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, 2002

                                       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
4.)

        As of June 28, 2002, 18,150,070 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 $66.2 million.

                                   -----------


                    DOCUMENTS INCORPORATED BY REFERENCE: None


<PAGE>






                                TABLE OF CONTENTS
                                -----------------


PART I.........................................................................5

   Item 1.  Business...........................................................5
   Item 2.  Properties........................................................35
   Item 3.  Legal Proceedings.................................................36
   Item 4.  Submission of Matters to a Vote of Security Holders...............36

PART II.......................................................................37

   Item 5.  Market for Registrant's Common Equity and Related Stockholder
            Matters...........................................................37
   Item 6.  Selected Financial Data...........................................40
   Item 7.  Management's Discussion and Analysis of Financial Condition and
            Results of  Operations............................................41
   Item 7A. Qualitative and Qualitative Disclosures About Market Risk.........54
   Item 8.  Financial Statement and Supplementary Data........................55
   Item 9.  Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure..............................................55

PART III......................................................................56

   Item 10. Directors and Executive Officers of the Registrant................56
   Item 11. Executive Compensation............................................64
   Item 12. Security Ownership of Certain Beneficial Owners and Management....69
   Item 13. Certain Relationships and Related Transactions....................70
   Item 14. Controls and Procedures...........................................73

PART IV.......................................................................74

   Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..74



<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.

                                       4


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                                     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 rich media
communications platforms and software development solutions.

        We have approximately 400 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 videoconferencing network solutions for IP, ISDN, SIP and
3G-based networks, supporting most end points in the industry. These products
are sold primarily to resellers and OEMs who use this infrastructure to develop
and install advanced IP and ISDN-based videoconferencing systems. The NBU also
provides businesses and service providers with integrated solutions that deliver
converged IP-based video telephony applications to employee computer desktops,
residential broadband homes, and 3G video phones worldwide.

        Our Technology Business Unit, or TBU, is a one-stop-shop of V2oIP
Ensemble Development toolkits. The TBU provides protocol development tools and
platforms, enabling equipment vendors and service providers to develop and
deploy new 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 enabling technologies for OEM
systems include developer toolkits for SIP, MEGACO/H.248, MGCP, H.323, 3G-324M
wireless multimedia delivery, and the ProLab(TM) Test Management Suite.

                                       5

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Today you may find RADVISION toolkits 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, 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) communications over packet networks. The combination of offering
IP-centric networking products and software toolkits uniquely positions us in
the center of the IP communication revolution. Both of our product lines are
essential for building IP networks that support real time voice and video
communication - with full interoperability with legacy ISDN/PSTN networks and
technologies. Key elements of our strategy include the following:

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

        Enable the migration of visual communications from the conference room
        (videoconferencing) to the desk top, the home, and on the road over 3G.
        RADVISION has been working with leading technology vendors as well as
        aggressively developing partnerships with broadband and wireless service
        providers to transform videoconferencing from a meeting application to a
        new mode of personal communications.

        Strengthen and expand our relationships with OEM customers. We have
        established and continue to maintain collaborative working relationships
        with many OEMs in the IP communications market, including 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 relationships with our
        OEM customers by starting with a few products and subsequently expanding
        these relationships by increasing the number and range of products sold
        to these customers. We intend to expand the depth and breadth of our
        existing OEM relationships while initiating similar new relationships
        with leading OEMs focused on the IP communications market.

                                        6

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        Continue to offer new and enhanced products and features. We believe we
        have consistently been either first, or among the first, to market
        products that support real-time voice, video and data communications
        over packet networks. We were the first to market with IP gateways that
        provide combined voice, video and data functionality, and first to
        market with software development kits for the development of
        H.323-compliant IP communications products and applications. We intend
        to utilize our technological expertise as a basis for market leadership
        by 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 communications industry.

        In 2002, our TBU expanded its product offering to include a key 3G
toolkit for wireless devices and infra-structure; an SIP Server product targeted
to SIP network products; an IP Phone Toolkit for IP Phone development; and the
unveiling of out Ensemble Duet professional services. These introductions have
helped us firm our position as the premier, one-stop-shop for all voice and
video technologies over IP and 3G and reinforces RADVISION's leadership position
as the protocol toolkit technology experts.

