UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K


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

                   For the fiscal year ended December 31, 2003

                                       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)

                   Israel                                     N/A
      (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                 Identification No.)

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

                               011-972-3-645-5220
              (Registrant's telephone number, including area code)

                                   -----------

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                       Ordinary Shares, NIS 0.1 par value
                                (Title of class)

                                    ---------


<PAGE>




        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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ] (Not applicable. See Preliminary Notes on page
i.)

        Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes |X| No |_|

        As of March 9, 2004, 19,344,849 ordinary shares of RADVISION Ltd. were
outstanding (not including treasury shares). The aggregate market value of the
ordinary shares held by non-affiliates was approximately $63.9 million.

                                   -----------


                    DOCUMENTS INCORPORATED BY REFERENCE: None


<PAGE>







                                TABLE OF CONTENTS


PART I.........................................................................1


   Item 1.  Business...........................................................1
   Item 2.  Properties........................................................33
   Item 3.  Legal Proceedings.................................................33
   Item 4.  Submission of Matters to a Vote of Security Holders...............34

PART II.......................................................................35

   Item 5.  Market for Registrant's Common Equity and Related
            Stockholder Matters...............................................35
   Item 6.  Selected Financial Data...........................................39
   Item 7.  Management's Discussion and Analysis of Financial Condition
            and Results of  Operations........................................40
   Item 7A. Qualitative and Qualitative Disclosures About Market Risk.........52
   Item 8.  Financial Statements and Supplementary Data.......................53
   Item 9.  Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure..........................................53
   Item 9A. Controls and Procedures...........................................53

PART III......................................................................54

   Item 10. Directors and Executive Officers of the Registrant................54
   Item 11. Executive Compensation............................................63
   Item 12. Security Ownership of Certain Beneficial Owners and
            Management........................................................68
   Item 13. Certain Relationships and Related Transactions....................70
   Item 14. Principal Accountants Fees and Services...........................71

PART IV.......................................................................73

   Item 15.  Exhibits, Financial Statement Schedules, and Reports on
             Form 8-K.........................................................73



<PAGE>

        Preliminary Notes: RADVISION Ltd. is incorporated in Israel and is a
"foreign private issuer" as defined in Rule 3b-4 under the Securities Exchange
Act of 1934 (the "1934 Act") and in Rule 405 under the Securities Act of 1933.
As a result, it is eligible to file this annual report pursuant to Section 13 of
the 1934 Act on Form 20-F (in lieu of Form 10-K) and to file its interim reports
on Form 6-K (in lieu of Forms 10-Q and 8-K). However, RADVISION Ltd. elected to
file its annual and interim reports on Forms 10-K, 10-Q and 8-K.

        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 room: 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington,
D.C. 20549, on the Securities and Exchange Commission Internet site
(http://www.sec.gov) and on our website www.radvision.com.

        Pursuant to Rule 3a12-3 under the 1934 Act regarding foreign private
issuers, the proxy solicitations of RADVISION Ltd. are not subject to the
disclosure and procedural requirements of Regulation 14A under the 1934 Act, and
transactions in its equity securities by its officers and directors are exempt
from Section 16 of the 1934 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.

        This Annual Report on Form 10-K 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
readers 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. Readers 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 the Risk Factors section
which appears in Item 1 - Business.

                                       i

<PAGE>


                                     PART I


Item 1.        Business

General

        We were incorporated under the laws of the State of Israel in
January1992, 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. We are
a public limited liability company under the Israeli Companies Law 1999 and
operate under this law and associated legislation. Our registered offices and
principal place of business are located at 24 Raoul Wallenberg Street, Tel Aviv
69719, Israel. Our address on the Internet is www.radvision.com. The information
on our website is not incorporated by reference into this annual report.

        With over a decade in business, RADVISION is the industry's leading
provider of high quality, scalable and easy-to-use products and technologies for
videoconferencing, video telephony, and the development of converged voice,
video and data over IP and 3G networks. Hundreds of thousands of end-users
around the world today communicate over a wide variety of networks using
products and solutions based on or built around RADVISION's multimedia
communication platforms and software development solutions.

        We have approximately 450 customers worldwide including Alcatel, Cisco,
FastWeb, NTT/DoCoMo, Philips, Panasonic, Samsung, Shanghai Bell, Siemens, Sony
and Tandberg.

        In the beginning of 2001, 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.

        Our Networking Business Unit, or NBU, offers one of the broadest and
most complete set of multimedia communication and videoconferencing network
solutions for IP, ISDN, SIP and 3G-based networks, supporting most end points in
the industry today. These products are sold primarily to resellers and OEMs who
use this infrastructure to develop and install advanced IP and ISDN-based
communication systems for enterprise customers. The NBU also provides service
providers, both 3G wireless and wireline, with integrated solutions that enable
the delivery of converged IP-based multimedia streaming and video telephony
applications to corporate customers as a managed service, residential broadband
customers, and 3G subscribers worldwide.

        Our Technology Business Unit, or TBU, is a one-stop-shop of voice and
video over IP and 3G Development toolkits. The TBU provides protocol development
tools and platforms, as well as associated solutions such as testing platforms
and IP phone toolkits that enable equipment vendors and service providers to
develop and deploy new IP and 3G-based converged networks, services, and
technologies. Our TBU also provides professional services to our customers,
assisting them to integrate our technology into their products.
RADVISION's TBU

                                       1

<PAGE>


solutions include developer toolkits for SIP, MEGACO/H.248, MGCP, H.323, and
3G-324M. It also includes RADVISION's ProLab(TM) Test Management Suite and IP
phone toolkit. Today you may find RADVISION toolkits implemented in a wide range
of environments from chipsets to simple user devices like IP phones, and from
integrated video systems through carrier class network devices like gateways,
switches, soft switches and 3G multimedia gateways.

Our Strategy

        Our goal is to be the leading provider of innovative products and
technologies that enable real-time multimedia collaboration (voice, video and
data) communication over packet networks. We provide solutions at every level -
protocol developer toolkits, professional services, network infrastructure, and
even integrated solutions that compliment the communication solutions of other
vendors such as those from Cisco and Microsoft. We believe that the combination
of offering IP-centric networking products and software toolkits uniquely
positions us as a key enabling vendor in the evolution of IP communication. Both
of our product lines are essential for building IP networks that support real
time voice and video communication with full interoperability with legacy
ISDN/PSTN networks and technologies. 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 and 3G communication
          products and services, such as our announcement in 2003 of support for
          SIP in our infrastructure  products - one of the first in the industry
          to do so. We have  accumulated  extensive  knowledge  and expertise as
          designers and  developers of commercial  products and  technology  for
          real-time packet-based  communication.  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    Enable the Migration of Visual  Communication from the conference room
          (videoconferencing) to the desk top, the home, and on the road over 3G
          (video telephony and multimedia  communication).  We have been working
          with leading technology vendors such as Cisco and Microsoft as well as
          aggressively  developing  partnerships  with  broadband  and  wireless
          service providers to transform  videoconferencing  from a meeting room
          application to a new mode of personal communication.

     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 communication market, including
          Cisco,  Samsung,  Siemens, Sony and Tandberg. 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 strive to establish long-term

                                        2

<PAGE>


          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 communication market.

     o    Become a Key Enabling  Technology  Solution for IP  Communication.  We
          continue to strive to ensure that our infrastructure solutions are key
          enabling  components in larger solution vendors'  portfolios.  To that
          end, in 2003,  we announced  that our viaIP  multimedia  communication
          platform  supports  multipoint and  multidevice  functionality  within
          Microsoft's Office Live Communication Server 2003 platform for desktop
          communication.  Additionally, RADVISION is the key enabling technology
          in a number of telecom equipment vendors' 3G communication platforms -
          enabling real-time multimedia services.

     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  communication
          over packet  networks.  We were the  first-to-market  with IP gateways
          that provide combined voice,  video and data  functionality,  first to
          market  with  software   development   kits  for  the  development  of
          H.323-compliant IP communication  products and applications,  and this
          year,  the  first to  announce  support  for SIP  (Session  Initiation
          Protocol)  in our  infrastructure  platform.  We intend to utilize our
          technological  expertise as a basis for market  leadership by striving
          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 enabling us to develop new
          products and  technologies  that are at the forefront of technological
          evolution in the IP communication industry.

        In 2003, our TBU expanded its product offering to include a new
direction for our company with the first of our toolkits that not only provide
protocol developer suites but actual reference designs. The first product is an
IP Phone toolkit, which provides all the functionality and call control, as well
as supporting multiple signaling protocols, that enables developers to more
easily develop IP phones. Additionally, in 2003, we announced a number of
upgrades to our toolkits to maintain our lead in supporting the latest versions
of signaling standards. TBU also announced in 2003 that it had ported its
developer solutions to a number of new emerging platforms including Linux and an
embedded chip operating system. Finally, in 2003 we launched our Professional
Services division, which features a team of highly skilled developers who are
available to assist clients in developing products using RADVISION toolkits and
protocol stacks. These introductions have helped us maintain our position as the
premier, one-stop-shop for all voice and video technologies over IP and 3G. We
also believe that they reinforce RADVISION's leadership position as a protocol
toolkit technology expert.

        In 2003, our NBU introduced a number of very significant new
technologies and platforms for videoconferencing and multimedia communication.
These introductions included an MCU version 3.2 (Multipoint Conferencing Unit)
which broke ground in both

                                       3

<PAGE>


price and performance as well as in its support of SIP and the new H.264
compression standard. We also introduced new versions of our INVISION platform
for enterprise communication as well as new scheduling and network management
tools. Finally, and perhaps most importantly, we announced full support of
Microsoft's Live Communication architecture, a powerful new desktop
communication architecture for converged voice, video, and data collaboration

        We expect to continue to introduce new or enhanced products in 2004,
including upgrades to our software toolkits and improvements to our
videoconferencing and multimedia communication product lines that include added
functionality. In addition, we plan to:

     o    Deepen  the  Distribution  Channels  for our  Products.  We  intend to
          continue to focus our sales and  marketing  efforts on  deepening  the
          relationship with our distribution channels.  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    Leverage Service Provider  Opportunities.  We are working closely with
          telecom equipment provides,  3G mobile carriers,  and wireline service
          providers to enable  multimedia  communication  in the home and on the
          road.  We are seeing  initial  success  and expect to continue to help
          grow  that  market  -  particularly  in the 3G  space  where we are in
          several active trials globally.

     o    Enable  Desktop  Conferencing  and  Communication   Through  Strategic
          Partners.  We will  continue our efforts to maintain our position as a
          key enabling solution provider for major vendors'  activities to drive
          visual  communication beyond the meeting room and onto the desktop. We
          intend to strengthen  our  relationship  with  Microsoft and its sales
          channels. We also expect to leverage our close relationship with Cisco
          and what they are doing in enterprise video telephony by virtue of our
          AVVID certification announcement in early 2004.

     o    Continue our Active  Involvement in Shaping Industry  Standards for IP
          Communication.  We  actively  participate  in  and  contribute  to the
          formulation of standards for IP  communication.  We intend to continue
          our active  involvement in the organizations that define the standards
          for real-time  communication 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  based  on  new  standards  adopted.  We are
          continually improving,  enhancing and expanding our core competency in
          real time IP communication  protocols  including H.323,  SIP, MGCP and
          MEGACO.  Because of our involvement in defining these IP communication
          standards,  we believe that we are  well-positioned to quickly develop
          enhanced functionality and new products based on multiple protocols.

                                        4

<PAGE>


        The following discussion of our business is separated into two sections:
the first addresses our videoconferencing network infrastructure section, or
NBU, and the second addresses our software developer toolkit business, or TBU.
In each section we will provide an overview of our products, our competitive
advantage, and industry trends that are beneficial to our business.

Networking Business Unit

NBU Products

        RADVISION's award-winning multimedia communication and videoconferencing
network infrastructure products provide both the platform and applications to
enable advanced conferencing and collaboration functionality between any
video-enabled device, such as a meeting room and desktop videoconferencing end
point, with other telephony and videoconferencing systems. Regardless of the
communication network used, from IP and SIP to ISDN and next generation 3G,
institutions, enterprises, and service providers can use the RADVISION solution
to create high quality, easy-to-use voice, video, and data communication and
collaboration environments.

        RADVISION's core infrastructure solution is viaIP, a customizable,
scalable array of ports, management solutions, and custom functionality with
which customers can design and quickly deploy a highly configured, highly
scalable visual communication network ideal for each client's unique needs. With
the viaIP product line the customer simply chooses the ideal port configuration,
management solution and additional applications and the entire solution is
delivered in an integrated chassis.

        Within the viaIP product line we offer INVISION, a plug-and-play line of
videoconferencing network appliances targeted at the enterprise. INVISION offers
an off-the-shelf, completely pre-configured solution with all the functionality
of a complete IP/ISDN videoconferencing infrastructure, from centralized
management and multipoint conferencing to gateway services and value-added
applications, in an integrated, easy-to-order and easy-to-install device.

        To complement the viaIP product, we offer our iVIEW family of management
applications for every videoconferencing need, including robust network
management and intuitive conference scheduling.

        The viaIP offers a customizable solution to layer video, voice, and data
collaboration onto a customer's network. Key components of the solution include:

     o    Gateways  - Provide  videoconferencing  interoperability  between  IP,
          circuit-switched ISDN and next generation 3G end points and networks.

     o    Gatekeepers - Control,  manage, and monitor real-time voice, video and
          data traffic over the visual communication networks.

                                        5

<PAGE>




     o    Conferencing Bridges (or multipoint conferencing  units/MCUs) - Enable
          voice or multimedia  conferencing  over packet and ISDN networks among
          three or more participants.

     o    Data  Collaboration  Servers  -  Enable  conference   participants  to
          collaborate  and share  applications.  Allow  users to view  diagrams,
          graphic  presentations  and slide lectures  simultaneously  with other
          videoconferencing  participants.  The DCS  also  makes  possible  text
          chats,   whiteboard   exchanges,   and  rapid  file  transfers  during
          multipoint videoconferences of three or more participants.

        See Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations for financial information relating to our NBU.

NBU Product Benefits

        While our products thoroughly support ISDN, we believe that the
principal competitive advantage of our family of solutions is our IP expertise.
Our products are the leading visual communication infrastructure solutions in
the industry today by virtue of our unmatched technological innovation in five
key areas:

        Native IP Routing. All competing solutions come from the legacy ISDN
world, with an ISDN-based switching fabric (TDM backplane). This means that for
an IP end point to IP end point session, every IP stream has to be translated to
"ISDN" in order to be switched by the system, and then translated back to IP to
be forwarded on. In contrast, we offer an IP backplane, meaning IP sessions are
routed natively, with no translation. RADVISION solutions all perform flawlessly
in supporting ISDN-only or hybrid IP/ISDN networks, providing an ideal platform
as a network migrates from ISDN to IP while preserving the customer's earlier
investment in legacy equipment.

        Distributed Architecture. The capacity of the viaIP400 is unmatched in
the industry. Because of its unique architecture, the viaIP system is not
limited to a single chassis. As a result, a single MCU (multiconferencing unit)
can support up to six gateway boards, achieving a capacity of up to 600 hundred
simultaneous calls on the same chassis and limitless calls on a stacked
multi-chassis system. Additionally, due to the system's IP architecture, the
entire infrastructure does not need to be mounted in a single integrated rack
but can be distributed throughout a network. By distributing intelligence
throughout the network, the enterprise benefits with increased redundancy,
network traffic optimization, resource management, and high scalability.

        Full Protocol Support. In addition to supporting both ISDN and H.323,
our solution also supports SIP and 3G-324M - two emerging protocols for desktop
and mobile communication.

        Specialized Network Architecture Provides Unparalleled Redundancy.
RADVISION has taken advantage of advanced chipsets to put an entire voice and
video processing matrix, with multiple chips, on a single board. Each board
supports a portion of the total calls. The boards are wired in parallel over a
shared backplane. In the event of a board failure, the system would

                                       6

<PAGE>


shift ongoing calls to another board, thereby reducing the overall capacity of
the device but not dropping any calls.

        Advanced Chips Provide Superior Performance and Functionality at a Lower
Cost. As an IP-centric platform with ISDN interworking, the RADVISION solution
is able to take advantage of the advances in integrated IP multifunction chip
technology. The system's on-board CPU is a PPC 400Mhz. We also use Texas
Instrument's revolutionary C6x programmable 100Mhz chipset for call
functionality.

        IP Protocol Expertise. RADVISION is a leader in developing and
delivering advanced voice and video protocols over IP networks, primarily H.323
and SIP. As a result, our solutions support the most recent versions of each of
the signal protocols with the associated features they enable. Also, as most IP
videoconferencing endpoints in the market use RADVISION protocol stacks, our
solutions are completely interoperable with virtually every standards-based end
point on the market today.

        Specific Breakdown of Features and Functionality

     o    Greater  port  density  for IP video and voice  calls - The  RADVISION
          platform  supports 48 IP video calls at 384Kbps and 150 voice calls on
          a single MCU card.

     o    Powerful  Price/Performance  - RADVISION  doubled the port capacity of
          768 Kbps calls in its MCU without any  associated  increase in product
          list  price.  The new list  price  for a 768 Kbps  call now  starts at
          $1,354 per port - a new benchmark in the industry.

     o    Number of conferences - A conference with RADVISION is a logic entity.
          As such,  there can be as many  conferences  as the number of calls to
          the MCU.

     o    Multiple layouts - RADVISION supports a maximum of 23 layouts.

     o    In addition to ISDN (H.320) and IP (H.323, SIP),  RADVISION's platform
          also supports a wide variety of additional  voice and video protocols,
          including MEGACO and 3G-324M (for 3G wireless videoconferencing).

Visual Communication Market Trends

        Evolution in the Way People Communicate. With the need for greater
efficiency and the importance of accurate communication, companies are turning
to new ways of communicating to enable remote parties to interact as if they
were in the same room. Conference calls and e-mail usage have increased
dramatically and Instant Messaging (IM) is being adopted increasingly in the
enterprise and home. This trend to new forms of communication has also sparked
enterprises to explore multimedia applications that provide advanced voice,
video and data experiences to maximize information flow, whether in a group
meeting or person to person.

        Major Vendors Providing Video Telephony and Desktop Multimedia
Communications. 2003 saw the entry of Microsoft into the desktop multimedia
communications space with the

                                       7

<PAGE>


launch of its Live Communications server and Windows Messenger. It also saw
Cisco's acquisition of Latitude and its flagship product MeetingPlace. Both of
these architectures are for personal (desktop) multimedia conferencing and
communications. RADVISION - due to its unique IP-based architecture and support
of standards such as SIP - is in a strong position to provide complementary
solutions and/or capitalize on the strong marketing and solution trends that
these two large companies, as well as others in the industry, including Nortel
with its own desktop solution, are offering to the IT manager and CEO/CIO/CTO.

        The Spread of Video Telephony Beyond the Enterprise and into the Home
and on the Road. End users are beginning to use multimedia applications for
their communication not only in the enterprise through meeting rooms and
desktops, but also at home and on the road. RADVISION is experiencing this trend
and is realizing sales from service providers as they are beginning to use our
technology to deliver video telephony services to residential homes as just
another broadband application like Internet access and video-on-demand.
Additionally, 3G wireless providers are increasingly looking to deliver
real-time multimedia content to their mobile subscribers. RADVISION is well
suited to play a role in this market with its 3G-324M architecture and
multimedia services support.

        The Evolution from ISDN to IP. Traditional (legacy) videoconferencing
systems are ISDN-based. This means expensive technology, a separate high-speed
line into the office for video only, and a separation between video running over
ISDN and data running over IP. However, IP-based videoconferencing recently has
been gaining greater acceptance. As companies put voice over their IP networks
(VoIP), they are also beginning to put video over their IP networks. RADVISION
is the pioneer in videoconferencing over IP. Because its technology is sited in
the core of the IP network, RADVISION's solutions enable network managers to
leverage their installed high speed data networks, merge video with voice and
data applications (running over the same IP connection) and centrally manage a
host of video end points, from meeting room to desktop to PC based systems, and
eventually to wireless video phones.

Technology Business Unit

        RADVISION's TBU provides standards-based toolkits and testing systems
for the development of real-time voice, video and data communication solutions
over packet networks and 3G networks.

TBU Products

        As a driving force behind evolving technologies of real-time IP
communication, RADVISION is in the advantageous position of offering one of the
most complete sets of Ensemble Development toolkits. RADVISION sells the core
enabling technology for real-time IP and 3G-based communication in the form of
software development kits. Communication equipment providers and developers
seeking to create and market industry standard compliant IP telephony and
multimedia products, systems and applications need core IP communication
protocol software to develop their IP-centric solutions. The same holds true for
developers of 3G-based multimedia solutions. Rather than dedicate in-house
resources to developing this core technology, these providers seek to build upon
RADVISION's proven enabling technologies.

                                       8

<PAGE>


RADVISION toolkits enable customers to focus on their core competencies and
dramatically reduce the time to market of industry standard compliant IP
communication products, systems and applications.

RADVISION SIP Development Toolkit

        SIP is a relatively new signaling protocol for initiating, managing and
terminating voice and video sessions across packet networks. SIP was designed,
from conception, for building high performance user agents. The "SIP toolkit"
enables the development of products that require full user/agent functionality.
The SIP Toolkit is designed to provide high scalability and extensibility for
both small and large-scale projects. It enables the implementation of all types
of feature rich SIP entities such as application servers, softswitches, IP-PBXs,
gateways and conferencing bridges. RADVISION has developed a SIP Server toolkit
to target the specific needs of customers developing infra-structure devices
based on the SIP protocol.

