million,  or 162.3%. This increase was due to an $18.1 million, or 212.9%,
increase in sales of our networking  products,  as well as a $10.3  million,  or
114.4%, increase in sales of technology products.

     Revenues from networking  products increased from $8.5 million for the year
ended  December 31, 1999 to $26.6 million for the year ended  December 31, 2000.
The increase in revenue from  networking  products is  attributable  to a global
increase in demand for these units as customers moved from  integrated  services
digital  networks,  or  ISDN to  IP-based  networks,  as  well  as from  new OEM
agreements that generated additional product sales.

                                      -33-

<PAGE>




     Revenues from technology  products increased from $9.0 million for the year
ended  December 31, 1999 to $19.3 million for the year ended  December 31, 2000.
This increase in revenues from technology products was primarily attributable to
increased market demand.

     Revenue from sales to customers in the United  States  increased  from $9.1
million,  or 51.6% of revenue,  for the year ended  December 31, 1999,  to $27.9
million, or 60.9% of revenue,  for the year ended December 31, 2000, an increase
of $18.8 million,  or 206.6%.  This increase in sales to customers in the United
States was primarily  attributable  to the more rapid adoption of our technology
in the United States as compared to the rest of the world.

     Revenue from sales to customers in Europe  increased from $4.0 million,  or
23.1% of revenue,  for the year ended  December 31, 1999,  to $7.3  million,  or
16.0% of revenue,  for the year ended  December  31,  2000,  an increase of $3.3
million,  or 82.5%.  This increase in sales to customers in Europe was primarily
attributable to increased market demand for our products in this region.

     Revenue  from  sales to  customers  in the Far  East  increased  from  $2.7
million,  or 15.4% of revenue,  for the year ended  December 31,  1999,  to $5.3
million, or 11.5% of revenue,  for the year ended December 31, 2000, an increase
of $2.6 million,  or 96.3%.  This increase in sales to customers in the Far East
was primarily attributable to increased sales efforts.

     Revenue from sales to customers in Israel  increased from $1.3 million,  or
7.2% of revenue,  for the year ended December 31, 1999, to $4.5 million, or 9.7%
of revenue,  for the year ended  December 31, 2000, an increase of $3.2 million,
or  246.2%.  This  increase  in sales  to  customers  in  Israel  was  primarily
attributable to increased sales efforts in this region.

     Cost of Revenues. Cost of revenues increased from $2.9 million for the year
ended  December 31, 1999 to $11.4 million for the year ended  December 31, 2000,
an increase of $8.5 million, or 293.1%. Gross profit as a percentage of revenues
decreased  from 83.7% for the year ended December 31, 1999 to 75.1% for the year
ended December 31, 2000, due to the increased  proportion of networking products
sales.

     Research and  Development,  Net.  Research and  development  expenses,  net
increased  from $6.6  million  for the year  ended  December  31,  1999 to $13.9
million for the year ended  December 31, 2000, an increase of $7.3  million,  or
111.7%. This increase was primarily attributable to an increase in the number of
research and  development  personnel whom we employed,  as well as a decrease in
grants  received from the Chief  Scientist.  We have  increased our research and
development personnel to support our existing and expected new product lines and
to accommodate the growth of our business.  Research and  development  expenses,
net as a percentage of revenues decreased from 37.4% for the year ended December
31, 1999 to 30.3% for the year ended December 31, 2000.

     Marketing and Selling,  Net. Marketing and selling expenses,  net increased
from $9.5 million for the year ended  December 31, 1999 to $17.4 million for the
year ended  December  31,  2000,  an increase of $7.9  million,  or 83.2%.  This
increase was primarily  attributable  to a $3.7 million,  or 78.7%,  increase in
personnel-related expenses resulting from our increasing the number of our sales
and marketing employees. We have increased our sales and

                                      -34-

<PAGE>


marketing  expenses in response to current and expected growth in the market for
our products.  Marketing and selling  expenses,  net as a percentage of revenues
decreased  from 54.1% for the year ended December 31, 1999 to 37.8% for the year
ended December 31, 2000.

     General and Administrative.  General and administrative  expenses increased
from $1.4  million for the year ended  December 31, 1999 to $3.5 million for the
year ended  December  31,  2000,  an  increase of $2.1  million or 142.5%.  This
increase was primarily  attributable to an increase of $1.3 million, or 175%, in
personnel  expenses.  General and  administrative  expenses as a  percentage  of
revenues  was 8.1% for the year ended  December  31,  1999 and 7.5% for the year
ended December 31, 2000.

     Royalty Payments to the Chief Scientist. In 2000 we determined to repay all
future royalty payments due to the Chief Scientist.  This decision has been made
as part of our strategy to discontinue the relationship with the Chief Scientist
to  reduce  the  growing  restrictions  imposed  by the Chief  Scientist  on our
business.  By doing so, we will also save the increased  interest rates that are
imposed by the Chief Scientist on part of the royalties due.

     Operating  Income.  Our operating  loss increased from $2.8 million for the
year ended  December  31, 1999 to $3.9  million for the year ended  December 31,
2000 as a result of our $3.7 million  repayment of future royalties to the Chief
Scientist.

     Financial  Income.  Financial  income  increased from $105,000 for the year
ended  December  31, 1999 to $4.2  million for the year ended  December 31, 2000
principally  as a result of the  increased  interest  income we derived from the
investment of the proceeds of our March 2000 initial public offering and private
placement.

     Net Income(Loss).  Net income increased from a net loss of $2.7 million, or
15.4%, for the year ended December 31 1999 to net income of $249,000, or 0.6% as
a percentage of revenues, for the year ended December 31, 2000.

Year Ended December 31, 1999 as Compared with Year Ended December 31, 1998

     Revenues.  Revenues increased from $8.9 million for the year ended December
31, 1998 to $17.5  million for the year ended  December 31, 1999, an increase of
$8.6 million,  or 97.3%.  This  increase was due to a $4.6  million,  or 117.9%,
increase in sales of our  networking  products,  as well as a $4.0  million,  or
80.0%, increase in sales of technology products.

     Revenues from networking  products increased from $3.9 million for the year
ended  December 31, 1998 to $8.5  million for the year ended  December 31, 1999.
The increase in revenues from networking products was primarily  attributable to
a global  growth in demand for these units as  customers  moved from  integrated
services digital networks, or ISDN, to IP-based networks.

     Revenues from technology  products increased from $5.0 million for the year
ended  December 31, 1998 to $9.0  million for the year ended  December 31, 1999.
This increase in revenues from technology products was primarily attributable to
increased market demand for this technology.


                                      -35-
<PAGE>




     Revenue from sales to customers in the United  States  increased  from $4.6
million,  or 51.7% of revenue,  for the year ended  December 31,  1998,  to $9.1
million, or 51.6% of revenue,  for the year ended December 31, 1999, an increase
of $4.5  million,  or 97.8%.  This  increase in sales to customers in the United
States was primarily  attributable  to the more rapid adoption of our technology
in the United States as compared to the rest of the world.

     Revenue from sales to customers in Europe  increased from $2.3 million,  or
25.8% of revenue,  for the year ended  December 31, 1998,  to $4.0  million,  or
23.1% of revenue,  for the year ended  December  31,  1999,  an increase of $1.7
million, or 73.9%.

     Revenue from sales to customers in the Far East increased from $942,000, or
10.6% of revenue,  for the year ended  December 31, 1998,  to $2.7  million,  or
15.2% of revenue,  for the year ended  December  31,  1999,  an increase of $1.8
million,  or 191.1%.  This  increase in sales to  customers in the Far East as a
percentage of total sales was primarily  attributable to increased sales efforts
in this region.

     Cost of Revenues. Cost of revenues increased from $1.4 million for the year
ended December 31, 1998 to $2.9 million for the year ended December 31, 1999, an
increase of $1.5  million,  or 107.1%.  This  increase was  attributable  to the
increase in our  revenues.  Gross profit as a percentage  of revenues  decreased
from  84.1% for the year  ended  December  31,  1998 to 83.7% for the year ended
December 31, 1999.

     Research and  Development,  Net.  Research and  development  expenses,  net
increased from $3.2 million for the year ended December 31, 1998 to $6.6 million
for the year ended  December 31, 1999, an increase of $3.4  million,  or 106.3%.
This  increase  was  primarily  attributable  to an  increase  in the  number of
research and  development  personnel  whom we employed.  We have  increased  our
research  and  development  personnel  to support our  existing and expected new
product  lines and to  accommodate  the  growth of our  business.  Research  and
development  expenses net as a percentage of revenues  increased  from 36.4% for
the year ended December 31, 1998 to 37.4% for the year ended December 31, 1999.

     Marketing and Selling,  Net. Marketing and selling expenses,  net increased
from $4.4  million for the year ended  December 31, 1998 to $9.5 million for the
year ended  December  31, 1999,  an increase of $5.1  million,  or 115.9%.  This
increase was primarily  attributable to a $2.5 million,  or 114.7%,  increase in
personnel-related expenses resulting from our increasing the number of our sales
and  marketing  employees in 1999 and to an increase of $836,000,  or 78.8%,  in
promotional  expenses.  We have  increased our sales and  marketing  expenses in
response  to  current  and  expected  growth  in the  market  for our  products.
Marketing and selling  expenses net as a percentage of revenues  increased  from
49.8% for the year ended  December 31, 1998 to 54.1% for the year ended December
31, 1999.

     General and Administrative.  General and administrative  expenses increased
from $670,000 for the year ended  December 31, 1998 to $1.4 million for the year
ended December 31, 1999, an increase of $730,000,  or 109.0%.  This increase was
primarily  attributable  to an  increase of  $340,000,  or 89.5%,  in  personnel
expenses  and  occupancy  costs and to an  increase of  $96,000,  or 114.3%,  in
recruitment costs. General and administrative expenses as a percentage of

                                      -36-

<PAGE>


revenues  increased  from 7.5% for the year ended  December 31, 1998 to 8.1% for
the year ended December 31, 1999.

     Net Loss.  Net loss increased from $829,000 for the year ended December 31,
1998 to $2.7 million for the year ended  December 31, 1999,  an increase of $1.9
million, or 229.2%. Net loss increased as a percentage of revenues from 9.3% for
the year ended December 31, 1998 to 15.4% for the year ended December 31, 1999.

     Financial  Income.  Financial  income  increased  from $22,000 for the year
ended  December  31,  1998 to  $105,000  for the year ended  December  31,  1999
principally  as a result of the  increased  interest  income we derived from the
investment of the cash surplus from our June 1998 private placement.

Consolidated Balance Sheet

     Trade  Receivables.  Trade  receivables  increased  from  $3.2  million  at
December  31, 1999 to $7.0  million at December  31,  2000,  an increase of $3.8
million, or 118.5%.  This increase was primarily  attributable to an increase in
sales of our products during the year ended December 31, 2000.

     Allowance for Doubtful Accounts.  Allowance for doubtful accounts increased
from $225,000 at December 31, 1999 to $577,000 at December 31, 2000, an increase
of $352,000,  or 156.4%.  Allowance for doubtful  accounts as a portion of trade
receivables  increased  from 6.5% as of December 31, 1999 to 7.6% as of December
31, 2000. This increase was primarily attributable to an increase in the balance
of receivables.

     Other  Receivables  and Prepaid  Expenses.  Other  receivables  and prepaid
expenses  decreased  from $1.5  million at December  31, 1999 to $1.1 million at
December 31, 2000, a decrease of $465,000 or 30.7%.  This decrease was primarily
attributable to a decrease in prepaid rental expenses.

     Inventories.  Inventories  increased from $2.4 million at December 31, 1999
to $4.9 million at December 31, 2000,  an increase of $2.5  million,  or 103.7%.
This increase was primarily attributable to an increase in inventory in response
to growth in our sales.

     Trade Payables.  Trade payables increased from $2.6 million at December 31,
1999 to $3.7  million at December  31,  2000,  an increase of $1.1  million,  or
45.3%. This increase was primarily  attributable to an increase in the volume of
activities during the year.

     Other Payables and Accrued  Expenses.  Other payables and accrued  expenses
increased  from $6.3 million at December  31, 1999 to $16.8  million at December
31, 2000, an increase of $10.5 million,  or 164.9%.  This increase was primarily
attributable to an increase in accrued  expenses and in accrued  deferred income
which  will be  recognized  only  after all  criteria  for  revenue  recognition
according to SOP 97-2 are met.

                                      -37-

<PAGE>




Quarterly Results of Operations

     The following tables present consolidated statements of operations data for
each of the eight fiscal  quarters  ended December 31, 2000, in dollars and as a
percentage of revenues.  In management's opinion, this unaudited information has
been prepared on the same basis as our audited consolidated financial statements
and includes all adjustments,  consisting only of normal recurring  adjustments,
necessary for fair  presentation  of the unaudited  information for the quarters
presented.  The  results  of  operations  for any  quarter  are not  necessarily
indicative of results that we might achieve for any subsequent periods.

<TABLE>
<CAPTION>
                       Mar. 31,  June 30,  Sept. 30, Dec. 31,  Mar, 31,  June 30, Sept. 30,  Dec. 31,
                        1999      1999      1999      1999      2000      2000      2000      2000
                       ------   -------   -------   -------   ------   -------   --------  ----------

<S>                    <C>      <C>       <C>       <C>       <C>      <C>       <C>       <C>
Revenues.............. $3,393   $3,979    $4,623    $5,555    $7,827   $10,201   $12,708   $15,176
Cost of revenues......   (454)    (592)     (642)   (1,165)   (1,944)   (2,579)   (3,102)   (3,822)
Gross profit..........  2,939    3,387     3,981     4,390     5,833     7,622     9,606    11,354
Operating expenses:
  Research and
   development........  1,408    1,917     2,124     2,217     2,529     3,332     3,749     4,653
  Less participation
   by the Chief
   Scientist..........  (208)     (318)     (245)     (325)     (236)     (365)      247         -
  Research and
   development, net... 1,200     1,599     1,879     1,892     2,293     2,967     3,996     4,653
  Marketing and
   selling, net....... 1,661     1,844     2,327     3,670     3,611     4,523     4,470     4,754
  General and
   administrative.....   240       291       299       596       615       670       779     1,393
  Repayment of future
   royalties..........     -         -         -         -         -         -         -     3,666
Operating income
  (loss)..............  (162)     (347)     (524)   (1,768)     (636)     (538)      361    (3,112)
Financing income
  (expenses), net.....    97        (1)       20       (11)      115     1,279     1,291     1,490
    Net income (loss).  $(65)    $(348)    $(504)  $(1,779)   $ (521)    $ 741   $ 1,652   $(1,622)


As a percentage of
revenues:
Revenues..............   100 %     100 %     100 %     100 %     100 %     100 %     100 %     100 %
Cost of revenues......   (13)      (15)      (14)      (21)      (25)      (25)      (24)      (25)
Gross profit..........    87        85        86        79        75        75        76        75
Operating expenses:
  Research and
   development.........   42        48        46        40        32        33        30        31
  Less participation
   by the
   Chief Scientist...     (6)       (8)       (5)       (6)       (3)       (4)        2         0
  Research and
   development, net..     36        40        41        34        29        29        32        31
  Marketing and
   selling, net........   49        47        50        66        46        44        35        31
  General and
   administrative......    7         7         6        11         8         7         6         9
  Repayment of future
   royalties.......        -         -         -         -         -         -         -        24
Operating income
  (loss) .............    (5)       (9)      (11)      (32)       (8)       (5)        3       (20)
Financing income
  (expenses), net.....     3         0         0        (0)        1        13        10        10
    Net income (loss).    (2)%      (9)%     (11)%     (32)%      (7)%       8 %      13 %     (10)%

</TABLE>

     We expect our operating results to fluctuate significantly in the future as
a  result  of  various   factors,   many  of  which  are  outside  our  control.
Consequently,  we believe that  period-to-period  comparisons  of our  operating
results may not necessarily be meaningful and, as a result,  you should not rely
on them as an indication of future performance.

                                      -38-

<PAGE>




Conditions in Israel

     We are  incorporated  under  the laws of,  and our  principal  offices  and
manufacturing and research and development  facilities are located in, the State
of Israel.  Therefore,  we are  directly  affected by  political,  economic  and
military conditions in Israel.

Political 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.  Israel  signed a peace treaty with
Egypt in 1979 and a peace  treaty  with  Jordan  in 1994.  Since  1993,  a joint
Israeli-Palestinian  declaration of principles and several other agreements have
been signed between Israel and the  Palestinians.  As of the date of this annual
report,  Israel has not entered into any peace agreement with Syria and Lebanon.
We cannot assure you whether any peace  agreement with Syria and Lebanon will be
signed.   Moreover,   while  Israel  is  in  the  process  of  conducting  peace
negotiations with the Palestinian Authority, since September 2000 there has been
a  significant   deterioration  in  the  relationship  between  Israel  and  the
Palestinian  Authority  and as a result of riots in Gaza and the West Bank,  the
peace process between the parties has stagnated.  Efforts to resolve the problem
have failed to result in an agreeable  solution.  Continued  hostilities between
the Palestinian  community and Israel and any failure to settle the conflict may
have a material adverse effect on our business and us. Further  deterioration of
hostilities  into a full scale conflict might require more  widespread  military
reserve service by some of our employees that may have a material adverse effect
on our business.

     Despite the progress  towards peace between  Israel and its Arab  neighbors
and the Palestinians,  some countries,  companies and organizations  continue to
participate  in a boycott of Israeli firms and others doing business with Israel
or with Israeli companies. Although we are precluded from marketing our products
to these  countries,  we  believe  that in the past  the  boycott  has not had a
material adverse effect on us. However,  restrictive laws, policies or practices
directed  towards Israel or Israeli  businesses  could have an adverse impact on
the expansion of our business.

     All male adult citizens and permanent  residents of Israel under the age of
48 are,  unless exempt,  obligated to perform up to 39 days of military  reserve
duty  annually.  Additionally,  these  residents  are subject to being called to
active duty at any time under emergency circumstances.  Some of our officers and
employees are currently  obligated to perform annual reserve duty. While we have
operated  effectively under these  requirements  since we began  operations,  we
cannot assess the full impact of these requirements on our workforce or business
if  conditions  should  change,  and we cannot  predict  the effect on us of any
expansion or reduction of these obligations.

Economic Conditions

     Israel's  economy  has been  subject  to  numerous  destabilizing  factors,
including a period of rampant  inflation in the early to mid-1980s,  low foreign
exchange  reserves,  fluctuations in world commodity prices,  military conflicts
and civil unrest. The Israeli government has intervened in

                                      -39-

<PAGE>


various sectors of the economy by utilizing fiscal and monetary policies, import
duties,  foreign currency  restrictions and control of wages, prices and foreign
currency exchange rates. In 1998, the Israeli currency control  regulations were
liberalized significantly to allow Israeli residents to deal in foreign currency
and  non-residents  of Israel to purchase and sell Israeli  currency and assets.
The Israeli government has periodically changed its policies in all these areas.
There are currently no Israeli currency  control  restrictions on remittances of
dividends  on our ordinary  shares or the proceeds  from the sale of our shares.
However,  legislation  remains in effect  under which  currency  controls can be
imposed by administrative action at any time.

     The Israeli government's  monetary policy contributed to relative price and
exchange rate stability in recent years,  despite  fluctuating rates of economic
growth and a high rate of  unemployment.  We cannot  assure you that the Israeli
government  will be successful in its attempts to keep prices and exchange rates
stable.  Price and exchange rate  instability may have a material adverse effect
on us.

Trade Relations

     Israel is a member of the United Nations, the International  Monetary Fund,
the International  Bank for Reconstruction and Development and the International
Finance Corporation. Israel is a member of the World Trade Organization and is a
signatory to the Global Agreement on Trade in Services. In addition,  Israel has
been granted  preferences  under the Generalized  System of Preferences from the
United States,  Australia,  Canada and Japan.  These preferences allow Israel to
export the products  covered by these  programs  either  duty-free or at reduced
tariffs.

     Israel and the EEC, known now as the European Union, concluded a free trade
agreement in July 1975 which confers  various  advantages on Israeli  exports to
most European  countries  and  obligates  Israel to lower its tariffs on imports
from  these  countries  over a number of years.  In 1985,  Israel and the United
States  entered into an agreement to establish a free trade area. The free trade
area has eliminated all tariff and specified  non-tariff  barriers on most trade
between the two countries.  On January 1, 1993, an agreement  between Israel and
the European Free Trade Association, known as the EFTA, established a free-trade
zone between Israel and the EFTA nations.  In November 1995, Israel entered into
a new agreement with the European Union, which includes redefinement of rules of
origin and other improvements, including providing for Israel to become a member
of the research and technology  programs of the European Union. In recent years,
Israel has  established  commercial  and trade  relations with a number of other
nations,  including Russia,  China,  India,  Turkey and other nations in Eastern
Europe and Asia.

Market Risk

     We currently do not invest in, or hold for trading or other  purposes,  any
financial instruments subject to market risk. We invest our cash surplus in time
deposits, cash deposits, U.S. federal agency securities and corporate bonds with
an average  credit rating of A2. We currently pay interest on our equipment term
loan facility based on the London interbank  offered rate. As a result,  changes
in the general level of interest  rates  directly  affect the amount of interest
payable by us under this facility.  However,  because our outstanding debt under
this


                                      -40-
<PAGE>


facility has never  exceeded  $218,000,  we do not expect our exposure to market
risk from changes in interest rates to be material.

Effective Corporate Tax Rate

     Israeli  companies are generally subject to income tax at the corporate tax
rate of 36%. However,  several investment programs at our manufacturing facility
in Tel Aviv have been granted approved  enterprise status and we are, therefore,
eligible  for tax  benefits  under  the Law for  the  Encouragement  of  Capital
Investments,  1959.  We have  derived,  and  expect to  continue  to  derive,  a
substantial  portion of our income from the approved  enterprise programs at our
manufacturing facility.

     Subject to  compliance  with  applicable  requirements,  the portion of our
income  derived from the approved  enterprise  programs will be eligible for the
following  tax  benefits  commencing  in the  first  year in which it  generates
taxable income:

    Year after we
  begin generating
   taxable income     Tax benefit
------------------    --------------------------------------------------

1-2...............    Tax-exempt
3-7...............    Corporate tax of up to 25%
8-10..............    Corporate  tax of up to 25% if  more  than  25% of
                      our shares are held by non-Israeli investors

     The period of tax benefits for our approved enterprise programs has not yet
commenced,  because we have yet to realize taxable income. These benefits should
result in income  recognized by us being tax exempt or taxed at a lower rate for
a specified  period after we begin to report  taxable income and exhaust any net
operating  loss  carry-forwards.  However,  these benefits may not be applied to
reduce   the  tax  rate  for  any  income   derived  by  our  U.S.   subsidiary.

     As of December 31, 2000, our net operating loss  carry-forwards for Israeli
tax purposes amounted to approximately  $15.0 million.  Under Israeli law, these
net operating  losses may be carried  forward  indefinitely  and offset  against
future  taxable  income.  We expect  that,  during the period in which these tax
losses are utilized,  our income will be  substantially  tax exempt.  Therefore,
there will be no tax benefit  available from these losses and no deferred income
taxes have been included in our financial  statements.  Deferred taxes for other
temporary differences are immaterial.

     As of December 31, 2000, the net operating loss  carry-forwards of our U.S.
subsidiary for U.S. tax purposes amounted to approximately  $8.0 million.  These
losses  are  available  to offset  any future  U.S.  taxable  income of our U.S.
subsidiary and will expire in the years 2010 through 2014.