        In 2002, our NBU introduced a number of new technologies and platforms
for videoconferencing. These introductions included an MCU version 2 (Multipoint
Conferencing Unit) which provide our customers with enhanced media handling and
advanced conference functionality. Of additional note were the introductions of
our viaIP 100 platform for distributed networks and our INVISION line of
videoconferencing network appliances for enterprise applications. All of these
products and other introductions in 2002 were driven by the evolution of the
videoconferencing market from early adopters to mainstream where networks were
looking for smaller, easier to use videoconferencing devices for quick
implementation and roll out of visual communications services. Our NBU also
introduced a gateway for 3G networks to enable video telephony to move from the
enterprise onto the road and into the hands of the public, enabling visual
communications anytime, anywhere.

        We will continue to introduce new or enhanced products in 2003. We plan
to introduce upgrades to our software toolkits and improvements to our
videoconferencing product lines that include added functionality. We plan to:

        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.

                                        7

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

        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, or TBU, business.
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 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 communications
network used, from IP and SIP to ISDN and next generation 3G, institutions and
enterprises can use the RADVISION solution to create high quality, easy-to-use
voice, video, and data communication and collaboration environments.

RADVISION provides two lines of videoconferencing solutions:

        OnLAN - Our stand-alone OnLAN gateways provide an interface between
traditional circuit-switched telephone networks and the new packet-based
networks. A gateway converts voice, video and data signals received from a
circuit-switched 1network. When the direction of the communication is reversed,
the gateway converts the packets back into circuit-switched signals. Our
stand-alone OnLAN gateways were designed for small to medium sized networks and
can support up to 16 voice calls or 8 multimedia calls simultaneously in a 1.75"
by 19" (1U) system.

        viaIP - Our viaIP solution is a customizable, scalable array of ports,
management solutions, and custom functionality with which customers can design
and quickly deploy a highly configured, high scalable visual communications
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.

                                        8

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        INVISION is a new product from the viaIP product line, and is a suite of
plug-and-play videoconferencing network appliances that offer an off-the-shelf,
completely pre-configured solution with all the functionality of an entire
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.

        We also offer iVIEW, a suite of world class management applications for
every videoconferencing need, including robust network management and intuitive
conference scheduling.

        Both the OnLan and viaIP product lines feature RADVISION's award winning
infrastructure solutions of:

     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 communications networks.

     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   Server  -  Enable  conference   participants  to
          collaborate  and share  applications.  Allows 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  a
          multipoint videoconference 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, the real competitive
advantage of RADVISION's family of solutions is its IP expertise. RADVISION's
products are the leading visual communications infrastructure solutions in the
industry today by virtue of its 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. RADVISION, in contrast, has 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, making it an ideal platform as a network migrates from
ISDN to IP while preserving its earlier investment in legacy equipment.

                                        9

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        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 such, 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.

        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 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.

        By using advanced DSPs and chips, the RADVISION solution is both future
proof (compatible with new technologies and products) and software upgradeable
for the easy additional of new features and functionality of solutions as they
become available. For example, when our platform supports SIP (an up and coming
voice/video over IP protocol) in early Q2, 2003, all RADVISION installed devices
in the market can be easily upgraded with a simple software download.

        IP Protocol Expertise. RADVISION is a leader in developing and
delivering advanced voice and video protocols over IP networks, primarily H.323
and SIP. RADVISION's videoconferencing systems leverage this expertise to
provide a powerful IP-centric platform that can be easily integrated into an
enterprise's LAN network. As most IP videoconferencing endpoints in the market
use RADVISION protocol stacks, our solution are completely interoperable with
every end point on the market today.

        Specific Break Down of Features and Functionality

     o    Greater  port  density  for IP video and voice  calls - The  RADVISION
          platform  supports  on a single MCU card 70 IP video  calls at 384Kbps
          and 150 voice calls.

     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 16 (4*4) layouts.

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

Visual Communications Market Trends
-----------------------------------

        Evolution in the way people communicate. With the difficulties in the
economy, companies are turning to new way of communicating with remote parties
as if they were in the same room. Telephone and e-mail usage has increased
dramatically and Instant Massaging (IM) has become ubiquitous in the enterprise
and home. This trend to new communications has also driven enterprises to use
multimedia applications that provide advanced voice, video and data experiences
to maximize information flow, whether in a conference room meeting with dozens
of people or two people speaking casually.