RADVISION H.323 Development Toolkit

        H.323 is currently the most widely deployed standard for real-time IP
communication. All components of an H.323-compliant network, including
terminals, gateways, gatekeepers and conferencing bridges, use the H.323
protocol to communicate. RADVISION's H.323 software development kits provide
developers with the core software building blocks needed to develop
H.323-compliant products, systems and applications. The RADVISION H.323 software
development kit is an integrated set of software programs that execute the H.323
protocol and perform the functions necessary to establish and maintain real-time
voice, video and data communication over packet-based networks. The 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 Development Toolkit

        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 telecommunication carriers and service providers that require
gateways that can support a high 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 telecommunication companies and
Internet service providers as well as by cable television companies building IP
communication solutions over their networks. The RADVISION MGCP software
development kit is used to build MGCP compliant media gateways controllers and
media gateways.

RADVISION MEGACO Development Toolkit

       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 a 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,

                                       9

<PAGE>


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 eliminating the need for developers
to write code for interpreting MEGACO/H.248 messages.

3G-324M Developer Toolkit

        There is a newly approved standard, called 3G-324M, which supports the
real-time streaming of multimedia broadband wireless communication over 3G by
routing traffic over the circuit switched network. Because it is
circuit-switched based, the standard is well suited for streaming real-time
multimedia. 3G-324M enables the development, deployment and support of a wide
variety of delay-sensitive applications immediately. These include multimedia
conferencing with other 3G mobile end points and wire lined H.323 or SIP
terminals, video streaming, cell phone TV, video-on-demand (news, sports, etc.),
and multimedia, multi-participant gaming, to name a few. RADVISION was one of
the first companies to introduce a toolkit for the development of 3G-324M-based
products.

IP Phone Toolkit

        RADVISION recently introduced a product for the manufacture of IP
Phones. The toolkit bundles TBU toolkits along with call control and endpoint
management software to provide an IP Phone application for any IP protocol (such
as H.323 and SIP). RADVISION is working with key silicon manufacturers in the
industry, including Texas Instruments, to provide pre-integrated packages
including the IP Phone Toolkit running on the OEM's chipset platform.

RADVISION ProLab Test Manager

       RADVISION's ProLab is designed for debugging and simulating numerous
testing scenarios. Based on RADVISION's award-winning SIP and H.323 Protocol
Toolkit, this testing tool simulates a full VoIP network with a professional
quality assurance laboratory, enabling developers or QA specialists to test SIP
and H.323 version compliance, version upgrade compliance, stress and load. The
ProLab(TM) Test Manager is a highly scalable tool designed to be aware of any
changes to the SIP and H.323 standards. It provides the:

     o    capability  to run the same  tests on the  application  each  time the
          underlying protocol version is upgraded;

     o    flexibility  to mix and match  scenarios  to develop a broad  range of
          testing possibilities; and

     o    ability to define  numerous  scripts and scale up the test scenario by
          linking them as the test plan progresses.

        See Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations for financial information relating to our TBU
business.

                                       10

<PAGE>




Professional Services

        Responding to requests from customers for assistance in developing
specialized telecommunications products based on the RADVISION developer toolkit
and reference design solution RADVISION initiated its Professional Services
Division. This division offers a full range of consulting, engineering and
software development services to support our customers in bringing innovative
voice and video products to market on time using the RADVISION ENSEMBLE suite of
developer toolkits and RADVISION's protocol and development expertise. Our
Professional Services team handles the complete project life-cycle from design,
throughout the product development, and even on-site deployment.

TBU Product Benefits

        Market Leading Technology for Standards - Based Real-time IP
Communication. We were one of the original five members of the ITU-T committee
responsible for defining the H.323 standard, which has been adopted worldwide
for real-time packet-based communication. We believe our technology is
recognized as the market-leading implementation of the H.323 industry standard
for real-time voice, video and data communication over packet networks. We also
believe that our technology is recognized as one of the market-leading
implementations of the Session Initiation Protocol, or SIP, and other protocols
such as MGCP and MEGACO/ H.248. We have been actively involved in the
development of protocols for real-time communication 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 communication over IP
networks. We continue to be actively involved in the specification of evolving
IP communication protocols and offer a complete suite of IP communication
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 communication systems. Because we
believe 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 communication 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 communication systems. Our
products and technology have been integrated into IP communication systems
developed by hundreds of communication equipment providers. Because our products
and technology are broadly deployed across various segments of the IP
communication 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 communication

                                       11

<PAGE>


protocols to ensure continued interoperability of our products and technology
across multiple protocols.

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

        Improved Time to Market. Our customers rely on our accumulated expertise
with communication standards and core technology to significantly reduce their
development cycle and improve time to market. Communication equipment providers
seeking to market standards-compliant systems for real-time voice and video
communication over packet and 3G 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 communication using our full suite of products or integrate
RADVISION products with their own products or other vendor products into their
real-time IP communication 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 communication solutions.

Industry Trends That Benefit RADVISION's Developer Toolkits:

Growth in Communication

        In the 1990's communication networks experienced dramatic growth in
traffic. After a decline in growth in the last three years due to what we
perceive as an industry trend, we believe this growth will resume within a few
years 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;

                                       12

<PAGE>




     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  communication  services
          and applications.

Limitations of Traditional Networks

        Traditionally, circuit-switched networks have been the principal medium
for the transmission of communication. 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 usage. The growth in data communication
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
communication. 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
communication 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  Products  that  Deliver  Industry  Standards  for  Real-time  IP
Communication

        Originally, enterprises and communication service providers deployed
packet networks primarily for handling data traffic and not for real-time IP
communication. Technical barriers initially hampered the use of packet networks
for real-time communication. 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 communication,
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 communication solved these technical problems by
using proprietary solutions developed by individual vendors. However,
proprietary

                                       13

<PAGE>


solutions from different vendors meant that different vendor products could not
interoperate with one another.

        To enable the global deployment of real-time IP communication networks,
industry standards and protocols were developed to promote interoperability of
real-time communication over packet networks. H.323 is currently the most widely
deployed protocol for real-time IP communication. H.323 was developed by a team
of computing, telephony and networking experts under the auspices of the
International Telecommunication Union, or ITU-T, a United Nations organization,
with the goal of specifying a universal real-time standard that would ensure
interoperability of rich-media communication on packet-based networks. 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.

        Additionally, many companies are beginning to develop SIP-based
products. RADVISION is one of the leading vendors in this space, providing
solutions for the development of SIP phones and devices, SIP servers and
registrars, IP-PBX's and a wide variety of other SIP-based communication
devices.

        Our leadership position stems from the pioneering work we began in 1993.
We were the first to develop and demonstrate commercially viable technology for
establishing real-time voice, video, and data on IP networks. Since our
inception, we have been helping to develop the industry standards that are
driving the emergence and growth of the use of packet networks for real-time
communication. RADVISION was an original member of the ITU (International
Telecommunication Union) team that defined the H.323 standard, and we continue
to work closely with the ITU, the IETF, IMTC, and other industry consortia to
define a broad spectrum of IP telephony protocols for voice and video
communication including, Session Initiation Protocol (SIP), Media Gateway
Control Protocol (MGCP) and MEGACO/H.248.

        Our protocol toolkits provide the underpinning technology required for
the rapid development of next generation products and applications for real-time
VoIP. 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 will 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.

Growth in Real-time Voice and Video IP Communication

        Due to the inherent benefits of packet networks and the advent of new
technologies and standards that have enabled real-time communication over these
networks, the use of packet networks for real-time voice, video and data
communication is expected to grow dramatically. This anticipated growth in
real-time IP communication is expected to be driven primarily by enterprises and
communication 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
communication capabilities to support their

                                       14

<PAGE>


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 communication
          traffic demands;

     o    support for new communication  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 communication,  rather
          than having to maintain separate telephone and computer networks.

        Communication 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 communication service providers, increased competition
among traditional telecommunication carriers, lower prices, innovative new
product and service offerings and accelerated customer turnover. To remain
competitive, communication 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.

Broadband Wireless

        There has been a tremendous rush to acquire and roll out 3G broadband
wireless services in key markets. While these efforts have slowed significantly
in North America, Asia has already rolled out its first WCDMA network and Europe
is close behind.

        Both 3G standards bodies, 3GPP and 3GPP2, envision 3G as running
entirely over an IP-based communication network (the Internet). However, the
prevailing business environment has pushed this vision out by quite a few years.
The current telecom downturn may further extend the length of time until 3G is
entirely IP-based.

        The main problem is that today's IP network (the Internet) is not
sufficiently robust for delay sensitive applications and, in fact, will not be
so until service providers move to IPv6 and SIP-based IP communication. IP, with
its variant transmission delays (many hops routing and congestion effects) and
packet overheads, is ill equipped at this time to provide high quality, real
time multimedia delivery over 3G (WCDMA and CDMA2000) networks.

        While the vision of a true IP-based 3G network has been delayed, the
promise of a feature-rich, multimedia wireless experience has not. This is due
to the emergence of a standard, called 3G-324M, which addresses and supports the
real-time streaming of multimedia broadband wireless communication by routing
traffic over the circuit switched network. Being circuit-switched based, the
standard has all the hallmarks of a protocol ideal for streaming real-time

                                       15

<PAGE>


multimedia, including a fixed delay, low overhead of CODECS, and no IP/UDP/RTP
header overheads.

        3G-324M, based on ITU H.324M and specified in detail by 3GPP (3GPP TS
26.112 and 3GPP TS 26.111 Working Groups), enables the development, deployment
and support of a wide variety of delay-sensitive applications immediately.
Enabled applications include multimedia conferencing with other 3G mobile end
points, and wire lined H.323 or SIP terminals, video streaming, cell phone TV,
video-on-demand (news, sports, etc.) and multimedia, multi-participant gaming.

        RADVISION has taken a pioneering role in providing 3G-324 developer
toolkits that enable equipment developers to develop products, ranging from 3G
handsets to gateways and media servers, that will deliver real time multimedia
services over 3G.

Products and Technology Under Development

        We intend to capitalize upon our technological leadership in real-time
IP communication and visual communication network appliance and functionality to
develop new products and technology that meet the evolving needs of the IP, 3G,
and visual communication 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 NBU 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 communication
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 communication 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.

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

        The following is a representative list of our customers who purchased
more than $250,000 of our products or technology during the year 2003:

                                       16

<PAGE>




        Networking Products

                      ADL                                 NTT - ME Corp.
                      Aethera Ltd.                        Macnica
                      Alcatel Ltd.                        Orient
                      Broadreach                          ReView Video
                      Cisco Systems                       Shanghai Foreign
                      Computer Assets                     Shanghai New Long
                      Comverse Ltd.                       Shanghai Zijiang
                      Control Tech                        T2 Supply
                      Ericsson                            Target Sales
                      GBH                                 Telesat
                      H.S. Digital                        Teletron
                      HP                                  Tandberg
                      IT Telecom                          VTEL Inc.
                      Kasturi                             VCON Ltd.
                      MVC Mobile Video                    Wire One

        Technology Products

                      Cisco Systems                       NTT - ME Corp
                      E-soft                              Pannaway Tech
                      Iwatsu Nortel                       Siemens Ltd.
                      Nortel
Sales and Marketing

        Sales organization. We market and sell our products through multiple
channels in North and South America, Europe, the Middle East and the Far East.
Our networking products are sold to end-users principally through indirect
channels by OEMs, system integrators and value added resellers. We market and
sell our technology products, primarily in the form of software development
kits, directly to developers of IP and 3G communication products and
applications. In several countries in the Far East 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,
and marketing or representative/liaison offices in Hong Kong, China, the United
Kingdom, Brazil, Japan and India. The geographic breakdown of our total sales
for the year ended December 31, 2003 was 47.6% in North America, 27.7% in Europe
and the Middle East and 24.7% in the Far East.

        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 sustain 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

                                       17

<PAGE>


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 communication 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
communication experts through quality content including providing information
related to issues relevant to the communication 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, 3G and visual communication, we actively
participate in key industry consortia and standards bodies. We are also active
in defining and reviewing evolving IP communication 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;

     o    IMTC,  a  global  organization  to  promote  interoperable  multimedia
          communication solutions based on international standards; and

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

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, Glen Rock, New Jersey, Sunnyvale, California, Hong Kong and China
and recently went to a 24x7x365 support timeline to better serve our networking
customers who desire the expanded service. We assist our networking customers
with the initial installation, set-up and training. In addition, our technical
support team trains and certifies our networking customers to provide local
support in each of the geographical areas in which our products are sold. In
2003, we developed and rolled out a customer support model where service
contracts are mandatory for each new customer.

        In addition, customers who purchase our TBU software development kits
generally request that we provide them with ongoing engineering and technical
support services to

                                       18

<PAGE>


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.

        Additionally, in 2003, we launched our Professional Services Division,
which provides development expertise to our TBU customers that might require not
only our developer solutions/toolkits but also our deep protocol experience and
development skill. In this case we work hand-in-hand with the customer
throughout the entire process, providing a full range of consulting, engineering
and software development services to support our customers in bringing
innovative voice and video products to market on time using the RADVISION
Ensemble suite of developer toolkits and RADVISION's protocol and development
expertise. The Professional Services team handles the complete project
life-cycle from design, throughout the product development, and even on-site
deployment

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 certain 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.

Research and Development

        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 gross investment in research and development for the
years ended

                                       19

<PAGE>


December 31, 2001, 2002 and 2003 was $17.9 million, $15.3 million and $14.6
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, 2003, our research and development staff consisted of
approximately 114 employees. Our research and development activities are
conducted at our facilities in Tel Aviv, Israel. 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.

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:

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


                                                 o    DynamicSoft Inc.
     o    Polycom Networks, a division
          of Polycom Inc., which was             o    Trillium Digital Systems,
          formerly known as Accord Networks           acquired by Continuous
                                                      Computing.
     o    Tandberg
                                                 o    Hughes Software Systems
     o    CUseeMe Networks Inc. (formerly
          known as White Pine Software Inc.,     o    DCL
          which merged with First Virtual
          Communication)                         o    Dylithium

    In the 3G market:                            o    In-house developers
     o    Erickson                                    employed by manufacturers
     o    Dylithium                                   of  telecommunication
                                                      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

                                       20

<PAGE>


purchasing our technology, our revenues from the sale of our software
development kits will decline.

Manufacturing

        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 our products in
a subcontractor's facilities in Israel 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
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.

Employees

        As of December 31, 2003, we had 258 employees worldwide, of whom 114
were employed in research and development, 94 in sales and marketing, 30 in
management and administration and 20 in operations. We have standard employment
agreements with all of our employees located in Israel. Of our employees, 180
are based in Israel, 52 are based in the United States, 19 are based in Hong
Kong and China and 7 are based in the United Kingdom.

        Our relationships with our employees in Israel are governed by Israeli
labor legislation and regulations, extension orders of the Israeli Ministry of
Labor and Welfare and personal employment agreements. Israeli labor laws and
regulations are applicable to all of our employees in Israel. The laws concern
various matters, including severance pay rights at termination, notice period
for termination, retirement or death, length of workday and workweek, 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 that include health insurance fees are
approximately 14.5% of wages, of which the employee contributes approximately
66.0% and the

                                       21

<PAGE>


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.

        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.

                                       22



<PAGE>


                                  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

Until 2001, we had a history of losses and we cannot assure you that we will
continue to operate profitably in the future.

        Although we operated profitably in 2003 we cannot assure you that we
will continue to operate profitably in the future. We incurred significant
losses in every fiscal year from our inception until 1999, and we incurred
operating losses in 2000 and 2001. As of December 31, 2003, our accumulated
deficit was $6.5 million.

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.

                                       23

<PAGE>




If the use of packet-based networks as a medium for real-time voice, video and
data communication 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 communication. 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 communication 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:

     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 that
comply with those industry standards that we believe have been, or will be,
broadly adopted. If one or more alternative standards were to gain greater
acceptance than the standards that 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 communication 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, MEGACO and H.324M. 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.

                                       24

<PAGE>




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 communication solutions. Our systems integrator customers either
purchase our full suite of products or integrate our individual products of
other manufacturers to build complete IP communication 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 market for our NBU products currently include
Polycom Inc., which acquired Accord Networks Inc., First Virtual Communication,
which merged with CUseeMe Networks Inc. (formerly known as White Pine Software
Inc.). The principal competitors in the market for our TBU products currently
include Hughes Software Systems, DynamicSoft, Dylithium, and in-house developers
employed by manufacturers of telecommunication equipment and 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.

Major solutions providers who currently work with us might compete with us in
the future.

        We currently provide our technology to major solutions providers
including Cisco, Siemens, Microsoft and Tanldberg. If these providers choose to
develop their own technologies, acquire technologies from our competitors, or
acquire such competitors, our financial condition and operating results could be
adversely impacted and we may face increased levels of competition from these
major companies.

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

        Both Vovida Networks, Inc. (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.

                                       25

<PAGE>




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 generally 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 generally 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 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,

                                       26

<PAGE>


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 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 or
coverage 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.

                                       27

<PAGE>




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 or the intellectual property rights licensed from third parties. 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. We rely on third parties to protect their intellectual
property which is licensed to us, but we do not generally investigate to what
extent such intellectual property is protected. 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 3. 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.

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 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

                                       28

<PAGE>


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 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 Communication Commission and other regulations affecting the
transmission of voice, video and data over telecommunication 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 Israel, and most of our offices
and our production facilities are located in the State of Israel. As a result,
the political, economic and military conditions in Israel directly influence us.
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
in the region. 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

                                       29

<PAGE>


additional peace agreements with such countries or with Syria or Lebanon. Peace
talks between Israel and the Palestinian Authority began in the early 1990s, but
broke down in mid-2000. Attacks on Israel by Palestinian terrorists, and
military responses by Israel, have accelerated considerably since late 2000. The
continued hostilities between the Palestinian community and Israel and the
failure to settle the conflict has had and continues to have a material adverse
effect on the Israeli economy and may have a material adverse effect on our
business and us. Further expansion of hostilities might require more widespread
military reserve service by some of our employees, which may have a material
adverse effect on our business. We cannot predict whether or when the peace
process will resume, whether a full resolution of these problems will be
achieved, the nature of any such resolution or the consequences that any of
these factors may have on us.

The economic conditions in Israel have not been stable in recent years.

        As a result of political instability, the increased level of hostilities
with the Palestinian Authority and the world-wide economic crisis in the
high-tech and communication industries, the Israeli rate of economic growth
deteriorated in 2001 and 2002, the Israeli currency was devalued and the rate of
inflation increased. The Israeli Government has proposed certain budgetary cuts
and other changes. Although with the assistance of the U.S. Government economic
stability was reached in 2003 and the rate of inflation was negative for the
first time in 2003 since the establishment of the State, we cannot assure you
that the Israeli Government will be successful in its attempts to stabilize the
Israeli economy or to maintain Israel's current credit rating. Should Israel's
credit rating decline, the ability of the Israeli government to generate foreign
financial and economic assistance may be adversely affected. Economic decline as
well as price and exchange rate instability may have a material adverse effect
on us.

Some of our directors, officers and employees are obligated to perform annual
military reserve duty in Israel. We cannot assess the potential impact of these
obligations on our business.

        Our directors, officers and employees who are male adult citizens and
permanent residents of Israel under the age of 48 are, unless exempt, are
obligated to perform annual military reserve duty and are subject to being
called to active duty at any time under emergency circumstances. 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 our business in
the event of an expansion or reduction of these obligations.

Because most 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.

        Most 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

                                       30

<PAGE>


operations. In 1999 and 2000 while the rate of inflation was low, there was a
devaluation of the dollar against the NIS. In the years 2001 and 2002 the rate
of devaluation of the NIS against the dollar exceeded the rate of inflation. In
2003 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 Israeli 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 rate 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 during the period in which we would have benefited from the tax
exemption or reduced tax rates and would likely be denied these benefits in the
future.

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. Many 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.

Risks Relating to Our Ordinary Shares

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

        There is a risk that we will be classified as a passive foreign
investment company, or 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

                                       31

<PAGE>


excess of gains over losses from the disposition of assets that 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, if the value of our stock
declines, there is a substantial risk that we will be classified as a PFIC under
the asset test described in the preceding paragraph. Based on an independent
third party opinion, we believe that we were not deemed to be classified as a
PFIC in 2002, and as a result of the increase in the value of our stock, we
believe that we were not deemed to be classified as a PFIC in 2003. We have,
however, no assurance that the U.S. Internal Revenue Services will accept this
determination and there can be no assurance that we will not be classified as a
PFIC in the future.

        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.

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

                                       32

<PAGE>


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 been brought against
a company following periods of volatility in the market price of its securities.
We could potentially 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 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.

Item 2. Properties

        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
$1,164,000 in 2003. The lease for our principal offices expires in June 2005. In
the United States, we lease approximately 10,380 square feet of office space in
Glen Rock, New Jersey expiring in July 2004 and approximately 3,156 square feet
in Sunnyvale, California expiring in April 2004. We are in the final process of
signing a lease expiring in September 2007 for a 11,605 square foot building in
Fairlawn, New Jersey at a total annual rental of $191,499. We also lease
approximately 2,651 square feet in Hong Kong expiring in May 2004 and
approximately 800 square feet in the United Kingdom expiring in October 2005.
The aggregate annual rent for our sales and service offices in the United
States, Hong Kong, China and the United Kingdom was approximately $450,000 in
2003.