Impact of Inflation and Currency Fluctuations

     The dollar cost of our  operations is influenced by the extent to which any
inflation in Israel is offset, is offset on a lagging basis, or is not offset by
the devaluation of the NIS in relation to the dollar. When the rate of inflation
in Israel exceeds the rate of devaluation of the

                                      -41-

<PAGE>


NIS against the dollar,  companies  experience  increases  in the dollar cost of
their operations in Israel. Unless offset by a devaluation of the NIS, inflation
in Israel will have a negative effect on our profitability as we receive payment
in dollars or dollar-linked NIS for all of our sales while we incur a portion of
our expenses, principally salaries and related personnel expenses, in NIS.

     The following  table  presents  information  about the rate of inflation in
Israel, the rate of devaluation of the NIS against the U.S. dollar, and the rate
of inflation of Israel adjusted for the devaluation:

                                                         Israeli
                       Israeli          Israeli         inflation
    Year ended        inflation    devaluation rate   adjusted for
   December 31,         rate %             %          devaluation %
   ------------       ---------    ----------------   -------------

       1996              10.6             3.7               6.6
       1997               7.0             8.8              (1.7)
       1998               8.6            17.6              (7.7)
       1999               1.3            (0.1)              1.3
       2000               0.0            (2.7)              2.8

     We cannot assure you that we will not be materially and adversely  affected
in the future if inflation in Israel exceeds the  devaluation of the NIS against
the dollar or if the timing of the devaluation  lags behind inflation in Israel.

     A  devaluation  of the NIS in  relation  to the  dollar  has the  effect of
reducing  the dollar  amount of any of our  expenses  or  liabilities  which are
payable in NIS, unless these expenses or payables are linked to the dollar. This
devaluation  also has the effect of  decreasing  the  dollar  value of any asset
which consists of NIS or receivables  payable in NIS, unless the receivables are
linked  to the  dollar.  Conversely,  any  increase  in the  value of the NIS in
relation  to the  dollar has the effect of  increasing  the dollar  value of any
unlinked NIS assets and the dollar amounts of any unlinked NIS  liabilities  and
expenses.

     Because   exchange   rates  between  the  NIS  and  the  dollar   fluctuate
continuously,  with a  historically  declining  trend  in the  value of the NIS,
exchange rate fluctuations and especially larger periodic devaluations will have
an impact on our profitability and period-to-period  comparisons of our results.
The effects of foreign currency re-measurements are reported in our consolidated
financial statements in current operations.

B.   LIQUIDITY AND CAPITAL RESOURCES

     From our  inception  until our initial  public  offering in March 2000,  we
financed our  operations  through cash generated by operations and a combination
of private placements of our share capital and borrowings under lines of credit.
Through December 31, 1999, we raised a total of  approximately  $12.2 million in
aggregate  net  proceeds in four  private  placements.  In March  2000,  we sold
4,370,000  of our  ordinary  shares in an initial  public  offering  and 590,822
ordinary  shares  in  a  private   placement  to  Samsung   Venture   Investment
Corporation, a member of the Samsung group, and Siemens Aktiengesellschraft.  We
received  net  proceeds of $89.2  million  from the public  offering and private
placement.  As of December 31, 2000, we had approximately  $41.6 million in cash
and cash equivalents and our working capital was approximately $73.7 million.

                                      -42-

<PAGE>




     Capital  expenditures  for the years ended December 31, 1998, 1999 and 2000
were  approximately  $1.1 million,  $2.4 million and $4.2 million  respectively.
These  expenditures  were  principally for research and  development  equipment,
motor vehicles,  office furniture and equipment and leasehold  improvements.  We
currently do not have significant capital spending or purchase  commitment,  but
we expect to continue to engage in capital spending  consistent with anticipated
growth in our operations, infrastructure and personal.

     Net cash provided by operating  activities was  approximately  $8.6 million
for the year ended December 31, 2000. This amount was primarily  attributable to
an increase of $10.4  million in other  payables  and  accrued  expenses  and an
increase in  depreciation  of $1.8 million.  These increases in cash provided by
operating  activities were offset in part by an increase in trade receivables of
$3.8 million and an increase in inventory of $2.5 million.

     The  increase  in  inventory  for the  year  ended  December  31,  2000 was
primarily in anticipation  of expected growth in product sales.  The increase in
accounts  receivable  for the year ended  December  31, 2000 was  primarily  the
result  of  increased  sales.   Net  cash  used  in  investing   activities  was
approximately  $59.5 million for the year ended  December 31, 2000. For the year
ended December 31, 2000, $39.5 million of cash used in investing activities were
invested in short term  deposits and $15.9  million  were  invested in long term
investments.  During the year ended December 31, 2000, $4.2 million of cash used
in investing activities was for purchases of property and equipment.

     Net cash  provided by financing  activities  was $90.0 million for the year
ended December 31, 2000. For the year ended December 31, 2000,  cash provided by
financing  activities  was  attributable  principally  to the proceeds  from our
initial public offering and a private placement of our ordinary shares.

     As of December 31, 2000, our principal commitments consisted of obligations
outstanding under operating leases. Although we have no material commitments for
capital  expenditures,  we  anticipate an increase in capital  expenditures  and
lease  commitments   consistent  with  our  anticipated  growth  in  operations,
infrastructure and personnel.  We also may establish additional operations as we
expand globally.

     As of December 31, 2000, we had $65,000 outstanding under an equipment term
loan facility and a $2.5 million line of credit, all of which was unused.

     Our capital  requirements  are dependent on many factors,  including market
acceptance  of our products and the  allocation of resources to our research and
development efforts, as well as our marketing and sales activities.  In the last
three years, we have experienced  substantial increases in our expenditures as a
result of the growth in our operations and personnel.  We intend to increase our
expenditures in the future consistent with our anticipated growth. We anticipate
that our cash resources will be used primarily to fund our operating activities,
as well as for capital expenditures.

     Our  February  28,  2001,  we  announced  that our Board of  Directors  has
authorized the repurchase of up to 10% of our outstanding Ordinary Shares in the
open market from time to time at  prevailing  market  prices.  No time limit has
been placed on the duration of the share

                                      -43-

<PAGE>


repurchase program. We may use the repurchased shares for issuance upon exercise
of employee stock options or other corporate purposes.

C.   RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

     Research and development  costs, net are charged to operations as incurred.
Software  development costs are considered for capitalization when technological
feasibility is established  according to SFAS No. 86,  "Accounting for the Costs
of Computer Software to be Sold,  Leased or Otherwise  Marketed." Costs incurred
after  achievement  of  technological  feasibility  in the  process of  software
production  have not been material.  Therefore,  the Company has not capitalized
any of its research and  development  expenses and does not anticipate  that its
development process will differ materially in the future.

     We place  considerable  emphasis on research and  development to expand the
capabilities of our existing  products and  technology,  to develop new products
and to improve our existing  technologies and capabilities.  We believe that our
future  success  will  depend upon our  ability to  maintain  our  technological
leadership,  to enhance our existing products and technology and to introduce on
a timely basis new  commercially  viable products and technology  addressing the
needs of our customers.  Our net investment in research and  development for the
three  years ended  December  31,  1998,  1999 and 2000 was $4.4  million,  $7.7
million  and $14.3  million,  respectively.  We intend to  continue  to devote a
significant  portion of our personnel  and  financial  resources to research and
development.  As part of our product  development  process,  we seek to maintain
close  relationships  with our customers to identify  market needs and to define
appropriate product specifications.

     As of December 31, 2000, our research and  development  staff  consisted of
approximately  153  employees.  Our  research  and  development  activities  are
conducted at our facilities in Tel Aviv, Israel and in our office in Mahwah, New
Jersey.  To introduce new, high quality  products,  we deploy procedures for the
design,  development and quality assurance of our new product developments.  Our
team is divided  according to our existing product lines. Each product line team
is headed by a team  leader and  includes  software or  hardware  engineers  and
quality control technicians.

Manufacturing and Assembly

     Our manufacturing operations consist of materials planning and procurement,
out-sourcing of  sub-assemblies,  final  assembly,  product  assurance  testing,
quality control and packaging and shipping. We assemble and test our products at
our facilities in Tel Aviv,  Israel.  We test our products both during and after
the assembly  process  using  internally  developed  product  assurance  testing
procedures. We have a flexible assembly process that enables us to configure our
products at the final assembly stage for customers who require that our products
be modified to bear their private label.  This flexibility is designed to reduce
our  assembly  cycle time and reduce our need to maintain a large  inventory  of
finished goods. We use an enterprise  resource planning,  or ERP, system that we
purchased from BAAN Systems that we modified to our specific needs.  This system
allows  us to use just in time  procurement  and  manufacturing  procedures.  We
believe that the  efficiency  of our assembly  process to date is largely due to
our product  architecture  and our  commitment to assembly  process  design.  We
manufacture our

                                      -44-

<PAGE>


software  development  kits on CD-ROMs and package and ship them  accompanied by
relevant documentation.

     As part of our commitment to quality, we have been certified as an ISO 9002
supplier.  The  ISO  9002  standard  defines  the  procedures  required  for the
manufacture of products with predictable and stable performance and quality.  We
are continuously  trying to improve our quality based on the guidelines dictated
by the ISO 9002 standard.

Government Grants

     We principally  conduct our research and development  operations in Israel.
Our  research  and  development  efforts  have been  financed  through  internal
resources  and in the past  from  grants  from the  Chief  Scientist.  The Chief
Scientist provided grants for research and development  efforts of approximately
$1.1 million both in 1998 and 1999,  and $353,000 in 2000,  representing  26.0%,
14.3% and 2.5%, respectively,  of our total research and development expenses in
these periods.  We do not intend to apply for grants from the Chief Scientist in
the future.

     For the last three years, we have paid or accrued  royalties to the Israeli
government as follows:

      Year ended           Royalties paid
     December 31,            or accrued
     ------------            ----------
         1998                $  178,000
         1999                   495,000
         2000                 4,198,000

     In 2000 we  determined  to repay all future  royalty  payments to the Chief
Scientist.  This  decision was made as part of the strategy to  discontinue  our
relationship   with  the  Chief   Scientist  in  order  to  reduce  the  growing
restrictions  imposed by the Chief  Scientist on our  business.  By doing so, we
also save the increased  interest rates that are imposed by the Chief  Scientist
on part of the  royalties  due. The $3.7 million  repayment of future  royalties
will     benefit     our     operating     results     in    future     periods.

     The Israeli government, through the Fund for the Encouragement of Marketing
Activities,  awards grants to Israeli companies for overseas marketing expenses,
including expenses for maintaining branches, advertising,  catalogs, exhibitions
and surveys,  up to a maximum rate of 33% of these expenses,  not to exceed $1.2
million  annually.  In 1998, we received grants from the marketing fund totaling
approximately  $178,000,  and are required to pay royalties in  connection  with
these grants at a rate of 3.0% of the increase in our sales generated outside of
Israel  from the date of the grant up to the total  dollar-linked  amount of the
grants.  Marketing  grants are currently  awarded only to companies whose annual
exports in the year preceding the application  did not exceed $15.0 million.  As
of December 31, 2000,  our  contingent  liability to the Israeli  government for
grants received from the marketing fund was $200,000.  If we fail to satisfy the
terms and  conditions  of the  grants,  we may be  required to refund the grants
already received and would likely be denied these grants in the future. We do

                                      -45-

<PAGE>


not  intend  to apply  for any  grants  from the Fund for the  Encouragement  of
Marketing Activities in the future.

D.   TREND INFORMATION

     As a result of a less predictable business environment and ongoing softness
in  enterprise  spending  in the United  States,  we are  unable to provide  any
guidance as to current sales and profitability trends.  Nevertheless,  we expect
revenues for fiscal 2001 to be no less than what we reported in fiscal 2000.  In
order to compensate for the lower revenue  expectations  for fiscal 2001 we have
reduced overall spending and have implemented a 10% reduction in our workforce.

Recently Issued Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting  for  Derivative  Instruments  and Hedging  Activities.  SFAS No. 133
established  accounting and reporting  standards requiring that every derivative
instrument  be  recorded on the  balance  sheet at its fair value.  SFAS No. 133
requires that changes in the derivative's fair value be recognized  currently in
earnings unless specific hedge accounting  criteria are met. Special  accounting
for qualifying  hedges allows a derivative's  gains and losses to offset related
results on the  hedged  item in the  statement  of  operations.  SFAS No. 133 is
effective  for fiscal years  beginning  after June 15, 2000. We believe that the
adoption  of SFAS  No.  133 will not have a  material  effect  on our  financial
statements.

     In March  2000,  the FASB issued  interpretation  No. 44,  "Accounting  for
Certain  Transactions  Involving Stock  Compensation - an  Interpretation of APB
Opinion No. 25." The  interpretation  clarifies the application of APB No. 25 in
certain  situations,  as defined.  The interpretation is effective July 1, 2000,
but covers  certain events  occurring  during the period after December 15, 1998
but  before  the  effective  date.  To the extent  that  events  covered by this
interpretation  occur during the period after  December 15, 1998, but before the
effective date the effects of applying this  interpretation  would be recognized
on a  prospective  basis from the  effective  date.  Accordingly,  upon  initial
application of the final interpretation, (a) no adjustments would be made to the
financial statements for periods before the effective date, (b) no expense would
be recognized for any additional compensation cost measured that is attributable
to periods before the effective date, and (c) no expense would be recognized for
any additional compensation cost measured that is attributable to periods before
the effective date. We believes that the adoption of this  interpretation  would
not have any effect on the accompanying financial statements.

     In December  1999,  the  Securities  and Exchange  Commission  issued Staff
Accounting   Bulletin   (SAB)  No.  101,   "Revenue   Recognition  in  Financial
Statements." SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. We adopted SAB
101 as required in the second  quarter of 2000.  The adoption of SAB 101 did not
have a material impact on our  consolidated  results of operations and financial
position.

                                      -46-

<PAGE>




Cautionary Statement Regarding Forward-Looking Statements

     This  Annual  Report  on  Form  20-F  contains   various   "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
within the Private  Securities  Litigation Reform Act of 1995, as amended.  Such
forward-looking  statements  reflect  our  current  view with  respect to future
events and financial  results.  Forward-looking  statements  usually include the
verbs,  "anticipates,"  "believes,"  "estimates," "expects," "intends," "plans,"
"projects,"  "understands"  and other verbs  suggesting  uncertainty.  We remind
shareholders  that   forward-looking   statements  are  merely  predictions  and
therefore  inherently  subject to  uncertainties  and other  factors and involve
known and unknown risks that could cause the actual results, performance, levels
of  activity,  or  our  achievements,  or  industry  results,  to be  materially
different  from any future  results,  performance,  levels of  activity,  or our
achievements expressed or implied by such forward-looking statements.  Investors
are cautioned not to place undue reliance on these  forward-looking  statements,
which speak only as of the date hereof.  We undertake no  obligation to publicly
release any revisions to these  forward-looking  statements to reflect events or
circumstances   after  the  date  hereof  or  to  reflect  the   occurrence   of
unanticipated events.

     We have  attempted to identify  additional  significant  uncertainties  and
other factors  affecting  forward-looking  statements in a Risk Factors  section
which appears in Item 3 - Key Information.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.   DIRECTORS AND SENIOR MANAGEMENT

     Our directors and executive officers are as follows:

Name                       Age   Position
------------------------   ---   -----------------------------------------------
Zohar Zisapel (1).......    52   Chairman of the Board of Directors
Yehuda Zisapel (1)......    59   Director
Gadi Tamari (1).........    56   Chief Executive Officer, President and Director
Ami Amir (1)............    57   Director
Eli Doron...............    49   Chief Technical Officer and Executive Vice
                                 President
David Seligman..........    43   Chief Financial Officer
Adi Gan (1).............    33   Director
Dan Goldstein (2).......    47   Director
Hillel E. Milo (1)......    51   Director
Efraim Wachtel (1)......    56   Director
Andreas Mattes (1)......    40   Director
Liora Katzenstein (2)...    45   Director

----------------
                                      -47-

<PAGE>



(1)  Zohar Zisapel,  Yehuda Zisapel,  Gadi Tamari,  Ami Amir, Adi Gan, Hillel E.
     Milo, Efraim Wachtel,  and Andreas Mattes will serve as directors until our
     2001 annual general meeting of shareholders.

(2)  Liora  Katzenstein  and Dan  Goldstein  will  serve  as  outside  directors
     pursuant to the  provisions  of the Israeli  Companies Law for a three-year
     term (i.e.,  January 2003 for Mr.  Goldstein  and  December  2003 for Prof.
     Katzenstein).  Thereafter,  their  term of service  may be renewed  for one
     additional three-year term.

     Adi Gan, Dan Goldstein,  Liora  Katzenstein and Hillel Milo are independent
directors.

     Zohar Zisapel has served as a director of RADVISION  since  November  1992,
and as our  Chairman  of the Board of  Directors  until  August  1999.  He again
assumed the  position of Chairman of the Board in April 2001.  Mr.  Zisapel is a
founder  and a  director  of RAD Data  Communications  Ltd.,  or RAD,  a leading
worldwide data communications  company  headquartered in Israel, of which he has
served as president from January 1982 until 1999, and a director of other public
companies in the RAD-BYNET group,  including RADCOM,  SILICOM,  RIT, Ceragon and
RADWARE.  During the last five years,  Mr.  Zisapel has been  engaged  mainly in
management  of high  technology  companies.  Mr.  Zisapel  has  B.Sc.  from  the
Technion,  Israel  Institute  of  Technology  and  M.Sc.  degrees  from Tel Aviv
University

     Yehuda  Zisapel has served as a director of RADVISION  since  November 1992
and as our chairman of the board of directors  until April 2001.  Mr. Zisapel is
also a founder and a director of RAD, of which he has served as a director since
1979, and its affiliate,  BYNET Data Communications Ltd. Mr. Zisapel also serves
as the chairman of the board of RIT Technologies  Ltd. and RADWARE Ltd. and as a
director of other companies in the RAD-BYNET group,  including  SILICOM Ltd. and
RADCOM  Ltd.  Mr.  Zisapel  has a  B.Sc.  and  an  M.Sc.  degree  in  electrical
engineering  from the Technion,  Israel  Institute of  Technology  and an M.B.A.
degree from Tel Aviv University. Yehuda Zisapel and Zohar Zisapel are brothers.

     Gadi  Tamari has served as our chief  executive  officer  since April 2001.
From  November  1999  to  April  2001,  Mr.  Tamari  was  the  vice   president,
international  operations  of the  OpenNet  Softswitch  organization,  of Lucent
Technologies. During the years 1996-1999 he was chief operating officer of Excel
Switching Corporation responsible for international sales, operations, marketing
and customer support.  Mr. Tamari has a B.Sc.  degree in mechanical  engineering
and an  M.Sc.  degree  in  industrial  engineering  from  the  Technion,  Israel
Institute of Technology and attended Harvard  University's  Advanced  Management
Program.

     Ami Amir,  our  co-founder,  served as our  president  and chief  executive
officer from November  1992 until April 2001 and has served as a director  since
November  1992.  From March 1987 to November 1992, Mr. Amir was the president of
RAD Data Communications Inc. Before March 1987, Mr. Amir held senior engineering
positions  for  Simtech  Advanced  Training  and  Simulation  Systems,   Tadiran
Electronic  Industries  and Elbit  Systems Ltd.  Mr. Amir has a B.Sc.  degree in
electronics  and  computer   science  from  the  Technion  Israel  Institute  of
Technology.

                                      -48-

<PAGE>




     Eli Doron,  our co-founder,  has served as our executive vice president and
chief  technical  officer since July 1998.  From October 1992 to July 1998,  Mr.
Doron was our vice president of research and  development.  From October 1983 to
October 1992, Mr. Doron held senior  engineering  positions at Simtech  Advanced
Training and Simulation Systems. Mr. Doron has a B.Sc. degree in electronics and
computer science from Ben Gurion University.

     David  Seligman has served as our chief  financial  officer since  November
1999.  From July 1996 until November 1999, Mr.  Seligman was the chief financial
officer and secretary of LanOptics  Ltd. From October 1993 until June 1996,  Mr.
Seligman  was a  senior  financial  analyst  for  Fidelity  Investments  Systems
Company.  Mr.  Seligman has a B.A. in  political  science and  geography  and an
M.B.A. in accounting and finance from Tel Aviv University.

     Adi Gan has served as a director of  RADVISION  since  August  1998.  Since
January 1998, Mr. Gan has been an investment  manager with  Evergreen's  Venture
Capital  Group.  From August 1995 until  January  1998,  Mr. Gan was employed by
TesCom  Ltd.,  initially  as a  project  manager  and then as a  manager  of the
real-time system division of TesCom Ltd. Mr. Gan has a B.Sc. in physics from the
Technion,  Israel  Institute of  Technology,  and an M.Sc. in chemistry from Tel
Aviv University.

     Dan Goldstein has served as an outside  director of RADVISION since January
2000. In 1985, Mr.  Goldstein  founded  Formula Systems (1985) Ltd. and has been
its chief  executive  officer and chairman of the board of directors  since that
time.  Mr.  Goldstein  is also the  chairman of the board of  directors of other
companies in the Formula  Systems group,  including  Magic Software  Enterprises
Ltd., Sintec Advanced  Technologies Ltd., F.C.T.  Formula Computer  Technologies
Ltd. and Applicom Software  Industries (1990) Ltd., and is a director of Crystal
Systems  Solutions  Ltd. Mr.  Goldstein has a B.Sc.  degree in  mathematics  and
computer  science  and an  M.B.A.  in  business  administration  from  Tel  Aviv
University.

     Hillel E. Milo has served as a director of RADVISION since May 1995.  Until
July 1999, Mr. Milo was president and chief executive officer of Israel Infinity
Venture  Capital Fund.  Since January  1995,  Mr. Milo has been chief  executive
officer and  managing  director of Clal Venture  Capital Fund L.P. In 1993,  Mr.
Milo  co-founded  Walden  Israel  Venture  Capital fund and has been the general
partner  of that fund  since  that  time.  Mr.  Milo has a B.Sc.  in  mechanical
engineering and an M.A. in management science from the University of Alabama.

     Efraim Wachtel has served as a director of RADVISION  since March 1998. Mr.
Wachtel has been  president and chief  executive  officer of RAD since  November
1997.  From October 1985 to November  1997,  Mr.  Wachtel was vice  president of
sales and  marketing  of RAD.  Before  October  1985,  Mr.  Wachtel held various
research and  development  positions  in several  companies in Israel and in the
U.S. Mr. Wachtel has a B.Sc. degree in electrical engineering from the Technion,
Israel Institute of Technology.

     Andreas  Mattes has served as a director of RADVISION  since  March,  2000.
Since April 1999,  Mr. Mattes has been the  president of enterprise  networks of
Siemens ICN. From October 1998 until April 1999, Mr. Mattes was the president of
central sales of Siemens ICN. From June 1997 until October 1998,  Mr. Mattes was
the president of international sales of Siemens PN. From January 1996 until June
1997, Mr. Mattes was the vice president of product management


                                      -49-
<PAGE>


of Siemens PN. From October 1985 until  January  1996,  Mr.  Mattes held various
sales, marketing and business administration positions at Siemens.

     Liora  Katzenstein  has served as an outside  director of  RADVISION  since
December 2000. Prof. Liora  Katzenstein  specializes in Business  Administration
and Entrepreneurship.  During the last five years she founded, and serves as the
President and CEO of, ISEMI - Israel School of  Entrepreneurial  Management  and
Innovation.  Prof.  Katzenstein  has also served as a Senior Lecturer in various
academic  institutions  in Israel  and abroad  including  the  Harvard  Business
School,  Nanyang  University and the Technion,  Israel  Institute of Technology.
Prof.   Katzenstein  currently  serves  as  a  director  of  Clal  Industries  &
Investments Ltd., Discount Issuers Ltd., Amanat Ltd., Palafric  Investments Ltd.
and Tachlit - Discount  Bank,  and holds  various  other  academic  and business
related positions,  including as a member of the Israeli Governmental  Committee
on Start-Up Companies. Over the last fifteen years Prof. Katzenstein served as a
faculty member and on the management of universities  and management  institutes
both in Israel  and abroad  and  published  numerous  business  articles  in the
Israeli professional press.