        This move to multimedia communications is moving towards the
videoconferencing and video telephony markets, and RADVISION is a recipient of
this trend as it continued to see increased sales during every quarter in 2002.

        The Spread of Video Telephony Out of 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. We are experiencing this trend and
are realizing benefits for 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 using RADVISION technology to deliver
video telephony services to 3G broadband handsets. Today in Japan, tomorrow in
Europe and possibly in the United States once 3G has taken hold as analysts
predict.

        The Changing Use of Videoconferencing in the Enterprise. More and more
enterprises that are using videoconferencing for their communications tool are
seeing multimedia, applications and video telephony in particular, as a
preferred method of Personal Communications. Where up until a year or two ago,
videoconferencing was an event that was planned with a group of people in a
meeting room using huge systems, more and more companies are installing small
videoconferencing units at the desktop, or using PCs as an end point, and are
enabling end users to use video as another way to "personally communicate." This
move and early adoption of videoconferencing on the personal level has long
range implication for the entire industry and RADVISION in particular, as
RADVISION's product is a low cost, network based solution that is tailor made
for multiple personal low end points.

        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, recently IP-based videoconferencing has
been gaining greater acceptance. As companies put voice over their IP network
(VoIP) so too are they beginning to put video over their IP network. RADVISION
is the pioneer in videoconferencing over IP and its technology, sitting in the
core of the IP network, enabling network managers to leverage their installed
high

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speed data network, 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 Technology Business Unit (TBU) provides standards-based
toolkits and testing systems for the development of real-time voice, video and
data communications solutions over packet networks and 3G networks.

TBU Products

        As a driving force behind evolving technologies of real-time IP
communications, RADVISION is in the advantageous position of offering one of the
most complete sets of V2oIP Ensemble Development toolkits. We sell the core
enabling technology for real-time IP and 3G-based communications in the form of
software development kits. Communications equipment providers and developers
seeking to market industry standard compliant IP telephony and multimedia
products, systems and applications need core IP communication protocol software
to develop their IP-centric solutions. 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 our proven
enabling technologies. RADVISION toolkits enables our customers to focus on
their core competencies and dramatically reduces the time to market of industry
standard compliant IP communications products, systems and applications.

RADVISION SIP 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" is
ideal for developing 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 is ideal for implementing all types of
feature rich SIP entities such as application servers, softswitches, IP-PBXs,
gateways and conferencing bridges. We have 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
communications. All components of an H.323-compliant network, including
terminals, gateways, gatekeepers and conferencing bridges, use the H.323
protocol to communicate. Our RADVISION H.323 software development kits provide
developers with the core software building blocks needed to develop
H.323-compliant products, systems and applications. Our RADVISION H.323 software
development kit is an integrated set of software programs which execute the
H.323 protocol and perform the functions necessary to establish and maintain
real-time voice, video and data communications over packet-based networks. Our
RADVISION H.323 software development kits can be used to develop a broad
spectrum of products, including gateways, gatekeepers, conferencing bridges, IP
telephones and other H.323-compliant products.

                                       12

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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 telecommunications 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 telecommunications companies and
Internet service providers as well as by cable television companies building IP
communications solutions over their networks. Our RADVISION MGCP software
development kit is used to build MGCP compliant media gateways controllers and
media gateways.

RADVISION MEGACO 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 unique collaborative effort between the IETF and ITU
standards organizations. Derived from MGCP, MEGACO/H.248 offers several key
enhancements including support for multimedia and conferencing calls, improved
handling of protocol messages and a formal process for creating extensions to
support advanced functionality. RADVISION's MEGACO/H.248 Toolkit includes a
unique Media Device Manager to greatly simplify application development and
reduce development time by 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 communications over 3G 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
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 is 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 dedicated to manufacturers of IP
Phones. The toolkit bundles TBU toolkits along with call control and endpoint
management software to provide an IP Phone application. RADVISION is working
with key silicon manufacturers in the industry, like Texas Instruments to
provide pre-integrated packages including the IP Phone Toolkit running on the
OEM's chipset platform.

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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 powerful 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 relating to our TBU business.