Item 3. Legal Proceedings

        In January 2001, we entered into an agreement with Zohar Zisapel
Properties Inc. and Yehuda Zisapel Properties Inc. (entities that are wholly
owned by Zohar Zisapel, our Chairman of the Board and a principal shareholder,
and Yehuda Zisapel, a principal shareholder and our former Chairman,
respectively) to lease approximately 24,000 feet square of office space in

                                       33

<PAGE>


Paramus, New Jersey for a period of 5 years, which space we subsequently
surrendered. The parties disagreed as to the extent of damages caused by this
action, if any. In December 2003, the parties proceeded to binding arbitration
before Judge Robert E. Tarleton (retired) in Hackensack, New Jersey. The claim
filed against us was in the range of $1,500,000 and appropriate provision was
taken for such amount. Judge Tarleton issued his final ruling on February 12,
2004 stating the amount owed to Zisapel Properties is $400,000. This ruling will
not have a negative impact on our financial condition or results of operations.

        Other than the above, we are not involved in any legal proceedings that
are material to our business or financial condition. From time to time we
receive requests from third parties to determine if we need to take out a
license to certain technology for which such third party may hold a patent or
other intellectual property right. We check such requests in the ordinary course
of business.

        In 1998, Lucent sent correspondence to our affiliate, RAD Data
Communication 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.

        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.

Item 4. Submission of Matters to a Vote of Security Holders

        No matters were submitted to a vote of securities holders during the
fourth quarter of the fiscal year ended December 31, 2003.

                                       34


<PAGE>



                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

        Our ordinary shares have traded on the Nasdaq National Market under the
symbol RVSN since our initial public offering on March 14, 2000. Since October
20, 2002, our ordinary shares have also traded on the Tel Aviv Stock Exchange.

         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
and the Tel Aviv Stock Exchange:

                        Nasdaq National Market           Tel Aviv Stock Exchange
                        ----------------------           -----------------------
                         High            Low              High              Low
                         ----            ---              ----              ---
2002
----
First Quarter.......     $7.90           $5.39           $  --             $ --
Second Quarter......      6.80            4.40              --               --
Third Quarter.......      5.45            4.05              --               --
Fourth Quarter......      6.71            4.48             5.95             4.70

2003
----
First Quarter.......     $7.70           $5.50            $7.16            $5.66
Second Quarter......      7.20            5.05             7.17             5.30
Third Quarter.......      9.00            6.50             8.99             6.81
Fourth Quarter......     13.26            7.81            12.97             7.99


        As of March 8, 2004 we had approximately 2,523 beneficial shareholders
including 50 holders of record.

        We have never paid dividends on our ordinary shares since our inception
and we do not anticipate paying any dividends in the foreseeable future. If we
were able to distribute cash dividends out of income that had been exempt from
tax because of our investment program's Approved Enterprise status (for
description of such status please refer to the section entitled "Effective
Corporate Tax Rate" in "Item 7. Management's Division and Analysis of Financial
Conditions and Results of Operations") such income would become subject to
Israeli corporate tax.

        If we were to declare dividends in the future, we would declare those
dividends in NIS but pay those dividends to our non-Israeli shareholders in U.S.
dollars. Because exchange rates between NIS and the dollar fluctuate
continuously, a U.S. shareholder would be subject to currency fluctuation
between the date when the dividends were declared and the date the dividends
were paid.

                                       35



<PAGE>




Exchange Controls

        Israeli law and regulations do not impose any material foreign exchange
restrictions on non-Israeli holders of our ordinary shares. In May 1998, a new
"general permit" was issued under the Israeli Currency Control Law, 1978, which
removed most of the restrictions that previously existed under such law, and
enabled Israeli citizens to freely invest outside of Israel and freely convert
Israeli currency into non-Israeli currencies.

        Non-residents of Israel who purchase our ordinary shares will be able to
convert dividends, if any, thereon, and any amounts payable upon our
dissolution, liquidation or winding up, as well as the proceeds of any sale in
Israel of our ordinary shares to an Israeli resident, into freely repatriable
dollars, at the exchange rate prevailing at the time of conversion, provided
that the Israeli income tax has been withheld (or paid) with respect to such
amounts or an exemption has been obtained.

Dual Listing

        In addition to trading on Nasdaq, on October 20, 2002, our ordinary
shares began trading on the Tel Aviv Stock Exchange. According to a publication
of the Israeli Tax Authorities, sales of securities of an industrial company,
such as us, by individuals and companies to whom Chapter B of the Inflationary
Law does not apply will continue to enjoy benefits of a lower Israeli capital
gains tax after a dual listing.

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


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


                                       36

<PAGE>






Securities Authorized for Grant under Equity Compensation Plans

        The following table sets forth, for the compensation plans indicated,
the number of securities to be issued upon exercise of outstanding options,
warrants and rights, the weighted average exercise price of outstanding options,
warrants and rights and the number of securities remaining available for future
issuance under our equity compensation plans as of December 31, 2003:

<TABLE>
<CAPTION>
                                                                                Number of
                                   Number of                                    securities
                                Securities to be      Weighted average     remaining available
                                  issued upon         exercise price of    for future issuance
                                  exercise of       outstanding options,       under equity
    Compensation Plans*       outstanding options    warrants and rights   compensation plans**
-------------------------     -------------------   --------------------   --------------------
<S>                                <C>                     <C>                    <C>
1996 Stock Option Plan...            864,096               $13.79                      0

2000 Stock Option Plan...          3,890,760                $6.69                 50,098
                                   ---------                -----                 ------
Total....................          4,754,856                $7.98                 50,098
</TABLE>

*       All our compensation plans were approved by our shareholders.
**      Excluding securities reflected in the first column.

Changes in Securities and Use of Proceeds.

        The following information required by Item 701(f) of Regulation S-K
relates to our initial public offering of ordinary shares of our company on
March 14, 2000. 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.

                                                                 For the account
                                               For the account    of the selling
                                               of our company       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, 2003. 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.

                                       37

<PAGE>




                                                  Direct or indirect payments to
                                                  persons other than affiliated
                                                             persons
                                                 -------------------------------
                                                         $6,118,000
     Underwriting discounts and commissions
     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
 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 ............................             $58,448,000
 Temporary investments ......................                 N/A
 Other purposes .............................                 N/A



Issuer Purchase of Equity Securities

        The following table sets forth, for each of the months indicated, the
total number of shares purchased by us or our behalf or any affiliated
purchaser, the average price paid per share, the number of shares purchased as
part of a publicly announced repurchase plan or program, the maximum number of
shares or approximate dollar value that may yet be purchased under the plans or
programs.

                                       38



<PAGE>

<TABLE>
<CAPTION>
                                                             Total number of    Maximum number
                                                            shares purchased    of shares that
                                                               as part of         may yet be
                                                                publicly        purchased under
                       Total number of     Average price     announced plans     the plans or
   Period in 2003     shares purchased    paid per share       or programs         programs
   --------------     ----------------    --------------       -----------         --------
<S>                        <C>                 <C>                <C>              <C>
January..........               -                  -                   -           2,000,000
February.........               -                  -                   -           2,000,000
March............               -                  -                   -           2,000,000
April............          14,000              $5.55              14,000           1,986,000
May..............               -                  -                   -           1,986,000
June.............               -                  -                   -           1,986,000
July.............               -                  -                   -           1,986,000
August...........               -                  -                   -           1,986,000
September........               -                  -                   -           1,986,000
October..........               -                  -                   -           1,986,000
November.........               -                  -                   -           1,986,000
December.........               -                  -                   -           1,986,000
</TABLE>


Item 6. Selected Financial Data

           The following selected consolidated financial data for and as of the
five years ended December 31, 2003, are derived from our audited consolidated
financial statements which have been prepared in accordance with U.S. GAAP. Our
consolidated financial statements for the three years ended December 31, 2001
were audited by Luboshitz Kasierer, a member firm of Arthur Andersen, and our
consolidated financial statements for the years ended December 31, 2002 and 2003
were audited by Kost Forer Gabbay & Kasierer (formerly Kost, Forer & Gabbay), a
member of Ernst & Young Global, independent auditors whose report with respect
to the years ended December 31, 2002 and 2003 appears in this Annual Report. A
copy of the report issued by Luboshitz Kasierer for the year ended December 31,
2001 also appears in this Annual Report.

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                   ----------------------------------------------------------
                                       1999       2000         2001         2002       2003
                                       ----       ----         ----         ----       ----
                                             (in thousands, except per share data)
<S>                                <C>          <C>         <C>           <C>        <C>
Consolidated Statement of
Operations Data:
Revenues.........................  $ 17,550     $ 45,911   $  46,227      $ 49,095   $ 51,304
Cost of revenues.................     2,853       11,446      10,362        10,946     11,351
                                      -----       ------      ------        ------     ------
Gross profit.....................    14,697       34,465      35,865        38,149     39,953
                                     ------       ------      ------        ------     ------
Operating expenses:
Research and development.........     7,667       14,263      17,933        15,338     14,573
Less participation by the Chief
  Scientist......................     1,097          353           -             -          -
                                      -----          ---         ---           ---        ---
Research and development, net....     6,570       13,910      17,933        15,338     14,573
Marketing and selling, net.......     9,502       17,358      16,735        18,624     19,969
General and administrative.......     1,426        3,458       4,438         4,098      4,040
Restructuring costs..............         -            -       3,023             -          -

</TABLE>


                                       39

<PAGE>

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                   ----------------------------------------------------------
                                       1999       2000         2001         2002       2003
                                       ----       ----         ----         ----       ----
                                             (in thousands, except per share data)
<S>                                <C>          <C>         <C>           <C>        <C>
Royalties to Chief Scientist.....         -        3,666           -             -          -
                                        ---        -----         ---           ---        ---
Total operating expenses.........    17,498       38,392      42,129        38,060     38,582
                                     ------       ------      ------        ------     ------
Operating income (loss)..........    (2,801)      (3,927)     (6,264)           89      1,371
Financial income, net............       105        4,176       4,652         2,667      2,130
                                        ---        -----       -----         -----      -----
Net income (loss)................  $ (2,696)    $    249   $  (1,612)     $  2,756   $  3,501
                                   ========     ========   =========      ========   ========
Basic net earnings (loss) per
ordinary share...................  $  (0.26)    $  0.014   $   (0.09)     $   0.15   $   0.19
Weighted average number of
ordinary shares..................    10,538       17,174      18,943        18,353     18,660
Diluted net earnings (loss) per
ordinary share...................  $  (0.26)    $  0.013   $   (0.09)     $   0.15   $   0.18
Weighted average number of
   ordinary  shares..............    10,538       19,873      18,943         18,983    19,963

</TABLE>


<TABLE>
<CAPTION>

                                                       As At December 31,
                                    ----------------------------------------------------------
                                       1999        2000         2001        2002       2003
                                       ----        ----         ----        ----       ----
                                                         (in thousands)
<S>                                <C>          <C>        <C>            <C>        <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents........  $  2,605     $ 41,617   $   6,717      $  13,825  $ 16,433
Working capital..................       814       73,660      53,377
                                                                             38,158    43,350

Total assets.....................    13,261      116,351      99,767        106,671   117,012
Total bank debt, less current
maturities.......................        67           19           -              -         -
Shareholders' equity.............     3,481       94,345      83,549         85,015    93,241
</TABLE>


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

Operating Results

        The following discussion of our 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 U.S. dollars.
Consequently, we use the dollar as our functional currency. Transactions and
balances in other currencies are re-measured into dollars according to the
principles in Financial Accounting Standards Board Statement No. 52. Gains and
losses arising from re-measurement are reflected in the statements of operations
as financial income or expenses as appropriate.



                                       40

<PAGE>

Overview

        We are a leading designer, developer and supplier of products and
technology that enable real-time voice, video and data communication 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.
We currently have sales offices in the United States and Israel and marketing,
representative and liaison offices in Brazil, China, Hong Kong, India, Japan and
the United Kingdom.

Critical Accounting Estimates

        We have identified the following policies as critical to the
understanding of our financial statements. The preparation of our financial
statements 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 sales and expenses during the reporting periods. Areas where significant
judgments are made include, but are not limited to, inventory valuation,
warranty and revenue recognition. Actual results could differ materially from
these estimates. Our consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States.

        Inventories. Inventories are stated at the lower of cost or market. Cost
is determined by the moving average method, inventory write-offs and write-down
provisions are provided to cover risks arising from slow-moving items or
technological obsolescence.

        Revenue Recognition. We recognize revenues in respect of products when,
among other things, we have delivered the goods being purchased and we believe
collectibility to be reasonably assured. We do not grant a right of return to
our customers. We perform ongoing credit evaluations of our customers' financial
condition and we require collateral as deemed necessary. We maintain allowances
for doubtful accounts for estimated losses resulting from the inability of our
customers to make payments. In judging the adequacy of the allowance for
doubtful accounts, we consider multiple factors including the aging of our
receivables, historical bad debt experience and the general economic
environment. Management applies considerable judgment in assessing the
realization of receivables, including assessing the probability of collection
and the current creditworthiness of each customer. If the financial condition of
our customers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required.

        Warranty Reserves. Upon shipment of products to our customers, we
provide for the estimated cost to repair or replace products that may be
returned under warranty. Our warranty period is typically 12 months from the
date of shipment to the end user customer. For existing products, the reserve is
estimated based on actual historical experience. For new products, the
warranty reserve is based on historical experience of similar products until
such time as sufficient historical data has been collected on the new product.
Factors that may impact our warranty costs in the future include our reliance on
our contract manufacturer to provide quality

                                       41

<PAGE>


products and the fact that our products are complex and may contain undetected
defects, errors or failures in either the hardware or the software. Warranty
reserves amounted to $550,000 and $350,000 at December 31, 2003 and 2002,
respectively.

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 Middle East and Far East. For the year ended December
31, 2003, approximately 46.2% of our revenues were generated in the United
States.

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.

        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, we have not capitalized
any of our research and development expenses and do not anticipate that our
development process will differ materially in the future.

                                       42

<PAGE>




        Historically our research and development expenses were presented net of
payments received from the Office of the Chief Scientist of Israeli Ministry of
Industry and Trade, or the Chief Scientist. In 2000 we voluntarily repaid
$3,666,000 in future 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
Government of Israel 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.

        Financial income, net. Our financial income consists primarily of
interest earned on bank deposits and other liquid investments, gains and losses
from the re-measurement of monetary 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 tax benefits. 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.



                                       43

<PAGE>

Results of Operations

        The following discussion of our results of operations for the years
ended December 31, 2001, 2002 and 2003, 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:

                                              Year Ended December 31,
                                              -----------------------
                                              2001      2002     2003
                                              ----      ----     ----

Revenues..................................   100.0%    100.0%   100.0%
Cost of revenues..........................    22.4      22.3     22.1
Gross profit..............................    77.6      77.7     77.9
Operating expenses:
  Research and development................    38.8      31.2     28.4
  Marketing and selling, net..............    36.2      37.9     38.9
  General and administrative..............     9.6       8.4      7.9
  One time charge/repayment of future          6.5        -        -
    royalties.............................
 Total operating expenses.................    91.1      77.5     75.2
Operating profit (loss)...................   (13.5)      0.2      2.7
Financial income, net.....................    10.1       5.4      4.1
                                              ----       ---      ---
Net income (loss).........................    (3.4)%     5.6%     6.8%
                                             =======    =====    =====

Year Ended December 31, 2003 as Compared with Year Ended December 31, 2002

        Revenues. Revenues increased 4.5% from $49.1 million for the year ended
December 31, 2002 to $51.3 million for the year ended December 31, 2003. This
increase was due to increased sales of networking products. Revenues from
networking products increased 4.7% from $36.3 million for the year ended
December 31, 2002 to $38.1 million for the year ended December 31, 2003. The
increase in revenue from networking products is attributable to an increase in
demand for these units as customers moved from integrated services digital
networks, or ISDN, to IP-based networks. Revenues from technology products
increased 3.8% from $12.8 million for the year ended December 31, 2002 to $13.2
million for the year ended December 31, 2003. This slight increase in revenues
from technology products was primarily attributable to approximately $900,000 in
research and development services by our Professional Services Division, which
we began to offer in the first quarter of 2003.

        Revenue from sales to customers in the United States decreased from
$24.1 million, or 49.0% of revenue, for the year ended December 31, 2002, to
$23.7 million, or 46.2% of revenue, for the year ended December 31, 2003, a
decrease of $400,000, or 1.7%. Revenue from sales to customers in Europe
decreased from $12.0 million, or 24.5% of revenue, for the year ended December
31, 2002, to $11.2 million, or 21.8% of revenue, for the year ended December 31,
2003, a decrease of $800,000, or 6.7%. This decrease in sales to customers in
Europe was primarily attributable to the ongoing softness in enterprise spending
in Europe. Revenue from sales to customers in the Far East increased from $10.2
million, or 20.8% of revenue, for the year ended December 31, 2002, to $12.7
million, or 24.8% of revenue, for the year ended December 31, 2003, an increase
of $2.5 million, or 24.5%. This increase in sales to customers in this region


                                       44

<PAGE>

was primarily attributable to increased sales efforts for our networking
products. Revenue from sales to customers in Israel increased from $2.3 million,
or 4.6% of revenue, for the year ended December 31, 2002, to $3.0 million, or
5.8% of revenue, for the year ended December 31, 2003, an increase of $700,000,
or 30.4%. This increase in sales to customers in Israel was primarily
attributable to increased sales efforts for our networking products.

        Cost of Revenues. Cost of revenues increased from $10.9 million for the
year ended December 31, 2002 to $11.4 million for the year ended December 31,
2003, an increase of $500,000, or 4.6%. Gross profit as a percentage of revenues
increased from 77.7% for the year ended December 31, 2002 to 77.9% for the year
ended December 31, 2003.

        Research and Development. Research and development expenses decreased
from $15.3 million for the year ended December 31, 2002 to $14.6 million for the
year ended December 31, 2003, a decrease of $700,000, or 4.6%. We have decreased
our research and development personnel consistent with the scope of our research
and development programs. Research and development expenses as a percentage of
revenues decreased from 31.2% for the year ended December 31, 2002 to 28.4% for
the year ended December 31, 2003.

        Marketing and Selling. Marketing and selling expenses increased from
$18.6 million for the year ended December 31, 2002 to $20.0 million for the year
ended December 31, 2003, an increase of $1.4 million, or 7.5%. We increased our
marketing and selling expenses in response to current and expected continued
improvement in the market for our networking products. Marketing and selling
expenses as a percentage of revenues increased from 37.9% for the year ended
December 31, 2002 to 38.9% for the year ended December 31, 2003.

        General and Administrative. General and administrative expenses
decreased from $4.1 million for the year ended December 31, 2002 to $4.0 million
for the year ended December 31, 2003, a decrease of $100,000, or 2.4%. This
decrease was primarily attributable to a decrease in personnel expenses. General
and administrative expenses as a percentage of revenues decreased from 8.4% for
the year ended December 31, 2002 to 7.9% for the year ended December 31, 2003.

        Financial Income, Net. Financial income decreased from $2.7 million for
the year ended December 31, 2002 to $2.1 million for the year ended December 31,
2003 principally as a result of lower interest rates.

Year Ended December 31, 2002 as Compared with Year Ended December 31, 2001

        Revenues. Revenues increased from $46.2 million for the year ended
December 31, 2001 to $49.1 million for the year ended December 31, 2002. This
increase was due to increased sales of networking products. Revenues from
networking products increased from $29.7 million for the year ended December 31,
2001 to $36.3 million for the year ended December 31, 2002. The increase in
revenue from networking products is attributable to an increase in demand for
these units as customers moved from integrated services digital networks, or
ISDN, to IP-based networks, as well as from the sale of an integrated
videoconferencing solution to FastWeb, a Milan-based service provider that
provides bundled broadband voice, video and data services to consumers and
businesses throughout Italy. Revenues from technology products decreased from

                                       45

<PAGE>

$16.5 million for the year ended December 31, 2001 to $12.8 million for the year
ended December 31, 2002. This decrease in revenues from technology products was
primarily attributable to decreased market demand as budgets for these products
declined due to the worldwide economic downturn.

        Revenue from sales to customers in the United States decreased from
$28.3 million, or 61.3% of revenue, for the year ended December 31, 2001, to
$24.1million, or 49.0% of revenue, for the year ended December 31, 2002, a
decrease of $4.2 million, or 14.8%. Revenue from sales to customers in Europe
increased from $8.1 million, or 17.5% of revenue, for the year ended December
31, 2001, to $12.1 million, or 24.5% of revenue, for the year ended December 31,
2002, an increase of $4.0 million, or 49.4%. This increase in sales to customers
in Europe was primarily attributable to increased market demand for our products
in this region and due to the FastWeb sale. Revenue from sales to customers in
the Far East increased from $6.9 million, or 15.0% of revenue, for the year
ended December 31, 2001, to $10.2 million, or 20.8% of revenue, for the year
ended December 31, 2002, an increase of $3.3 million, or 47.8%. This increase in
sales to customers in this region was primarily attributable to increased sales
efforts for our networking products. Revenue from sales to customers in Israel
increased from $1.9 million, or 4.2% of revenue, for the year ended December 31,
2001, to $2.3 million, or 4.6% of revenue, for the year ended December 31, 2002,
an increase of $400,000, or 21.1%. This increase in sales to customers in Israel
was primarily attributable to increased sales efforts for our networking
products.