     Other key managers are as follows:

Name                           Age  Position
-----------------------------  ---  -------------------------------------------
Boaz Raviv...................  40   General Manager of the Technology Group
Avinoam Barak................  38   General Manager of the Networking Group
Gene Wolf....................  52   Senior Vice President of Worldwide Sales
                                    and Support
Michelle Blank...............  46   Senior Vice President, Global Marketing
Ofer Shapiro.................  31   Senior Vice President, Business Development

     Boaz Raviv has served as general  manager  of the  technology  group  since
December  2000.  From  December  1999 to December  2000,  Mr. Raviv was the vice
president of business development and marketing at Elron TeleSoft.  From January
1996 to November 1999, he was telecom division  manager at Elron Software.  From
July 1989 to December  1995, Mr. Raviv held various key positions at CAP GEMINI,
France.  Raviv served his  apprenticeship  at Robotic in CEMAGREF and he holds a
bachelor's degree from the Technion, Israel Institute of Technology in Haifa.

     Avinoam Barak has served as the general manager of our networking  business
unit since June 2000. Prior to joining RADVision,  and since 1989 Mr. Barak held
various positions at MLM, a division of Israel Aircraft Industries.  In his last
position, he was a business manager for a communications-system  unit. Mr. Barak
holds a B.Sc.  in Computer  Engineering  from the Technion  Israel  Institute of
Technology  and an M.B.A.  in  Information  Systems  and  Finance  from Bar Ilan
University.

     Gene Wolf has served as our senior vice  president of  worldwide  sales and
support since January 2001.  Prior to that,  and since 1999,  Mr. Wolf served as
president of RADVISION  Inc. Prior to that, he served as the president and chief
executive officer of Controlware

                                      -50-

<PAGE>


Communications  Systems, Inc. (U.S. subsidiary of Controlware GmbH, Inc.). Prior
to Controlware,  he served as vice president of  international  sales for Teleos
Corporation.

     Michelle Blank has served as our senior vice president of global  marketing
since May 1999. From June 1997 to May 1999, Ms. Blank was president of RADVISION
Inc.  From  September  1990 to June  1997,  Ms.  Blank  acted as an  independent
consultant  to several  technology  companies.  Ms. Blank has a Ph.D.  degree in
cognitive science from The University of Texas.

     Ofer  Shapiro  has  served  as  our  Senior  Vice   President  of  Business
Development  since  September 2000.  While at RADVISION,  Mr. Shapiro has held a
variety of key  positions  including  Vice  President of Strategic  Accounts and
leading  the  development  of  RADVISION's   first   gatekeeper  and  multipoint
conferencing   unit  products.   Prior  to  joining  us,  Mr.  Shapiro   managed
electro-optics  related projects in the Israeli Defense Force for five years. He
holds a B.Sc. degree in math and physics from the Hebrew University in Jerusalem
and an M.Sc. in applied physics from Tel Aviv University.

Election of Directors

     Pursuant to our articles of association,  all of our directors,  other than
our outside directors, are elected at our annual general meeting of shareholders
by a vote of the  holders of a  majority  of the voting  power  represented  and
voting at such meeting. Outside directors are elected for a three-year term. All
the members of our Board of Directors  (except the outside directors as detailed
below)  may be  reelected  upon  completion  of  their  term of  office.  In the
intervals between annual general meetings of the Company, our Board of Directors
may elect new  directors,  whether to fill  vacancies or in addition to those of
their body,  but only if the total  numbers of  directors  shall not at any time
exceed any maximum  number (if any) fixed by or in accordance  with our articles
of association.  Seven of our directors  currently in office were elected by our
shareholders at our 2000 annual meeting of shareholders  and Mr. Gadi Tamari was
appointed a director by the Board of Directors in April 2001.

Independent and Outside Directors

     The Israeli  Companies Law requires Israeli companies with shares that have
been  offered  to the  public in or  outside  of Israel to  appoint at least two
outside  directors.  No person may be  appointed  as an outside  director if the
person or the  person's  relative,  partner,  employer  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 outside director,  any affiliation with the
company or any entity  controlling,  controlled by or under common  control with
the company. The term affiliation includes:

     o    an employment relationship;

     o    a business or professional relationship maintained on a regular basis;

     o    control; and

     o    service as an officer holder.


                                      -51-
<PAGE>


     No person may serve as an outside  director  if the  person's  position  or
other activities create, or may create, a conflict of interest with the person's
responsibilities  as an outside  director or may  otherwise  interfere  with the
person's  ability  to serve as an  outside  director.  If,  at the time  outside
directors are to be appointed, all current members of the Board of Directors are
of the same  gender,  then at least one  outside  director  must be of the other
gender.

     Outside directors are elected by shareholders.  The shareholders  voting in
favor of their  election  must  include at least  one-third of the shares of the
non-controlling shareholders of the company who are present at the meeting. This
minority  approval  requirement  need not be met if the total  shareholdings  of
those non-controlling  shareholders who vote against their election represent 1%
or less of all of the voting rights in the company.  Outside directors serve for
a three-year term, which may be renewed for only one additional three-year term.
Outside directors can be removed from office only by the same special percentage
of shareholders  as can elect them, or by a court,  and then only if the outside
directors  cease to meet the  statutory  qualifications  with  respect  to their
appointment or if they violate their duty of loyalty to the company.

     Any  committee of the board of directors  must include at least one outside
director and the audit committee must include all of the outside  directors.  An
outside director is entitled to compensation as provided in regulations  adopted
under the Companies  Law and is otherwise  prohibited  from  receiving any other
compensation, directly or indirectly, in connection with such service.

     In addition,  the Nasdaq  Stock  Market  requires us to have at least three
independent  directors  on our  Board of  Directors  and to  establish  an audit
committee,  at least a majority of whose members are  independent of management.
Our current audit committee complies with the Nasdaq rules. In addition,  we are
required to adopt an audit committee charter. We have adopted an audit committee
charter that complies with Nasdaq specifications.

Approval of Related Party Transactions Under Israeli Law

     The  Companies  Law codifies the  fiduciary  duties that "office  holders",
including directors and executive officers, owe to a company. An "office holder"
is defined in the Companies Law as a director,  general manager,  chief business
manager,  deputy general manager,  vice general manager,  other manager directly
subordinate  to  the  managing   director  or  any  other  person  assuming  the
responsibilities  of any of the  foregoing  positions  without  regard  to  such
person's title. An office  holder's  fiduciary  duties consist of a duty of care
and a duty of loyalty.  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  (i)  information  regarding  the  appropriateness  of a given  action
brought for his  approval or performed by him by virtue of his position and (ii)
all other  information of importance  pertaining to the foregoing  actions.  The
duty of loyalty  includes  avoiding any conflict of interest  between the office
holder's  position  in the  company  and  his  personal  affairs,  avoiding  any
competition with the company,  avoiding  exploiting any business  opportunity of
the company in order to receive  personal  gain for the office holder or others,
and  disclosing  to the company any  information  or  documents  relating to the
company's affairs which the office holder has received due to his position as an
office holder. Each person listed as a

                                      -52-

<PAGE>


director or executive  officer in the table under " -- Directors  and  Officers"
above is an office  holder.  Under the  Companies  Law, all  arrangements  as to
compensation  of office  holders who are not directors  require  approval of our
Board of Directors,  and the  compensation  of office  holders who are directors
must be approved by our Audit Committee, Board of Directors and shareholders.

     The  Companies Law requires  that an office  holder  promptly  disclose any
personal  interest that he or she may have and all related material  information
known to him or her, in connection with any existing or proposed  transaction by
us. In addition, if the transaction is an extraordinary transaction,  that is, a
transaction other than in the ordinary course of business,  other than on market
terms,  or likely to have a  material  impact  on the  company's  profitability,
assets or  liabilities,  the  office  holder  must also  disclose  any  personal
interest held by the office holder's spouse,  siblings,  parents,  grandparents,
descendants, spouse's descendants and the spouses of any of the foregoing, or by
any  corporation  in which the office  holder or a  relative  is a 5% or greater
shareholder,  director or general manager or in which he or she has the right to
appoint at least one director or the general manager. Some transactions, actions
and arrangements involving an office holder (or a third party in which an office
holder  has an  interest)  must be  approved  by the  board of  directors  or as
otherwise  provided  for in a company's  articles of  association,  as not being
adverse to the company's  interest.  In some cases,  such a transaction  must be
approved  by the audit  committee  and by the board of  directors  itself  (with
further   shareholder   approval   required   in  the   case  of   extraordinary
transactions).  An office holder who has a personal interest in a matter,  which
is considered at a meeting of the board of directors or the audit committee, may
not be present during the board of directors or audit committee  discussions and
may not vote on this matter,  unless the majority of the members of the board or
the audit committee have a personal interest, as the case may be.

     The Companies Law also  provides  that some  transactions  between a public
company and a controlling  shareholder,  or  transactions in which a controlling
shareholder  of the  company  has a personal  interest  but which are  between a
public  company  and  another  entity,  require  the  approval  of the  board of
directors and of the shareholders. Moreover, an extraordinary transaction with a
controlling   shareholder  or  the  terms  of   compensation  of  a  controlling
shareholder must be approved by the audit committee,  the board of directors and
shareholders.  The shareholder  approval for an  extraordinary  transaction must
include at least one-third of the shareholders who have no personal  interest in
the transaction and are present at the meeting.  The transaction can be approved
by shareholders  without this one-third approval,  if the total shareholdings of
those  shareholders  who  have  no  personal  interest  and  voted  against  the
transaction  do not represent  more than one percent of the voting rights in the
company.  In addition,  a private placement of securities that will increase the
relative  holdings  of a  shareholder  that  holds  5% or more of the  company's
outstanding  share capital or that will cause any person to become,  as a result
of the issuance, a holder of more than five percent of the company's outstanding
share capital,  requires approval by the board of directors and the shareholders
of the company.  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 25%  shareholder of the company.  This
rule does not apply if there is already  another 25% shareholder of the company.
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 45% shareholder of the company,  unless
there is a 50% shareholder

                                      -53-

<PAGE>


of the company.  Regulations  under the Companies Law provide that the Companies
Law's  tender  offer rules do not apply to a company  whose  shares are publicly
traded outside of Israel, if pursuant to the applicable  foreign securities laws
and stock exchange rules there is a restriction on the  acquisition of any level
of control of the company,  or if the acquisition of any level of control of the
company   requires  the   purchaser  to  make  a  tender  offer  to  the  public
shareholders.

Indemnification of Directors and Officers

     The  Companies  Law provides that an Israeli  company  cannot  exculpate an
office  holder from  liability  with respect to a breach of his duty of loyalty,
but may exculpate in advance an office holder from his liability to the company,
in whole or in part,  with respect to a breach of his duty of care. Our Articles
of  Association  provide  that,  subject  to  any  restrictions  imposed  by the
Companies  Law, we may enter into a contract for the  insurance of the liability
of any of our office holders with respect to:

     o    a breach of his duty of care to us or to another person;

     o    a breach of his duty of loyalty to us, provided that the office holder
          acted in good faith and had  reasonable  cause to assume  that his act
          would not prejudice our interests; or

     o    a financial  liability  imposed upon him in favor of another person in
          respect  of an act  performed  by him in  his  capacity  as an  office
          holder.

     In addition, we may indemnify an office holder against:

     o    a financial liability imposed on him in favor of another person by any
          judgment,  including a settlement or an arbitrator's award approved by
          a court in respect of an act  performed  in his  capacity as an office
          holder; and

     o    reasonable litigation expenses, including attorneys' fees, expended by
          such office  holder or charged to him by a court,  in  proceedings  we
          institute  against  him or  instituted  on our  behalf  or by  another
          person,  or in a criminal  charge from which he was acquitted,  all in
          respect of an act performed in his capacity as an office holder.

     These  provisions  are  specifically  limited in their scope by the Israeli
Companies Law, which provides that a company may not indemnify an office holder,
nor enter  into an  insurance  contract  that  would  provide  coverage  for any
monetary liability incurred as a result of any of the following:

     o    a breach by the office holder of his duty of loyalty unless the office
          holder acted in good faith and had a reasonable  basis to believe that
          the act would not prejudice the company;

                                      -54-

<PAGE>




     o    a breach by the office  holder of his duty of care if such  breach was
          done  intentionally or in disregard of the circumstances of the breach
          or its consequences;

     o    any act or omission done with the intent to derive an illegal personal
          benefit; or

     o    any fine levied  against  the office  holder as a result of a criminal
          offense.

     Under the  Companies  Law,  our  shareholders  may amend  our  Articles  of
Association to include either of the following provisions:

     o    Prospectively  undertake to indemnify an office holder of the Company,
          provided that the  undertaking is limited to types of events which our
          board of directors  deems to be  anticipated  and limited to an amount
          determined  by the  board of  directors  to be  reasonable  under  the
          circumstances; or

     o    Retroactively indemnify an office holder of the Company.

     In  addition,  pursuant  to the  Companies  Law,  indemnification  of,  and
procurement  of insurance  coverage for, our office  holders must be approved by
our Audit Committee and our Board of Directors and, in specified  circumstances,
by our shareholders.

     We have  agreed to  indemnify  our  office  holders to the  fullest  extent
permitted  under the  Companies  Law. We have  obtained  directors  and officers
liability insurance for the benefit of our office holders.

B.   COMPENSATION

     The  following  table  presents  all  compensation  we  paid  to all of our
directors  and officers as a group for the year ended  December  31,  2000.  The
table does not include any amounts we paid to  reimburse  any of our  affiliates
for costs incurred in providing us with services during this period.

                                           Salaries, fees,   Pension, retirement
                                           commissions and    and other similar
                                               bonuses             benefits
                                           ---------------   -------------------

All directors and officers as a group,
  consisting of fifteen persons...........  $2,112,779             $134,808

     As of December 31, 2000,  our directors and executive  officers as a group,
consisting of fifteen persons,  held options to purchase an aggregate of 608,950
ordinary shares. Other than reimbursement for expenses, we do not compensate our
directors for serving on our board of directors.

     Under  the  Companies   Law,  the  board  of  directors  must  approve  all
compensation  arrangements  of office holders who are not directors.  Directors'
compensation  arrangements  also require audit  committee  approval before board
approval and shareholder approval.

                                      -55-

<PAGE>




C.   BOARD PRACTICES

Audit Committee

     Our audit committee currently composed of Dan Goldstein,  Liora Katzenstein
and Efraim Wachtel.  It is currently  contemplated that the audit committee will
meet at least two times each year. The  responsibilities  of the audit committee
include:  (i) examining the manner in which management  ensures and monitors the
adequacy of the nature,  extent and  effectiveness  of  accounting  and internal
control systems;  (ii) reviewing prior to publication the statutory accounts and
other  published   financial   statements  and  information;   (iii)  monitoring
relationships  with  our  independent  auditors,  ensuring  that  there  are  no
restrictions on the scope of the statutory audit, making  recommendations on the
auditors'  appointment and dismissal,  and reviewing the  activities,  findings,
conclusions  and  recommendations  of the independent  auditors;  (iv) reviewing
arrangements  established  by management  for  compliance  with  regulatory  and
financial reporting requirements;  and (v) reviewing the scope and nature of the
work of the internal auditing unit.

     The audit  committee  is  authorized  generally to  investigate  any matter
within the scope of its  responsibilities  and has the power to obtain  from the
internal  auditing  unit,  our  independent  auditors  or any other  officer  or
employee any information that is relevant to such investigations.

     The Israeli  Companies Law provides that public  companies  must appoint an
audit  committee.  The  responsibilities  of the audit  committee  also  include
approving  related-party  transactions  as  required  by law.  Under the Israeli
Companies  Law, an audit  committee  must consist of at least three  members and
include all of the company's  outside  directors.  However,  the chairman of the
board of directors,  any director employed by the company or providing  services
to the company on a regular basis, any controlling  shareholder and any relative
of a  controlling  shareholder  may not be a member of the audit  committee.  An
audit  committee may not approve an action or a  transaction  with a controlling
shareholder,  or with an  office  holder,  unless  at the time of  approval  two
outside directors are serving as members of the audit committee and at least one
of the outside  directors  was  present at the meeting in which an approval  was
granted.

Internal Audit

     The Israeli  Companies Law also requires the board of directors of a public
company to appoint an  internal  auditor  nominated  by the audit  committee.  A
person who does not satisfy the Companies Law's  independence  requirements  may
not be appointed as an internal auditor.  The role of the internal auditor is to
examine,  among other  things,  the  compliance  of the  company's  conduct with
applicable law and orderly business practice. Our internal auditor complies with
the  requirements  of the Companies  Law. Our Internal  Auditor is currently Mr.
Gideon Duvshani, C.P.A. of Schwartz, Lerner, Duvshani & Co.

Committees

     Our board of  directors  has  formed  an audit  committee,  an  option  and
compensation committee and an executive committee.

                                      -56-

<PAGE>




     Our option and  compensation  committee,  which  consists of Zohar Zisapel,
Efraim Wachtel and Gadi Tamari, administers our consultants option plan and sets
the annual  compensation  for Gadi  Tamari,  our chief  executive  officer.  Our
executive committee, which consists of Zohar Zisapel, Dan Goldstein, Gadi Tamari
and Ami Amir, is  responsible  for managing our daily  operations  and acting on
behalf of our board of directors in exigent circumstances.

D.   EMPLOYEES

     As of April 30,  2001,  we had 277  employees  worldwide,  of whom 155 were
employed  in  research  and  development,  77  in  sales  and  marketing,  25 in
management and administration and 20 in operations.  We have standard employment
agreements with all of our employees  located in Israel.  Of our employees,  215
are based in Israel and 52 are based in the United  States,  9 are based in Hong
Kong and China and one is based in the United Kingdom.

     Our  relationships  with our  employees  in Israel are  governed by Israeli
labor legislation and regulations, extension orders of the Ministry of Labor and
personal employment agreements.

     Israeli labor laws and  regulations are applicable to all of our employees.
The laws concern various matters, including severance pay rights at termination,
retirement or death,  length of work day and work week,  minimum wage,  overtime
payments and insurance for work-related accidents. We currently fund our ongoing
legal  severance pay  obligations by paying monthly  premiums for our employees'
insurance policies.

     In addition,  Israeli law requires  Israeli  employees and employers to pay
specified  sums to the  National  Insurance  Institute,  which is similar to the
United  States  Social  Security  Administration.  Since  January 1, 1995,  such
amounts also include payments for national health insurance. The payments to the
National Insurance Institute are approximately 14.5% of wages, up to a specified
amount, of which the employee  contributes  approximately 66.0% and the employer
contributes  approximately  34.0%.  The majority of our permanent  employees are
covered by life and pension insurance policies  providing  customary benefits to
employees,  including retirement and severance benefits.  We contribute 13.3% to
15.8%,  depending on the employee,  of base wages to such plans and the employee
contributes 5.0%.

     RADVISION and its employees  are not parties to any  collective  bargaining
agreements.  However, certain provisions of the collective bargaining agreements
between  the  Histadrut,  the  General  Federation  of Labor in Israel,  and the
Coordination  Bureau of Economic  Organizations,  including  the  Manufacturers'
Association of Israel,  are applicable to our employees by "extension orders" of
the Israeli Ministry of Labor and Welfare.  These provisions principally concern
periodic cost of living adjustments, procedures for dismissing employees, travel
allowances, recuperation pay and other conditions of employment.

Employment Agreements

     At the start of their employment,  our employees in North America generally
sign offer letters  specifying  basic terms and conditions of employment as well
as non-disclosure agreements. At the start of their employment, our employees in
Israel generally sign written employment agreements that include confidentiality
and non-compete provisions.

                                      -57-

<PAGE>




E.   SHARE OWNERSHIP

Beneficial Ownership of Executive Officers and Directors

     The  following  table sets forth certain  information  as of March 31, 2001
regarding  the  beneficial  ownership  by each of our  directors  and  executive
officers:

                                       Number of Ordinary
                                             Shares            Percentage of
Name                                 Beneficially Owned (1)    Ownership (2)
----                                 ----------------------    -------------

Zohar Zisapel (3)...................       2,028,041              10.53%
Yehuda Zisapel (4)..................       2,134,561              11.08%
Twelve directors and
 executive officers
 as a group (5).....................       4,232,714              21.80%
------------------

(1)  Beneficial  ownership is  determined  in  accordance  with the rules of the
     Securities  and  Exchange  Commission  and  generally  includes  voting  or
     investment  power with respect to securities.  Ordinary  shares relating to
     options currently  exercisable or exercisable within 60 days of the date of
     this annual report are deemed  outstanding  for computing the percentage of
     the person  holding  such  securities  but are not deemed  outstanding  for
     computing  the  percentage  of any other  person.  Except as  indicated  by
     footnote,  and subject to community  property  laws where  applicable,  the
     persons named in the table above have sole voting and investment power with
     respect to all shares shown as beneficially owned by them.

(2)  The  percentages  shown are based on 19,260,480  ordinary shares issued and
     outstanding as of March 31, 2001.

(3)  Includes 477,213 ordinary shares owned of record by Rad Data Communications
     Ltd.

(4)  Includes 477,213 ordinary shares owned of record by Rad Data Communications
     Ltd.,  310,856 ordinary shares owned of record by Michael and Klil Holdings
     (93) Ltd., and 306,456 ordinary shares owned of record by Lomsha Ltd.

(5)  Includes 155,036 ordinary shares subject to currently  exercisable  options
     granted under our stock option plans, at an average exercise price of $4.22
     per share. Such options expire between June 2003 to March 2011.

1996 Stock Option Plan

     In April 1996, we adopted our key employee share incentive plan.  Employees
of RADVISION and its subsidiaries of or affiliates of RADVISION belonging to the
RAD-BYNET  group are eligible to participate in the plan.  Options granted under
this plan are for a term of  sixty-two  months from the date of the grant of the
option.  The following table presents option grant  information for this plan as
of March 31, 2001:

                                      -58-

<PAGE>






      Ordinary shares reserved          Options          Weighted average
         for option grants              granted           exercise price
      ------------------------         ---------         ----------------
             3,163,523                 3,100,223              $2.86

     The  3,163,523  ordinary  shares  indicated  in the  table as  having  been
reserved for option grants reflect the total number of ordinary  shares reserved
for grants under this plan and our consultants option plan in the aggregate.  We
intend to grant further  options  under this plan to our executive  officers and
employees.

Plan Administration

     The share  incentive  committee of our board of directors  administers  the
plan.  Under the plan, the committee has the authority to recommend to the Board
or determine, as applicable, in its discretion:

     o    the persons to whom options are granted;

     o    the number of shares underlying each option award;

     o    the time or times at which the award shall be made;

     o    the exercise price,  vesting  schedule and conditions  under which the
          options may be exercised; and

     o    any other matter necessary or desirable for the  administration of the
          plan.

Option Trust

     Under the plan, all options, or shares issued upon exercise of options, are
held in trust  and  registered  in the name of a trustee  selected  by the share
incentive committee.  The trustee may not release the options or ordinary shares
to the beneficiaries of these options or shares before the second anniversary of
the registration of the options in the name of the trustee.

     During this period,  voting rights  attached to the ordinary  shares issued
upon exercise of the options may be exercised by the trustee.

Termination and Amendment

     Our board of directors may  terminate or amend the plan,  provided that any
action by our board of  directors  which  will  alter or impair the rights of an
option holder requires the prior consent of that option holder.