TBU Product Benefits

         Market Leading Technology for Standards Based Real-time IP
Communications. We were one of the original five members of the ITU-T committee
responsible for defining the H.323 standard, which has been adopted worldwide
for real-time packet-based communications. We believe our technology is
recognized as the market-leading implementation of the H.323 industry standard
for real-time voice, video and data communications over packet networks. We 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 communications since the inception of the
industry in 1994 and believe that we were the first-to-market with enabling
products and technology for voice, video and data communications over IP
networks. We continue to be actively involved in the specification of evolving
IP communications protocols and offer a complete suite of IP communications
software toolkits to developers of IP-centric products, applications and
services. We believe that our technology has become the technology of choice
among developers of standards-compliant IP communications systems. Because we
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 communications solutions in the market. We believe that
the accumulated knowledge that we have gained participating in the development
of industry standards provides us with a competitive advantage, and positions us
to be among the first to market products and technology based on the latest
technological advances.

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<PAGE>




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

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

        Improved Time to Market. Our customers rely on our accumulated expertise
with communications standards and core technology to significantly reduce their
development cycle and improve time to market. Communications equipment providers
seeking to market standards-compliant systems for real-time voice and video
communications over packet 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 communications using our full suite of products or integrate
RADVISION products with their own products or other vendor products into their
real-time IP communications solution. Similarly, our technology has been
designed to enable the development of a broad range of products and
applications, from those that can service single users, including hand held
devices and residential IP phones, to multi-user products, like highly complex,
powerful carrier class gateways. Taken together, our products and technology
provide all of the key network components necessary to build a real-time IP
communications solutions.

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Industry Trends That Benefit RADVISION's Developer Toolkits:

Growth in Communications

        In the 1990's communications 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;

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

     o    an increase in available bandwidth at declining prices; and

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

Limitations of Traditional Networks

        Traditionally, circuit-switched networks have been the principal medium
for the transmission of communications. Circuit-switched technology dedicates a
circuit with a fixed amount of bandwidth for the duration of the connection,
regardless of a user's actual bandwidth usage. The growth in data communications
traffic, particularly the growth in the number of Internet users, has placed
significant strains on the capacity of traditional circuit-switched networks.
Circuit-switched networks were initially deployed to handle only voice
communications. These networks were not designed to handle data efficiently and
cannot scale cost-effectively to accommodate the growth in data traffic.
Moreover, circuit-switched networks were built based on proprietary, complex
technologies, which have historically limited the entrance of new competitors
and hindered the development and introduction of new services.

Advantages of Packet-based Networks

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

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<PAGE>




The Need for Products that Deliver Industry Standards for Real-time IP
Communications

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

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

        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
communications. RADVISION was an original member of the ITU (International
Telecommunications 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
V2oIP. 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.

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<PAGE>




Growth in Real-time Voice and Video IP Communications

        Due to the inherent benefits of packet networks and the advent of new
technologies and standards that have enabled real-time communications over these
networks, the use of packet networks for real-time voice, video and data
communications is expected to grow dramatically. This anticipated growth in
real-time IP communications is expected to be driven primarily by enterprises
and communications service providers migrating to packet networks. As
enterprises move from centralized organizations to distributed networks of
employees, customers, suppliers and business partners, they require more
effective communications capabilities to support their operations and remain
competitive in a global and rapidly changing market. Packet networks are well
suited for enterprises because they provide enterprises with the following
advantages:

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

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

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

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

        Communications service providers have also begun to deploy packet
networks in an effort to compete more effectively in a deregulated market.
Global deregulation and rapid technological advances have resulted in the
emergence of many new communications service providers, increased competition
among traditional telecommunications carriers, lower prices, innovative new
product and service offerings and accelerated customer turnover. To remain
competitive, communications service providers must be able to develop and
introduce new services to differentiate themselves in the market and attract and
maintain customers. Packet networks are well suited to accomplish these
objectives because they enable the rapid deployment of new and differentiated
solutions. In addition, packet-based technology allows new competitors to enter
the market quickly without substantial investment in infrastructure.

        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 & 3GPP2, envision 3G as running entirely
over an IP-based communications 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

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<PAGE>


SIP-based IP communications. 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 communications 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
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 communications and visual communications network appliance and functionality
to develop new products and technology that meet the evolving needs of the IP,
3G, and visual communications market. Our future product and technology
offerings are expected to include platforms and tools needed for creating
value-added IP-centric enhanced services.