        Cost of Revenues. Cost of revenues increased from $10.4 million for the
year ended December 31, 2001 to $10.9 million for the year ended December 31,
2002, an increase of $500,000, or 4.8%. Gross profit as a percentage of revenues
increased from 77.6% for the year ended December 31, 2001 to 77.7% for the year
ended December 31, 2002.

        Research and Development. Research and development expenses decreased
from $17.9 million for the year ended December 31, 2001 to $15.3 million for the
year ended December 31, 2002, a decrease of $2.6 million, or 14.5%. We have
decreased our research and development personnel consistent with the scope of
our research and development programs. Research and development expenses as a
percentage of revenues decreased from 38.8% for the year ended December 31, 2001
to 31.2% for the year ended December 31, 2002.

        Marketing and Selling. Marketing and selling expenses increased from
$16.7 million for the year ended December 31, 2001 to $18.6 million for the year
ended December 31, 2002, an increase of $1.9 million, or 11.4%. We increased our
sales and marketing expenses in response to current and expected continued
improvement in the market for our networking products. Marketing and selling
expenses as a percentage of revenues increased from 36.2% for the year ended
December 31, 2001 to 37.9% for the year ended December 31, 2002.

        General and Administrative. General and administrative expenses
decreased from $4.4 million for the year ended December 31, 2001 to $4.1 million
for the year ended December 31, 2002, a decrease of $300,000, or 6.8%. This
decrease was primarily attributable to a decrease in personnel expenses. General
and administrative expenses as a percentage of revenues decreased from 9.6% for
the year ended December 31, 2001 to 8.4% for the year ended December 31, 2002.

                                       46

<PAGE>




        Financial Income, Net. Financial income decreased from $4.7 million for
the year ended December 31, 2001 to $2.7 million for the year ended December 31,
2002 principally as a result of lower interest rates.

Consolidated Balance Sheet Data

        Trade Receivables. Trade receivables decreased from $9.5 million at
December 31, 2002 to $8.7 million at December 31, 2003, a decrease of $800,000,
or $8.4%. This decrease was primarily attributable to one-time event associated
with the FastWeb deal in the fourth quarter of 2002 that was paid in the first
quarter of 2003.

        Allowance for Doubtful Accounts. Allowance for doubtful accounts
increased from $1,593,000 at December 31, 2002 to $1,704,000 at December 31,
2003, an increase of $111,000, or 7.0% due to increased sales in the last two
quarters of 2003 compared to revenues for the last two quarters of 2002.
Allowance for doubtful accounts as a portion of trade receivables decreased from
14.4% as of December 31, 2002 to 16.4% as of December 31, 2003.

        Other Receivables and Prepaid Expenses. Other receivables and prepaid
expenses decreased from $2.8 million at December 31, 2002 to $2.7 million at
December 31, 2003, a decrease of $100,000, or 3.6%.

        Inventories. Inventories remained relatively constant at approximately
$1.0 million at December 31, 2002 and December 31, 2003. Our management of
inventory levels improved in 2003 as measured by our increased level of sales
and the number of inventory days outstanding, which decreased from 29 days at
December 31, 2002 to 26 days at December 31, 2003.

        Trade Payables. Trade payables decreased from $ 3.3 million at December
31, 2002 to $1.3 million at December 31, 2003, a decrease of $2.0 million, or
60.6%, primarily due to the one time FastWeb deal that increased our trade
payables and trade receivables balances at December 31, 2002 and were paid in
2003.

        Other Payables, Accrued Expenses and Deferred Revenues. Other payables
and accrued expenses increased from $15.2 million at December 31, 2002 to $19.1
million at December 31, 2003, an increase of $3.9 million, or 25.7%. This
increase was primarily attributable to an increase of accruals relating to the
purchase of material and an increase in deferred income related to technology
sales that will be recognized in the future upon providing maintenance service.

Quarterly Results of Operations

        The following tables present consolidated statements of operations data
for each of the eight fiscal quarters ended December 31, 2003, 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.

                                       47

<PAGE>

<TABLE>
<CAPTION>
                              Mar 31,    June 30,    Sept. 30,     Dec. 31,    Mar.31,     June 30,    Sept. 30,  Dec. 31,
                                2002       2002         2002         2002       2003        2003        2003       2003
                                ----       ----         ----         ----       ---         ----        ----       ----
                                                                                                   2003
<S>                           <C>          <C>        <C>          <C>        <C>         <C>        <C>        <C>
 Revenues...................  $11,557      $11,707    $12,158      $13,673    $11,053     $11,605    $13,080    $15,566
 Cost of revenues...........   (2,558)      (2,571)    (2,615)      (3,202)    (2,360)     (2,598)    (2,932)    (3,461)
 Gross profit...............    8,999        9,136      9,543       10,471      8,693       9,007     10,148     12,105
 Operating expenses:
    Research and development    4,041        3,870      3,815        3,612      3,564       3,596      3,693      3,720
    Marketing and selling, net  4,469        4,587      4,642        4,926      4,732       4,853      5,023      5,361
    General and administrative    969        1,073      1,071          985        948         976      1,020      1,096
 Operating income ..........     (480)        (394)        15          948       (551)       (418)       412      1,928
 Financial income, net......      752          686        634          595        566         560        500        504
      Net income ...........     $272         $292       $649      $ 1,543         15         142        912      2,432

As a percentage of
 revenues:
 Revenues...................      100%         100%       100%         100%       100%        100%       100%       100%
 Cost of revenues...........      (22)         (22)       (22)         (23)       (21)        (22)       (22)       (22)
 Gross profit...............       78           78         78           77         79          78         78         78
 Operating expenses:
    Research and development       35           33         31           27         32          31         28         24
    Marketing and selling, net     39           39         38           36         43          42         38         34
    General and administrative      8            9          9            7          9           8          8          7
 Operating income  .........       (4)          (3)         -            7         (5)         (4)         3         12
 Financial income, net......        6            6          5            4          5           5          4          3
      Net income ...........        2%           3%         5%          11%         0%          1%         7%        16%
</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.

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, 2003, we had approximately $16.4 million in cash and
cash equivalents, $35.0 million in short term investments and our working
capital was approximately $43.4 million. Taking into account long-term liquid
investments, we had $99.9 million in cash and liquid investments as of December
31, 2003.

        Another financial measure that our management believes is important in
assessing our company's financial condition is days sales outstanding, or DSOs.
In 2003, we achieved

                                       48

<PAGE>


significant success in reducing the number of DSOs from 64 days at December 31,
2002 to 43 days (well below our target of 55 days) at December 31, 2003.

        Capital expenditures for the years ended December 31, 2001, 2002 and
2003 were approximately $2.0 million, $1.7 million and $1.3 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
commitments, but we expect to continue to engage in capital spending consistent
with anticipated growth in our operations, infrastructure and personnel. Net
cash provided by operating activities was approximately $7.5 million for the
year ended December 31, 2003. This amount was primarily attributable to a net
profit of $3.5 million, an increase of $3.2 million in deferred revenues, a
decrease of $820,000 in trade receivables and an increase in depreciation of
$1.9 million. These increases in cash provided by operating activities were
offset in part by a decrease in trade payables of $2.1 million.

        Net cash used in investing activities was approximately $9.6 million for
the year ended December 31, 2003. For the year ended December 31, 2003, $75.3
million of cash provided by investing activities were from sales of bank
deposits and marketable securities and $83.7 million were invested in long term
investments. During the year ended December 31, 2003, $1.3 million of cash used
in investing activities was for purchases of property and equipment.

        On February 28, 2001, we announced that our board of directors
authorized the repurchase of up to 10% of our outstanding shares in open market
transactions at prevailing market prices. We completed the share repurchase
program in the first fiscal quarter of 2002, having purchased 1,866,117 ordinary
shares at a total cost of $11.8 million, or an average price of $6.30 per share.

        On August 28, 2002, we announced that our board of directors authorized
the repurchase of up to $10 million or 2 million of our ordinary shares in the
open market from time to time at prevailing market prices. During April 2003, we
started to repurchase our ordinary shares based on the instruction of our board
of directors. As of December 31, 2003, we had purchased 14,000 ordinary shares
at a total cost of $78,000, or an average price of $5.55 per share.

        Net cash provided by financing activities was $4.6 million for the year
ended December 31, 2003, as compared to $4.1 million in the year ended December
31, 2002. For both years, cash provided by financing activities was principally
attributable to the issuance of ordinary shares and treasury stock for cash upon
exercise of options.

        As of December 31, 2003, our principal commitments consisted of
obligations outstanding under operating leases. 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.

                                       49

<PAGE>


        As of December 31, 2003, we had an unused $2.5 million line of credit.

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 (per Israeli Tax
                         Authorities' position - invested 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, 2003, our net operating loss carry-forwards for
Israeli tax purposes amounted to approximately $16.5 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, 2003, the net operating loss carry-forwards of our
U.S. subsidiary for U.S. tax purposes amounted to approximately $14.0 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 2022.

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 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 NIS against the

                                       50

<PAGE>


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
       2001                1.4            9.3              (7.8)
       2002                6.5            7.3              (0.7)
       2003               (1.9)          (7.6)              6.1

        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.

Off-Balance Sheet Arrangements

        We are not a party to any material off-balance sheet arrangements. In
addition, we have no unconsolidated special purpose financing or partnership
entities that are likely to create material contingent obligations.

Tabular Disclosure of Contractual Obligations

        The following table summarizes our minimum contractual obligations and
commercial commitments, including obligations of discontinued operations, as of
December 31, 2003 and the

                                       51

<PAGE>


effect we expect them to have on our liquidity and cash flow in future periods.
<TABLE>
<CAPTION>
Contractual Obligations                                 Payments due by Period
-----------------------------------  -----------------------------------------------------------
                                                 less than                             more than
                                       Total       1 year    1-3 Years    3-5 Years     5 years
                                     ----------  ----------  ----------   ---------    ---------
<S>                                  <C>         <C>           <C>            <C>          <C>
Long-term debt obligations.....          -           -           -            -            -
Capital (finance) lease obligations      -           -           -            -            -
Operating lease obligations....      $2,657,000  $1,788,000    $869,000       -            -
Purchase obligations...........          -           -           -            -            -
Other long-term liabilities
  reflected on the Company's
  balance sheet under  U.S.
  GAAP.....................              -           -           -            -            -
                                     ----------  ----------  ----------   ---------    ---------
Total..........................      $2,657,000  $1,788,000    $869,000       -            -
</TABLE>


        Research and development activities are vital for our continued success.
In 2003, we expended $14.6 million for research and development and believe that
our expenditures in 2004 will not change materially.

Item 7A.  Qualitative and Qualitative Disclosures About Market Risk

        We are exposed to a variety of risks, including changes in interest
rates and foreign currency fluctuations.

Interest Rate Risk

        As of December 31, 2003, we had cash and cash equivalents and short-term
investments of $51.4 million. 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. These investments are not purchased for trading or other
speculative purposes. Due to the nature of these investments, we believe that we
do not have a material exposure to market risk.

        Our exposure to market risks for changes in interest rates is limited
since we do not have any material indebtedness.

Foreign Currency Exchange Risk

        We develop products in Israel and sell them in North America, Asia and
several European countries. As a result our financial results could be affected
by factors such as changes in foreign currency exchange rates or weak economic
conditions in foreign markets.

        Our foreign currency exposure with respect to our sales is mitigated,
and we expect it will continue to be mitigated, through salaries, materials and
support operations, in which part of these costs are denominated in NIS.

        Since the beginning of 2003, the NIS has revalued approximately 7.6%
against the dollar. Among the factors contributing to the revaluation are the
low interest rate for US$ investments compared to the higher interest rate for
NIS investments. The revaluation has resulted in a

                                       52

<PAGE>


deflation in Israel, which was approximately 1.9% for the year 2003 compared to
an annual inflation rate of 6.5% for 2002.

        Since most of our sales are quoted in $, and a portion of our expenses
are incurred in NIS, our results may be adversely affected by a change in the
rate of inflation in Israel or if such change in the rate of inflation is not
offset, or is offset on a lagging basis, by a corresponding devaluation of the
NIS against the dollar and other foreign currencies.

        During 2002 we entered into one foreign exchange contract. The foreign
exchange contract was for 400,000 Euros and was closed in early 2003 at a slight
loss.

Item 8. Financial Statement and Supplementary Data

        See Index to Financial Statements on page F-1 for a list of the
financial statements being filed therein.

Item 9. Changes  in and  Disagreements  with  Accountants  on  Accounting  and
        Financial Disclosure

        Not applicable.

Item 9A. Controls and Procedures

        During the year 2003, we carried out an evaluation, under the
supervision and with the participation of our management, including our chief
executive officer and chief financial officer, of the effectiveness of the
design and operation of our company's disclosure controls and procedures
pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. Based upon that
evaluation, our chief executive officer and chief financial officer concluded
that our company's disclosure controls and procedures are effective in timely
alerting them to material information relating to our company required to be
included in our company's periodic SEC filings.

        There have been no significant changes in our internal controls or other
factors which could significantly affect internal controls subsequent to the
date we carried out the evaluation.

        It should be noted that any system of controls, however well designed
and operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system are met. In addition, the design of any control system
is based in part upon certain assumptions about the likelihood of future events.
Because of these and other inherent limitations of control systems, there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions.

                                       53

<PAGE>




                                    PART III

Item 10. Directors and Executive Officers of the Registrant

        Our directors and executive officers are as follows:

Name                              Age   Position
-------------------------------   ---   ----------------------------------
Zohar Zisapel..................    55   Chairman of the Board of Directors
Gad Tamari.....................    59   Chief Executive Officer and Director
Yuval Bloch....................    50   Chief Operating Officer
Tsipi Kagan....................    38   Chief Financial Officer
Joseph Atsmon..................    55   Director
Liora Katzenstein..............    48   Director
Andreas Mattes.................    43   Director
Efraim Wachtel.................    59   Director

        Zohar Zisapel, Gad Tamari, Andreas Mattes and Efraim Wachtel will serve
as directors until our 2004 annual general meeting of shareholders. Liora
Katzenstein is serving as outside director pursuant to the provisions of the
Israeli Companies Law for her second three-year term ending December 2006, which
cannot be renewed. Joseph Atsmon is serving for a three-year term as outside
director pursuant to the provisions of the Israeli Companies Law ending June
2006. His term of service may be renewed for one additional three-year term

        Zohar Zisapel has served as a director since November 1992, and as our
Chairman of our Board of Directors until August 1999.  He again assumed the
position of Chairman in April 2001.  During the last several years, Mr. Zisapel
has been engaged mainly in management of high technology companies. Mr. Zisapel
is a founder and a director of RAD Data Communication Ltd., of which he has
served as president from January 1982 until 1999, and a director of other public
companies including RADCOM Ltd., RIT Technologies Ltd., Ceragon Networks Ltd.
and Verisity Ltd. Mr. Zisapel has a B.Sc. from the Technion, Israel Institute of
Technology and M.Sc. degrees from Tel Aviv University.

        Gad 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. Prior thereto and since 1996, Mr. Tamari was chief operating
officer of Excel Switching Corporation responsible for international sales,
operations, marketing and customer support. He also served for many years in
senior management positions with a number of telecommunication companies. Mr.
Tamari has a B.Sc. degree in mechanical engineering and a M.Sc. degree in
industrial engineering from the Technion, Israel Institute of Technology and
attended Harvard University's Advanced Management Program.

        Yuval Bloch has served as our Chief Operating Officer since February
2004 and is responsible for overseeing and managing the day-to-day operations of
our group, including product development, sales, quality assurance, and product
marketing. Mr. Bloch's primary

                                       54

<PAGE>


responsibility is to provide a corporate-wide perspective to all company
operations, making sure that there are efficiencies in decisions, directions,
goals, and processes across the different groups and regions of our company. Mr.
Bloch brings over twenty-five years of management experience in
telecommunication to our company, having spent a majority of his career with
Motorola including the period from March 1982 to June 2003. Mr. Bloch holds a
Bachelor of Science in Electrical Engineering, Technion, Israel Institute of
Technology and an MBA from the Recanati School of Business at the Tel-Aviv
University.

        Tsipi Kagan has served as our chief financial officer since August 1,
2003. Prior to joining us and since April 2000, Ms. Kagan, 38, was Chief
Financial Officer for Phone-Or Ltd., a leader in advanced optical microphones
and sensors. Previously and since September 1994, Ms. Kagan was Senior Manager
for Ernst & Young in Israel and served as a Certified Public Accountant (CPA)
for Miller, Kaplan, Arase & Co., an accounting firm in Los Angeles from February
1991 to August 1994. Ms. Kagan holds a B.A. degree in Accounting and Economics
from Tel-Aviv University and is a licensed CPA in Israel.

        Joseph Atsmon has served as an outside director since June, 2003 From
July 2001 until November 2002, he served as Chairman of Discretix Ltd. He has
served as a director of Nice Ltd. since July 2001 and Ceragon Networks Ltd.
since July 2001. From 1995 until 2000, he served as chief executive officer of
Teledata Communication Ltd., a public company acquired by ADC Telecommunication
Inc. in 1998. From 1986 until 1995, Mr. Atsmon served in various positions at
Tadiran Ltd., among them a division president and corporate vice president for
Business Development. Mr. Atsmon received a B.Sc. in Electrical Engineering,
summa cum laude, from the Technion, Israel Institute of Technology.

        Liora Katzenstein has served as an outside director since December 2000.
Prof. Liora Katzenstein specializes in Business Administration and
Entrepreneurship. During the last five years she founded, and serves as the
President of ISEMI - The Institute for the Study of Entrepreneurship and
Management of 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 RIT, Inc.,
Radward Inc., OTI Inc. and Palafric Investments Ltd. In the past she has served
on the boards of Clal Industries & Investments Ltd., Discount Issuers Ltd., and
Amanat Ltd. 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.

        Andreas Mattes has served as a director since February 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 of Siemens PN.
From October 1985 until January 1996, Mr. Mattes held various sales, marketing
and business administration positions at Siemens.

                                       55

<PAGE>


        Efraim Wachtel has served as a director since March 1998. Mr. Wachtel
has been president and chief executive officer of RAD Data Communication Ltd.,
or 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.

        Other key managers are as follows:

  Name                       Age   Position
  -------------------------- ---   --------------------------------------------
  Meir Alon.................  42   Vice President Operations and Quality
                                   Management
  Avinoam Barak.............  42   General Manager of the Networking Group
  Killko Caballero..........  45   Senior Vice President of Enterprise Strategy
  Eli Doron.................  51   Chief Technical Officer and Executive Vice
                                   President
  Irit Machtey..............  48   Senior Vice President Organization & Human
                                   Resources
  Boaz Raviv................  44   General Manager of the Technology Group
  Arnie Taragin.............  48   Corporate Vice President and General Counsel
  Adit Tevel................  48   Senior Vice President, Global NBU Sales

        Meir Alon joined our company in December 2000 and since November 2003
has been responsible for all of our manufacturing, operations, and quality
management, both on the corporate and regional levels. In this position he
oversees all engineering, quality, production, purchasing, global customer
support, validation/verification, and the company's IT and IS departments. Prior
to joining our company and since 1993, Mr. Alon was employed by Israel Aircraft
Industries, where he held senior positions in its quality and engineering
departments. Mr. Alon holds a B.sc. degree (with honors) in electronic and
computer engineering from Tel Aviv University and a master's degree (with
honors) in reliability and quality assurance from Technion Israel Institute of
Technology.

        Avinoam Barak is responsible for all product development and research
and development for RADVISION's line of conferencing and communication products
since June 2000. Prior to joining RADVISION Mr. Barak was at MLM, a division of
Israel Aircraft Industries for eleven years holding senior engineering
positions. Mr. Barak holds a B.S. in computer engineering from the Technion,
Israel Institute of Technology and an MBA in information systems and finance
from Bar Ilan University.

        Killko Caballero has been our senior vice president of enterprise
strategy since November 2003. Based in our Sunnyvale, California office, Mr.
Caballero leads our company's future product development and strategy for
addressing the rapidly emerging desktop multimedia (video, voice, and data)
conferencing and communication market. Prior to joining our company

                                       56

<PAGE>


and since 1995, Mr. Caballero was the president and Chief Executive Office CTO,
of both First Virtual Communication and CUseeMe, pioneers in the desktop voice,
video and data conferencing over IP market.

        Eli Doron, as co-founder, executive vice president and chief technology
officer at RADVISION since October 1992, is responsible for leading the
company's service provider initiatives, both wireless and wireline. Mr. Doron
brings more than 24 years experience defining and designing video and
communication systems to his current position. During his career, Mr. Doron was
one of the original contributors to the H.323 protocol and also designed the
first worldwide videoconference gateway between ISDN and IP, as well as the
first videoconference-over-IP system that included call control, dialing plan,
and protocols. Mr. Doron holds a master's degree in business administration from
Bradford University, and a bachelor's degree in electronics and computer science
from Ben-Gurion University.

        Irit Machtey has been responsible for our organization & human resources
department since July 31, 2002 when she joined our company as senior vice
president of human resources. Prior to that and since April 2000, Ms. Machtey
was a management and organizational consultant at My Time, a leading consultancy
for high tech and communication companies in Israel. Prior to joining My Time
and since 1986, Ms. Machtey held a series of senior level positions at Cellcom
Ltd., Sapiens Intentional, and National Semiconductor. Ms. Machtey holds a
bachelor's degree in behavioral science from the Ben-Gurion University and an
M.B.A. in organizational behavioral from the School of Business Administration
of Tel Aviv University.