Consultants Option Plan

     In March 1999, we adopted our  consultants  option plan.  Our employees and
directors  and  consultants  employed by us are eligible to  participate  in the
plan. Options granted under the

                                      -59-

<PAGE>


plan are for a term of  sixty-two  months  from the date of grant of the option.
The following table presents option grant  information for this plan as of March
2001:

       Ordinary shares                             Weighted average
 reserved for option grants   Options granted       exercise price
 --------------------------   ---------------      ----------------
          3,163,523               63,300                $1.18


     The  3,163,523  ordinary  shares  indicated  in the  table as  having  been
reserved for option grants reflect the total number of ordinary  shares reserved
for grants  under this plan and our key  employee  share  incentive  plan in the
aggregate.

Plan Administration

     The option committee of our board of directors  administers the plan. Under
the plan, the committee has the authority to determine, in its discretion:

     o    the persons to whom options are granted;

     o    the number of shares underlying each option award;

     o    the time or times at which the award shall be made;

     o    the exercise price,  vesting  schedule and conditions  under which the
          options may be exercised; and

     o    any other matter necessary or desirable for the  administration of the
          plan.

Option Trust

     Under the plan, all options, or shares issued upon exercise of options, are
held in trust and  registered  in the name of a trustee  selected  by the option
committee.

     During this period,  voting rights  attached to the ordinary  shares issued
upon exercise of the options may be exercised by the trustee.

Termination and Amendment

     Our board of directors may  terminate or amend the plan,  provided that any
action by our board of  directors  which  will  alter or impair the rights of an
option holder requires the prior consent of that option holder.

2000 Stock Option Plan

     Our 2000 Employee Stock Option Plan, or the 2000 Plan, authorizes the grant
of options to purchase up to 636,477 ordinary shares.  Employees and consultants
of our company and its  subsidiaries  are  eligible to  participate  in the 2000
Plan.  The 2000 Plan also  provides for the grant of options equal in the amount
of up to 4% of our share capital, on a fully diluted basis, in

                                      -60-

<PAGE>


each  subsequent  year following the year 2000 for issuance under the 2000 Stock
Option Plan. An additional  894,945 ordinary shares were authorized for grant in
2001 based on 4% of our share  capital at December 31, 2000.  Options  which are
canceled or not  exercised  within the option  period will become  available for
future  grants.  Awards  under  the  2000  Plan  may be  granted  in the form of
incentive stock options as provided in Section 422 of the U.S.  Internal Revenue
Code of 1986, as amended,  non-qualified stock options, options granted pursuant
to Section 102 of the  Israeli Tax  Ordinance  and options  granted  pursuant to
Section 3.9 of the Israeli Tax Ordinance.

     The option and compensation  committee  appointed by the Board of Directors
administers  the 2000  Plan.  Subject  to the  provisions  of the 2000  Plan and
applicable law, the option and compensation committee has the authority,  in its
sole discretion, to:

     o    grant  awards  under the 2000 Plan and select the persons to whom such
          awards are granted;

     o    determine the form,  terms and  conditions of the written stock option
          agreement evidencing the option,  including the type of option and the
          number of shares to which it pertains,  the option  price,  the option
          period and its vesting schedule,  and  exercisability of the option in
          special  cases (such as death,  retirement,  disability  and change of
          control);

     o    prescribe  the form and  provisions  of the  notice  of  exercise  and
          payment of the option;

     o    nominate a trustee for options issued under Section 102 of the Israeli
          Tax Ordinance;

     o    adjust any or all of the number and type of shares that thereafter may
          be made the subject of options,  the number and type of shares subject
          to outstanding  options,  and the grant or exercise price with respect
          to any option,  or, if deemed  appropriate,  make provision for a cash
          payment  to the holder of any  outstanding  option in order to prevent
          dilution or enlargement of the benefits or potential benefits intended
          to be made available  under the 2000 Plan in the event of any dividend
          or other distribution,  recapitalization,  stock split,  reverse stock
          split,  reorganization,  merger,  consolidation,  split-up,  spin-off,
          combination, repurchase, or exchange of shares or other securities;

     o    interpret the provisions of the 2000 Plan; and

     o    prescribe,  amend,  and rescind rules and regulations  relating to the
          2000  Plan  or any  award  thereunder  as it  may  deem  necessary  or
          advisable.

     Neither the Board of Directors  nor the option and  compensation  committee
may, without the consent of the optionee,  alter or in any way impair the rights
of such optionee under any award previously granted.  Neither the termination of
the 2000 Plan nor the change of control of

                                      -61-

<PAGE>


our  company  (except to the extent  provided  in the 2000 Plan) will affect any
option previously granted.

     The  option  price per  share may not be less than 100% of the fair  market
value of such share on the date of the  award;  provided,  however,  that in the
case of an award of an incentive  stock  option made to a 10% owner,  the option
price per share may not be less than 110% of the fair market value (as such term
is defined in the 2000 Plan) of such share on the date of the award.

     An option may not be  exercisable  after the  expiration  of ten (10) years
from the date of its award.  No option may be exercised  after the expiration of
its  term.  In the case of an award of  incentive  stock  options  made to a 10%
owner,  such options may not be  exercisable  after the  expiration  of five (5)
years from its date of award.

     Options are not assignable or transferable  by the optionee,  other than by
will or the laws of descent and  distribution,  and may be exercised  during the
lifetime of the  optionee  only by the  optionee or his or her guardian or legal
representative;  provided,  however,  that during the optionee's  lifetime,  the
optionee may, with the consent of the option and compensation committee transfer
without  consideration  all or any  portion  of his  options  to  members of the
optionee's  immediate family (as defined in the 2000 Plan), a trust  established
for the exclusive  benefit of members of the optionee's  immediate  family, or a
limited  liability  company in which all members  are members of the  optionee's
immediate family.

     The following table presents  option grant  information for this plan as of
March 2001:

       Ordinary shares                            Range of exercise
 reserved for option grants   Options granted           prices
 --------------------------   ---------------     -----------------

        1,531,422                1,065,118         $10.20 - $28.00

Exercise of options during 2000 and the first quarter of 2001

     During the period  January 2000 through March 31, 2001,  we issued  714,634
ordinary shares,  par value NIS 0.1 per share each, to employees and consultants
as a result of the exercise of stock options.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.   MAJOR SHAREHOLDERS

     The following table sets forth certain information,  as of the date of this
annual report,  regarding the beneficial  ownership by all shareholders known to
us to own beneficially more than 5% of our ordinary shares. The voting rights of
our major  shareholders do not differ from the voting rights of other holders of
our ordinary  shares.  However,  concurrent  with our initial public offering in
March 2000,  certain of our shareholders  entered into a voting agreement.  As a
result,  such  shareholders  may be able to exercise control with respect to the
election  of  directors.  See  "Item 7B.  Related  Party  Transactions  - Voting
Agreement."

                                      -62-

<PAGE>




                                            Number of ordinary    Percentage of
                                                  shares           outstanding
                                               beneficially         ordinary
Name                                              owned(1)          shares (2)
------------------------------------------- ------------------    -------------
Yehuda Zisapel (3).........................      2,134,561          11.08%
Zohar Zisapel (4)..........................      2,028,041          10.53%
Siemens Aktiengesellschaft (5).............      1,625,228           8.44%
Clal Venture Capital Fund LP (6)...........       722,230            3.75%
Samsung entities (7).......................      1,000,000           5.19%
Morgan Stanley Dean Witter & Co. (8).......      1,695,826           8.64%
Morgan Stanley Dean Witter  Investment
 Management Inc.(8)........................      1,695,826           8.64%

--------------

(1)  Beneficial  ownership is  determined  in  accordance  with the rules of the
     Securities  and  Exchange  Commission  and  generally  includes  voting  or
     investment  power with respect to securities.  Ordinary  shares relating to
     options currently  exercisable or exercisable within 60 days of the date of
     this annual report are deemed  outstanding  for computing the percentage of
     the person  holding  such  securities  but are not deemed  outstanding  for
     computing  the  percentage  of any other  person.  Except as  indicated  by
     footnote,  and subject to community  property  laws where  applicable,  the
     persons named in the table above have sole voting and investment power with
     respect to all shares shown as beneficially owned by them.

(2)  The  percentages  shown are based on 19,620,480  ordinary shares issued and
     outstanding as of March 31, 2001.

(3)  Includes 477,213 ordinary shares owned of record by Rad Data Communications
     Ltd.

(4)  Includes 477,213 ordinary shares owned of record by Rad Data Communications
     Ltd.,  310,856 ordinary shares owned of record by Michael and Klil Holdings
     (93) Ltd., and 306,456 ordinary shares owned of record by Lomsha Ltd.

(5)  The address of Siemens  Aktiengesellschaft  is Hofmannstrasse  51, D-81359,
     Munich, Germany.

(6)  The address of Clal Venture Capital Fund LP is Atidim  Technological  Park,
     Building No. 4, Tel Aviv, Israel.  Hillel Milo, chief executive officer and
     managing  director  of  Clal  Venture  Capital  Fund LP and a  director  of
     RADVISION,  disclaims  beneficial  ownership of the ordinary shares held by
     Clal  Venture  Capital  Fund LP  except to the  extent of his  proportional
     interest in the ordinary shares.

(7)  The address of Samsung  Electro-Mechanics  Co.  Ltd. is 314 Maetan  3-Dong,
     Paldal-Gu,  Suwon, Kyunggi-D, Korea 442-743. The address of Samsung Venture
     Investment Corporation is Samsung Yeok Sam Bldg. 647-9, Yeok Sam-Dong, Kang
     Nam-Gu, Korea 135-080.

                                      -63-

<PAGE>




(8)  Based solely upon,  and  qualified in its  entirety  with  reference  to, a
     Schedule 13G filed with the Commission on February 8, 2001.

     Concurrent with our initial public  offering,  Samsung  Venture  Investment
Corporation,  a member of the  Samsung  group,  and  Siemens  Aktiengesellschaft
purchased  an  aggregate  of  2,625,228  of our  ordinary  shares  in a  private
transaction.  We sold 590,822  ordinary shares in the private  placement and the
remaining  2,034,406  ordinary  shares  were  sold by some of our  shareholders,
including our former chairman of the board,  former chief executive  officer and
some of our directors.

     To our knowledge,  we are not directly or indirectly owned or controlled by
another  corporation or by any government,  and there are no  arrangements  that
might result in a change in our control.

     As of April 25,  2001,  there were 112  holders  of record of our  ordinary
shares, of which 15 record holders, holding approximately 61.16% of our ordinary
shares,  had  registered  addresses in the United  States.  As of April 24, 2001
there were approximately 3,524 beneficial holders of our ordinary shares.

B.   RELATED PARTY TRANSACTIONS

The RAD-BYNET Group

     Yehuda and Zohar  Zisapel  are  directors  and  principal  shareholders  of
RADVISION.  Individually  or together,  they are also  directors  and  principal
shareholders  of several other companies  which,  together with us and the other
subsidiaries  and  affiliates,   are  known  as  the  RAD-BYNET   group.   These
corporations include:

AB-NET Ltd.                      Axerra Networks Inc.      RADView Software Ltd.
BYNET Data Communications Ltd.   RADCOM Ltd.               RADWARE Ltd.
BYNET Electronics Ltd.           RAD Data Communications   RADWIN Ltd.
BYNET SEMECH Ltd.                RADLAN Computer           RIT Technologies Ltd.
BYNET Systems Applications Ltd.    Communications Ltd.     RND Networks
BYNET Personal Computers Ltd.                              Sanrad Inc.
Commerce.net Ltd.                                          SILICOM Ltd.
Ceragon Networks Ltd.
Modules INC.

     In addition to engaging in other businesses, members of the RAD-BYNET group
are actively engaged in designing, manufacturing,  marketing and supporting data
communications products, none of which currently compete with our products. Some
of the products of members of the RAD-BYNET group are  complementary to, and may
be used in connection with, our products.

     Members of the RAD-BYNET  group provide us with legal,  human resources and
administrative  services,  and we  reimburse  each  company  for  its  costs  in
providing  these  services.  The aggregate  amount of these  reimbursements  was
approximately $152,000, $196,000,

                                      -64-

<PAGE>


$271,793  and $29,968 in 1998,  1999,  2000 and the three months ended March 31,
2001, respectively.

Agreement with RADCOM Ltd.

     In January 1999, we entered into an agreement to license our H.323 software
development kit to RADCOM Ltd., an affiliated  company  controlled by Yehuda and
Zohar  Zisapel and a member of the RAD-BYNET  group.  The  agreement,  which was
based on our standard form, provides for an aggregate fee of $187,000.  This fee
includes  maintenance  and support  services  for one year and  minimum  royalty
payments on sales of products which incorporate the technology  contained in the
software  development  kit  during  the  first two  years of the  agreement.  In
addition,  the  agreement  provides  that  RADCOM  has an option  to extend  the
maintenance  and support  services for  additional  annual periods as well as an
option to purchase  additional  RADVISION  products and  technology at specified
discounts.

Agreement with IP-RAD Ltd.

     In  September  2000,  we entered  into an  agreement to license our MGCP MG
software to IP-RAD Ltd.,  an affiliated  company  controlled by Yehuda and Zohar
Zisapel and a member of the RAD-BYNET group.  The agreement,  which was based on
our standard form,  provides for an aggregate fee of $80,000.  This fee includes
maintenance  and support  services  for one year.  In  addition,  the  agreement
provides  that  IP-RAD  has an option  to extend  the  maintenance  and  support
services for additional annual periods.

Lease Arrangements

     We lease from RAD Data Communications,  an affiliated company controlled by
Yehuda  Zisapel  and  Zohar  Zisapel  and  a  member  of  the  RAD-BYNET  group,
approximately 11,000 square feet of office space for our facility in New Jersey,
for a monthly rent of approximately $8,800. The term of the lease is five years,
commencing  May 1997 and  terminating  in May 2002.  The monthly  rent  payments
include a 15% intra-group discount. If the property is sold, this discount would
no longer apply and our monthly payments will increase.

     We lease from Zohar Zisapel Properties, Inc., a company controlled by Zohar
Zisapel,  and from Yehuda  Zisapel  Properties,  Inc., a company  controlled  by
Yehuda  Zisapel,  approximately  24,077  square feet of office space  located in
Paramus,  New Jersey, for a monthly rent of approximately  $32,132.  The term of
the lease is five years, commencing April 2001 and terminating in April 2006. We
expect to vacate one of our New Jersey premises in 2001.

Supply Arrangement

     We purchase from RAD Data Communications components which we integrate into
our  multimedia  RADVISION  products.  The  aggregate  purchase  price  of these
components  was  approximately  $252,000  for the year ended  December 31, 1998,
$301,000 for the year ended  December 31, 1999,  and $798,374 for the year ended
December 31, 2000.

     We generally ascertain the market prices for goods and services that can be
obtained at arms' length from  unaffiliated  third parties before  entering into
any transaction with a member of

                                      -65-

<PAGE>


the  RAD-BYNET  group for those  goods and  services.  In  addition,  all of our
transactions  to  date  with  members  of  the  RAD-BYNET  group  were  approved
unanimously by our  shareholders.  As a result, we believe that the terms of the
transactions  in which we have  engaged  and are  currently  engaged  with other
members of the RAD-BYNET  group are beneficial to us and no less favorable to us
than terms which might be available to us from unaffiliated  third parties.  Any
future  transactions and arrangements with entities,  including other members of
the RAD-BYNET  group, in which our office holders have a personal  interest will
require  approval  by our  audit  committee,  our  board of  directors  and,  if
applicable, our shareholders.

Private Placements

     See "Item 7A. Major  Shareholders  and Related Party  Transactions  - Major
Shareholders."

Registration Rights

     In the private  placement of our ordinary shares in April 1995,  several of
our shareholders were granted registration rights for their ordinary shares. The
agreements grant registration rights to each of:

o    Yehuda  Zisapel,  Zohar  Zisapel,  RAD  Data  Communications  Ltd.  and the
     employees' trust, as a group;

o    Clal Venture Capital Fund LP and ECI Telecom Ltd., as a group; and

o    other shareholder groups specified in the agreements.

     Under the agreements,  each of these shareholder groups will have the right
to  make  a  single  demand  for  the  registration  of  their  ordinary  shares
outstanding at the time of our public offering in March 2000 provided that:

o    the shareholder  group owns at least 2% of our  outstanding  share capital;
     and

o    the demand covers shares representing a market value of at least $3 million
     and does not include  shares which may be sold without  restriction  within
     three months from the date of the demand.

     The  shareholders'  rights will be  exercisable  at any time  commencing on
March 13, 2001 and for a period of three years thereafter.  In addition, each of
the  investors  in the April 1995  private  placement  has the right to have its
ordinary shares included in some of our registration  statements,  provided that
the shareholder owns at least 2% of our outstanding share capital at the time it
exercises this right.

     In the private  placement of our ordinary shares in September  1996,  Intel
Corporation  was granted  registration  rights for their  ordinary  shares.  The
agreement  provides for registration  rights on the same terms and conditions as
contained in the private placement agreements of April 1995.

                                      -66-

<PAGE>




     In the private  placement of our preferred  shares in May 1998,  several of
our  shareholders  were  granted  registration  rights for the  ordinary  shares
outstanding or to be issued upon  conversion of their  preferred  shares,  which
represent 2,957,165 ordinary shares in the aggregate.

     The agreement  provides that the purchasers of the preferred  shares in May
1998, as a group,  will have the right to make a demand on two occasions for the
registration of their ordinary shares  outstanding at the time of this offering,
provided that:

     o    the demand  covers shares  representing  a market value of at least $3
          million; and

     o    the  demand  does  not  include  shares  which  may  be  sold  without
          restriction within three months from the date of the demand.

     The shareholders'  rights will be exercisable at any time commencing on the
first  anniversary of the  consummation of our public offering in March 2000 and
for a period of three years  thereafter or, in specified  cases, for a period of
five years. In addition, each of the investors in the May 1998 private placement
has the right to have its ordinary shares  included in some of our  registration
statements.  The  agreement  also  provides  that  if  subsequent  investors  in
RADVISION  are  granted  more  favorable  terms   concerning   demand  or  other
registration rights, each of the investors will be granted identical rights, for
so long as they own at least 5% of our outstanding shares at that time.

Agreements with Our Former Chief Executive Officer

Founders Agreement

     In January 1992, Messrs. Yehuda and Zohar Zisapel entered into an agreement
with Ami  Amir,  under  which Ami Amir  agreed  to serve as our chief  executive
officer  for a  period  of not  less  than 5  years.  In  consideration  for his
services,  Zohar  Zisapel  and  Yehuda  Zisapel  transferred  11%  of  our  then
outstanding  share capital to Ami Amir.  The agreement  provides that so long as
Ami  Amir  is our  shareholder  or  director,  he may  not  engage  in  business
activities that compete with us or pertain to data communications.  In addition,
none of the parties may disclose to third parties information  pertaining to our
business.  The agreement also gives each of Messrs. Yehuda and Zohar Zisapel and
Ami Amir a right of first refusal if any of them offers to transfer their shares
to a third party.

Grant of Securities

     Under agreements between us, Messrs.  Yehuda and Zohar Zisapel and Ami Amir
dated April 7, 1995 and January 1, 1999, we issued 196,652  ordinary  shares and
granted  119,848  options to Ami Amir.  The options began to vest over a two and
one-half year period, commencing January 1, 1999.

Loan Agreement

     In July 1997,  we entered  into an  agreement  with Ami Amir under which we
loaned him approximately  $66,000 at an annual interest rate of 1% linked to the
Israel consumer price index. The loan is scheduled to be repaid upon the earlier
of the termination of his employment with us

                                      -67-

<PAGE>


or the sale by Ami Amir of all or any portion of his shares of RADVISION. During
April 2000 Mr. Amir repaid his loan to us.

Voting Agreement

     Upon the  completion  of the  private  placement,  Siemens  and some of our
existing  shareholders,  including our current chairman of the board, our former
chief executive  officer,  the Evergreen Group, Clal Venture Capital Fund LP and
Yehuda Zisapel,  entered into a voting agreement.  The voting agreement provided
that, in the election of our directors,  the shareholders party to the agreement
will  nominate  and vote for a nominee of Siemens to serve as a director  and as
many other  nominees  as the other  shareholders  party to the  agreement  shall
unanimously propose to serve as directors. However, the number of directors that
the other shareholders propose to serve as directors shall at a minimum be equal
to the number of directors which these  shareholders have appointed to the board
prior to our initial public offering in March 2000. If all directors, except for
one director, decide that the continuation of a director on our board may damage
our business prospects, then the director shall be removed from our board.

     The  voting  agreement  expires  in  March  2003,  except  that  it will be
automatically  extended for two additional  one-year periods,  unless any of the
parties to the  agreement  notifies each of the other parties 60 days before the
expiration date of the then current term that such party wishes to terminate the
agreement.  6,399,605 ordinary shares,  representing  approximately 33.2% of the
outstanding shares, are subject to the voting agreement.

C.   INTERESTS OF EXPERTS AND COUNSEL

     Not applicable

ITEM 8. FINANCIAL INFORMATION

A.   CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     See the consolidated financial statements, including the notes thereto, and
exhibits listed in Item 19 hereof and incorporated herein by this reference.

Legal Proceedings

     We are not party to any material legal proceedings.

     In  1998,   Lucent  sent   correspondence   to  our  affiliate,   RAD  Data
Communications Ltd., alleging that some products manufactured by RAD and some of
its  affiliates,  including  us,  infringe  upon  specified  Lucent  patents and
offering  to license  these  patents to RAD and its  affiliates.  In  subsequent
correspondence,   RAD  requested  that  Lucent  specifically  substantiate  each
allegation  of  infringement  before  RAD or any  of  its  affiliates  considers
entering  into any licensing  arrangements.  RAD has recently  received  further
correspondence  from Lucent in which Lucent has reiterated its claims.  RAD does
not believe Lucent has substantiated its claims and has communicated this belief
to Lucent. RAD advises us that the alleged infringement claims are unresolved.

                                      -68-

<PAGE>




     The  elements of our  products  that Lucent has alleged  infringe  upon its
patents  are  contained  within  components  which we obtain  from a third party
manufacturer.  We believe that the third party manufacturer has a license to use
these patents and that we may be entitled to the benefits of this license.

     In addition,  based on Lucent's fee and royalty  schedule for licensing the
relevant patents, we believe that any licensing fee and royalty payments that we
may be required to pay for the right to use  Lucent's  patents  would not have a
material  impact on our earnings.  As a result,  we do not believe that Lucent's
allegations will have a material adverse effect upon us, our business, financial
condition or liquidity.

Dividend Distribution

     We have never paid cash dividends to our shareholders.  We intend to retain
future  earnings  for use in our  business  and do not  anticipate  paying  cash
dividends on our ordinary shares in the foreseeable  future. Any future dividend
policy  will be  determined  by the Board of  Directors  and will be based  upon
conditions  then  existing,  including  our  results  of  operations,  financial
condition,  current and anticipated  cash needs,  contractual  restrictions  and
other conditions as the Board of Directors may deem relevant.

     According to the Israeli Companies Law, a company may distribute  dividends
out of its  profits,  so long  as the  company  reasonably  believes  that  such
dividend  distribution  will not prevent the company from paying all its current
and future debts.  Profits, for purposes of the Companies Law, means the greater
of retained earnings or earnings  accumulated during the preceding two years. In
the event cash dividends are declared, such dividends will be paid in NIS.

B.   SIGNIFICANT CHANGES

     Since the date of the annual consolidated  financial statements included in
this annual report, no significant change has occurred.