        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. Mr. Raviv served his apprenticeship at Robotic in CEMAGREF and he holds
a bachelor's degree from the Technion, Israel Institute of Technology in Haifa.

        Arnie Taragin joined our company in early 2003 as vice president and
general counsel. Prior to joining us and since April 1999, Mr. Taragin was
general counsel of Scitex Corporation, and when Scitex Corporation merged with
Creo Inc., he became vice president and general counsel of CreoScitex
Corporation Ltd. Prior thereto and since 1999 Mr. Taragin was employed by
Israeli Aircraft Industries as an attorney. Before moving to Israel in 1992, Mr.
Taragin practiced law in the United States, first as an associate and then in
1985 as a partner in a law firm, specializing in business law, international
commerce and regulatory matters. Mr. Taragin graduated with honors from the
Johns Hopkins University (1997) and the University of Maryland Law School (1980)
where he received national awards for achievement.

        Adit Tevel has been responsible for global sales and field marketing for
our NBU products since May 1999. From January 1997 until September 1998, Ms.
Tevel was the Vice President of Product Development for Mer Telenray Solution
Ltd. Ms. Tevel has over 20 years of experience in the hi-tech industry in the
spectrum of product development life cycle, including research and development
product marketing, and sales. Ms. Tevel has a B.S. in Computer Science from the
Technion Institute in Haifa, Israel and an M.B.A. from Tel Aviv University.

                                       57

<PAGE>


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, 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. Five of our directors currently in office were elected by our
shareholders at our 2002 annual general meeting of shareholders.

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.

        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.

                                       58

<PAGE>




        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.

Audit Committee

        Our audit committee, established in accordance with Section 114 of the
Israeli Companies Law and Section 3(a)(58)(A) of the Securities Exchange Act of
1934, assists our board of directors in overseeing the accounting and financial
reporting processes of our company and audits of our financial statements,
including the integrity of our financial statements, compliance with legal and
regulatory requirements, our independent public accountants' qualifications and
independence, the performance of our internal audit function and independent
public accountants, finding any defects in the business management of our
company for which purpose the audit committee may consult with our independent
auditors and internal auditor, proposing to the board of directors ways to
correct such defects, approving related-party transactions as required by
Israeli law, and such other duties as may be directed by our board of directors.

        Our audit committee is currently composed of Joseph Atsmon, Liora
Katzenstein and Efraim Wachtel, each of whom satisfies the requirement
applicable to members of audit committees. Joseph Atsmon has been elected as the
Chairperson of the Audit Committee. The audit committee meets at least once each
quarter. Our Audit Committee charter is available on our website at
www.radvision.com.

        Under Israeli law, 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.

        Our 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.

        Our Audit Committee has adopted and our Board of Directors has approved
a company-wide Code of Business Ethics which appears on our company's website.

Audit Committee Financial Expert

        Our board of directors has determined that Joseph Atsmon meets the
definition of an audit committee financial expert, as defined in Item 401 of
Regulation S-K.

                                       59

<PAGE>





Other Committees

        In addition to our audit committee, our board of directors has
established an option committee and an executive committee.

        Our option committee, whose members are Zohar Zisapel, Efraim Wachtel
and Gad Tamari, administers our consultants option plan. The Board of Directors
serves as the compensation committee of our board directors and sets the annual
compensation for Gad Tamari, our chief executive officer. Mr. Tamari does not
participate in any discussions or decisions that involve any aspect of his
compensation.

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.

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 identified as a director or executive officer in the
first table in the section is an office holder. Under the Companies Law and our
Articles of Association, all arrangements as to compensation of office holders
who are not directors require approval of our Audit Committee and Board of
Directors if the transaction is an "extraordinary transaction", or if such
transaction is not an "extraordinary transaction," the approval of our General
Manager according to guidelines of the Board of Directors. The compensation of
office holders who are directors must be approved by our Audit Committee, Board
of Directors and shareholders.

                                       60

<PAGE>


        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, in which case
such transaction will also require the approval of shareholders.

        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. The Companies Law defines a controlling
shareholder as a person who holds 25% or more of the voting rights at the
company's general meeting, provided there is no other person that holds more
than 50% of the voting rights in the company; for purposes of holding, two or
more persons who hold voting rights in the company and each of whom has a
personal interest in the approval of the same transaction up for approval by the
company shall be deemed one holder. Moreover, an extraordinary transaction with
a controlling shareholder or the terms of compensation of a controlling
shareholder, or an extraordinary transaction with another person in whom the
controlling shareholder has a personal interest 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

                                       61

<PAGE>


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 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;

                                       62

<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.

     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.

        On January 18, 2000, our shareholders 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.

Code of Ethics

        We have adopted a Code of Business Conduct Ethics for Executive and
Financial Officers and which applies to all of our employees. The Code of
Business Conduct is publicly available on our website at www.radvision.com and
we will provide shareholders with a written copy upon request. If we make any
substantive amendments to the Code of Business Conduct or grant any waivers,
including any implicit waiver, from a provision of these codes to our chief
executive officer, chief financial officer or corporate controller, we will
disclose the nature of such amendment or waiver on our website.

Item 11. Executive Compensation

        The following table sets forth information concerning the total
compensation paid to our executive officers in fiscal 2003:

                                         Salaries,          Pension,
                                           fees,         retirement and
                                        commissions       other similar
Name and Principal Position             and bonuses         benefits
---------------------------             -----------         --------
All officers and directors as a group
(7 persons)......................        $499,333            $35,823


                                       63

<PAGE>


        The aggregate value of all other perquisites and other personal benefits
furnished to each of these executive officers was less than 10% of each
officer's salary for such year.

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 January 31, 2004:

      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. As of January 31, 2004, 864,096 options may be exercised under this
plan.

Plan Administration

        The share incentive committee of our board of directors administers the
plan subject to Board Ratification. Under the plan, the committee has the
authority to recommend to the Board:

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

                                       64

<PAGE>

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. Employees and
directors and consultants employed by us are eligible to participate in the
plan. Options granted under the 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 January 31, 2004:

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

        The 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. As
of January 31, 2004 there were no options eligible for exercise.

Plan Administration

        The option and compensation committee of our board of directors
administers the plan, subject to Board ratification. Under the plan, the
committee has the authority to recommend to the Board:

     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
option and compensation committee. The plan provides that the trustee will
empower Yehuda and Zohar Zisapel to exercise the voting rights attached to the
ordinary shares issued upon exercise of the options.

                                       65

<PAGE>




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, currently
authorizes the grant of options to purchase up to 4,865,839 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 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, an
additional 887,630 ordinary shares were authorized for grant in 2002 based on 4%
of our share capital at December 31, 2001, an additional 748,997 ordinary shares
were authorized for grant in 2003 based on 3.3% of our share capital at December
31, 2002 and an additional 795,290 ordinary shares were authorized for grant in
2004 based on 3.3% of our share capital at December 31, 2003. 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.

Plan Administration

        The option and compensation committee appointed by the Board of
Directors administers the 2000 Plan, subject to Board ratification. Subject to
the provisions of the 2000 Plan and applicable law, the option and compensation
committee has the authority to recommend to the Board:

     o    the persons to whom such awards are granted;

     o    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);
          and

     o    the form and  provisions  of the notice of exercise and payment of the
          option.

        Subject to the provisions of the 2000 Plan and applicable law, the Board
has the authority to:

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

                                       66

<PAGE>




     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 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 January 31, 2004:

                                       67

<PAGE>




       Ordinary shares                            Range of exercise
 reserved for option grants   Options granted           prices
 --------------------------   ---------------     -----------------
          4,865,839               4,474,070         $4.57- $28.00

As of January 31, 2004, 3,890,760 options may be exercised under this plan.

Exercise of Options During 2003

        During the year ended December 31, 2003, we issued 1,072,919 ordinary
shares, par value NIS 0.1 per share each, at an average exercise price of $4.25
per share to employees and consultants as a result of the exercise of stock
options.

Item 12. Security Ownership of Certain Beneficial Owners and Management

        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.

                                              Number of     Percentage of
                                            ordinary shares  outstanding
                                             beneficially     ordinary
Name                                          owned(1)         shares(2)
----                                          --------         ---------
Yehuda Zisapel (3)(4)....................     1,964,561          10.03%
Zohar Zisapel (5)(6).....................     2,028,041          10.36
Siemens Venture Capital GmbH (7).........       799,378           4.08
Samsung entities (8).....................     1,000,000           5.11
The Baupost Group, L.L.C. (9) ...........     3,377,975          17.25
--------------

(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



<PAGE>


        sole voting and investment power with respect to all shares shown as
        beneficially owned by them.

(2)     The percentages shown are based on 19,577,985 ordinary shares issued and
        outstanding as of March 10, 2004.

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

(4)     The address of Mr. Yehuda Zisapel is 24 Raul Wallenberg Street, Tel Aviv
        69719, Israel.

(5)     Includes 477,213 ordinary shares owned of record by Rad Data
        Communication 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.

(6)     The address of Mr. Zohar Zisapel is 24 Raul Wallenberg Street, Tel Aviv
        69719, Israel.

(7)     The address of Siemens Venture Capital GmbH is Baierbrunner Str. 23,
        81379, Munich, Germany.

(8)     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.

(9)     Based solely upon, and qualified in its entirety with reference to, a
        Schedule 13G filed with the Securities and Exchange Commission on
        February 12, 2004.

Directors and Executive Officers

        The following table and the footnotes thereto contain information
concerning the beneficial ownership of our ordinary shares by all of our
directors and executive officers as a group, including currently exercisable
stock options.

                                  Number of ordinary   Percentage of outstanding
Name                              shares               ordinary shares (1)(2)
-------------------------------   ------------------   -------------------------
All directors and executive
officers as a group (8 persons)   2,596,479            13.26%

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

(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


                                       69
<PAGE>


        above have sole voting and investment power with respect to all shares
        shown as beneficially owned by them.

(2)     The percentage of ordinary shares for each person and the group shown in
        this table is based on the 19,577,985 ordinary shares outstanding on
        March 10, 2004.

Item 13. Certain Relationships and Related Transactions

The RAD-BYNET Group

        Zohar Zisapel our chairman and Yehuda Zisapel, our former director and
chairman, are principal shareholders of our company. 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 but not limited to:
<TABLE>
<S>                                       <C>                                 <C>
AB-NET Ltd.                               Ceragon Networks Ltd.               RADWARE Ltd.
Axerra Networks Inc.                      RAD-BYNET Properties and Services   RADCOM Ltd.
BYNET Data Communication Ltd.               (1981) Ltd.                       RADWIN Ltd.
BYNET Electronics Ltd.                    Modules INC.                        RIT Technologies Ltd.
BYNET Properties Ltd.                     RAD Data Communication Ltd.         Sanrad Inc.
BYNET SEMECH Outsourcing Ltd.             RAD-OP Inc.                         SILICOM Ltd.
BYNET Systems Applications Ltd.           E-BEAT Software and Internet        WISAIR Inc.
BYNET Personal Computers Ltd.                Services Ltd.
</TABLE>

        In addition to engaging in other businesses, members of the RAD-BYNET
group are actively engaged in designing, manufacturing, marketing and supporting
data communication 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 human resource and
administrative services, and we reimburse each company for its costs in
providing these services. The aggregate amount of these reimbursements was
approximately $54,000 and $28,000 in 2002 and 2003, respectively.

Agreement with  Axerra Ltd. (formally named IP RAD Ltd)

        In September 2000, we entered into an agreement to license our MGCP MG
software to Axerra 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 Axerra has an option to extend the maintenance and support
services for additional annual periods.

                                       70

<PAGE>




Supply Arrangement

        We purchase from RAD Data Communication components that we integrate
into our multimedia RADVISION products. The aggregate purchase price of these
components was approximately $133,000 for the year ended December 31, 2002 and
$23,000 for the year ended December 31, 2003.

        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 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.

Voting Agreement

        Upon the completion of the private placement which took place
contemporaneously with our March 2000 initial public offering, 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 appointed
to the board prior to 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 expired in March 2003, but was subject to automatic
extensions for two additional one-year periods unless any of the parties to the
agreement provided notice to the other parties 60 days before the expiration
date of the then current term that such party wishes to terminate the agreement.
The voting agreement continues in effect at present and 3,837,554 ordinary
shares, representing approximately 19.6% of our outstanding shares, are
currently subject to the voting agreement.

Item 14. Principal Accountants Fees and Services

        The following table sets forth, for each of the years indicated, the
fees paid to our independent public accountants and the percentage of each of
the fees out of the total amount paid to the accountants:

                                       71

<PAGE>




                                          Year ended December 31,
                            ----------------------------------------------------
                                     2002                        2003
                            -----------------------     ------------------------
       Services Rendered    Fees     Percentages(*)     Fees      Percentages(*)
    ---------------------   -------  --------------     -------   --------------
    Audit (1)............   $50,000      49.0%          $43,000      53.8%
    Audit-related (2)....     5,000       4.9             5,000       6.2
    Tax (3)..............    17,000      16.7            32,000      40.0
    Other (4)............    30,000      29.4                -          -
    Total................   102,000     100.0            80,000     100.0
--------------
(1)     Audit fees consist of services that would normally be provided in
        connection with statutory and regulatory filings or engagements,
        including services that generally only the independent accountant can
        reasonably provide.

(2)     Audit-related fees relate to assurance and associated services that
        traditionally are performed by the independent accountant, including
        consultation concerning financial accounting and reporting standards.

(3)     Tax fees relate to services performed by the tax division for tax
        compliance, planning, and advice.

(4)     Other fees include services related to valuation study and related
        opinion.

Pre-Approval Policies and Procedures

        The Audit Committee has adopted a policy and procedures for the
pre-approval of audit and non-audit services rendered by our independent public
accountants, Kost Forer Gabbay & Kasierer, a member of Ernest & Young Global.
The policy generally pre-approves certain specific services in the categories of
audit services, audit-related services, and tax services up to specified
amounts, and sets requirements for specific case-by-case pre-approval of
discrete projects, those which may have a material effect on our operations or
services over certain amounts. Pre-approval may be given as part of the Audit
Committee's approval of the scope of the engagement of our independent auditor
or on an individual basis. The pre-approval of services may be delegated to one
or more of the Audit Committee's members, but the decision must be presented to
the full Audit Committee at its next scheduled meeting. The policy prohibits
retention of the independent public accountants to perform the prohibited
non-audit functions defined in Section 201 of the Sarbanes-Oxley Act or the
rules of the SEC, and also considers whether proposed services are compatible
with the independence of the public accountants.

                                       72

<PAGE>



                                     PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1) See Index to Financial Statements on Page F-1 for a list of the financial
statements being filed herein.


(a)(2)  Index to Financial Statement Schedules


Schedule II--Valuation and qualifying accounts (years ended December 31, 2003,
2002 and 2001).

(a)(3) See Exhibits below for all Exhibits being filed or incorporated by
reference herein.

     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 Communication 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 Communication 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

                                       73

<PAGE>




        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***   Form of 2000 Employee Stock Option Plan

        10.2*     Key Employee Share Incentive Plan, as amended

        10.3*     Consultant Option Plan, as amended

        10.4*     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 Communication Inc., as amended

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

        11        Statements re computation of per share earning.

        21        Subsidiaries of RADVISION Ltd.

        23.1      Consent of Kost Forer Gabbay & Kasierer, a member of Ernst &
                  Young Global, with respect to the Registration Statements on
                  Form S-8.

        31.1      Certification by Chief Executive Officer pursuant to Rule
                  13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
                  as amended.

        31.2      Certification by Chief Financial Officer pursuant to Rule
                  13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
                  as amended.

        32.1      Certification  by Chief  Executive  Officer  Pursuant  to 18
                  U.S.C.  Section 1350, As Adopted  Pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002.

        32.2      Certification  by Chief  Financial  Officer  Pursuant  to 18
                  U.S.C.  Section 1350, As Adopted  Pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002.
        -------------------

                                       74

<PAGE>




*       Incorporated by reference to our registration statement on Form F-1,
        registration number 333-30916, as amended, filed with the Securities and
        Exchange Commission.
**      Incorporated by reference to our Annual Report on Form 20-F for the
        fiscal year ended December 31, 2000, filed with the Securities and
        Exchange Commission.
***     Incorporated by reference to our Annual Report on Form 10-K for the
        fiscal year ended December 31, 2001, filed with the Securities and
        Exchange Commission.



(b) Reports on Form 8-K filed during the last quarter of the period covered by
this report:

        An 8-K bearing the cover date of October 20, 2003 with respect to a
press release announcing the Registrant's third quarter earnings was filed on
October 21, 2003.

        An 8-K bearing the cover date of November 10, 2003 with respect to "Item
5. Other Events and Regulation FD Disclosure" was filed on November 10, 2003.

                                       75


<PAGE>

<TABLE>
<CAPTION>
                         RADVISION Ltd. and Subsidiaries
                 Schedule II--Valuation and Qualifying Accounts

Column A                                  Column B              Column C             Column D     Column E
--------                                 -----------   ---------------------------  ----------  ----------
                                                               Additions
                                                       ---------------------------
                                          Balance at   Charged to                                Balance at
                                          beginning    costs and     Charged to                     end
Description                               of period     expenses   other accounts   Deductions   of period
-----------                               ---------     --------   --------------   ----------   ----------
<S>                                      <C>             <C>                                    <C>
Year ended December 31, 2003:
Allowance for doubtful accounts....      $1,593,000      $111,000                               $1,704,000
                                         ==========                                             ==========
Year ended December 31, 2002:
Allowance for doubtful accounts....      $1,126,000      $467,000                               $1,593,000
                                         ==========                                             ==========
Year ended December 31, 2001:
Allowance for doubtful accounts....        $577,000      $549,000                               $1,126,000
                                         ==========                                             ==========
</TABLE>

                                       76


<PAGE>






                       RADVISION LTD. AND ITS SUBSIDIARIES


                        CONSOLIDATED FINANCIAL STATEMENTS



                             AS OF DECEMBER 31, 2003



                                 IN U.S. DOLLARS




                                      INDEX

                                                                    Page

 Reports of Independent Auditors                                     F-2

 Consolidated Balance Sheets                                         F-4

 Consolidated Statements of Operations                               F-5

 Statements of Changes in Shareholders' Equity                       F-6

 Consolidated Statements of Cash Flows                               F-7

 Notes to the Consolidated Financial Statements                      F-8



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




                                       F-1


<PAGE>

ERNST & YOUNG


                         REPORT OF INDEPENDENT AUDITORS


                             To the Shareholders of


                                 RADVISION LTD.



     We have audited the accompanying  consolidated  balance sheets of Radvision
Ltd. (the "Company") and its  subsidiaries as of December 31, 2002 and 2003, and
the related  consolidated  statements of  operations,  changes in  shareholders'
equity and cash flows for each of the two years in the period ended December 31,
2003. Our audits also included the financial  statement  schedule  listed in the
Index  at  Item  15(a).   These  financial   statements  and  schedule  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  financial  statements  and schedule  based on our audits.  The
financial  statements of Radvision Ltd. as of December 31, 2001 and for the year
then ended,  were  audited by other  auditors  who have ceased  operations  as a
foreign  associated  firm of the  Securities  and Exchange  Commission  Practice
Section of the  American  Institute of Certified  Public  Accountants  and whose
report  dated  January  30,  2002,  expressed  an  unqualified  opinion on those
statements and schedule.

     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 provide a reasonable  basis
for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
the  Company and its  subsidiaries  as of  December  31, 2002 and 2003,  and the
consolidated  results of their  operations  and their cash flows for each of the
two years in the period ended December 31, 2003, in conformity  with  accounting
principles  generally accepted in the United States.  Also, in our opinion,  the
related financial statement  schedule,  when considered in relation to the basic
financial  statements  and  schedule  taken as a whole,  present  fairly  in all
material respects the information set forth therein.




                                             /s/Kost, Forer, Gabbay & Kasierer
Tel-Aviv, Israel                                KOST FORER GABBAY & KASIERER
February 3, 2004,                               A Member of Ernst & Young Global
except for Note 7e,
 for which date is February 12, 2004.


                                      F-2
<PAGE>



This is a copy of the previously issued Independent Public  Accountants'  report
of Arthur Andersen. The report has not been reissued by Arthur Andersen.


                    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) and its subsidiaries as of December 31, 2000 and 2001,
and the related consolidated statements of operations,  shareholders' equity and
cash flows for each of the three years in the period  ended  December  31, 2001.
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  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
RADVISION  Ltd. and its  subsidiaries  as of December 31, 2000 and 2001, and the
consolidated results of operations and cash flows for each of the three years in
the period ended  December 31, 2001, in conformity  with  accounting  principles
generally accepted in the United States.