ITEM 9. THE OFFER AND LISTING

A.   OFFER AND LISTING DETAILS

Quarterly Stock Information

     Our  ordinary  shares are traded on the Nasdaq  National  Market  under the
symbol RVSN. The following table sets forth, for the periods indicated, the high
and low sale prices of our  ordinary  shares as reported by the Nasdaq  National
Market since our initial public offering on March 14, 2000:

                                      -69-

<PAGE>




2000                                             High           Low
----                                            -------      --------
First Quarter (from March 14, 2000)......       $65          $40-1/2
Second Quarter ..........................        52-3/4       16-1/8
Third Quarter ...........................        40-1/2       24-5/8
Fourth Quarter...........................        29-1/2       11-5/16

Monthly Stock Information

     The  following  table sets forth,  for each month in the last six months of
2000,  the range of high and low  sales  prices  of the  ordinary  shares on the
Nasdaq National Market:


2000                                           High           Low
----                                         ---------      --------
July...................................      $40-1/2        $25-1/4
August.................................       38-3/4         30-5/8
September..............................       32-13/64       24-5/8
October................................       29-1/2         18-3/8
November...............................       25-5/8         13-7/8
December...............................       20-5/8         11-5/16

B.   PLAN OF DISTRIBUTION

     Not applicable

C.   MARKETS

     Our ordinary  shares have been traded on the Nasdaq  National  Market under
the symbol RVSN since our initial public offering on March 14, 2000.

D.   SELLING SHAREHOLDERS

     Not applicable.

E.   DILUTION

     Not applicable.

F.   EXPENSE OF THE ISSUE

     Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A.   SHARE CAPITAL

     Not applicable.

B.   MEMORANDUM AND ARTICLES OF ASSOCIATION

                                      -70-

<PAGE>




Purposes and Objects of the Company

     We are a public  company  registered  under  the  Israel  Companies  Law as
RADVISION LTD.,  registration number 51-165181-2.  Pursuant to our memorandum of
association,  we were formed for the purpose of  developing,  manufacturing  and
supplying products in the electronics filed in general, and specifically, in the
field of data communication.

The Powers of the Directors

     Under the  provisions  of the  Israel  Companies  Law and our  articles  of
association,  a director cannot participate in a meeting nor vote on a proposal,
arrangement  or  contract  in  which  he or she  is  materially  interested.  In
addition, our directors cannot vote compensation to themselves or any members of
their body without the approval of our audit committee and our shareholders at a
general  meeting.  See "Item 6B.  Directors,  Senior  Management and Employees -
Compensation."

     The authority of our directors to enter into borrowing  arrangements on our
behalf is not limited, except in the same manner as any other transaction by us.

Rights Attached to Shares

     Our authorized  share capital consists of 25,000,000  shares,  divided into
23,984,470  ordinary  shares of a nominal  value of NIS 0.10  each,  and  15,530
deferred  shares of a nominal value of NIS 0.10 each. All  outstanding  ordinary
shares are validly issued, fully paid and non-assessable.

     Deferred  Shares.  The deferred  shares  confer no rights or  privileges on
their  holders,  except  for the  right  to  receive  upon  our  dissolution  or
liquidation  NIS 0.10 per deferred  share.  Holders of deferred  shares will not
receive any share dividends.

     Ordinary shares. The rights attached to the ordinary shares are as follows:

     Dividend  rights.  Holders of our ordinary  shares are entitled to the full
amount  of any  cash or  share  dividend  subsequently  declared.  The  board of
directors  may declare  interim  dividends  and propose the final  dividend with
respect to any fiscal year only out of the retained earnings, in accordance with
the provisions of the Israeli Companies Law. Our articles of association provide
that the declaration of a dividend requires  approval by an ordinary  resolution
of the shareholders,  which may decrease but not increase the amount proposed by
the board of directors.  See "Item 10E.  Additional  Information - Taxation." If
after one year a dividend has been declared and it is still unclaimed, the board
of directors is entitled to invest or utilize the  unclaimed  amount of dividend
in any manner to our benefit  until it is claimed.  We are not  obligated to pay
interest or linkage differentials on an unclaimed dividend.

     Voting rights.  Holders of ordinary  shares have one vote for each ordinary
share held on all  matters  submitted  to a vote of  shareholders.  Such  voting
rights may be affected by the grant of any special  voting rights to the holders
of a class of shares  with  preferential  rights that may be  authorized  in the
future.  Concurrent with our initial public  offering in March 2000,  certain of
our shareholders entered into a voting agreement. As a result, such shareholders
may be able to

                                      -71-

<PAGE>


exercise effective control with respect to the election of directors.  See "Item
7B. Related Party Transactions - Voting Agreement."

     The quorum required for an ordinary meeting of shareholders  consists of at
least two shareholders represent in person or by proxy who hold or represent, in
the  aggregate,  at least one third of the  voting  rights of the  issued  share
capital.  A meeting adjourned for lack of a quorum generally is adjourned to the
same day in the following  week at the same time and place or any time and place
as the directors  designate in a notice to the  shareholders.  At the reconvened
meeting, the required quorum consists of any two members present in person or by
proxy.

     An  ordinary  resolution,  such  as a  resolution  for the  declaration  of
dividends,  requires  approval by the holders of a majority of the voting rights
represented at the meeting,  in person, by proxy or by written ballot and voting
thereon.  Under our  articles  of  association,  a special  resolution,  such as
amending our memorandum of association or articles of association, approving any
change in  capitalization,  winding-up,  authorization of a class of shares with
special  rights,  or other changes as specified in our articles of  association,
requires  approval of a special  majority,  representing  the holders of no less
than 65% of the voting rights  represented at the meeting in person, by proxy or
by written ballot, and voting thereon.

     Pursuant to our articles of  association,  our directors are elected at our
annual general meeting of shareholders by a vote of the holders of a majority of
the  voting  power  represented  and  voting  at such  meeting.  See  "Item  6A.
Directors,  Senior Management and Employees - Election of Directors." Concurrent
with our initial public offering in March 2000, certain of our shareholders have
entered into a voting agreement.  As a result,  such shareholders may be able to
exercise effective control with respect to the election of directors.  See "Item
7B. Related Party Transactions - Voting Agreement."

     Rights in the Company's  profits.  Our shareholders have the right to share
in our profits  distributed as a dividend and any other permitted  distribution.
See "Item 10B. Rights Attached to Shares - Dividend Rights."

     Rights in the event of liquidation. In the event of our liquidation,  after
satisfaction of liabilities to creditors,  our assets will be distributed to the
holders of ordinary shares in proportion to the nominal value of their holdings.
This right may be affected by the grant of preferential dividend or distribution
rights to the holders of a class of shares with preferential  rights that may be
authorized in the future.

Changing Rights Attached to Shares

     According  to our  articles of  association,  in order to change the rights
attached to any class of shares,  unless otherwise  provided by the terms of the
class,  such change must be adopted by a general meeting of the shareholders and
by a separate  general  meeting  of the  holders  of the  affected  class with a
majority of 65% of the voting power participating in such meeting.

Annual and Extraordinary Meetings

     The Board of Directors  must convene an annual meeting of  shareholders  at
least  once  every  calendar  year,  within  fifteen  months of the last  annual
meeting. Notice of at least twenty-

                                      -72-

<PAGE>


one days prior to the date of the meeting is required.  An extraordinary meeting
may be convened by the board of directors, as it decides or upon a demand of any
two  directors or 25% of the  directors,  whichever is lower,  or of one or more
shareholders  holding in the  aggregate  at least 5% of our issued  capital.  An
extraordinary  meeting  must be held not more  than  thirty-five  days  from the
publication  date of the  announcement  of the  meeting.  See "Item 10B.  Rights
Attached to Shares-Voting Rights."

Limitations on the Rights to Own Securities in Our Company

     Neither our memorandum of  association  or our articles of association  nor
the laws of the State of Israel  restrict in any way the  ownership or voting of
shares by non-residents,  except with respect to subjects of countries which are
in a state of war with Israel.

Changes in Our Capital

     Changes in our capital are subject to the approval of the shareholders at a
general  meeting  by a  special  majority  of 65% of the  votes of  shareholders
participating and voting in the general meeting.

C.   MATERIAL CONTRACTS

     None.

D.   EXCHANGE CONTROLS

     The  Israeli  Currency  Control  Law,  1978  imposes  certain   limitations
concerning  foreign currency  transactions and transactions  between Israeli and
non-Israeli  residents,  which  limitations  may be  regulated  or waived by the
Controller  of Foreign  Exchange at the Bank of Israel,  through  "general"  and
"special"  permits.  In May 1998, a new "general  permit" was issued pursuant to
which  substantially  all  transactions in foreign  currency are permitted.  Any
dividends  or other  distributions  paid in respect of  ordinary  shares and any
amounts payable upon the dissolution,  liquidation or winding up of our affairs,
as well as the  proceeds of any sale in Israel of our  securities  to an Israeli
resident  are freely  repatriable  into  non-Israeli  currencies  at the rate of
exchange prevailing at the time of conversion,  provided that Israeli income tax
has been paid on (or  withheld  from)  such  payments.  Because  exchange  rates
between the NIS and the U.S. dollar fluctuate  continuously,  U.S.  shareholders
will be subject to any such  currency  fluctuation  during the period  from when
such dividend is declared through the date payment is made in U.S. dollars.

E.   TAXATION

     The following is a discussion of Israeli and United States tax consequences
material to our shareholders.  To the extent that the discussion is based on new
tax  legislation  which  has not been  subject  to  judicial  or  administrative
interpretation,  the views expressed in the discussion  might not be accepted by
the tax authorities in question.  The discussion is not intended, and should not
be  construed,  as legal or  professional  tax advice and does not  exhaust  all
possible tax considerations.

                                      -73-

<PAGE>




     o    Holders of our ordinary  shares should  consult their own tax advisors
          as to the  United  States,  Israeli or other tax  consequences  of the
          purchase,  ownership and disposition of ordinary shares, including, in
          particular, the effect of any foreign, state or local taxes.

General Corporate Tax Structure

     Israeli  companies are subject to company tax at the rate of 36% of taxable
income.  However,  the  effective  tax rate payable by a company,  which derives
income from an approved enterprise  discussed further below, may be considerably
less.

Tax Benefits Under the Law for the Encouragement of Capital Investments, 1959

     The  Law for the  Encouragement  of  Capital  Investments,  1959,  commonly
referred to as 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, for example,
the equipment to be purchased and utilized  under the program.  The tax benefits
derived  from  any  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 is approved, its effective
tax rate is the result of a weighted average of the applicable rates.

     Taxable income of a company derived from an approved  enterprise is subject
to company tax at the  maximum  rate of 25%,  rather  than 36%,  for the benefit
period.  This  period is  ordinarily  seven  years,  or ten years if the company
qualifies as a foreign  investors'  company as described below,  commencing with
the year in which  the  approved  enterprise  first  generates  taxable  income.
However,  this period is limited to twelve years from commencement of production
or 14 years from the date of approval,  whichever is earlier. The Investment Law
also provides that a company that has an approved  enterprise within Israel will
be eligible for a reduced tax rate for the remainder of the benefit period.

     A company owning an approved enterprise may elect to receive an alternative
package of benefits.  Under the  alternative  package of  benefits,  a company's
undistributed  income  derived from an approved  enterprise  will be exempt from
company  tax for a period of  between  two and ten years  from the first year of
taxable income,  depending on the geographic location of the approved enterprise
within  Israel,  and the company will be eligible for a reduced tax rate for the
remainder of the benefits period.

     A company that has an approved  enterprise  program is eligible for further
tax  benefits  if it  qualifies  as a  foreign  investors'  company.  A  foreign
investors'  company  is a  company  more  than 25% of whose  share  capital  and
combined  share and loan capital is owned by  non-Israeli  residents.  A company
which qualifies as a foreign investors'  company and has an approved  enterprise
program is eligible  for tax  benefits  for a ten year  benefit  period.  Income
derived  from the  approved  enterprise  program  will be exempt  from tax for a
period of two years and will be subject to a reduced tax for an additional eight
years. The tax rate is for the additional eight

                                      -74-

<PAGE>


years is 25% unless the level of foreign  investment  exceeds 49%, in which case
the tax rate is 20% if the  foreign  investment  is more  than 49% and less than
74%; 15% if more than 74% and less than 90%; and 10% if 90% or more.

     A company  that has elected the  alternative  package of benefits  and that
subsequently pays a dividend out of income derived from the approved  enterprise
during  the  tax  exemption  period  will  be  subject  to tax on of the  amount
distributed.  The  rate of the tax  will  be the  rate  which  would  have  been
applicable had the company not elected the alternative package of benefits. This
rate is generally  10%-25%,  depending on the percentage of the company's shares
held by foreign  shareholders.  The  dividend  recipient is taxed at the reduced
rate  applicable  to dividends  from approved  enterprises  which is 15%, if the
dividend is distributed during the tax exemption period or within 12 years after
the period. The company must withhold this tax at source,  regardless of whether
the dividend is converted into foreign currency.

     Subject to applicable  provisions  concerning  income under the alternative
package of benefits,  all dividends are  considered  to be  attributable  to the
entire  enterprise  and their  effective  tax rate is the  result of a  weighted
average of the various applicable tax rates. Under the Investment Law, a company
that  has  elected  the  alternative  package  of  benefits  is not  obliged  to
distribute exempt retained  profits,  and may generally decide from which year's
profits to declare dividends. We currently intend to reinvest any income derived
from our  approved  enterprise  programs and not to  distribute  the income as a
dividend.

     The  Investment  Center  bases its  decision  whether  or not to approve an
application  on the criteria in the  Investment  Law and  regulations,  the then
prevailing  policy of the  Investment  Center and the  specific  objectives  and
financial criteria of the applicant. Therefore, we cannot assure you that any of
our applications  will be approved.  In addition,  the benefits  available to an
approved   enterprise  are  conditional   upon  the  fulfillment  of  conditions
stipulated in the  Investment  Law and its  regulations  and the criteria in the
specific certificate of approval, as described above. If a company does not meet
these  conditions,  it would be required  to refund the amount of tax  benefits,
with the addition of the consumer price index linkage adjustment and interest.

     The  Investment  Center of the  Ministry of Industry  and Trade has granted
several investment  programs at our manufacturing  facility approved  enterprise
status under  Israeli law. We have elected the  alternative  package of benefits
under these approved enterprise programs. The portion of our income derived from
these approved  enterprise  programs will be exempt from tax for a period of two
years and will be subject to a reduced tax for an additional five to eight years
depending  on  the  percentage  of  our  share  capital  held  by  non-Israelis,
commencing when we begin to realize net income from these programs. The benefits
available to an approved  enterprise  program are dependent upon the fulfillment
of conditions stipulated in applicable law and in the certificate of approval.

     We have derived, and expect to continue to derive, a substantial portion of
our income from our approved  enterprise  programs.  Subject to compliance  with
applicable  requirements,  income derived from our approved  enterprise programs
will be tax  exempt  for a period of two years  commencing  in the first year in
which there is taxable income and will be subject for the  subsequent  period of
five years to a reduced company tax of up to 25%, or eight years if the

                                      -75-

<PAGE>


percentage of  non-Israeli  investors who hold our ordinary  shares exceeds 25%.
The period of tax  benefits  for our  approved  enterprise  programs has not yet
commenced, because we have yet to realize taxable income.

Grants  under  the  Law  for  the  Encouragement  of  Industrial   Research  and
Development, 1984

     Under the Law for the Encouragement of Industrial Research and Development,
1984,  commonly  referred  to as the  Research  Law,  research  and  development
programs  which meet  specified  criteria  and are  approved  by a  governmental
committee of the Office of the Chief Scientist are eligible for grants of 50% of
the  project's  expenditure  (except as provided  under the  Research  Law),  as
determined by the research  committee,  in exchange for the payment of royalties
from the sale of products  developed  under the program.  Regulations  under the
Research  Law  generally  provide  for the  payment  of  royalties  to the Chief
Scientist of 3-5% on sales of products and services  derived from our technology
developed  using these grants  until  100%-150%  of the  dollar-linked  grant is
repaid. Following the full repayment of the grant, there is no further liability
for repayment.

     The terms of the Israeli  government  participation  also  require that the
manufacture of products developed with government grants be performed in Israel.
However,  under the regulations of the Research Law, if any of the manufacturing
is performed  outside  Israel by any entity  other than us,  assuming we receive
approval  from the Chief  Scientist  for the  foreign  manufacturing,  we may be
required to pay increased royalties.  The increase in royalties depends upon the
manufacturing volume that is performed outside of Israel follows:

Manufacturing volume                   Royalties to the Chief Scientist
outside of Israel                      as a percentage of grant
--------------------                   --------------------------------
less than 50%                                   120%
between 50% and 90%                             150%
more than 90%                                   300%

     The technology developed with Chief Scientist grants may not be transferred
to third parties  without the prior approval of a governmental  committee  under
the Research Law. The approval,  however,  is not required for the export of any
products developed using the grants.  Approval of the transfer of technology 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.  We cannot  assure you that any  consent,  if
requested, will be granted.

     Effective  for grants  received  from the Chief  Scientist  under  programs
approved  after January 1, 1999, the  outstanding  balance of the grants will be
subject  to  interest  equal  to the 12  month  London  interbank  offered  rate
applicable  to dollar  deposits  that is published on the first  business day of
each calendar year.

     The funds  generally  available  for grants from the Chief  Scientist  were
reduced for 1998, and the Israeli authorities have indicated that the government
may further  reduce or abolish  grants from the Chief  Scientist  in the future.
Even if these grants are  maintained,  we cannot assure you that we will receive
Chief Scientist grants in the future. In addition, each application


                                      -76-
<PAGE>


to the Chief  Scientist  is  reviewed  separately,  and  grants are based on the
program approved by the research committee.  Generally,  expenditures  supported
under  other  incentive  programs  of the State of Israel are not  eligible  for
grants from the Chief Scientist.  We cannot assure you that  applications to the
Chief Scientist,  if any will be submitted by us in the future, will be approved
and, until approved, the amounts of any grants are not determinable.

Tax Benefits and Grants for Research and Development

     Israeli tax law allows, under specific  conditions,  a tax deduction in the
year incurred for  expenditures,  including  capital  expenditures,  relating to
scientific research and development projects, if:

     o    the  expenditures  are  approved by the  relevant  Israeli  government
          ministry, determined by the field of research;

     o    the research and development is for the promotion of the company; and

     o    the  research  and  development  is carried out by or on behalf of the
          company seeking the deduction.

     Expenditures  not so approved  are  deductible  over a  three-year  period.
However,  expenditures  made  out  of  proceeds  made  available  to us  through
government grants are not deductible according to Israeli law.

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

     According  to the Law for the  Encouragement  of  Industry  (Taxes),  1969,
generally  referred to as the Industry  Encouragement Law, an industrial company
is a company resident in Israel, at least 90% of the income of which, in a given
tax year,  determined  in Israeli  currency  exclusive of income from  specified
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.  We believe that we currently qualify as an industrial  company within
the definition of the Industry Encouragement Law.

     Under the Industry  Encouragement Law, industrial companies are entitled to
the following preferred corporate tax benefits:

     o    deduction of  purchases  of know-how  and patents  over an  eight-year
          period for tax purposes;

     o    deduction of  specified  expenses  incurred  for a public  issuance of
          securities over a three-year period for tax purposes;

     o    right to elect, under specified conditions, to file a consolidated tax
          return with additional related Israeli industrial companies; and

     o    accelerated depreciation rates on equipment and buildings.

                                      -77-

<PAGE>


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

     We believe that we currently  qualify as an industrial  company  within the
definition of the Industry  Encouragement Law. We cannot assure you that we will
continue  to qualify as an  industrial  company or that the  benefits  described
above will be available to us in the future.

Special Provisions Relating to Taxation under Inflationary Conditions

     The Income Tax Law (Inflationary Adjustments),  1985, generally referred to
as the  Inflationary  Adjustments  Law,  represents  an attempt to overcome  the
problems  presented to a traditional tax system by an economy  undergoing  rapid
inflation.  The  Inflationary  Adjustments Law is highly  complex.  Its features
which are material to us can be described as follows:

     o    There is a special tax  adjustment for the  preservation  of equity as
          follows:   Where  a  company's   equity,   as  calculated   under  the
          Inflationary  Adjustments  Law,  exceeds the depreciated cost of fixed
          assets,  a deduction  from taxable  income is  permitted  equal to the
          excess  multiplied by the  applicable  annual rate of  inflation.  The
          maximum  deduction  permitted in any single tax year is 70% of taxable
          income, with the unused portion permitted to be carried forward. Where
          a company's  depreciated cost of fixed assets exceeds its equity, then
          the excess  multiplied by the  applicable  annual rate of inflation is
          added to taxable income.

     o    Subject to specified  limitations,  depreciation  deductions  on fixed
          assets and losses carried  forward are adjusted for inflation based on
          the increase in the consumer price index.

     o    Gains on sales of traded  securities,  which are normally  exempt from
          tax,  are  taxable in  specified  circumstances.  However,  dealers in
          securities are subject to the regular tax rules applicable to business
          income in Israel.

Capital Gains Tax on Sales of Our Ordinary Shares

     Israeli law imposes a capital gains tax on the sale of capital assets.  The
law distinguishes  between real gain and inflationary  surplus. The inflationary
surplus  is a  portion  of the total  capital  gain  that is  equivalent  to the
increase of the relevant  asset's  purchase price which is  attributable  to the
increase in the Israeli  consumer  price index  between the date of purchase and
the date of sale. The real gain is the excess of the total capital gain over the
inflationary  surplus.  The  inflationary  surplus  accumulated  from and  after
December 31, 1993, is exempt from any capital gains tax in Israel while the real
gain is added to ordinary income, which is taxed at ordinary rates of 30% to 50%
for individuals and 36% for corporations.

     Under  current  law,  sales of our ordinary  shares  offered by this annual
report are exempt from Israeli  capital  gains for so long as they are quoted on
Nasdaq or listed on a stock exchange in specified countries and we qualify as an
industrial company. We cannot assure that we will


                                      -78-
<PAGE>


maintain this  qualification or our status as an industrial  company.  Moreover,
dealers in  securities  in Israel are taxed at regular tax rates  applicable  to
business income.

     Under the convention  between the United States and Israel concerning taxes
on income,  Israeli  capital  gains tax will not apply to the sale,  exchange or
disposition of ordinary shares by a person:

     o    who qualifies as a resident of the United States within the meaning of
          the U.S.-Israel tax treaty; and

     o    who is entitled to claim the  benefits  available to the person by the
          U.S.-Israel tax treaty.

     However,  this exemption will not apply if the treaty U.S.  resident holds,
directly or  indirectly,  shares  representing  10% or more of our voting  power
during  any  part  of the  12-month  period  preceding  the  sale,  exchange  or
disposition,  subject to specified conditions.  In this case, the sale, exchange
or  disposition  would be  subject  to Israeli  tax,  to the extent  applicable.
However,  under the  U.S.-Israel tax treaty,  the treaty U.S.  resident would be
permitted to claim a credit for the taxes  against the U.S.  federal  income tax
imposed on the sale, exchange or disposition, subject to the limitations in U.S.
laws  applicable  to foreign tax credits.  The  U.S.-Israel  tax treaty does not
relate to U.S. state or local taxes.

Taxation of Non-Resident Holders of 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,
including dividends,  royalties and interest, as well as non-passive income from
services  provided in Israel.  On  distributions  of dividends  other than bonus
shares or stock dividends,  income tax is withheld at source. Unless a different
rate is provided in a treaty  between  Israel and the  shareholder's  country of
residence, the withholding rate is as follows:

       Dividends generated by an              Dividends not generated by an
           approved enterprise                      approved enterprise
--------------------------------------    ------------------------------------
 U.S. company holding                     U.S. company holding
  10% or more of our         Other         10% or more of our         Other
        shares           non-resident            shares           non-resident
---------------------    ------------     --------------------    ------------
         15%                  15%                12.5%                25%

     Under  an  amendment  to  the  Inflationary  Adjustments  Law,  non-Israeli
corporations  might be subject to Israeli taxes on the sale of traded securities
in an  Israeli  company,  subject to the  provisions  of any  applicable  double
taxation treaty.