                                            Luboshitz Kasierer
                                            Arthur Andersen
Tel-Aviv, Israel
January 30, 2002



                                      F-3
<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share data

<TABLE>
<CAPTION>
                                                                   December 31,
                                                            -----------------------------
                                                                2002            2003
                                                            -------------   -------------
  <S>                                                        <C>             <C>
     ASSETS

  CURRENT ASSETS:
    Cash and cash equivalents                                $    13,825     $    16,433
    Short-term bank deposits                                      14,879          13,574
    Short-term marketable securities                              14,712          21,403
    Trade receivables (net of allowance for doubtful
    accounts of $1,593 and $ 1,704  at December 31,
    2002 and 2003, respectively)                                   9,505           8,685
    Other accounts receivable and prepaid expenses                 2,836           2,704
    Inventories                                                      996             969
                                                            -------------   -------------
  Total current assets                                            56,753          63,768
                                                            -------------   -------------
  LONG-TERM ASSETS:
    Long-term bank deposits                                       11,013           4,004
    Long-term marketable securities                               33,929          44,497
    Severance pay fund                                             1,641           2,171
                                                            -------------   -------------
  Total long-term assets                                          46,583          50,672
                                                            -------------   -------------
  PROPERTY AND EQUIPMENT, NET                                      3,335           2,572
                                                            -------------   -------------
   Total assets                                               $  106,671     $   117,012
                                                            =============   =============
     LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES:
    Trade payables                                           $     3,347     $     1,270
    Deferred revenues                                              2,863           6,047
    Accrued expenses and other accounts payable                   12,385          13,101
                                                            -------------   -------------
  Total current liabilities                                       18,595          20,418
                                                            -------------   -------------
  ACCRUED SEVERANCE PAY                                            3,061           3,353
                                                            -------------   -------------
  Total liabilities                                               21,656          23,771
                                                            -------------   -------------

  COMMITMENTS AND CONTINGENCIES

  SHAREHOLDERS' EQUITY:
    Ordinary shares of NIS 0.1 par value:
     Authorized - 25,000,000 shares as of
     December 31, 2002 and 2003; Issued
     -20,152,045 as of December 31, 2002 and 2003;
     Outstanding - 18,285,930 and
     19,344,849 shares as of
     December 31, 2002 and 2003, respectively                        187             187
    Additional paid-in capital                                   104,586         104,663
    Deferred stock compensation                                     (117)              -
    Treasury stock (1,866,115 and 807,196
     Ordinary shares as of December 31,
     2002 and 2003, respectively)                                (11,757)         (5,075)
    Accumulated deficit                                           (7,884)         (6,534)
                                                            -------------   -------------
  Total shareholders' equity                                      85,015          93,241
                                                            -------------   -------------
  Total liabilities and shareholders' equity                 $   106,671     $   117,012
                                                            =============   =============
</TABLE>


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

                                      F-4

<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except per share data

<TABLE>
<CAPTION>
                                                            Year ended December 31,
                                                    ---------------------------------------
                                                        2001         2002          2003
                                                    ------------ ------------- ------------
 <S>                                                  <C>         <C>           <C>
 Revenues:
    Hardware products                                 $  29,683   $  36,336     $ 38,059
    License and royalties                                10,027       6,619        7,463
    Services and other                                    6,517       6,140        5,782
                                                    ------------ ------------  ------------
 Total revenues                                          46,227      49,095       51,304
 Cost of revenues                                        10,362      10,946       11,351
                                                    ------------ ------------  ------------
 Gross profit                                            35,865      38,149       39,953
                                                    ------------ ------------ -----------
 Operating expenses:
    Research and development expenses                    17,933      15,338       14,573
    Marketing and selling expenses, net                  16,735      18,624       19,969
    General and administrative expenses                   4,438       4,098        4,040
    Restructuring costs                                   3,023           -            -
                                                    ------------ ------------ ------------
 Total operating expenses                                42,129      38,060       38,582
                                                    ------------ ------------ ------------
 Operating income (loss)                                 (6,264)         89        1,371
 Financial income, net                                    4,652       2,667        2,130
                                                    ------------ ------------ ------------
 Net income (loss)                                    $  (1,612)  $   2,756     $  3,501
                                                    ============ ============ ===========
 Basic net earnings (loss) per Ordinary share         $   (0.09)  $    0.15     $   0.19
                                                    ============ ============ ===========
 Diluted net earnings (loss) per Ordinary share       $   (0.09)  $    0.15     $   0.18
                                                    ============ ============ ===========

</TABLE>




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

                                      F-5

<PAGE>




                                             RADVISION LTD. AND ITS SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share data

<TABLE>
<CAPTION>
                                                Ordinary shares     Additional   Deferred                                  Total
                                             --------------------    paid-in      stock      Treasury    Accumulated  Shareholders'
                                                Number     Amount     capital   compensation    stock      deficit       equity
                                             ----------    -------  ---------- ------------- ----------- ------------ ------------
<S>                                           <C>          <C>      <C>         <C>          <C>         <C>          <C>
Balance as of January 1, 2001                 19,144,984   $  165   $ 103,849   $     (641)  $       -   $   (9,028)  $   94,345
  Purchase of treasury stock                  (1,585,446)       -           -            -      (9,903)           -       (9,903)
  Options exercised                              744,706       17         924            -           -            -          941
  Payment of issuance expenses                         -        -        (550)           -           -            -         (550)
  Amortization of deferred compensation                -        -         (14)         342           -            -          328
  Net loss                                             -        -           -            -           -       (1,612)      (1,612)
                                             -----------   -------  ---------- ------------  ----------  -----------  -----------
Balance as of December 31, 2001               18,304,244      182     104,209         (299)     (9,903)     (10,640)      83,549
  Purchase of treasury stock                    (280,669)       -           -            -      (1,854)           -       (1,854)
  Exercise of options by employees               262,355        5         377            -           -            -          382
  Amortization of deferred stock
   compensation                                        -        -           -          182           -            -          182
  Net income                                           -        -           -            -           -        2,756        2,756
                                             -----------   -------- ----------- ------------ ----------- ------------ ------------
Balance as of December 31, 2002               18,285,930      187     104,586         (117)    (11,757)      (7,884)      85,015
  Purchase of treasury stock                     (14,000)       -           -            -         (77)           -          (77)
  Exercise of options by employees             1,072,919        -          77            -       6,759       (2,151)       4,685
  Amortization of deferred stock
   compensation                                        -        -           -          117           -            -          117
  Net income                                           -        -           -            -           -        3,501        3,501
                                             -----------   -------- ----------- ------------ ----------- ------------ ------------
Balance as of December 31, 2003               19,344,849   $  187   $ 104,663   $        -   $  (5,075)  $   (6,534)   $  93,241
                                             ===========   ======== =========== ============ =========== ============ ============

</TABLE>




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

                                      F-6

<PAGE>



                                             RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. dollars in thousands
<TABLE>
<CAPTION>
                                                                              Year ended December 31,
                                                            ------------------------------------------
                                                                  2001            2002           2003
                                                            -----------    ------------   ------------
 <S>                                                          <C>           <C>            <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                          $  (1,612)    $  2,756       $  3,501
   Adjustments required to reconcile net income (loss)
    to net cash provided by operating activities:
    Depreciation                                                  2,407        2,665          1,926
    Gain on sale of property and equipment                            -           (2)           (45)
    Accrued interest and amortization of premium on
    held-to-   maturity marketable securities and bank
    deposits                                                          -         (263)          (513)
    Accrued severance pay, net                                      279          748           (238)
    Amortization of deferred stock compensation                     328          182            117
    Decrease (increase) in trade receivables, net                 1,947       (4,427)           820
    Decrease (increase) in other accounts receivable and
    prepaid    expenses                                            (208)      (1,577)           124
    Decrease in inventories                                       3,072          888             27
    Increase (decrease) in trade payables                        (2,951)       2,582         (2,077)
    Increase (decrease) in deferred revenues                     (6,807)        (628)         3,184
    Increase in accrued expenses and other accounts
      payable                                                     3,592        2,314            716
    Other                                                           174            -              -
                                                            -----------    -----------    ------------

 Net cash provided by operating activities                          221        5,238          7,542
                                                            -----------    -----------    ------------
 CASH FLOWS FROM INVESTING ACTIVITIES:
   Increase in short-term investments                           (13,235)           -              -
   Increase in long-term investments                            (10,429)           -              -
   Proceeds from redemption of held-to-maturity
    marketable securities                                             -       45,810         56,811
   Purchase of held-to-maturity marketable securities                 -      (44,800)       (73,600)
   Proceeds from withdrawal of bank deposits                          -       36,998         18,476
   Purchase of bank deposits                                          -      (33,167)       (10,119)
   Purchase of property and equipment                            (2,045)      (1,705)        (1,300)
   Proceeds from sale of property and equipment                     146          225            182
                                                            -----------    -----------    ------------
 Net cash provided by (used in) investing activities            (25,563)       3,361         (9,550)
                                                            -----------    -----------    ------------
 CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of share capital                                        941            -              -
   Purchase of treasury stock                                    (9,903)      (1,854)           (77)
   Exercise of options by employees                                   -          382              -
   Payment of issuance expenses                                    (550)           -              -
   Repayment of long-term bank loans                                (46)         (19)             -
   Issuance of Ordinary shares and treasury stock for
   cash upon exercise of options                                      -            -          4,693
                                                            -----------    -----------    ------------
 Net cash provided by (used in) financing activities             (9,558)      (1,491)         4,616
                                                            -----------    -----------    ------------
 Increase (decrease) in cash and cash equivalents               (34,900)       7,108          2,608
 Cash and cash equivalents at the beginning of the year          41,617        6,717         13,825
                                                            -----------    -----------    ------------
  Cash and cash equivalents at the end of the year            $   6,717     $ 13,825       $ 16,433
                                                            ===========    ===========    ============
  Supplemental disclosure of cash flow activities:
  ------------------------------------------------
    Cash paid during the year for:
    Interest                                                 $        4      $     -       $      -
                                                            ===========    ===========    ============
 Supplemental disclosure of non-cash flow investing and
 financing activities:
 ---------------------
   Issuance of Ordinary shares upon sale of treasury
    stock                                                    $        -      $     -       $      8
                                                            ===========    ===========    ============
</TABLE>

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

                                      F-7

<PAGE>





                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 1:- GENERAL

          Radvision  Ltd.  ("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  Company's  products and  technology  are used by its customers to
          develop systems that enable  enterprises and service  providers to use
          packet networks for real-time IP ("Internet Protocol") communications.

          Commencing  in  2001,  the  Company   operates  under  two  reportable
          segments:  1) the "networking" business unit (or "NBU"), which focuses
          on a networking  product and is responsible for developing  networking
          products for IP-centric voice,  video and data conferencing  services;
          and 2) the  "technology"  business  unit (or "TBU"),  which focuses on
          creating  developer  toolkits  for  the  underlying  IP  communication
          protocols and testing tools needed for real-time  voice and video over
          IP.

          The Company has four wholly-owned subsidiaries: Radvision Inc., in the
          United States,  Radvision  B.V., in the  Netherlands,  Radvision HK in
          Hong Kong, and Radvision U.K. in the United Kingdom.  The subsidiaries
          are  primarily  engaged  in the sale and  marketing  of the  Company's
          products and technology.

          Revenues  derived  from  the  Company's   largest  customer  in  2003,
          represented 21% of total sales (see Note 10c).


NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

          The consolidated financial statements are prepared according to United
          States generally accepted accounting principles ("U.S. GAAP").

          a.   Use of estimates

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

          b.   Principles of consolidation:

               The consolidated financial statements include the accounts of the
               Company   and   its   wholly-owned   subsidiaries.   Intercompany
               transactions    and   balances   have   been    eliminated   upon
               consolidation.


                                       F-8

<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          c.   Financial statements in U.S. dollars:

               The Company and its subsidiaries'  revenues are generated in U.S.
               dollars  ("dollar").  In addition,  a significant  portion of the
               Company and its subsidiaries'  costs is incurred in dollars.  The
               Company's  management  believes  that the  dollar is the  primary
               currency of the economic environment in which the Company and its
               subsidiaries operate. Thus, the functional and reporting currency
               of the Company and its subsidiaries is the dollar.

               Accordingly,  the Company and its subsidiaries'  transactions and
               balances  denominated in dollars, are presented at their original
               amounts.   Non-dollar   transactions   and  balances   have  been
               remeasured  into  dollars in  accordance  with  Statement  of the
               Financial   Accounting   Standard   No.  52   "Foreign   Currency
               Translation"  ("SFAS No.52").  All  transaction  gains and losses
               from remeasurement of monetary balance sheet items denominated in
               non-dollar  currencies,   are  reflected  in  the  statements  of
               operations as financial income or expenses,  as appropriate,  and
               have not been material for all periods presented.

          d.   Cash equivalents:

               Cash  equivalents are short-term  highly liquid  investments that
               are readily  convertible to cash with  maturities of three months
               or less at the date acquired.

          e.   Marketable securities:

               The  Company  accounts  for  investments  in debt  securities  in
               accordance  with Statement of Financial  Accounting  Standard No.
               115,  "Accounting  for  Certain  Investments  in Debt and  Equity
               Securities"   ("SFAS  No.  115").   Management   determines   the
               appropriate  classification of its investments in debt and equity
               securities  at  the  time  of  purchase  and   reevaluates   such
               determinations  at each balance sheet date.  Debt  securities are
               classified as held-to-maturity  when the Company has the positive
               intent and ability to hold the  securities  to  maturity  and are
               stated at amortized cost. The amortized cost of  held-to-maturity
               securities is adjusted for amortization of premiums and accretion
               of  discounts  to  maturity.  Such  amortization,  accretion  and
               decline in value judged to be other than  temporary  and interest
               are included in financial income, net.

          f.   Short-term bank deposits:

               Short-term  bank  deposits are deposits  with  maturities of more
               than three  months but less than one year.  The  deposits  are in
               dollars and bear interest at an average rate of 3.75% at December
               31, 2003.  The  short-term  deposits are presented at their cost,
               including accrued interest.

          g.   Long-term bank deposits:

               Bank deposits with maturities of more than one year are presented
               at their cost plus accrued interest.  The deposits are in dollars
               and bear  interest at an average  rate of 2.25% at  December  31,
               2003.


                                       F-9

<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          h.   Inventories:

               Inventories are stated at the lower of cost or market value.

               Inventory  write-offs and  write-down  provisions are provided to
               cover  risks  arising  from  slow-moving  items or  technological
               obsolescence.  The  Company  and  its  subsidiaries  periodically
               evaluate  the  quantities  on  hand,   relative  to  current  and
               historical  selling  prices,  and historical and projected  sales
               volume and aging inventory. Based on this evaluation,  provisions
               are made when  required  to write  inventory  down to its  market
               prices.  As a result of adjusted  forecast  of  revenues  for the
               years 2003 and 2004,  and the  decision  to  discontinue  selling
               certain  products,  the  Company and its  subsidiaries  wrote off
               excess  inventories in order to adjust the inventory level to the
               new revenue expectations. The Company's provision for slow-moving
               items or  technological  obsolescence  was $ 2,914, $ 3,310 and $
               2,452 as of December 31, 2001, 2002 and 2003, respectively.

               Cost is determined as follows:

               Raw materials - using the average cost method.
               Work-in-progress   -  represents  the  cost  of   subcontractors.
               Finished products - on the basis of  subcontractors'  costs, with
               the addition of raw materials.

          i.   Property and equipment:

               Property and  equipment  are stated at cost,  net of  accumulated
               depreciation.  Depreciation is calculated using the straight-line
               method over the  estimated  useful  lives of the  assets,  at the
               following annual rates:

                                                                 %
                                                    --------------------------
               Computers and peripheral equipment              15-33
               Office furniture and equipment                  7-15
               Motor vehicles                                   15
               Leasehold improvements               Over the term of the lease


          j.   Impairment of Long-Lived Assets:

               The Company and the subsidiaries'  long-lived assets are reviewed
               for   impairment  in  accordance   with  Statement  of  Financial
               Accounting  Standard No. 144,  "Accounting  for the Impairment or
               Disposal of Long-Lived  Assets" ("SFAS No. 144") whenever  events
               or changes in circumstances  indicate that the carrying amount of
               an asset may not be recoverable.  Recoverability  of assets to be
               held and used is measured by a comparison of the carrying  amount
               of an asset to the future  undiscounted cash flows expected to be
               generated  by the  assets.  If such assets are  considered  to be
               impaired,  the  impairment  to be  recognized  is measured by the
               amount by which the  carrying  amount of the assets  exceeds  the
               fair value of the assets.  As of December 31, 2003, no impairment
               losses have been identified.

                                       F-10


<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          k.   Severance pay:

               The Company's  liability for severance pay is calculated pursuant
               to Israeli  severance  pay law based on the most recent salary of
               the employees multiplied by the number of years of employment, as
               of the balance sheet date.  Employees are entitled to one month's
               salary  for each year of  employment  or a portion  thereof.  The
               Company's liability for all of its employees is fully provided by
               monthly  deposits for insurance  policies and by an accrual.  The
               value of these  policies is recorded as an asset in the Company's
               balance sheet.

               The deposited funds include profits accumulated up to the balance
               sheet date.  The deposited  funds may be withdrawn  only upon the
               fulfillment of the obligation  pursuant to Israeli  severance pay
               law or labor  agreements.  The  value of the  deposited  funds is
               based on the cash surrendered  value of the policies and includes
               immaterial profits.

               Severance  pay  expenses  for the years ended  December 31, 2001,
               2002 and 2003,  amounted to approximately $ 279, $ 748 and $ 390,
               respectively.

          l.   Revenue recognition:

               The Company and its subsidiaries  generate  revenues mainly from:
               1) sales of systems;  2) licensing the rights to use its software
               products  royalty  income;  3)  maintenance  and  support; and 4)
               customization  projects.  The Company and its  subsidiaries  sell
               their hardware  products  through OEMs,  system  integrators  and
               value added resellers, all of whom are considered end-users.

               Software licensing, royalties and other revenues:

               The  Company  accounts  for  software  sales in  accordance  with
               Statement of Position  97-2,"Software Revenue Recognition," ("SOP
               97-2").  SOP 97-2 generally  requires  revenue earned on software
               arrangements  involving multiple elements to be allocated to each
               element  based on the  relative  fair value of the  elements.  In
               addition  the  Company has adopted  Statement  of Position  98-9,
               "Modification  of SOP 97-2,  Software  Revenue  Recognition  with
               Respect to Certain Transactions", ("SOP 98-9"). SOP 98-9 requires
               that  revenue be  recognized  under the  "residual  method"  when
               vendor  specific  objective  evidence (VSOE) of fair value exists
               for all undelivered elements,  VSOE does not exist for all of the
               delivered  elements  and all other SOP 97-2  revenue  recognition
               criteria are met.  Under the residual  method any discount in the
               arrangement is allocated to the delivered element.

               Revenue from license fees is recognized when persuasive  evidence
               of an agreement exists,  delivery of the product has occurred, no
               significant obligations with regard to implementation remain, the
               fee is fixed or determinable and collectibility is probable.

               Maintenance  and support  revenue  included  in multiple  element
               arrangements is deferred and recognized on a straight-line  basis
               over the term of the maintenance and support agreement.  The VSOE
               of  fair  value  of the  undelivered  elements  (maintenance  and
               support  fees) is  determined  based on the price charged for the
               undelivered element when sold separately.


                                      F-11
<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               In agreements for which the customer requires a 30-day acceptance
               provision, the Company and its subsidiaries defer the recognition
               of revenues until the receipt of the acceptance confirmation.

               Certain royalty  agreements  provide for per unit royalties to be
               paid to the Company  based on the shipments by customers of units
               containing the Company's products. Revenues under such agreements
               are  recognized at the time of shipments by the customers as they
               are  reported  to the Company by these  customers  on cash basis.
               Non-refundable  payments  on  account  of future  royalties  from
               similar agreements are recognized upon payment,  provided that no
               future obligation exists.

               Revenues  from  professional  services  are  recognized  based on
               Statement of Position No. 81-1  "Accounting  for  Performance  of
               Construction  - Type and  Certain  Production  - Type  Contracts"
               ("SOP  81-1"),  using  contract  accounting  on a  percentage  of
               completion method, based on completion of agreed-upon  milestones
               and in accordance  with the "Output  Method" or based on the time
               and material basis.  After delivery of milestone,  if uncertainty
               exists about customer acceptance, revenue is not recognized until
               acceptance.   Provisions  for  estimated  losses  on  uncompleted
               contracts are recognized in the period in which the likelihood of
               such losses is  determined.  As of  December  31,  2003,  no such
               estimated losses were identified.

               Deferred  revenue   includes   unearned  amounts  received  under
               maintenance  and support  contracts,  and amounts  received  from
               customers but not recognized as revenues.

               The Company  offers a one-year  warranty for all of its products.
               The  specific  terms  and  conditions  of those  warranties  vary
               depending  upon the product sold and country in which the Company
               does  business.  For  products  sold in the  United  States,  the
               Company  provides a basic limited  warranty,  including parts and
               labor,  for all  products  for a period of one year.  The Company
               estimates the costs that may be incurred  under its basic limited
               warranty  and records a liability  in the amount of such costs at
               the time product  revenue is recognized.  Factors that affect the
               Company's  warranty  liability  include  the number of  installed
               units,  historical and anticipated rates of warranty claims,  and
               cost per claim. The Company periodically assesses the adequacy of
               its  recorded  warranty  liabilities  and  adjusts the amounts as
               necessary.

               Sales of system:

               Revenues  from product sales are  recognized  in accordance  with
               Staff Accounting  Bulletin No.104,  "Revenue  Recognition"  ("SAB
               No.104"),  when delivery has occurred,  persuasive evidence of an
               agreement exists,  the vendor's fee is fixed or determinable,  no
               further obligation exists and collectibility is probable.