Foreign Exchange Regulations

     We are permitted to pay in Israeli and non-Israeli currency:

                                      -79-

<PAGE>




     o    dividends to holders of our ordinary shares; and

     o    any  amounts  payable to the holders of our  ordinary  shares upon our
          dissolution, liquidation or winding up.

     If we make any payments in Israeli currency,  the payments may be converted
into freely repatriable  dollars at the rate of exchange  prevailing at the time
of conversion.

United States Federal Income Tax Consequences

     The  following is a summary of certain  material  U.S.  federal  income tax
consequences  that apply to U.S.  Holders  who hold  ordinary  shares as capital
assets.  This  summary is based on the United  States  Internal  Revenue Code of
1986,  as amended (the "Code"),  Treasury  regulations  promulgated  thereunder,
judicial and  administrative  interpretations  thereof,  and the U.S.-Israel Tax
Treaty,  all as in effect on the date  hereof  and all of which are  subject  to
change either prospectively or retroactively.  This summary does not address all
tax  considerations  that may be  relevant  with  respect  to an  investment  in
ordinary shares. This summary does not account for the specific circumstances of
any particular investor, such as:

     o    broker-dealers,

     o    financial institutions,

     o    certain insurance companies,

     o    investors liable for alternative minimum tax,

     o    tax-exempt organizations,

     o    non-resident aliens of the U.S. or taxpayers whose functional currency
          is not the U.S. dollar,

     o    persons who hold the ordinary  shares  through  partnerships  or other
          pass-through entities,

     o    investors  that actually or  constructively  own 10 percent or more of
          our voting shares, and

     o    investors  holding  ordinary shares as part of a straddle or a hedging
          or conversion transaction.

     This summary does not address the effect of any U.S. Federal taxation other
than U.S.  Federal income taxation.  In addition,  this summary does not include
any discussion of state, local or foreign taxation.

     You are urged to consult your tax advisors regarding the foreign and United
States federal,  state and local tax considerations of an investment in ordinary
shares.


                                      -80-
<PAGE>




     For purposes of this summary, a U.S. Holder is:

     o    an  individual  who is a  citizen  or,  for U.S.  federal  income  tax
          purposes, a resident of the United States;

     o    a partnership,  corporation or other entity created or organized in or
          under  the laws of the  United  States  or any  political  subdivision
          thereof;

     o    an  estate  whose  income  is  subject  to  U.S.  federal  income  tax
          regardless of its source; or

     o    a trust if:

     (a)  a  court  within  the  United  States  is  able  to  exercise  primary
          supervision over administration of the trust, and

     (b)  one or more United  States  persons have the  authority to control all
          substantial decisions of the trust.

Taxation of Dividends

     The gross  amount of any  distributions  received  with respect to ordinary
shares,  including  the amount of any Israeli  taxes  withheld  therefrom,  will
constitute dividends for U.S. Federal income tax purposes,  to the extent of our
current and  accumulated  earnings and profits as  determined  for U.S.  federal
income tax principles.  You will be required to include this amount of dividends
in gross income as ordinary income.  Distributions in excess of our earnings and
profits will be treated as a non-taxable return of capital to the extent of your
tax basis in the  ordinary  shares  and any  amount in excess of your tax basis,
will be treated as gain from the sale of ordinary shares.  See "--Disposition of
Ordinary  Shares"  below for the  discussion  on the taxation of capital  gains.
Dividends  will  not  qualify  for the  dividends-received  deduction  generally
available to corporations under Section 243 of the Code.

     Dividends  that we pay in NIS,  including  the amount of any Israeli  taxes
withheld  therefrom,  will be included in your  income in a U.S.  dollar  amount
calculated by reference to the exchange rate in effect on the day such dividends
are received.  A U.S.  Holder who receives  payment in NIS and converts NIS into
U.S.  dollars at an exchange  rate other than the rate in effect on such day may
have a foreign currency  exchange gain or loss that would be treated as ordinary
income or loss.  U.S.  Holders should consult their own tax advisors  concerning
the U.S. tax consequences of acquiring, holding and disposing of NIS.

     Any Israeli  withholding  tax imposed on such  dividends  will be a foreign
income tax eligible for credit against a U.S.  Holder's U.S.  federal income tax
liability,   subject   to  certain   limitations   set  out  in  the  Code  (or,
alternatively,  for deduction against income in determining such tax liability).
The  limitations  set out in the Code  include  computational  rules under which
foreign tax credits  allowable with respect to specific classes of income cannot
exceed the U.S. federal income taxes otherwise payable with respect to each such
class of income.  Dividends generally will be treated as foreign-source  passive
income or financial services income for

                                      -81-

<PAGE>


United States foreign tax credit  purposes.  Foreign income taxes  exceeding the
credit limitation for the year of payment or accrual may be carried back for two
taxable years and forward for five taxable years in order to reduce U.S. federal
income taxes, subject to the credit limitation applicable in each of such years.
Other restrictions on the foreign tax credit include a prohibition on the use of
the  credit  to  reduce  liability  for  the  U.S.  individual  and  corporation
alternative  minimum  taxes by more than  90%.  A U.S.  Holder  will be denied a
foreign tax credit with respect to Israeli  income tax withheld  from  dividends
received on the ordinary  shares to the extent such U.S. Holder has not held the
ordinary shares for at least 16 days of the 30-day period  beginning on the date
which is 15 days before the  ex-dividend  date or to the extent such U.S. Holder
is under an  obligation to make related  payments with respect to  substantially
similar  or  related  property.   Any  days  during  which  a  U.S.  Holder  has
substantially diminished its risk of loss on the ordinary shares are not counted
toward  meeting the 16-day  holding  period  required by the statute.  The rules
relating to the  determination  of the foreign tax credit are  complex,  and you
should consult with your personal tax advisors to determine  whether and to what
extent you would be entitled to this credit.

Dispositions of Ordinary Shares

     If you sell or otherwise  dispose of ordinary  shares,  you will  recognize
gain or loss for U.S.  Federal  income tax  purposes  in an amount  equal to the
difference  between the amount realized on the sale or other disposition and the
adjusted tax basis in ordinary shares. Subject to the discussion below under the
heading "Passive Foreign Investment Companies," such gain or loss generally will
be capital gain or loss and will be  long-term  capital gain or loss if you have
held the ordinary shares for more than one year at the time of the sale or other
disposition.  In  general,  any  gain  that you  recognize  on the sale or other
disposition of ordinary  shares will be U.S.-source  for purposes of the foreign
tax credit limitation;  losses,  will generally be allocated against U.S. source
income.  Deduction of capital losses is subject to certain limitations under the
Code.

     In the case of a cash basis U.S. Holder who receives NIS in connection with
the sale or disposition of ordinary shares, the amount realized will be based on
the U.S. dollar value of the NIS received with respect to the ordinary shares as
determined on the settlement  date of such exchange.  A U.S. Holder who receives
payment in NIS and converts NIS into United States dollars at a conversion  rate
other than the rate in effect on the settlement date may have a foreign currency
exchange gain or loss that would be treated as ordinary income or loss.

     An accrual basis U.S. Holder may elect the same treatment  required of cash
basis  taxpayers  with  respect to a sale or  disposition  of  ordinary  shares,
provided  that the  election  is applied  consistently  from year to year.  Such
election may not be changed without the consent of the Internal  Revenue Service
(the "IRS"). In the event that an accrual basis U.S. Holder does not elect to be
treated  as  a  cash  basis  taxpayer  (pursuant  to  the  Treasury  regulations
applicable  to  foreign  currency  transactions),  such U.S.  Holder  may have a
foreign  currency gain or loss for U.S.  federal income tax purposes  because of
differences between the U.S. dollar value of the currency received prevailing on
the trade date and the settlement  date. Any such currency gain or loss would be
treated as ordinary  income or loss and would be in addition to gain or loss, if
any,  recognized by such U.S. Holder on the sale or disposition of such ordinary
shares.

                                      -82-

<PAGE>




Passive Foreign Investment Companies

     For U.S.  federal  income tax  purposes,  we will be  considered  a passive
foreign investment company ("PFIC") for any taxable year in which either (i) 75%
or more of our  gross  income  is  passive  income,  or (ii) at least 50% of the
average  value of all of our assets for the taxable year produce or are held for
the production of passive  income.  For this purpose,  passive  income  includes
dividends,  interest,  royalties,  rents, annuities and the excess of gains over
losses from the disposition of assets which produce  passive income.  If we were
determined to be a PFIC for U.S.  federal  income tax purposes,  highly  complex
rules would apply to U.S. Holders owning ordinary shares.  Accordingly,  you are
urged to consult your tax advisors regarding the application of such rules.

     As a result of our  substantial  cash position and the decline in the value
of our stock,  there is a substantial  risk that we will be classified as a PFIC
under the asset test described in the preceding paragraph.  However, because the
determination  of  whether we are a PFIC is based  upon the  composition  of our
income and assets  from time to time,  this  determination  can not be made with
certainty until the end of the calendar year.

     If we are treated as a PFIC for any taxable  year,  then,  unless you elect
either  to treat  your  investment  in  ordinary  shares as an  investment  in a
"qualified  electing  fund"  (a  "QEF  election")  or to  "mark-to-market"  your
ordinary shares, as described below:

     o    you would be required to allocate  income  recognized  upon  receiving
          certain  dividends or gain recognized upon the disposition of ordinary
          shares ratably over the holding period for such ordinary shares,

     o    the amount  allocated  to each year during  which we are  considered a
          PFIC other than the year of the dividend payment or disposition  would
          be subject to tax at the highest  individual or corporate tax rate, as
          the case may be, and an interest  charge would be imposed with respect
          to the resulting tax liability allocated to each such year,

     o    gain  recognized  upon the  disposition  of ordinary  shares  would be
          taxable as ordinary income and

     o    you  would be  required  to make an  annual  return  on IRS Form  8621
          regarding  distributions  received with respect to ordinary shares and
          any gain realized on your ordinary shares.

     If you make  either  a  timely  QEF  election  or a  timely  mark-to-market
election  in respect of your  ordinary  shares,  you would not be subject to the
rules described above. If you make a timely QEF election,  you would be required
to  include  in your  income  for each  taxable  year your pro rata share of our
ordinary  earnings as ordinary income and your pro rata share of our net capital
gain as  long-term  capital  gain,  whether  or not such  amounts  are  actually
distributed  to you. You would not be eligible to make a QEF election  unless we
comply with certain applicable information reporting requirements.


                                      -83-
<PAGE>




     Alternatively,  if you elect to "mark-to-market"  your ordinary shares, you
will  generally  include in income any  excess of the fair  market  value of the
ordinary  shares at the close of each tax year over your  adjusted  basis in the
ordinary shares. If the fair market value of the ordinary shares had depreciated
below your adjusted basis at the close of the tax year, you may generally deduct
the excess of the  adjusted  basis of the  ordinary  shares over its fair market
value at that time. However,  such deductions  generally would be limited to the
net  mark-to-market  gains,  if any, that you included in income with respect to
such ordinary shares in prior years.  Income  recognized and deductions  allowed
under  the  mark-to-market  provisions,  as  well  as any  gain  or  loss on the
disposition of ordinary shares with respect to which the mark-to-market election
is made, is treated as ordinary income or loss.

Backup Withholding and Information Reporting

     Payments  in respect  of  ordinary  shares  may be  subject to  information
reporting to the U.S.  Internal  Revenue Service and to a 31 percent U.S. backup
withholding tax. Backup  withholding will not apply,  however,  if you (i) are a
corporation or come within certain exempt  categories,  and demonstrate the fact
when so required,  or (ii) furnish a correct taxpayer  identification number and
make any other required certification. Any amount withheld under these rules may
be credited against your federal income tax liability.

     Backup  withholding is not an additional  tax.  Amounts  withheld under the
backup  withholding  rules may be  credited  against a U.S.  Holder's  U.S.  tax
liability,  and a U.S. Holder may obtain a refund of any excess amounts withheld
under the backup  withholding  rules by filing the appropriate  claim for refund
with the IRS.

     Any U.S.  holder  who  holds  10% or more in vote or value of our  ordinary
shares will be subject to certain additional United States information reporting
requirements.

U.S. Gift and Estate Tax

     An individual  U.S.  Holder of ordinary shares will be subject to U.S. gift
and estate taxes with  respect to ordinary  shares in the same manner and to the
same extent as with respect to other types of personal property.

F.   DIVIDEND AND PAYING AGENTS

     Not applicable.

G.   STATEMENT BY EXPERTS

     Not applicable.

H.   DOCUMENTS ON DISPLAY

     We  are  subject  to  the  reporting  requirements  of  the  United  States
Securities  Exchange Act of 1934, as amended,  as applicable to "foreign private
issuers"  as defined  in Rule 3b-4 under the  Exchange  Act,  and in  accordance
therewith,  we file annual and interim  reports and other  information  with the
Securities and Exchange Commission.

                                      -84-

<PAGE>




     As a foreign private issuer,  we are exempt from certain  provisions of the
Exchange  Act.  Accordingly,  our proxy  solicitations  are not  subject  to the
disclosure and procedural requirements of Regulation 14A under the Exchange Act,
transactions  in our equity  securities by our officers and directors are exempt
from reporting and the  "short-swing"  profit recovery  provisions  contained in
Section  16 of the  Exchange  Act.  Although  we are not  required  to make  our
Securities and Exchange Commission filings electronically,  we do so in order to
make them  available on the  Securities and Exchange  Commission's  website.  In
addition,  we are not required  under the Exchange Act to file periodic  reports
and financial statements as frequently or as promptly as United States companies
whose securities are registered under the Exchange Act.  However,  we distribute
annually to our shareholders an annual report  containing  financial  statements
that have been  examined  and  reported  on,  with an opinion  expressed  by, an
independent  public  accounting firm and we file reports with the Securities and
Exchange Commission on Form 6-K containing  unaudited financial  information for
the first three quarters of each fiscal year.

     This annual report and the exhibits  thereto and any other document we file
pursuant  to the  Exchange  Act may be  inspected  without  charge and copied at
prescribed  rates at the following  Securities  and Exchange  Commission  public
reference rooms: 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington,
D.C. 20549; Seven World Trade Center, Suite 1300, New York, NY 10048; Room 3190,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. You may
obtain information on the operation of the Securities and Exchange  Commission's
public reference room in Washington, D.C. by calling the Securities and Exchange
Commission  at  1-800-SEC-0330  or  by  visiting  the  Securities  and  Exchange
Commission's  website at  http://www.sec.gov/.  The Exchange Act file number for
our Securities and Exchange Commission filings is 000-29871.

     The documents  concerning  our company which are referred to in this annual
report may also be  inspected  at our  offices  located  at 24 Raoul  Wallenberg
Street, Tel Aviv 69719 Israel.

I.   SUBSIDIARY INFORMATION

     Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

Interest Rate Risk

     We  currently  do not invest in, or  otherwise  hold,  for trading or other
purposes,  any financial  instruments subject to market risk. We pay interest on
our   credit   facilities   and   short-term   loans   based   on   LIBOR,   for
dollar-denominated  loans,  and Israeli prime or adjustment  differences  to the
Israeli  consumer  price  index,  for some of our  NIS-denominated  loans.  As a
result,  changes in the general  level of  interest  rates  directly  affect the
amount of interest  payable by us under this  facility.  However,  we expect our
exposure  to market risk from  changes in  interest  rates to be minimal and not
material. Therefore, no quantitative tabular disclosures are required.

                                      -85-

<PAGE>




Foreign Currency Exchange Risk

     A devaluation  of the NIS in relation to the U.S.  dollar has the effect of
reducing the U.S. dollar amount of any of our expenses or liabilities  which are
payable in NIS (unless such expenses or payables are linked to the U.S. dollar).
As of December 31, 2000, we had liabilities  payable in NIS which are not linked
to the U.S.  dollar in the amount of $2.6 million.  An increase of 1% of the NIS
against  the  dollar  will  increase  our  financial   expenses  in  $26,000.  A
devaluation  of 1% of the NIS  against the dollar will  decrease  our  financial
expenses in the same amount.  However,  the amount of liabilities payable in NIS
is likely to change from time to time.  As of December  31, 2000 we had cash and
receivables in the amount of $503,000 denominated in NIS. A devaluation of 1% of
the NIS against the dollar will increase our financial expenses in the amount of
$5,000.  An  increase of 1% of the NIS  against  the dollar  will  decrease  our
financial expenses in the same amount.

     Because  exchange  rates  between  the NIS and the  U.S.  dollar  fluctuate
continuously  (albeit with a  historically  declining  trend in the value of the
NIS),  exchange rate  fluctuations and especially  larger periodic  devaluations
will have an impact on our profitability and period-to-period comparisons of our
results.  The effects of foreign  currency  re-measurements  are reported in our
consolidated financial statements in current operations.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

                                    PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     None.

ITEM 14.  MATERIAL  MODIFICATIONS  TO THE RIGHTS OF SECURITY  HOLDERS AND USE OF
          PROCEEDS

Use of Proceeds

        The  effective  date  of  the  registration   statement  for  which  the
information  is being  disclosed  is March 14,  2000 (File No.  333-30916)  (the
"Registration  Statement").  The following table sets forth, with respect to the
ordinary shares registered,  the amount of securities registered,  the aggregate
offering price of amount registered,  the amount sold and the aggregate offering
price of the amount sold, for both the account of our company and the account of
any selling security holder.

                                      -86-

<PAGE>



                                                              For the account
                                        For the account of       of the
                                           the company      selling shareholder
                                        ------------------  --------------------

Number of ordinary shares registered ..     4,370,000              N/A
Aggregate offering price of shares
   registered .........................   $87,400,000              N/A
Number of ordinary shares sold ........     4,370,000              N/A
Aggregate offering price of shares sold   $87,400,000              N/A

     The  following  table sets forth the expenses  incurred by us in connection
with our public offering during the period  commencing the effective date of the
Registration  Statement and ending December 31, 2000. None of such expenses were
paid directly or indirectly to directors,  officers,  persons owning 10% or more
of any class of equity securities of our company or to our affiliates.

                                               Direct or indirect payments to
                                           persons other than affiliated persons
                                           -------------------------------------

Underwriting discounts and commissions ....         $6,118,000
Finders' fees .............................            550,000
Expenses paid to or for underwriters ......             41,290
Other expenses ............................          2,241,113
                                                     ---------
Total expenses ............................         $8,950,403
                                                    ==========

     The net public offering  proceeds to us, after deducting the total expenses
(set forth in the table above), were $78,449,597.

     The following table sets forth the amount of net public  offering  proceeds
used by us for the  purposes  listed  below.  None of such  payments  were  paid
directly or indirectly to directors, officers, persons owning 10% or more of any
class of our equity securities or to our affiliates.

                                                 Direct or  indirect  payments
                                                 to  persons   other  than  to
Purpose                                          affiliated persons
------------------------------------------------ -----------------------------

 Acquisition of other companies and
 business(es) ...............................                 N/A
 Construction of plant, building and facilities               N/A
 Purchase and installation of machinery
    and equipment ...........................                 N/A
 Purchase of real estate ....................                 N/A
 Repayment of indebtedness ..................                 N/A
 Working capital ............................             $78,449,597
 Temporary investments ......................                 N/A
 Other purposes .............................                 N/A

ITEM 15.  RESERVED

                                      -87-

<PAGE>




ITEM 16.  RESERVED

                                    PART III

ITEM 17.  FINANCIAL STATEMENTS

     The  Company  has  elected  to furnish  financial  statements  and  related
information specified in Item 18.

ITEM 18.  FINANCIAL STATEMENTS

Consolidated Financial Statements.



    Index to Consolidated Financial Statements..............................F-1

    Report of Independent Public Accountants................................F-2

    Consolidated Balance Sheets as of December 31, 1999 and 2000............F-3

    Consolidated Statements of Operations for the years ended
          December 31,  1998, 1999 and 2000.................................F-4

    Consolidated Statements of Shareholders' Equity for the years
          ended December 31, 1998, 1999 and 2000............................F-5

    Consolidated Statements of Cash Flows for the years ended
          December 31,  1998, 1999 and 2000.................................F-6

    Notes to Consolidated Financial Statements..............................F-7


ITEM 19.  EXHIBITS

     Index to Exhibits

    Exhibit            Description
    -------            -----------

     *3.1 Memorandum of Association of the Registrant

     *3.2 Articles of Association of the Registrant

     *4.1 Form of Ordinary Share Certificate

     *4.2 Agreement,  dated as of April 14, 1995, by and among  Registrant,  RAD
          Data Communications Ltd. and Yehuda Zisapel and Zohar Zisapel

     *4.3 Agreement,  dated as of April 18, 1995, by and among Registrant,  Clal
          Venture Capital Fund LP and Yehuda Zisapel and Zohar Zisapel



                                      -88-

<PAGE>


     *4.4 Agreement, dated as of April 18, 1995, by and among Registrant, Lannet
          Data Communications Ltd. and Yehuda Zisapel and Zohar Zisapel

     *4.5 Agreement,  dated as of April 19, 1995, by and among  Registrant,  ECI
          Telecom Ltd. and Yehuda Zisapel and Zohar Zisapel

     *4.6 Agreement, dated as of April 24, 1995, by and among Registrant,  Zohar
          Gilon, Avraham Neuman, Yair Tauman and W.S.P. Capital Investment Ltd.,
          and Yehuda Zisapel and Zohar Zisapel

     *4.7 Agreement, dated as of April 26, 1995, by and among Registrant, Lerosh
          Investments  Ltd.,  Gevahim   Investments  House  Limited  Ltd.,  Yoav
          Chelouche,  Permal Emerging Growth V Ltd.,  Maritime--Julex Investment
          Ltd., Shraga Blazer and Eli Luz and Yehuda Zisapel and Zohar Zisapel

     *4.8 Agreement,  dated as of  April  27,  1995,  by and  among  Registrant,
          Finovelec, Factory Systemes, Houston Venture Partners, Ltd. and Yehuda
          Zisapel and Zohar Zisapel

     *4.9 Agreement, dated September 12, 1996, by and among Registrant and Intel
          Corporation, as amended

     *4.10 Agreement, dated May 12,  1998,  by and among  Registrant,  Evergreen
          Canada Israel Management Ltd., IJT Technologies Ltd., Periscope I Fund
          Israeli  Partnership,  Dovrat Shrem Trust Company Ltd.,  Rubin Gruber,
          C.E.  Unterberg,  Towbin LLC, C.E.  Unterberg,  Towbin  Private Equity
          Partners LP, C.E.  Unterberg,  Towbin Private Equity Partners CV, C.E.
          Unterberg,   Private  Profit  Sharing  Plan  FBO  Alex  Bernstein  and
          Steimatzsky Ltd.

     *10.1 Key Employee Share Incentive Plan, as amended

     *10.2 Consultant Option Plan, as amended

     *10.3 License Agreement,  dated January 13, 1999,  between  Registrant  and
          RADCOM Ltd.

     *10.5 Lease Agreement, dated May 12, 1997,  between  RADVision Inc. and RAD
          Data Communications Inc., as amended

     10.6 Lease  Agreement,  dated  January  19,  2001,  between  Zohar  Zisapel
          Properties, Inc., Yehuda Zisapel Properties, Inc. and RADVision Inc.

     23   Consent of Luboshitz  Kasierer,  Member Firm of Arthur Andersen,  with
          respect to the Registration Statements on Form S-8.