                                      F-12
<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)


               The Company and its  subsidiaries  generally do not grant a right
               of  return  to its  customers.  When  returns  are  expected  and
               estimated,  the Company defers revenue until the  probability for
               such  returns  expires,  at  which  time  revenue  is  recognized
               provided that all other revenue recognition criteria are met. The
               Company  maintains  provision for product  returns;  based on its
               experience in accordance  with Statement of Financial  Accounting
               Standard  No.  48,  "Revenue  Recognition  When  Right of  Return
               Exists".  The provision has been  immaterial  for the years ended
               December 31, 2001, 2002 and 2003.


               In November 2002, the Emerging  Issues Task Force ("EITF") of the
               FASB  reached  a  consensus  on EITF  Issue No.  00-21,  "Revenue
               Arrangements with Multiple Deliverables" related to the timing of
               revenue  recognition for  arrangements in which goods or services
               or both are delivered  separately in a bundled sales arrangement.
               The  consensus  requires that when the  deliverables  included in
               this type of  arrangement  meet certain  criteria  they should be
               accounted for separately.  This may result in a difference in the
               timing of revenue  recognition but will not result in a change in
               the  total  amount  of  revenue  recognized  over the life of the
               arrangement.   The   allocation   of  revenue  to  the   separate
               deliverables  is based on the relative fair value of each item in
               a bundled sales  arrangement.  If the fair value is not available
               for the delivered  items,  the residual method must be used. This
               method  requires that the amount  allocated  for the  undelivered
               items in the  arrangement  be  recorded at their full fair value.
               This  results in the  discount,  if any,  being  allocated to the
               delivered items.  This consensus is effective  prospectively  for
               arrangements  entered into in fiscal periods beginning after June
               15,  2003.  The  adoption of EITF Issue No.  00-21 did not have a
               material impact upon the Company's financial position, cash flows
               or results of operations.

          m.   Research and development costs:

               Research and development  costs  are charged to the statement  of
               operations,  as  incurred.   Statement  of  Financial  Accounting
               Standard No. 86 "Accounting for the Costs of Computer Software to
               be Sold, Leased or Otherwise Marketed",  requires  capitalization
               of  certain   software   development   costs  subsequent  to  the
               establishment of technological feasibility.

               Based on the Company's product development process, technological
               feasibility  is established  upon  completion of a working model.
               Costs incurred by the Company  between  completion of the working
               models and the point at which the  products are ready for general
               release  have been  insignificant.  Therefore,  all  research and
               development costs have been expensed.

          n.   Non-royalties bearing grants:

               The  Company  received  grants  from the  Israel  U.S  Binational
               Industrial  Research  and  Development  Foundation  and the Chief
               Scientist  Office (see Note 7a).  These grants are  recognized at
               the time the  Company is  entitled to such grants on the basis of
               the costs  incurred  and  included as a deduction of research and
               development costs.

                                      F-13

<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          o.   Income taxes:

               The Company  and its  subsidiaries  account  for income  taxes in
               accordance with Statement of Financial  Accounting  Standards No.
               109,  "Accounting  for  Income  Taxes"  ("SFAS  No.  109").  This
               Statement  prescribes  the use of the  liability  method  whereby
               deferred tax assets and liability account balances are determined
               based on differences between financial reporting and tax bases of
               assets and  liabilities  and are  measured  using the enacted tax
               rates and laws that will be in effect  when the  differences  are
               expected to reverse.  The Company and its subsidiaries  provide a
               valuation allowance,  if necessary, to reduce deferred tax assets
               to their estimated realizable value.

          p.   Fair value of financial instruments:

               The Company and its subsidiaries, in estimating the fair value of
               their  financial  instruments  used  the  following  methods  and
               assumptions for disclosures of financial instruments:

               The carrying  amount  reported in the balance  sheet for cash and
               cash equivalents, short-term bank deposits, trade receivables and
               trade  payables   approximate   their  fair  values  due  to  the
               short-term maturities of such instruments.

               The fair value of held to maturity marketable securities is based
               on amortized cost, which does not differ  significantly  from the
               quoted market prices (see Note 3).

          q.   Accounting for stock-based compensation:

               The Company  accounts for stock-based  compensation in accordance
               with the  provisions of Accounting  Principles  Board Opinion No.
               25,  "Accounting  for Stock Issued to Employees" (APB No. 25) and
               FASB interpretation No. 44, "Accounting for Certain  Transactions
               Involving  Stock  Compensation"  ("FIN No. 44") in accounting for
               its employee stock  options.  Under APB No. 25, when the exercise
               price of the  employee's  options  equals or is  higher  than the
               market  price  of the  underlying  Company  share  on the date of
               grant, no compensation expense is recognized.

               The  Company  adopted  the  disclosure  provisions  of  Financial
               Accounting  Standards  Board  Statement No. 148,  "Accounting for
               Stock-Based  Compensation - Transition and Disclosure" ("SFAS No.
               148"), which amended certain provisions of Statement of Financial
               Accounting    Standard   No.123   "Accounting   for   Stock-Based
               Compensation"  ("SFAS No. 123") to provide alternative methods of
               transition  for an entity  that  voluntarily  changes to the fair
               value  based  method  of  accounting  for  stock-based   employee
               compensation,  effective as of the  beginning of the fiscal year.
               The Company  continues to apply the  provisions of APB No. 25, in
               accounting for stock-based compensation.

               Pro forma  information  regarding the Company's net income (loss)
               and net earnings (loss) per share is required by SFAS No. 123 and
               has been  determined  as if the  Company  had  accounted  for its
               employee stock options under the fair value method  prescribed by
               SFAS No. 123.

                                      F-14
<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               The fair value of these  options is amortized  over their vesting
               period and  estimated at the date of grant using a  Black-Scholes
               multiple option pricing model with the following weighted average
               assumptions;  risk-free  interest rates of 2.5%, 3% and 2.37% for
               2001, 2002 and 2003,  respectively;  a dividend yield of 0.0% for
               each of those years; a volatility  factor of the expected  market
               price of the Company's Ordinary shares of 0.98 for 2001, 0.48 for
               2002 and 0.771 for 2003; and a weighted-average  expected life of
               the option of 2.9 years for 2001, 2002 and 2003.

               The weighted average fair values on the grant date, for the years
               ended December 31, 2001, 2002 and 2003 amounted to $ 3.29, $ 2.03
               and $ 4.25, respectively.

               The following  table  illustrates the effect on net income (loss)
               and net earnings (loss) per share,  assuming that the Company had
               applied the fair value  recognition  provision of SFAS No. 123 on
               its stock-based employee compensation:


<TABLE>
<CAPTION>
                                                       Year ended December 31,
                                               ---------------------------------------
                                                  2001          2002          2003
                                               -----------   -----------   -----------

  <S>                                           <C>           <C>           <C>
   Net income (loss) as reported                $  (1,612)    $   2,756     $   3,501
                                               ===========   ===========   ===========
    Add: stock based compensation expense
     determined under APB 25 intrinsic value    $     328     $     182     $     117
                                              ===========   ===========   ===========
   Deduct: stock-based compensation expense
     determined under fair value method for
     all  awards                                $  (6,687)    $  (5,440)    $  (3,640)
                                               ===========   ===========   ===========
   Pro forma net loss                           $  (7,971)    $  (2,502)    $     (22)
                                               ===========   ===========   ===========
   Basic net earnings (loss) per share, as
     reported                                   $   (0.09)    $    0.15     $    0.19
                                               ===========   ===========   ===========
    Pro forma basic net loss per share          $   (0.42)   $    (0.14)    $    *)-
                                               ===========   ===========   ===========
   Diluted earnings (loss( per share as
     reported                                   $   (0.09)    $    0.15     $    0.18
                                               ===========   ===========   ===========
    Pro forma diluted net loss per share        $   (0.42)   $    (0.14)    $    *)-
                                               ===========   ===========   ===========

   *) Represents amounts lower than $ 0.01


</TABLE>

          r.   Concentration of credit risk:

               Financial  instruments that  potentially  subject the Company and
               its  subsidiaries  to   concentrations  of  credit  risk  consist
               principally of cash and cash equivalents,  marketable securities,
               short-term  bank deposits,  trade  receivables and long-term bank
               deposits.


                                      F-15

<PAGE>



                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)


               The  majority  of  the  Company's  cash  and  cash   equivalents,
               short-term  and  long-term  bank  deposits are invested in dollar
               investments with major banks in Israel and the U.S. Such cash and
               cash  equivalents,  short-term and long-term bank deposits in the
               United  States  may be in excess of  insured  limits  and are not
               insured in other jurisdictions. However, management believes that
               the financial  institutions  that hold the Company's  investments
               are financially sound and accordingly, minimal credit risk exists
               with respect to these investments.

               The  marketable  securities  of the Company and its  subsidiaries
               include investments in debentures of U.S corporations,  and state
               and  political   subdivisions.   Management   believes  that  the
               portfolio is well  diversified,  and accordingly,  minimal credit
               risk exists with respect to these marketable securities.

               The trade receivables of the Company and its subsidiaries related
               to NBU  business  are  derived  from  sales  to large  and  solid
               organizations  located mainly in North America,  Europe, Far East
               and  Israel.  The Company and its  subsidiaries  perform  ongoing
               credit  evaluations  of  their  customers  and to date  have  not
               experienced  any  material  losses.  An  allowance  for  doubtful
               accounts is  determined  with  respect to those  amounts that the
               Company and its  subsidiaries  have  determined to be doubtful of
               collection and by a general  reserve.  In certain  circumstances,
               the Company and its  subsidiaries  may require letters of credit,
               other collateral or additional guarantees.

               The Company and its subsidiaries'  trade  receivables  related to
               TBU business are derived from sales to emerging companies located
               mainly in North  America,  Europe,  the Far East and Israel.  The
               Company and its subsidiaries  perform ongoing credit  evaluations
               of their customers and when uncertainty of collectibility exists,
               the  Company  and its  subsidiaries  defer  revenues  until  such
               uncertainty expires.

               As of December  31,  2003,  the current  balance of one  customer
               accounted  for 21.7% of the  Company's  trade  receivables  for a
               total of approximately $ 1,884.

               The  Company  and  its   subsidiaries  do  not  have  significant
               off-balance-sheet  concentration  of credit risk, such as foreign
               exchange  contracts,  options  contracts or other foreign hedging
               arrangements.

          s.   Basic net earnings (loss) per share:

               Basic net  earnings  (loss)  per share is  computed  based on the
               weighted average number of Ordinary shares outstanding during the
               year. For the same periods, diluted net earnings (loss) per share
               further includes the effect of dilutive stock options outstanding
               during the year, all in accordance  with SFAS No. 128,  "Earnings
               per Share".

               Options  outstanding  to  purchase  approximately  2,226,906  and
               1,202,258  Ordinary  shares for the years ended December 31, 2002
               and 2003,  respectively,  were not included in the computation of
               diluted net earnings per share,  because  option  exercise  price
               were greater than the average market price of the Ordinary shares
               and therefore their inclusion would have been anti-dilutive.

                                      F-16
<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 3:- MARKETABLE SECURITIES

          The following is a summary of held-to-maturity  securities at December
          31, 2003 and 2002:

<TABLE>
<CAPTION>
                                        Amortized cost       Unrealized gains       Estimated fair
                                                                 (losses)                value
                                     --------------------- --------------------- --------------------
                                        2002       2003       2002       2003       2002       2003
                                     --------- ----------- ---------- ---------- ---------  ---------
             <S>                        <C>       <C>         <C>        <C>        <C>        <C>
             Debts of states and       $21,501   $27,212     $   821    $   115    $22,322    $27,327
              political
              subdivisions
             Corporate debentures       27,140    38,688        (876)      (435)    26,264     38,253
                                     --------- ----------- ---------- ---------- ---------  ---------
                                       $48,641   $65,900     $   (55)   $  (320)   $48,586    $65,580
                                     ========= =========== ========== ========== =========  =========
</TABLE>

          Gross  realized  gains or  losses  for 2003,  2002,  and 2001 were not
          significant.

          The  amortized  cost  and  fair  value  of  held-to-maturity  debt and
          securities at December 31, 2003, by contractual maturities,  are shown
          below:

                                                   Amortized       Estimated
                                                      cost         fair value
                                                  ------------    ------------
          Due in one year or less                  $  21,403      $   21,099
          Due after one year through two years        44,497          44,481
                                                  ------------    ------------
                                                   $  65,900      $   65,580
                                                  ============    ============

NOTE 4:- INVENTORIES

          Inventories are composed of the following:

                                                          December 31,
                                                  -----------------------------
                                                      2002            2003
                                                  -------------   -------------
  Raw materials                                     $      194      $      361
  Work-in-progress                                         720             490
  Finished products                                         82             118
                                                  -------------   -------------
                                                    $      996      $      969
                                                  =============   =============


NOTE 5:- PROPERTY AND EQUIPMENT, NET

          Composition  of  assets,  grouped  by  major
          classifications,  is  as follows:

   Computers and peripheral equipment                $    5,780      $    8,153
   Office furniture and equipment                         3,272           2,294
   Motor vehicles                                           591             198
   Leasehold improvements                                 1,536           1,834
                                                  --------------  --------------
                                                         11,179          12,479
   Less - accumulated depreciation                        7,844           9,907
                                                  --------------  --------------
   Depreciated cost                                  $    3,335      $    2,572
                                                  ==============  ==============


                                      F-17

<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 6:- ACCRUED EXPENSES AND OTHER ACCOUNTS PAYABLE

                                                           December 31,
                                                    ----------------------------
                                                       2002            2003
                                                    ------------   -------------
             Employees and employee accruals         $    1,617      $    2,415
             Accrued expenses                            10,768          10,686
                                                    ------------   -------------
                                                     $   12,385      $   13,101
                                                    ============   =============

NOTE 7:- COMMITMENTS AND CONTINGENCIES

          a.   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
               (BIRD-F),  in the total amount of  approximately  $188. 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 BIRD-F
               participations  received or  accrued,  net of  royalties  paid or
               accrued,  totaled approximately $ 276 as of December 31, 2002 and
               2003.  Royalties  paid or accrued to the BIRD-F  amounted  to $ 0
               during the year 2003.

          b.   The Company and its subsidiaries  operate from leased premises in
               Israel,  United States,  China, the United Kingdom and Hong Kong.
               The  leases  expire  through  October  2005  (some  with  renewal
               options).  The Company rents their vehicles under operating lease
               agreements  that expire on various dates,  the latest of which is
               in 2005.

               Annual  minimum  future  rental  payments  due  under  the  above
               agreements,  at the exchange rate in effect on December 31, 2003,
               are approximately as follows:

                2004             $   1,788
                2005                   869
                               -------------

                                 $   2,657
                               =============

               For the years  ended  December  31,  2001,  2002 and  2003,  rent
               expenses were $ 1,424, $ 1,556 and $ 1,608, respectively.


                                      F-18

<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 7:- COMMITMENTS AND CONTINGENCIES (Cont.)

          c.   The Company is  committed to pay  royalties to two 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,  as long as the  Company  uses  these
               technologies.

               The rates of royalties to one of the third parties are based on a
               fixed amount per product sold by the Company  ranging from $ 1.00
               to $ 5.00 (in dollars) 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 as of December 31, 2003:

                 2004           $      25
                              ==============

               The Company paid royalties in the amount of $ 25 in 2003.

          d.   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.  The  Company's  management  is unable to
               determine  with  any  certainty  the  ultimate   outcome  of  the
               allegations, and its effect on the Company's business, results of
               operations and financial condition.

          e.   In January  2001,  the Company  entered  into an  agreement  with
               related  parties,  to lease  approximately  24,000 square feet of
               office  space in  Paramus,  New  Jersey  for a period of 5 years,
               which space the  Company  subsequently  surrendered.  The parties
               have a dispute with respect to damages caused by this action,  if
               any.  In  December  2003,   the  parties   proceeded  to  binding
               arbitration.  The presiding arbitrator issued his final ruling on
               February  12,  2004  stating  the amount owed by the Company is $
               400. The Company accrued sufficient funds for the outcome of this
               dispute.


                                      F-19

<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 8:- SHAREHOLDERS' EQUITY

          The Ordinary  shares of the Company are traded on the NASDAQ  National
          Market.

          Since October 20, 2002,  the Ordinary  shares of the Company have also
          been traded on the Tel Aviv Stock Exchange.

          The  Ordinary  shares  confer upon their  holders the right to receive
          notice to participate and vote in general meetings of the Company, and
          the right to receive dividends, if declared.

          a.   The Company had an authorized  share  capital of 15,530  deferred
               shares of par value NIS 0.1 each. The deferred  shares  conferred
               no rights or privileges on their holders, except for the right to
               receive,  upon  dissolution or liquidation,  the par value of the
               deferred shares. In October 2002,  special  shareholders  meeting
               approved a conversion of the deferred shares to Ordinary shares.

          b.   In  February  2001,  the  Company  announced  that  its  Board of
               Directors authorized the purchase of up to 10% of its outstanding
               Ordinary  shares  in the  open  market,  from  time to  time,  at
               prevailing market prices. No time limit was given with respect to
               the duration of the share purchase program.

               On  August  28,  2002,  the  Board  of  Directors  authorized  an
               additional  purchase  of up  to $  10,000  or  2,000,000  of  the
               Company's outstanding Ordinary shares in the open market.

               As of  December  31,  2003,  the  remaining  amount of  purchased
               Ordinary shares was 807,196, at a cost of $ 5,075.

               Such repurchases of Ordinary shares are accounted for as treasury
               stock and result in a reduction  of  stockholders'  equity.  When
               Treasury  shares  are  reissued,  the  Company  accounts  for the
               re-issuance in accordance with Accounting  Principles Board No. 6
               "Status  of  Accounting  Research  Bulletins"  ("APB No.  6") and
               charges the excess of the  repurchase  cost over  issuance  price
               using the weighted average method to retained  earnings.  In case
               the repurchase cost is lower than the issuance price, the Company
               credits the difference to additional paid-in capital.

          c.   The Company  adopted a key employee share  incentive  plans which
               provides  for the  grant  by the  Company  of  option  awards  to
               purchase  up to an  aggregate  of  7,484,072  Ordinary  shares to
               officers, employees, directors and consultants of the Company and
               its  subsidiaries  and affiliates.  The options vest ratably over
               vesting  periods  ranging  from three to five years.  The options
               expire 5 to 10 years  from the date of  issuance.  The  incentive
               plan  provides for the grant of options equal in the amount of up
               to 4% of the Company's share capital on a diluted basis.

               On April 8, 2003,  the Company  authorized  the issuance of up to
               748,997  additional  Ordinary  shares,  of NIS 0.1 par  value per
               share.

               On December  22,  2003,  the Board of  Directors  authorized  the
               issuance of up to 250,000 additional shares to qualify for future
               grants.


                                      F-20
<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 8:- SHAREHOLDERS' EQUITY (Cont.)

               As of December 31, 2003,  50,098 shares qualify for future grant.
               Options that are cancelled or forfeited before  expiration become
               available for future grant.

               Transactions related to the share incentive plan during the years
               ended December 31, 2001, 2002 and 2003, and the weighted  average
               exercise prices per share at the date of grant, are summarized as
               follows:
<TABLE>
<CAPTION>
                                                           Year ended December 31,
                                        --------------------------------------------------------------
                                              2001                  2002                 2003
                                        ------------------  -------------------- ---------------------
                                                  Weighted             Weighted                Weighted
                                                  average              average                 average
                                                  exercise             exercise                exercise
                                         Amount    price      Amount    price     Amount        price
                                         ------    -----      ------    -----     ------        -----
                                                     $                    $                      $
                                                   -----                -----                   -----
             <S>                         <C>        <C>      <C>         <C>     <C>            <C>
             Options outstanding at
               the beginning of the year 3,228,656  7.48     3,885,872   7.29    4,410,936      6.99
             Granted                     2,284,095  5.65     1,167,000   5.19    1,749,700      8.19
              Exercised                   (744,706) 1.31      (262,355)  1.61   (1,072,919)     4.25
             Forfeited                    (882,173) 8.74      (379,581)  7.88     (332,861)     7.96
                                          --------            --------            --------
              Options outstanding at
               the end of the year       3,885,872  7.29     4,410,936   6.99    4,754,856      7.98
                                         =========  ====     =========   ====    =========      ====
             Options exercisable at
               the end of the year         698,842  8.01     1,485,885   7.53    1,610,343      8.99
                                           =======  ====     =========   ====    =========      ====
</TABLE>

               A summary of the options  outstanding and exercisable at December
               31, 2003, is as follows:
<TABLE>
<CAPTION>
                                        Options outstanding                   Options exercisable
                             ------------------------------------------   ----------------------------
                                              Weighted
                              Outstanding      average       Weighted     Outstanding       Weighted
                                as of         remaining      average          as of         average
              Exercise        December        contractual    exercise       December        exercise
                price          31, 2003         life          prices        31, 2003         prices
            -------------    ------------    -----------    -----------   -------------    -----------
                  $                             Years            $                              $
            -------------                    -----------    -----------                    -----------
             <S>               <C>                 <C>           <C>         <C>                <C>
               0.68-1.02         105,546           5.64           0.95          81,281           0.95
               1.02-1.53          29,540           5.06           1.18          14,770           1.18
               1.53-2.30          70,466           6.21           1.58          62,026           1.58
               3.45-5.18         870,913           8.17           4.87         291,891           4.93
               5.18-7.77       2,109,347           8.35           6.00         644,396           6.04
              7.77-11.66         928,039           9.19          10.01          23,789           9.59
             11.66-17.49         490,505           3.23          14.83         380,565          14.73
             26.24-28.00         150,500           6.74          28.00         111,625          28.00
                             ------------                                 -------------
                               4,754,856                          7.98       1,610,343           8.99
                             ============                   ===========   =============    ===========
</TABLE>

               The amounts of deferred  stock  compensation  recognized  arising
               from the  difference  between  the  exercise  price  and the fair
               market value on the date of the grant of $ 0 for options  granted
               in the years ended December 31, 2001, 2002 and 2003, are included
               in  shareholders'  equity  and are  amortized  over  the  vesting
               periods of the options according to APB No. 25. Under APB No. 25,
               the amortization of deferred  compensation  expense for the years
               ended  December 31, 2001,  2002 and 2003 amounted to $ 342, $ 182
               and $ 117, respectively.