        -------------------

     *    Incorporated by reference to our  registration  statement on Form F-1,
          registration number 333-30916,  as amended,  filed with the Securities
          and Exchange Commission.

                                      -89-

<PAGE>




                                 RADVISION LTD.




                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS






                                                                      Page
                                                                      ----

Report of Independent Public Accountants                               F-2

Consolidated Balance Sheets as of December 31, 1999 and 2000           F-3

Consolidated Statements of Operations for the years ended
  December 31,  1998, 1999 and 2000                                    F-4

Consolidated Statements of Shareholders' Equity for the years
  ended December 31, 1998, 1999 and 2000                               F-5

Consolidated Statements of Cash Flows for the years ended
  December 31,  1998, 1999 and 2000                                    F-6

Notes to the Consolidated Financial Statements                         F-7










                                      F-1
<PAGE>



                                                                 Arthur Andersen
                                                              Luboshitz Kasierer







                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors and the Shareholders of
RADVision Ltd.:
---------------



We have audited the accompanying  consolidated  balance sheets of RADVision Ltd.
(an  Israeli  corporation)  as of December  31,  1999 and 2000,  and the related
consolidated  statements of operations,  shareholders' equity and cash flows for
each of the three years in the period ended December 31, 2000.  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 auditing standards generally accepted
in the 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. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe that our audits  provides 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
RADVision Ltd. as of December 31, 1999 and 2000, and the consolidated results of
its  operations  and its cash  flows for each of the three  years in the  period
ended  December 31, 2000, in conformity  with  accounting  principles  generally
accepted in the United States.

                                                    /s/Luboshitz Kasierer
                                                      Luboshitz Kasierer
                                                Member Firm of Arthur Andersen

February 5, 2001


                                      F-2

<PAGE>
                                 RADVISION LTD.

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                        December 31,
                                                                 --------------------------
                                                       Note           1999          2000
                                                       ----      -----------   ------------
<S>                                                    <C>       <C>           <C>
Current assets
  Cash and cash equivalents                             (3)      $ 2,604,735   $ 41,616,732
  Short-term investments                                (4)                -     39,549,589
  Trade receivables, net                                (5)        3,214,462      7,024,800
  Other receivables and prepaid expenses                (5)        1,516,576      1,051,481
  Inventories                                           (6)        2,433,422      4,955,796
                                                                   ---------      ---------
        Total current assets                                       9,769,195     94,198,398
                                                                   ---------     ----------

Long-term investments                                   (4)                -     15,897,320
                                                                   ---------     ----------

Property and equipment, net                             (7)        3,021,015      5,199,980
                                                                   ---------      ---------

Deposit with insurance companies                       (10)          470,361      1,054,730
                                                                     -------      ---------

      Total assets                                               $13,260,571   $116,350,428
                                                                 ===========   ============
Current liabilities
  Current maturities of long-term loans                          $    63,901   $     46,375
  Trade payables                                                   2,557,978      3,716,003
  Other payables and accrued expenses                   (8)        6,333,376     16,776,634
                                                                   ---------     ----------
      Total current liabilities                                    8,955,255     20,539,012
                                                                   ---------     ----------
Long-term liabilities
  Bank loans                                            (9)           67,383         18,750
  Accrued severance pay                                (10)          756,812      1,448,094
                                                                     -------      ---------
                                                                     824,195      1,466,844
                                                                     -------      ---------

        Total liabilities                                          9,779,450     22,005,856
                                                                   ---------     ----------
Commitments and contingencies                          (11)

Shareholders' equity                                   (12)
Preferred shares of NIS 0.1 par value:
  Authorized - 5,275,000 shares as of
   December 31, 1999; issued and outstanding -
   2,957,165 shares as of December 31, 1999                            3,825              -
Ordinary shares of NIS 0.1 par value:
  Authorized - 12,332,317 and 24,984,470 shares
   as of December 31, 1999 and 2000; issued and
   outstanding - 10,627,859 and 19,144,984 shares
   as of December 31, 1999 and 2000                                   16,820        164,675
  Additional paid-in capital                                      13,788,618    103,848,699
  Deferred compensation                                           (1,051,549)      (641,128)
  Accumulated deficit                                             (9,276,593)    (9,027,674)
                                                                  ----------     ----------
      Total shareholders' equity                                   3,481,121     94,344,572
                                                                   ---------     ----------

      Total liabilities and shareholders' equity                 $13,260,571   $116,350,428
                                                                 ===========   ============
</TABLE>

       /s/Ami Amir                                      /s/David Seligman
       -----------                                      -----------------
       AMI AMIR                                         DAVID SELIGMAN
       Chief Executive Officer                          Chief Financial Officer

Date of approval of financial statements:
February 5, 2001


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

                                      F-3


<PAGE>

                                 RADVISION LTD.

                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
                                                             For the year ended December 31,
                                                        ------------------------------------------
                                             Note           1998           1999            2000
                                             ----       -----------    -----------     -----------


<S>                                          <C>        <C>            <C>             <C>
Revenues                                     (13)       $ 8,894,414    $17,549,903     $45,911,292

Cost of revenues                                          1,412,147      2,853,393      11,446,399
                                                          ---------      ---------      ----------
      Gross profit                                        7,482,267     14,696,510      34,464,893
                                                          ---------     ----------      ----------

Operating expenses

  Research and development expenses                       4,378,829      7,666,583      14,263,347
  Less - participation by the Chief
    Scientist of the Government of Israel    (11)         1,139,749      1,096,722         352,994
                                                          ---------      ---------         -------

  Research and development expenses, net                  3,239,080      6,569,861      13,910,353

  Marketing and selling expenses, net        (14)         4,425,231      9,501,682      17,357,667

  General and administrative expenses                       669,578      1,426,154       3,458,004

  Repayment of future royalties              (11A)
    to the Chief Scientist                                        -              -       3,665,910
                                                          ---------     ----------       ---------

        Total operating expenses                          8,333,889     17,497,697      38,391,934
                                                          ---------     ----------      ----------

Operating loss                                             (851,622)    (2,801,187)     (3,927,041)

Financing income, net                                        22,447        105,133       4,175,960
                                                             ------        -------       ---------
       Net income (loss)                                $  (829,175)   $(2,696,054)    $   248,919
                                                        ===========    ===========     ===========

Earnings (loss) per ordinary share            (2)       $     (0.08)   $     (0.26)    $     0.014
                                                        ===========    ===========     ===========

Weighted average number of ordinary
  shares outstanding                                     10,491,764     10,538,395      17,174,453
                                                         ==========     ==========      ==========


Diluted earnings (loss) per ordinary share    (2)       $     (0.08)   $     (0.26)    $     0.013
                                                        ===========    ===========     ===========


Weighted average number of shares                        10,491,764     10,538,395      19,873,222
                                                         ==========     ==========      ==========



</TABLE>



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

                                      F-4

<PAGE>


                                   RADVISION LTD.

                           CONSOLIDATED STATEMENTS OF
                              SHAREHOLDERS' EQUITY
<TABLE>
                                     Preferred shares      Ordinary shares     Additional     Deferred     Accumulated     Total
                                     -----------------     ---------------      paid-in     compensation     deficit       -----
                                      Shares    Amount      Shares   Amount     capital     ------------     -------
                                      ------    ------      ------   ------     -------

<S>                               <C>         <C>      <C>        <C>       <C>             <C>            <C>          <C>
Balance as of January 1, 1998             -   $     -  10,438,381 $ 16,482  $  7,180,255    $   (82,493)   $(5,751,364) $ 1,362,880

Ordinary shares issued                    -         -      89,675      159             -              -              -          159

Preferred shares issued           2,957,165     3,825           -        -     4,795,895(1)           -              -    4,799,720

Deferred compensation                     -         -           -        -       112,000       (112,000)             -            -

Amortization of deferred
  compensation                            -         -           -        -             -        116,115              -      116,115

Net loss                                  -         -           -        -             -              -       (829,175)    (829,175)
                                  ---------   -------  ---------- --------  ------------    -----------    -----------  -----------

Balance as of December 31, 1998   2,957,165   $ 3,825  10,528,056 $ 16,641  $ 12,088,150    $   (78,378)   $(6,580,539) $ 5,449,699

Ordinary shares issued                    -         -     158,250      179       249,821              -              -      250,000

Deferred compensation                     -         -           -        -     1,466,647     (1,466,647)             -            -

Amortization of deferred
compensation                              -         -           -        -       (16,000)       493,476              -      477,476

Net loss                                  -         -           -        -             -              -     (2,696,054)  (2,696,054)
                                  ---------   -------  ---------- --------  ------------    -----------    -----------  -----------

Balance as of December 31, 1999   2,957,165   $ 3,825  10,686,306 $ 16,820  $ 13,788,618    $(1,051,549)   $(9,276,593) $ 3,481,121

Ordinary shares issued                    -         -   4,960,822  125,052    89,094,289(2)           -              -   89,219,341

Conversion of preferred shares   (2,957,165)   (3,825)  2,957,165    3,825             -              -              -            -

Cancellation of ordinary shares           -         -     (58,447)       -             -              -              -            -

Deferred compensation                     -         -           -        -       218,000       (218,000)             -            -

Options exercised                         -         -     599,138   18,978       779,802              -              -      798,780

Amortization of deferred
  compensation                            -         -           -        -       (32,010)       628,421              -      596,411

Net income                                -         -           -        -             -              -        248,919      248,919
                                  ---------   -------  ---------- --------  ------------    -----------    -----------  -----------

Balance as of December 31, 2000           -   $     -  19,144,984 $164,675  $103,848,699    $  (641,128)   $(9,027,674) $94,344,572
                                  =========   =======  ========== ========  ============    ===========    ===========  ===========

</TABLE>


(1)   Net of issuance expenses of approximately $85,000.
(2)   Net of issuance expenses of approximately $8,400,000.


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



                                      F-5

<PAGE>


                                 RADVISION LTD.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
                                                                     For the year ended December 31,
                                                                 --------------------------------------------
                                                                      1998            1999            2000
                                                                 ------------    -----------    -------------
<S>                                                              <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net (loss) income                                              $  (829,175)    $(2,696,054)   $    248,919
  Adjustments to reconcile net (loss) income to net cash
    provided by (used in) operating activities:
     Income and expenses not affecting operating cash flows:
        Depreciation                                                 360,331         718,444       1,843,449
        Severance pay                                                 39,051         103,616         106,913
        Amortization of deferred compensation                        116,115         477,476         596,411
        Other                                                         17,159          19,308          35,115
     Changes in operating assets and liabilities:
        Increase in trade receivables, net                          (724,060)       (647,116)     (3,810,338)
        Decrease (increase) in other receivables and prepaid
          expenses                                                  (625,820)       (429,625)        465,095
        Increase in inventories                                     (447,200)     (1,560,790)     (2,522,374)
        Increase in trade payables                                   282,924       1,923,895       1,158,025
        Increase in other payables and accrued expenses              963,589       3,528,540      10,443,258
                                                                     -------       ---------      ----------
            Net cash provided by (used in) operating activities     (847,086)      1,437,694       8,564,473
                                                                    --------       ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES
  Increase in short-term investments                                       -               -     (39,549,589)
  Increase in long-term investments                                        -               -     (15,897,320)
  Purchase of property and equipment                              (1,102,164)     (2,388,490)     (4,175,250)
  Proceeds from sale of property and equipment                        19,285          74,257         117,721
                                                                      ------          ------         -------
            Net cash used in investing activities                 (1,082,879)     (2,314,233)    (59,504,438)
                                                                  ----------      ----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Issuance of share capital                                        4,799,879         250,000      90,018,121
  Decrease in short-term credit                                      (54,055)        (10,701)              -
  Long-term loans received                                           100,000               -               -
  Repayment of long-term loans                                       (45,734)        (62,763)        (66,159)
                                                                     -------         -------         -------
            Net cash provided by financing activities              4,800,090         176,536      89,951,962
                                                                   ---------         -------      ----------

INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                      2,870,125        (700,003)     39,011,997

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR                                                  434,613       3,304,738       2,604,735
                                                                     -------       ---------       ---------
CASH AND CASH EQUIVALENTS AT
  END OF YEAR                                                    $ 3,304,738     $ 2,604,735    $ 41,616,732
                                                                 ===========     ===========    ============

CASH PAID DURING THE YEAR IN RESPECT OF
  INTEREST                                                       $    22,715     $    15,839    $      8,367
                                                                 ===========     ===========    ============

NON-CASH ACTIVITY                                                $         -     $   200,000    $          -
                                                                 ===========     ===========    ============

</TABLE>


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


                                      F-6

<PAGE>




                                 RADVISION LTD.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

Note 1 - General

          RADVision Ltd. referred to in these consolidated  financial statements
          as the Company, an Israeli corporation, designs, develops and supplies
          products and technology that enable  real-time  voice,  video and data
          communications over packet networks,  including the Internet and other
          networks based on the Internet protocol.

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

          Transactions and balances  originally  denominated in U.S. dollars are
          presented  at their  original  amounts.  Transactions  and balances in
          other  currencies are remeasured into U.S.  dollars in accordance with
          the  principles  set  forth  in  Statement  No.  52 of  the  Financial
          Accounting  Standards Board of the United States ("FASB").  Items have
          been remeasured as follows:

          -    Monetary  items - at the  exchange  rate in effect on the balance
               sheet date.

          -    Non monetary items - at historical exchange rates.

          -    Revenue and expense items - at the exchange rates in effect as of
               the date of  recognition of those items,  excluding  depreciation
               and other items deriving from non-monetary items.

          All exchange gains and losses from the remeasurement  mentioned above,
          which are  immaterial  for all periods  presented are reflected in the
          statement  of  operations.  The  representative  rate of  exchange  at
          December 31, 2000 was U.S.$ 1.00 = NIS 4.041; and at December 31, 1999
          and 1998 = NIS 4.153 and NIS 4.16, respectively.

     Note 2 - Significant Accounting Policies

          The financial  statements are prepared according to generally accepted
          accounting principles in the United States. The significant accounting
          policies


                                      F-7

<PAGE>

                                 RADVISION LTD.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




          followed in the preparation of the financial statements,  applied on a
          consistent basis, are as follows:

          A.   Principles of Consolidation

               The financial  statements include the accounts of the Company and
               its wholly-owned  subsidiaries in the United States,  Netherlands
               and Hong Kong.  Material  intercompany  balances and transactions
               have been eliminated.

          B.   Cash and Cash Equivalents

               All highly liquid  investments with an original maturity of three
               months or less are considered cash equivalents.

          C.   Allowance for Doubtful Accounts

               Allowance  for doubtful  accounts is computed for specific  debts
               the  collectibility of which is doubtful based upon the Company's
               experience.

          D.   Inventories

               Inventories  are valued at the lower of cost or  market.  Cost is
               determined on the moving average basis.

          E.   Property and Equipment

               Property  and  equipment  are  stated  at cost.  Depreciation  is
               computed by the  straight-line  method over the estimated  useful
               life of the assets, ranging from 3 to 15 years.

          F.   Investments

               The  Company   accounts  for  investments  in  debentures   under
               Statement  of  Financial  Accounting  Standard  ("SFAS") No. 115,
               Accounting for Certain Investments in Debt and Equity Securities.
               Under  SFAS No.  115,  investments  in  debentures  for which the
               Company has the positive  intent and ability to hold to maturity,
               are reported at amortized cost,  which  approximates  fair market
               value.


                                      F-8
<PAGE>

                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)





          G.   Revenue Recognition

               Revenues from sales of products and  technology are recognized in
               accordance  with  Statement of Position (SOP) 97-2, as amended by
               SOP  98-4,  upon  delivery,  when  collection  is  probable,  the
               vendor's fee is fixed or determinable and persuasive  evidence of
               an  arrangement  exists.  Provided that all other elements of SOP
               97-2 are met, revenues are recognized upon delivery,  whether the
               customer is a  distributor  or the final end user.  Revenues  for
               maintenance  and support  services are  deferred  and  recognized
               ratably over the service period.

               In  accordance   with  SOP  97-2,   revenues  for   multi-element
               arrangements,  that  is,  sales  of  products  or  technology  in
               conjunction with  post-contract  customer support  services,  are
               segregated.  Revenues  allocated  to the  delivered  elements are
               recognized upon delivery, provided that the other elements of SOP
               97-2  are  satisfied.   Revenues  allocated  to  the  undelivered
               elements  (post-contract  customer support services) are deferred
               and recognized  ratably over the service  period.  The portion of
               the  fee  for   multi-element   arrangements   allocated  to  the
               undelivered elements (post-contract customer support services) is
               based on vendor-specific  objective evidence  determined,  in the
               case of  post-contract  customer support  services,  based on the
               annual  renewal  rate  for  such  services  actually  charged  to
               customers for years  subsequent to the first year following sale.
               The  remaining  portion of the fee is allocated to the  delivered
               elements based on the residual value method.

          H.   Research and Development Costs

               Research and  development  costs,  net of  participations  by the
               Government of Israel  through the Ministry of Industry and Trade,
               Office of the Chief  Scientist,  are  charged  to  operations  as
               incurred.   Software   development   costs  are   considered  for
               capitalization  when  technological  feasibility  is  established
               according to SFAS No. 86,  "Accounting  for the Costs of Computer
               Software  to  be  Sold,  Leased  or  Otherwise  Marketed."  Costs
               incurred after  achievement of  technological  feasibility in the
               process of software production have not been material. Therefore,
               the  Company  has  not   capitalized  any  of  its  research  and
               development expenses and does not anticipate that its development
               process will differ materially in the future.


                                      F-9

<PAGE>

                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




          I.   Income Taxes

               The Company  accounts for income taxes under the liability method
               of  accounting.  Under the liability  method,  deferred taxes are
               determined  based  on  the  differences   between  the  financial
               statement and tax basis of assets and  liabilities at enacted tax
               rates in effect in the year in which the differences are expected
               to reverse. Valuation allowances are established, when necessary,
               to reduce deferred tax assets to amounts expected to be realized.

          J.   Fair Value of Financial Instruments

               Unless   otherwise   noted,  the  carrying  amount  of  financial
               instruments approximates fair value.

          K.   Provision for Warranty Costs

               The Company  warranties  its products for a twelve month  period.
               Provision  for  warranty   costs  are  based  on  Company's  past
               experience.

          L.   Basic and Diluted Net Earnings (Loss) Per Share

               Basic and diluted  net  earnings  (loss) per share are  presented
               according to SFAS No. 128,  "Earnings per share", for all periods
               presented.

               Basic  and  diluted  net  earnings  (loss)  per  share  have been
               computed  using the weighted  average  number of ordinary  shares
               outstanding during the period.

          M.   Share-based Compensation

               The Company has adopted  the  disclosure  provisions  of SFAS No.
               123,   "Accounting   for  Stock-Based   Compensation,"   and  the
               accounting  rules in Accounting  Principles Board ("APB") Opinion
               No. 25, "Accounting for Stock Issued to Employees", including the
               FASB  Issued   Interpretation  No.  44  "Accounting  for  Certain
               Transactions  Involving Stock  Compensation on  Interpretation of
               APB 25."  The  Company  has  provided  the  necessary  pro  forma
               disclosures  as if the fair value  method had been  applied.  See
               Note 12(E).


                                      F-10

<PAGE>



                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




          N.   Use of Estimates

               The  preparation of the financial  statements in conformity  with
               generally accepted  accounting  principles requires management to
               make estimates and assumptions  that affect the reported  amounts
               of assets and liabilities and disclosure of contingent assets and
               liabilities  at the  date  of the  financial  statements  and the
               reported  amounts of revenues and expenses  during the  reporting
               period. Actual results could differ from those estimates.

          O.   Recently Issued New Accounting Standards

               In June 1998,  the Financial  Accounting  Standards  Board issued
               SFAS No. 133, "Accounting for Derivative  Instruments and Hedging
               Activities."  SFAS No.  133 as  amended  by SFAS 138  established
               accounting   and  reporting   standards   requiring   that  every
               derivative  instrument  be recorded  on the balance  sheet at its
               fair  value.   SFAS  No.  133   requires   that  changes  in  the
               derivative's  fair  value be  recognized  currently  in  earnings
               unless  specific  hedge  accounting  criteria  are  met.  Special
               accounting for qualifying hedges allows a derivative's  gains and
               losses  to  offset  related  results  on the  hedged  item in the
               statement of  operations.  SFAS No. 133 is  effective  for fiscal
               years  beginning  after June 15, 2000. The Company  believes that
               the  adoption of SFAS No. 133 will not have a material  effect on
               its financial statements.

     Note 3 - Cash and Cash Equivalents

                                                              December 31,
                                                        -----------------------
                                                            1999         2000
                                                        ----------  -----------
           Cash in banks, primarily in U.S. dollars     $1,828,335  $ 5,004,185
           Bank deposits in U.S. dollars, bearing
             annual interest rate of 6.5%                  615,875   36,150,532
           Bank deposits in NIS, bearing annual
             interest rate of 7.1%                         160,525      462,015
                                                           -------      -------
                                                        $2,604,735  $41,616,732
                                                        ==========  ===========


          The interest rates are as of December 31, 2000.

                                      F-11
<PAGE>



                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




     Note 4 - Investments

                                                              December 31,
                                                          -------------------
                                                          1999        2000
                                                          ----     ----------

          Bank deposits in U.S. dollars bearing
            annual interest rate of 6.7%                     -     12,208,190
          Marketable debentures, bearing annual
            interest of 7%.                                  -     27,341,399
                                                          ----     ----------
                                                             -     39,549,589
                                                          ====     ==========


          Marketable  debentures in the amount of $15,897,320  that mature later
          than December 31, 2001,  bearing annual  interest of 7%, are presented
          as long-term investments.

          The interest rates are as of December 31, 2000.

     Note 5 - Trade Receivables, Net

            A.    Trade  receivables are presented net of allowance for doubtful
                  accounts in the amount of $224,705 and $577,028 as of December
                  31, 1999 and 2000. The Company  generally  provides  customers
                  with a thirty to sixty day post-sale acceptance period, during
                  which  customers  can  return  products  for  a  full  refund.
                  Historically, returns during this period have been negligible.

            B.    Other   receivables  and  prepaid   expenses   include  grants
                  receivable  from the  Government  of Israel  in the  amount of
                  $864,444 and zero as of December 31, 1999 and 2000.

     Note 6 - Inventories

                                                       December 31,
                                                ------------------------
                                                    1999         2000
                                                ----------    ----------
           Materials and components             $1,037,633    $2,377,026
           Work in process                         634,969       609,637
           Finished products                       760,820     1,969,133
                                                   -------     ---------
                                                $2,433,422    $4,955,796
                                                ==========    ==========



                                      F-12
<PAGE>



                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




     Note 7 - Property and Equipment, net

                                                           December 31,
                                                    -------------------------
                                                        1999          2000
                                                    ----------     ----------
      COST
        Research and development equipment          $1,370,345     $2,694,941
        Motor vehicles                               1,039,715      1,090,178
        Manufacturing equipment                        236,208        280,047
        Office furniture and equipment and
         leasehold improvements                      1,753,264      4,288,005
                                                     ---------      ---------
                                                    $4,399,532     $8,353,171
                                                    ----------     ----------

      ACCUMULATED DEPRECIATION
        Research and development equipment             669,773      1,232,186
        Motor vehicles                                 148,674        241,872
        Manufacturing equipment                        109,383        169,159
        Office furniture and equipment and
         leasehold improvements                        450,687      1,509,974
                                                       -------      ---------
                                                     1,378,517      3,153,191
                                                     ---------      ---------

      NET BOOK VALUE                                $3,021,015     $5,199,980
                                                    ==========     ==========


          For the years ended  December  31, 1998,  1999 and 2000,  depreciation
          expense was $360,331, $718,444 and $1,843,449, respectively.