                                      F-21

<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 8:- SHAREHOLDERS' EQUITY (Cont.)

          A summary of the options  granted whose  exercise  prices equal to the
          market price of the stock on the date of grant as follows:

<TABLE>
<CAPTION>
                                                           Year ended December 31,
                                       ---------------------------------------------------------------
                                               2001                 2002                 2003
                                       -------------------- -------------------- ---------------------
                                                  Weighted              Weighted             Weighted
                                                  average               average              average
                                                  exercise              exercise             exercise
                                        Options    price     Options     price    Options     price
                                       --------- ---------- ---------- --------- ---------- ----------
                                                     $                     $                    $
                                                 ----------            ---------            ----------
             <S>                        <C>         <C>      <C>        <C>      <C>          <C>
             Weighted average
               exercise prices equal
               to fair value at date
               of grant                2,284,095    5.65     1,167,000  5.19     1,749,700     8.19
                                       ========= ==========  ========= ========= ========== ==========
</TABLE>

          In the event that cash  dividends  are  declared in the  future,  such
          dividends  will be paid in NIS or in foreign  currency  subject to any
          statutory  limitations.  The  Company  does  not  intend  to pay  cash
          dividends in the  foreseeable  future.  The Company has decided not to
          declare dividends out of tax exempt earnings.(see Note 14).

NOTE 9:- NET EARNINGS (LOSS) PER SHARE

          The following  table sets forth the  computation  of basic and diluted
          net earnings (loss) per share:
<TABLE>
<CAPTION>
                                                                   Year ended December 31,
                                                         --------------------------------------------
                                                              2001           2002           2003
                                                         --------------  -------------  -------------
             <S>                                           <C>             <C>            <C>
             Numerator:
              Net income (loss)                            $   (1,612)     $    2,756     $    3,501
                                                         ==============  =============  =============
             Denominator:
              Weighted average number of Ordinary shares
                outstanding during the
                year used to compute basic net earnings
                (loss) per share                           18,943,014      18,353,052     18,660,444
              Incremental shares attributable to
                exercise of outstanding options
                (assuming proceeds would be used to
                purchase treasury stock)                         *) -         630,278      1,302,816
                                                         --------------  -------------  -------------
               Weighted average number of Ordinary
                shares used to compute diluted net
                earnings (loss) per share                  18,943,014      18,983,330     19,963,260
                                                         ==============  =============  =============
             Basic net earnings (loss) per share           $    (0.09)     $     0.15     $     0.19
                                                         ==============  =============  =============
             Diluted net earnings (loss) per share         $    (0.09)     $     0.15     $     0.18
                                                         ==============  =============  =============
            *) Anti-dilutive.
</TABLE>

                                      F-22


<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 10:- SEGMENT REPORTING AND GEOGRAPHICAL INFORMATION

          a.   Beginning  in 2001,  the Company  operates  under two  reportable
               segments: the technology business unit ("TBU") and the networking
               business unit ("NBU").

               The technology  business unit is responsible  for the development
               of enabling  technologies  for real-time voice and video over IP.
               The  networking  business  unit  is  responsible  for  developing
               networking   products  for  IP-centric  voice,   video  and  data
               conferencing  services.  There  are no  significant  transactions
               between the two segments.

               The Company evaluates  segment  performance based on revenues and
               operating  income (loss) of each segment.  As such,  there are no
               separately   identifiable  segment  assets,  nor  are  there  any
               separately  identifiable  statements  of  operations  data  below
               operating loss.

               Business segment revenues are as follows:

                                               Year ended December 31,
                                             -----------------------------
                                                 2002            2003
                                             -------------  --------------
      TBU:
      License and royalties                   $    6,619      $    7,463
      Services and other                           6,140           5,782
                                             -------------  --------------
     Total technology business unit               12,759           13,245
      NBU                                         36,336           38,059
                                             -------------  --------------
      Total revenues                          $   49,095      $    51,304
                                             =============  ==============
      Business segment operating income
        (loss) is as follows:
      TBU                                     $      552      $     1,766
      NBU                                           (463)            (395)
                                             -------------  --------------
     Total operating income                   $       89      $     1,371
                                             =============  ==============

                                      F-23

<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 10:- SEGMENT REPORTING AND GEOGRAPHICAL INFORMATION (Cont.)

          b.   The Company's  sales by geographic area of  end-customers  are as
               follows:

                                           Year ended December 31,
                                   -----------------------------------------
                                     2001            2002           2003
                                   ----------    ------------   ------------
      North America, principally
       the United States             $29,245       $ 24,599       $  24,407
      Europe                           8,096         12,029          11,191
      Far East                         6,940         10,200          12,672
      Israel                           1,946          2,267           3,034
                                   ----------    -----------    ------------
                                    $ 46,227       $ 49,095       $  51,304
                                   ==========    ===========    ============
      Long-lived assets by
       geographical regions:
      Israel                        $  3,916       $  2,576       $   1,907
      United States                      445            591             527
      Other                              157            168             138
                                   ----------    -----------    ------------
                                    $  4,518       $  3,335       $   2,572
                                   ==========    ===========    ============

          c.   For the  years  ended  December  31,  2001,  2002 and  2003,  one
               customer   accounted   for   approximately   35%,  25%  and  21%,
               respectively,  of sales  for  that  period.  For the  year  ended
               December 31, 2002,  another customer  accounted for approximately
               11% of sales for that period.

NOTE 11:- MARKETING AND SELLING EXPENSES, NET

                                                        Year ended December 31,
                                                        -----------------------
                                                         2001    2002   2003
                                                        ------  ------ -------
            Marketing and selling expenses include:
              Royalties to the Government of Israel      $ 80    $  -   $  -
                                                        ======  ====== =======

NOTE 12:- RESTRUCTURING COSTS

          In the  second  quarter  of 2001,  the  Company  recorded  a charge of
          approximately   $  3,000,   primarily   relating  to  severance  costs
          associated  with a 13%  workforce  reduction  as part  of its  plan to
          reduce  operating  expenses.  As of December 31, 2003,  the  remaining
          reserve balance of approximately $ 1,560 is included in other payables
          and accrued expenses in the balance sheet.

                                      F-24

<PAGE>


                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 13:- RELATED PARTIES BALANCES AND TRANSACTIONS

          a.   Balances with related parties:

                                                           December 31,
                                                   -----------------------------
                                                       2002            2003
                                                   -------------   -------------
                 Receivables                        $    610        $     84
                 Trade payables                     $    116        $    179

          b.   Transactions with related parties:

<TABLE>
<CAPTION>
                                                                     Year ended December 31,
                                                            ------------------------------------------
                                                               2001            2002           2003
                                                            -----------    ------------   ------------
                 <S>                                          <C>            <C>            <C>
                 Revenues (1)                                 $    108       $     199      $       -
                 Cost of revenues (3)                         $    188       $     244      $      66
                 Research and development expenses (2)        $    184       $      44      $     379
                 Marketing, selling, general and
                   administrative expenses (2)                $    116       $     157      $     207
                 Purchase of property and equipment (4)       $    263       $     576      $     530
</TABLE>

                 (1)   Includes revenues from the Company's products and
                       maintenance sold to affiliated companies.

                 (2)   Includes administrative services provided to the Company
                       by affiliated companies that the Company reimburses for
                       the costs incurred in providing these services.

                 (3)   Includes the purchase of components from affiliated
                       companies.

                 (4)   Includes property and equipment that were purchased from
                       affiliated companies.

          c.   As for the dispute with related parties, see Note 7e.

NOTE 14:- TAXES ON INCOME

          a.   Tax  benefits  under  the Law for the  Encouragement  of  Capital
               Investment, 1959 ("the Law"):

               The Company's  investment program totaling $ 122 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 $ 459. The Company has chosen to enjoy "Alternative plan
               benefits",  according  to which 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,  and subject to  corporate  taxes at the reduced
               rate  of  10%-25%   (depending   on  the  level  of   non-Israeli
               investments in the Company).

                                      F-25

<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 14:- TAXES ON INCOME (Cont.)

               The period of tax benefits detailed above is subject to limits of
               12 years from the year of commencement of production, or 14 years
               from the date of granting  the  approval,  whichever  is earlier.
               Given the  aforementioned  conditions,  under the first expansion
               program,  the period of benefits for the  production  facilities,
               which has not yet commenced, will terminate in the year 2010, and
               under the second expansion program the period of benefits for the
               production,  which has yet commenced,  will terminate in the year
               2012.

               As the Company currently has no taxable income, the benefits have
               not yet commenced for all programs since inception.

               In  addition,  in July  2003,  the  Company  received a letter of
               approval for a second expansion of an approved plan. The approved
               investment  amounted to $ 180, which is to be carried out by July
               27, 2005.

               The tax-exempt income  attributable to the "Approved  Enterprise"
               can be distributed to shareholders without subjecting the Company
               to taxes only upon the complete  liquidation  of the Company.  If
               these  retained  tax-exempt  profits are  distributed in a manner
               other than in the complete  liquidation of the Company they would
               be taxed at the corporate tax rate  applicable to such profits as
               if  the  Company  had  not  elected  the  alternative  system  of
               benefits,  currently between 25% for an "Approved Enterprise". As
               of December 31, 2003, the accumulated deficit of the Company does
               not include tax-exempt profits earned by the Company's  "Approved
               Enterprise".

               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's
               management believes that it has complied with these conditions.

               By  virtue  of  this  law,  the  Company  is  entitled  to  claim
               accelerated  depreciation  on  equipment  used  by the  "Approved
               Enterprise" during five tax years.

               Income from sources other than the "Approved  Enterprise"  during
               the  benefit  period  will  be  subject  to tax  at  the  regular
               corporate tax rate of 36%.

          b.   Tax reform:

               On  July  24,  2002,  Amendment  132 to the  Israeli  Income  Tax
               Ordinance   ("the   Amendment")   was  approved  by  the  Israeli
               parliament and came into effect on January 1, 2003. The principal
               objectives  of the  Amendment  were to broaden the  categories of
               taxable  income  and to  reduce  the  tax  rates  imposed  on the
               employees' income.

                                      F-26

<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 14:- TAXES ON INCOME (Cont.)

               The material  consequences  of the  Amendment  applicable  to the
               Company  include,  among  other  things,  imposing a tax upon all
               income  of  Israeli  residents,   individuals  and  corporations,
               regardless  of the  territorial  source  of  income  and  certain
               modifications in the qualified  taxation tracks of employee stock
               options.

          c.   Measurement of taxable income under the Income Tax  (Inflationary
               Adjustments) Law, 1985:

               Results for tax purposes are measured and reflected in real terms
               in accordance with the change in the Israeli Consumer Price Index
               ("CPI").  As  explained  in  Note 2c the  consolidated  financial
               statements are presented in dollars.  The differences between the
               change in the Israeli  CPI and in the  NIS/U.S.  dollar  exchange
               rate causes a difference  between  taxable income or loss and the
               income  or  loss  before  taxes  reflected  in  the  consolidated
               financial  statements.  In accordance with paragraph 9(f) of SFAS
               No. 109,  the Company has not provided  deferred  income taxes on
               this difference  between the reporting currency and the tax bases
               of assets and liabilities.

          d.   Tax benefits under Israel's Law for the Encouragement of Industry
               (Taxation), 1969:

               The Company is an "industrial company", as defined by the law for
               the  Encouragement  of Industry  (Taxes),  1969,  and as such, is
               entitled  to claim  public  issuance  expenses,  and  accelerated
               depreciation on equipment used by the "Approved Enterprise", over
               five tax years.

          e.   As of  December  31,  2003,  the  Company's  net  operating  loss
               carryforwards  for  tax  purposes  amounted  to  approximately  $
               16,500.  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  tax asset has 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, 2003,  amounted to  approximately $ 14,000.  These losses are
               available  to offset any future U.S.  taxable  income of the U.S.
               subsidiary  and will expire in the years 2010  through  2022.  In
               light of the subsidiary's recent history of operating losses, the
               Company has recorded a valuation  allowance  for all its deferred
               tax assets.

               Utilization  of U.S.  net  operating  losses  may be  subject  to
               substantial  annual  limitation  due to the "change in ownership"
               provisions of the Internal Revenue Code of 1986 and similar state
               provisions.  The annual  limitations may result in the expiration
               of net operating losses before utilization.

                                      F-27

<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 14:-   TAXES ON INCOME (Cont.)

          g.   Deferred income taxes:

               Deferred  income  taxes  reflect  the  net  tax  effects  of  net
               operating  loss  carryforward  between  the  carrying  amounts of
               assets and  liabilities  for  financial  reporting  purposes  and
               amounts used for income tax purposes.  Significant  components of
               the  Company's  deferred  tax  assets  resulting  from  tax  loss
               carryforward are as follows:

                                                      December 31,
                                             --------------------------------
                                                  2002              2003
                                             --------------    --------------

         Net operating loss carryforward     $      9,540      $     11,540
         Valuation allowance                       (9,540)          (11,540)
                                             --------------    --------------
                                             $          -      $          -
                                             ==============    ==============

               The Company and its subsidiaries provided valuation allowances in
               respect  of  deferred   tax  assets   resulting   from  tax  loss
               carryforwards   and  other  temporary   differences.   Management
               currently  believes  that it is more  likely  than  not  that the
               deferred tax regarding the loss carryforwards and other temporary
               differences  will not be  realized.  The change in the  valuation
               allowance as of December 31, 2003 was $ 2,000.

          h.   The Company's  total income  (loss)  before  provision for income
               taxes is as follows:

                                               Year ended December 31,
                                      ------------------------------------------
                                         2001            2002           2003
                                      -----------    ------------   ------------
                  Domestic (Israel)     $  (965)       $   7,880      $   4,115
                  Foreign                  (647)          (5,124)          (614)
                                      -----------    ------------   ------------
                                        $(1,612)       $   2,756      $   3,501
                                      ===========    ============   ============

          i.   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:

                                                   Year ended December 31,
                                          --------------------------------------
                                             2001          2002         2003
                                          -----------  ------------ ------------
Net income (loss) before taxes on
  income                                   $  (1,612)   $    2,756   $    3,501
                                          ===========  ============ ============
Theoretical tax expense (benefit)
  computed at the statutory rate (36%)     $    (580)   $      992   $    1,260
Loss and other items for which
  deferred taxes were not provided, net          418        (1,235)      (1,431)
Non-deductible expenses                          162           243          171
                                          -----------  ------------ ------------
 Actual tax expenses                        $      -    $        -   $        -
                                          ===========  ============ ============

                                      F-28

<PAGE>




                                             RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 15:- QUARTERLY INFORMATION (UNAUDITED)

          The Company's quarterly consolidated financial position and statements
          of operations as of and for each of the quarterly periods in the years
          ended December 31, 2002, and 2003 are as follows:
<TABLE>
<CAPTION>
                                                                            Three months ended
                                      ----------------------------------------------------------------------------------------------
                                      Mar. 31,     June 30,    Sept. 30,   Dec. 31,    Mar. 31,    June 30,     Sept. 30,   Dec. 31,
                                        2002         2002        2002        2002        2003        2003         2003        2003
                                      ---------- ------------ ---------- ----------- ----------  ------------  ---------- ----------

<S>                                   <C>         <C>         <C>         <C>         <C>         <C>          <C>        <C>
Revenues                              $   11,557  $   11,707  $   12,158  $   13,673  $   11,053  $   11,605   $   13,080 $   15,566
Cost of revenues                           2,558       2,571       2,615       3,202       2,360       2,598        2,932      3,461
                                      ----------   ---------  ----------  ----------  ----------  -----------  ---------- ----------
Gross profit                               8,999       9,136       9,543      10,471       8,693       9,007       10,148     12,105
                                      ----------  ----------  ----------  ----------  ----------  -----------  ---------- ----------
Operating expenses
Research and development expenses          4,041       3,870       3,815       3,612       3,564       3,596        3,693      3,720
Marketing and selling expenses, net        4,469       4,587       4,642       4,926       4,732       4,853        5,023      5,361
General and administrative expenses          969       1,073       1,071         985         948         976        1,020      1,096
                                      ----------  ----------  ----------- ----------  ----------  -----------  ---------- ----------
Total operating expenses                   9,479       9,530       9,528       9,523       9,244       9,425        9,736     10,177
                                      ----------  ----------  ----------  ----------  ----------  -----------  ---------- ----------
 Operating income  (loss)                   (480)       (394)         15         948        (551)       (418)         412      1,928
Financial income, net                        752         686         634         595         566         560          500        504
                                      ----------  ----------  ----------  ----------  ----------  ----------   ---------- ----------
Net income                            $      272    $    292    $    649    $  1,543    $     15    $    142     $    912   $  2,432
                                      ==========  ==========  ==========  ==========  ==========  ==========   ========== ==========
Basic earnings per Ordinary share     $     0.01    $   0.02    $   0.04    $   0.08    $      -    $   0.01     $   0.05   $   0.13
                                      ==========  ==========  ==========  ==========  ==========  ==========   ========== ==========
Weighted average number of Ordinary
  shares outstanding                  18,168,617  18,063,334  18,137,900  18,218,850  18,331,538  18,473,504   18,743,188 19,093,547
                                      ==========  ==========  =========== ==========  ==========  ==========   ========== ==========
Diluted earnings per Ordinary share   $     0.01    $   0.02    $   0.03    $   0.08    $      -    $   0.01     $   0.05   $   0.11
                                      ==========  ==========  =========== ==========  ==========  ==========   ========== ==========
Weighted average number of shares     19,400,949  18,864,264  18,792,868  18,875,238  19,324,573  19,218,782   20,012,705 21,296,980
                                      ==========  ==========  =========== ==========  ==========  ==========   ========== ==========

</TABLE>

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


                                      F-29



<PAGE>



                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated: March 15, 2004

                                    RADVISION LTD.

                                                    /S/GAD TAMARI
                                          -------------------------------------
                                                    Gad Tamari
                                     By:  President and Chief Executive Officer
                                              (Principal Executive Officer)

                                                    /S/TSIPI KAGAN
                                          --------------------------------------
                                                    Tsipi Kagan
                                      By:       Chief Financial Officer
                                             (Principal Accounting Officer)

        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

               Name                                     Title
               ----                                     -----

        /s/ Zohar Zisapel
----------------------------------
          Zohar Zisapel                       Chairman of the Board of Directors

          /s/ Gad Tamari
----------------------------------
            Gad Tamari                        Chief Executive Officer, President
                                               and Director
        /s/ Andreas Mattes
----------------------------------
          Andreas Mattes                      Director

        /s/ Efraim Wachtel
----------------------------------            Director
          Efraim Wachtel

        /s/ Joseph Atsmon
----------------------------------            Director
          Joseph Atsmon

      /s/ Liora Katzenstein
----------------------------------            Director
        Liora Katzenstein

Dated: March 15,  2004

                                       77


<PAGE>



                                 RADVISION LTD.

                                  Exhibit Index

     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 Communication 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 Communication 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.


<PAGE>

    10.1***   Form of 2000 Employee Stock Option Plan

    10.2*     Key Employee Share Incentive Plan, as amended

    10.3*     Consultant Option Plan, as amended

    10.4*     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 Communication Inc., as amended

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

    11        Statements re computation of per share earning.

    21        Subsidiaries of RADVISION Ltd.

    23.1      Consent of Kost Forer Gabbay & Kasierer, a member of Ernst &
              Young Global, with respect to the Registration Statements on
              Form S-8.

    31.1      Certification by Chief Executive Officer pursuant to Rule
              13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
              as amended.

    31.2      Certification by Chief Financial Officer pursuant to Rule
              13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act,
              as amended.

    32.1      Certification  by Chief  Executive  Officer  Pursuant  to 18
              U.S.C.  Section 1350, As Adopted  Pursuant to Section 906 of
              the Sarbanes-Oxley Act of 2002.

    32.2      Certification  by Chief  Financial  Officer  Pursuant  to 18
              U.S.C.  Section 1350, As Adopted  Pursuant to Section 906 of
              the Sarbanes-Oxley Act of 2002.
        -------------------
*       Incorporated by reference to our registration statement on Form F-1,
        registration number 333-30916, as amended, filed with the Securities and
        Exchange Commission.
**      Incorporated by reference to our Annual Report on Form 20-F for the
        fiscal year ended December 31, 2000, filed with the Securities and
        Exchange Commission.
***     Incorporated by reference to our Annual Report on Form 10-K for the
        fiscal year ended December 31, 2001, filed with the Securities and
        Exchange Commission.