          The Company's property and equipment are primarily located in Israel.

     Note 8 - Other Payables and Accrued Expenses

                                                            December 31,
                                                     --------------------------
                                                         1999           2000
                                                     ----------     -----------
        Deferred income                              $2,903,587     $10,298,334
        Employees and employee institutions (1)       1,493,704       2,345,104
        Accrued royalties                               476,000         410,681
        Tax withholding payable                         403,000         310,068
        Accrued expenses                              1,030,085       3,412,447
                                                      ---------       ---------
                                                     $6,333,376     $16,776,634
                                                     ==========     ===========



                                      F-13

<PAGE>



                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




          (1)  Employees and employee institutions include salaries, bonuses and
               employee  institutions payable. The employee institutions include
               amounts  deducted  from  employees  payroll for December 1999 and
               2000,  respectively for educational funds and insurance  policies
               funds.  For the years  ended  December  31,  1998,  1999 and 2000
               educational  funds expenses were $122,239,  $232,996 and $547,491
               and insurance policies funds expenses were $208,145, $409,598 and
               $375,035.

     Note 9 - Long-term Bank Loans

                                                         December 31,
                                                    ---------------------
                                                      1999         2000
                                                    --------      -------
           Loans linked to the U.S. dollar          $131,284      $65,125
           Less - current maturities                  63,901       46,375
                                                      ------       ------
                                                    $ 67,383      $18,750
                                                    ========      =======


          The loans bear  interest at an annual rate of Libor plus 1%, which was
          7.3% at December 31, 2000, and mature in equal quarterly  installments
          through 2002.

     Note 10 - Accrued Severance Pay

          Under  Israeli  law and labor  agreements,  the Company is required to
          make  severance  payments to its  dismissed  employees  and  employees
          leaving its employment in certain other  circumstances.  The Company's
          severance pay liability to its  employees,  which is calculated on the
          basis  of the  salary  of each  employee  for the  last  month  of the
          reported period multiplied by the years of the employee's  employment,
          is reflected in the Company's  balance sheet on the accrual basis, and
          is partially  funded by purchase of insurance  policies in the name of
          the Company.  The severance  pay expense for the years ended  December
          31, 1998, 1999 and 2000 amounted to $134,248, $365,076, and $606,187.

     Note 11 - Commitments and Contingencies

          A.   In  connection  with its  research and  development,  the Company
               received and accrued  participation  payments  from the Office of
               the Chief  Scientist  of the  Ministry of  Industry  and Trade in
               Israel in the total  amount of  approximately  $4.9  million.  In
               December 2000 the Company


                                      F-14


<PAGE>


                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




               repaid  all  its  remaining   commitment   with  regard  to  this
               participation in the amount of approximately $3.7 million.

          B.   In connection with its marketing activities, the Company received
               and accrued participation  payments from the Government of Israel
               - Fund for the  Encouragement  of  Marketing  Activities,  in the
               total  amount  of  approximately  $686,000.  In  return  for  the
               participation payments, the Company is committed to pay royalties
               at a rate of 3% of the Company's  total increase in export sales,
               from  the  end  of  the  second  year  of  implementation  of the
               marketing plan until the date at which the participation has been
               fully  repaid.  The  Company's  total  commitment  for  royalties
               payable  with respect to future  sales,  based on  Government  of
               Israel participations  received or accrued, net of royalties paid
               or accrued,  totaled  approximately  $200,000 as of December  31,
               2000.

          C.   In  connection  with its  research and  development,  the Company
               received and accrued participation  payments from the Israel U.S.
               Binational   Industrial   Research  and  Development   Foundation
               (BIRDF), in the total amount of approximately $188,000. In return
               for the participation,  the Company is committed to pay royalties
               at a rate of 2.5% of proceeds  from the first year's sales and 5%
               of the  proceeds  from the  succeeding  years'  sales,  up to the
               amount  of the  grant.  Once the  amount  of the  grant  has been
               repaid,  royalties  will  be  payable  at the  rate  of  2.5%  of
               proceeds,  until  additional  royalties  equal to one half of the
               grant amount have been repaid. The Company's total commitment for
               royalties  payable  with  respect  to  future  sales,   based  on
               Government  participations  received or accrued, net of royalties
               paid or accrued,  totaled  approximately  $276,000 as of December
               31, 2000.

          D.   The Company and its subsidiaries  operate from leased premises in
               Israel,  United  States,  China and Hong Kong.  Lease  agreements
               expire  in  May  2001  through  March  2006  (some  with  renewal
               options).  Annual  minimum  future rental  payments due under the
               above agreements,  at the exchange rate in effect on December 31,
               2000, are approximately as follows:

                2001                               $1,932,482
                2002                                1,939,109
                2003                                1,888,664
                2004                                1,888,664
                2005 and thereafter                 1,273,360
                                                    ---------
                                                   $8,922,279
                                                   ==========



                                     F-15

<PAGE>



                                 RADVISION LTD.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




          E.   The Company is  committed to pay  royalties to third  parties for
               the  integration  of these third parties'  technologies  into the
               Company's  products.  Royalties  are  payable  based on the sales
               volume of these  products,  for as long as the Company uses these
               technologies,  without limit on the amount of royalties  payable.
               The  rates of these  royalties  are based on a fixed  amount  per
               product  sold by the  Company  in the range of $1.00 to $5.00 per
               unit sold.  The  agreements  pursuant to which the  royalties are
               payable have no expiration  date.  Annual  minimum future royalty
               payments are approximately as follows:

                 2001                                       $25,000
                 2002                                        25,000
                 2003                                        25,000
                                                             ------
                                                            $75,000
                                                            =======


          F.   In 1998,  a third  party  sent  correspondence  to the  Company's
               affiliate alleging that some products manufactured by the Company
               infringe  upon  patents  held by the third  party and  offered to
               license   these   patents   to   the   Company.   In   subsequent
               correspondence,  the Company's affiliate requested that the third
               party  specifically  substantiate each allegation of infringement
               before the  Company's  affiliate  would be prepared to enter into
               any  licensing  arrangements.  The Company  does not believe that
               these  allegations  will have a material  adverse effect upon its
               business, financial position, results of operations or liquidity.
               The Company's affiliate has received further  correspondence from
               the third  party,  in which  the third  party  has,  among  other
               things,  reiterated its claims. The Company's  affiliate does not
               believe  the third  party has  substantiated  its  claims and has
               communicated  this  belief  to the  third  party.  The  Company's
               affiliate  has advised the Company that the alleged  infringement
               claims are unresolved.

     Note 12 - Shareholders' Equity

          A.   On  January  18,  2000,  the  Company  increased  its  authorized
               Ordinary Share Capital to 24,984,470  Ordinary  Shares and 15,530
               deferred   shares  of  NIS  0.1  par  value  per  share  and  all
               outstanding  preferred  shares were  converted  into an identical
               number of ordinary shares.

               In January 2000,  the Company  effected a 211 to 1 share split in
               the form of a share dividend.


                                      F-16

<PAGE>



                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)





               All  references  to per share amounts and the number of shares in
               these  financial  statements  have been  restated  to reflect the
               abovementioned changes.

          B.   The Company has an authorized  share  capital of 15,530  deferred
               shares of par value NIS 0.1 each.  The deferred  shares confer no
               rights or  privileges  on their  holders  except for the right to
               receive  upon  dissolution  or  liquidation  the par value of the
               deferred shares.

          C.   In March 2000, the Company issued  590,822  ordinary  shares in a
               private   placement   to  Siemens   Aktiengesellschaft,   Samsung
               Electro-Mechanics   Co.  Ltd.  and  Samsung  Venture   Investment
               Corporation for an aggregate  consideration of approximately  $10
               million.

          D.   On March 13, 2000, the Company issued  4,370,000  ordinary shares
               in an initial public offering for $87 million, or $20 per share.

          E.   The Company  adopted a key employee  share  incentive  plan which
               provides  for the  grant  by the  Company  of  option  awards  to
               purchase  up to an  aggregate  of  3,800,000  ordinary  shares to
               officers,  employees,  directors and  consultants of the Company,
               its  subsidiaries  and affiliates.  The options vest ratably over
               vesting  periods  ranging  from three to five years.  The options
               expire 62 to 120 months from the date of  issuance.  The exercise
               price of  options,  under the plan is at varying  prices  ranging
               from $0.95 to $28.

               Transactions related to the share incentive plan during the years
               ended December 31, 1998,  1999 and 2000 and the weighted  average
               exercise prices per share and weighted  average fair value of the
               options at the date of grant are summarized as follows:


                                      F-17

<PAGE>



                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




                                          Outstanding   Weighted    Weighted
                                            options      average  average fair
                                                        exercise    value of
                                                        price per   options
                                                          share     granted
                                          -----------   --------- ------------
  Outstanding as of January 1, 1998          649,880    $ 1.41
  Options granted                            791,250      1.18        $0.29
  Options forfeited                          (10,550)     1.64
                                             -------      ----
  Outstanding as of December 31, 1998      1,430,580      1.28
  Options granted                          1,421,296      1.18        $1.14
  Options forfeited                         (184,625)     1.80
                                            --------      ----
  Outstanding as of December 31, 1999      2,667,251      1.23
  Options granted                          1,390,795     16.68        $9.38
  Options exercised                         (599,138)     1.46
  Options forfeited                         (230,252)     7.30
                                            --------      ----
  Outstanding as of December 31, 2000      3,228,656    $ 7.48
                                           =========    ======


          The following table summarizes  information about options  outstanding
          and exercisable at December 31, 2000:

                        Options outstanding             Options exercisable
              --------------------------------------- --------------------------
 Exercise        Number        Weighted -  Weighted -      Number     Weighted -
   price      outstanding at    average     average   outstanding at   average
               December 31,    remaining   exercise    December 31,   exercise
                   2000       contractual   prices         2000        prices
                                 life
-----------   --------------  ----------   ---------- --------------  ----------

$0.95-$0.98       663,494         2.86       $ 0.95       201,621       $0.95
 1.18             718,799         2.55         1.18       343,826        1.18
 1.58-1.64        503,881         3.48         1.58       132,771        1.59
 1.74              49,010         1.41         1.74        33,276        1.74
 10.20            118,478         4.04        10.20        29,620       10.20
 12.00            305,472         4.20        12.00         8,111       12.00
 12.94            186,000         4.97        12.94             -        -
 17.00            440,022         4.56        17.00             -        -
 28.00            243,500         4.91        28.00             -        -
                  -------                                 -------
                3,228,656                                 749,225
                =========                                 =======



                                      F-18

<PAGE>



                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




          The  amounts of  deferred  compensation  recognized  arising  from the
          difference between the exercise price and the fair market value on the
          date of the grant of  $112,000,  $1,466,647  and  $218,000 for options
          granted in the years  ended  December  31,  1998,  1999 and 2000,  are
          included in  shareholders'  equity and are amortized  over the vesting
          periods of the options according to APB 25. Under APB 25, the deferred
          compensation  expense for the years ended December  31,1998,  1999 and
          2000 amounted to $116,115, $477,476 and $596,411.


               If  deferred   compensation   had  been   determined   under  the
               alternative fair value accounting  method provided for under SFAS
               Statement No. 123, "Accounting for Stock-Based Compensation," the
               Company's  net  loss  and net  loss per  share  would  have  been
               increased to the following pro forma amounts:

                                              For the year ended December 31,
                                         ---------------------------------------
                                            1998           1999          2000
                                         ----------   ------------   -----------
                Net income (loss):
                  As reported            $(829,175)   $(2,696,054)     $248,919
                  Pro forma               (956,396)    (2,749,826)   (3,196,900)

                Net earnings (loss)
                 per share:
                   Basic                     (0.08)        (0.26)        0.014
                   Diluted                   (0.08)        (0.26)        0.013
                  Pro forma
                   Basic                     (0.09)        (0.26)        (0.19)
                   Diluted                    -             -             -

               Under  SFAS No.  123,  the fair  value  of each  option  grant is
               estimated   on  the  date  of  grant   using  the   Black-Scholes
               option-pricing   model   with  the   following   weighted-average
               assumptions  used for grants in 1998, 1999 and 2000: (1) expected
               life of the  options  of 2.72,  2.84 and  2.39;  (2) no  dividend
               yield;  (3)  expected  volatility  of 0% for  1998  and  1999 and
               expected  volatility of 80% for 2000; and (4) risk-free  interest
               rate of 5%.


                                      F-19


<PAGE>



                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




     Note 13 - Revenues

          The Company's sales by geographic area are as follows:

                                                    For the year ended
                                                       December 31,
                                         --------------------------------------
                                             1998          1999          2000
                                         ----------   -----------   -----------
         North America, principally
           the United States             $4,845,522   $ 9,530,948   $28,830,023
         Europe                           2,248,880     4,045,882     7,327,630
         Far East                           942,460     2,662,865     5,286,587
         Israel                             857,552     1,310,208     4,467,052
                                            -------     ---------     ---------
                                         $8,894,414   $17,549,903   $45,911,292
                                         ==========   ===========   ===========


          The  Company  manages  its  business  on the  basis of one  reportable
          segment.

          For the years ended  December  31, 1998 and 1999,  no single  customer
          represented  more than 10% of sales.  For the year ended  December 31,
          2000, one customer  accounted for  approximately 22% of sales for that
          period.

     Note 14 - Marketing and Selling Expenses, Net

                                                     For the year ended
                                                        December 31,
                                           -------------------------------------
                                               1998         1999         2000
                                           ----------   ----------   -----------

Marketing and selling expenses             $4,603,336   $9,699,745   $17,491,503
Participation by the Government
  of Israel                                   178,105      198,063       133,836
                                              -------      -------       -------
Marketing and selling expenses, net        $4,425,231   $9,501,682   $17,357,667
                                           ==========   ==========   ===========

Marketing and selling expenses include:
  Royalties to the Government of Israel    $  366,736   $  896,249   $   749,556
                                           ==========   ==========   ===========



     Note 15 - Concentration of Credit Risk

          For the period ended December 31, 1999, no single  customer  accounted
          for more than 10% of the Company's  sales and no customer  represented
          more



                                      F-20


<PAGE>


                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




          than  10% of trade  receivables.  As of  December  31,  2000,  current
          balances of two  customers  accounted for 22% and 20% of the Company's
          trade  receivables.  The Company does not generally require collateral
          to support  credit  sales.  Allowances  are  maintained  for potential
          credit losses.

     Note 16 - Related Party Balances and Transactions

          A.   Balances with Related Parties

                                                              December 31,
                                                         -------------------
                                                            1999      2000
                                                         --------   --------

                Receivables                              $124,264   $ 72,923
                Trade payables                            305,325    197,496


          B.   Transactions with Related Parties

                                                     For the year ended
                                                        December 31,
                                           ----------------------------------
                                               1998       1999         2000
                                           --------    --------    ----------

             Revenues (1)                  $ 47,429    $166,812    $  251,019
             Cost of revenues (3) (4)       252,655     384,951       842,143
             Research and development
               expenses (2)(3)                3,017     362,573       621,510
             Marketing, selling, general
               and administrative           201,238
               expenses (2) (3)                         343,873     1,210,381
             Purchase of property and
               equipment (5)                 64,225     283,752       722,157

          (1)  Includes  revenues  from  agreements  to  license  the  Company's
               technology  to  Radcom  Ltd.  and Rad Data  Communications  Ltd.,
               affiliated  companies.  The agreements are based on the Company's
               standard  form and  include  a  licensing  fee,  maintenance  and
               support  services  for one year and minimum  royalty  payments on
               sales of products which incorporate the technology.



                                      F-21
<PAGE>



                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




          (2)  Includes  legal,  human  resources  and  administrative  services
               provided to the Company by affiliated companies which the Company
               reimburses for the costs incurred in providing these services.

          (3)  Includes   rental  fees  based  on  lease   agreements  with  Rit
               Technologies  Ltd.,  Rad Data  Communications  Ltd.,  and several
               other affiliated  companies.  Under these lease  agreements,  the
               Company  leases  office space of  approximately  21,830 and 9,000
               square  feet,  in Israel  and in New  Jersey,  respectively.  The
               expiration dates of these lease agreements range from August 2000
               to May 2002.

          (4)  Includes the purchase of components from Rad Data  Communications
               Ltd., an affiliated  company,  which the Company  integrates into
               its products.

          (5)  Includes  property and equipment that were purchased  mainly from
               Bynet Data Communications Ltd., an affiliated company.

     Note 17 - Taxes on Income

          A.   The  Company's  investment  program  totaling  $122,000  has been
               granted   Approved   Enterprise   status   under   the   Law  for
               Encouragement  of Capital  Investments,  1959.  In addition,  the
               Company was granted Approved  Enterprise  status for an expansion
               of a previous program totaling $375,000.  The Company is entitled
               to a tax benefit  period of seven years,  on income  derived from
               these programs,  as follows:  a full income tax exemption for the
               first two years and a reduced  income tax rate of 25% (instead of
               the regular rate of 36%) for the remaining  five year period.  If
               foreign  shareholdings  in the Company exceed 25%, the period for
               which the Company is entitled to a reduced income tax is extended
               to eight years.

               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.

               Should the  Company  derive  income from  sources  other than the
               approved  enterprise  programs  during  the  relevant  period  of
               benefits,



                                      F-22


<PAGE>


                                 RADVISION LTD.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




               this income will be taxable at the  regular  corporate  tax rate,
               which is 36%.

               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 criteria in
               the  approval  for  the  specific  investment  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 that it has complied with these conditions.

          B.   The  Company  is  subject  to the  Income  Tax Law  (Inflationary
               Adjustments),  1985,  measuring income on the basis of changes in
               the Israeli Consumer Price Index.

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

          D.   Through  December 31, 1994, the Company's losses for tax purposes
               were  assigned to a  shareholder,  and are not  available  to the
               Company.

          E.   As of  December  31,  2000,  the  Company's  net  operating  loss
               carryforwards  for tax purposes  amounted to approximately  $15.0
               million.  These  net  operating  losses  may be  carried  forward
               indefinitely  and  offset  against  future  taxable  income.  The
               Company  expects that during the period in which these tax losses
               are  utilized  its  income  would be  substantially  tax  exempt.
               Accordingly,  the income tax rate of the  Company  during the tax
               exempt  period  will be zero,  and there  will be no tax  benefit
               available  from these  losses and no deferred  income  taxes have
               been included in these  financial  statements.  Deferred taxes in
               respect of other temporary differences are immaterial.

          F.   The U.S.  subsidiary's  carryforward  tax losses through December
               31, 2000 amounted to approximately $8.0 million. These losses are


                                      F-23

<PAGE>


                                 RADVISION LTD.

             NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)




               available  to offset any future U.S.  taxable  income of the U.S.
               subsidiary and will expire in the years 2010 - 2014.

               Details of deferred tax assets are as follows:

                                                              December 31,
                                                        -----------------------
                                                           1999        2000
                                                       ----------  ------------

                Net operating loss carryforwards       $ 770,000   $ 2,835,000
                Less - valuation allowance              (770,000)   (2,835,000)
                                                       ---------   -----------
                                                       $       -   $         -
                                                       =========   ===========


            G.    A reconciliation between the theoretical tax benefit, assuming
                  all income is taxed at the  statutory  tax rate  applicable to
                  the  income of the  Company  and the  actual  tax  expense  as
                  reported in the statements of operations, is as follows:

                                          For the year ended December 31,
                                       ------------------------------------
                                          1998         1999         2000
                                       ----------   ----------   ----------
       Theoretical tax expense
         (benefit) computed at the
         statutory rate (36%)          $(298,503)   $(970,579)   $  89,611
       Loss and other items for
         which deferred taxes were
         not provided, net               277,000      936,423     (181,665)
       Non-deductible expenses            21,503       34,156       92,054
                                          ------       ------       ------
       Income tax benefit              $       -    $       -    $       -
                                       =========    =========    =========


          H.   The Company has been  assessed for tax purposes  through the year
               1996.


                                  # # # # # # #


                                      F-24




<PAGE>

                               S I G N A T U R E S
                               -------------------

     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.

                                          RADVISION LTD.



                                          By: /s/Gadi Tamari
                                              --------------
                                              Name:  Gadi Tamari
                                              Title: Chief Executive Officer



                                          By: /s/David Seligman
                                              -----------------
                                              Name:  David Seligman
                                              Title:  Chief Financial Officer



Dated:  June 4, 2001

                                      -90-

<PAGE>

                                    Exhibits

    Exhibit            Description
    -------            -----------

     *3.1 Memorandum of Association of the Registrant

     *3.2 Articles of Association of the Registrant

     *4.1 Form of Ordinary Share Certificate

     *4.2 Agreement,  dated as of April 14, 1995, by and among  Registrant,  RAD
          Data Communications Ltd. and Yehuda Zisapel and Zohar Zisapel

     *4.3 Agreement,  dated as of April 18, 1995, by and among Registrant,  Clal
          Venture Capital Fund LP and Yehuda Zisapel and Zohar Zisapel

     *4.4 Agreement, dated as of April 18, 1995, by and among Registrant, Lannet
          Data Communications Ltd. and Yehuda Zisapel and Zohar Zisapel

     *4.5 Agreement,  dated as of April 19, 1995, by and among  Registrant,  ECI
          Telecom Ltd. and Yehuda Zisapel and Zohar Zisapel

     *4.6 Agreement, dated as of April 24, 1995, by and among Registrant,  Zohar
          Gilon, Avraham Neuman, Yair Tauman and W.S.P. Capital Investment Ltd.,
          and Yehuda Zisapel and Zohar Zisapel

     *4.7 Agreement, dated as of April 26, 1995, by and among Registrant, Lerosh
          Investments  Ltd.,  Gevahim   Investments  House  Limited  Ltd.,  Yoav
          Chelouche,  Permal Emerging Growth V Ltd.,  Maritime--Julex Investment
          Ltd., Shraga Blazer and Eli Luz and Yehuda Zisapel and Zohar Zisapel

     *4.8 Agreement,  dated as of  April  27,  1995,  by and  among  Registrant,
          Finovelec, Factory Systemes, Houston Venture Partners, Ltd. and Yehuda
          Zisapel and Zohar Zisapel

     *4.9 Agreement, dated September 12, 1996, by and among Registrant and Intel
          Corporation, as amended

     *4.10 Agreement, dated May 12,  1998,  by and among  Registrant,  Evergreen
          Canada Israel Management Ltd., IJT Technologies Ltd., Periscope I Fund
          Israeli  Partnership,  Dovrat Shrem Trust Company Ltd.,  Rubin Gruber,
          C.E.  Unterberg,  Towbin LLC, C.E.  Unterberg,  Towbin  Private Equity
          Partners LP, C.E.  Unterberg,  Towbin Private Equity Partners CV, C.E.
          Unterberg,   Private  Profit  Sharing  Plan  FBO  Alex  Bernstein  and
          Steimatzsky Ltd.

     *10.1 Key Employee Share Incentive Plan, as amended

     *10.2 Consultant Option Plan, as amended

<PAGE>


     *10.3 License Agreement,  dated January 13, 1999,  between  Registrant  and
          RADCOM Ltd.

     *10.5 Lease Agreement, dated May 12, 1997,  between  RADVision Inc. and RAD
          Data Communications Inc., as amended

     10.6 Lease  Agreement,  dated  January  19,  2001,  between  Zohar  Zisapel
          Properties, Inc., Yehuda Zisapel Properties, Inc. and RADVision Inc.

     23   Consent of Luboshitz  Kasierer,  Member Firm of Arthur Andersen,  with
          respect to the Registration Statements on Form S-8.

        -------------------

     *    Incorporated by reference to our  registration  statement on Form F-1,
          registration number 333-30916,  as amended,  filed with the Securities
          and Exchange Commission.