Customers

        We sell our 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 communications
solutions. Our systems integrator customers either purchase our full suite of
products or integrate our individual products with products of other
manufacturers to build complete IP communications solutions. Our VAR customers
purchase our products to resell to end-users as separate units, or as part of a
family of related product offerings, either under our RADVISION label or under
their private label.

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

        The following is a representative list of our customers who purchased
more than $250,000 of our products or technology during the year 2002:

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<PAGE>




                               Networking Products
                               -------------------

                ADL                                 Macnica
                Alcatel Ltd.                        Orient
                FastWeb                             Shanhai Zijiang
                Broadreach                          Shanhai Jonya
                Cisco Systems                       Target Sales
                Control Tech                        Jiarrhua Chemical
                First Virtual                       SKC
                GBH                                 Sony
                H.S. Digital                        Tandberg
                MVC Mobile Video                    VTEL
                NTT - ME Corp                       VCON Ltd.
                IPEX                                York Telecom
                ReView Video                        Wire One
                Critical

                               Technology Products
                               -------------------

                Bynet                               MAG Industries
                H.S. DigitalI                       Iwatsu Nortel
                Intel                               NTT - ME Corp



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 communications 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 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, 2002 was: 50.1% in North America, 29.1% in Europe and the Middle East and
20.8% 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

                                       20

<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 communications technology and the benefits of our products and
technology. We also view our web site as an important marketing tool for lead
generation, customer relations and to support our market position as the
communications experts through quality content including providing information
related to issues relevant to the communications industry, as well as important
product and market trends.

        To reinforce and further strengthen our market position as a technology
leader in the field of real-time IP, 3G and visual communications, we actively
participate in key industry consortia and standards bodies. We are also active
in defining and reviewing evolving IP communications standards that are being
developed by international standards bodies including:

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

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

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

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

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

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 addition, customers who purchase our software development kits
generally request that we provide them with ongoing engineering and technical
support services to integrate our technology into their products, although these
services are not essential for the use of our software development kits. In 2003
we are developing and rolling out a professional services

                                       21

<PAGE>


model where we will make such services available to our customers. Our standard
software development kit contract provides for one year of support services,
renewable annually at the customer's option. Customers who have contracted for
support services receive all relevant software updates and enhancements as well
as access to our customer care and technical support teams.

Intellectual Property

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

        Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products and technology or obtain and
use information that we regard as proprietary. Policing unauthorized use of our
products and technology is difficult. In addition, the laws of some foreign
countries in which we currently or may in the future sell products do not
protect our proprietary rights to as great an extent as do the laws of the
United States. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology,
duplicate our products or design around our intellectual property.

        We rely on 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 December 31, 2000, 2001 and 2002 was $14.3 million, $17.9 million
and $15.3 million, respectively. We intend to continue to devote a significant
portion of our personnel and financial resources to research and development. As
part of our product development process, we seek to maintain close relationships
with our customers to identify market needs and to define appropriate product
specifications.

        As of December 31, 2002, our research and development staff consisted of
approximately 117 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

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<PAGE>


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   Ezenia!, formerly known as               o  DynamicSoft Inc.
    Video-Server
                                             o  Trillium Digital Systems,
o   CUseeMe Networks Inc. (formerly known       acquired by Continuous
    as White Pine Software Inc., merged         Computing.
    with First Virtual Communications)
                                             o  Hughes Software Systems
o   Polycom Networks, a division of
    Polycom Inc., formerly known             o  DCL
    as Accord Networks
                                             o  In-house developers employed by
o   Tandberg                                    manufacturers of
                                                telecommunications equipment and
                                                systems

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

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

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

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<PAGE>


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, 2002, we had 245 employees worldwide, of whom 116
were employed in research and development, 94 in sales and marketing, 23 in
management and administration and 12 in operations. We have standard employment
agreements with all of our employees located in Israel. Of our employees, 172
are based in Israel, 50 are based in the United States, 21 are based in Hong
Kong and China and two 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 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.

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<PAGE>




        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.

RISK FACTORS

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

Risks Relating to Our Business

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

        Although we operated profitably in 2002 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, 2002, our accumulated
deficit was $7.9 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

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<PAGE>


achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis.

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

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

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

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

        timely identify new market trends; and

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

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

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

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

        Currently, we offer networking products that comply with the H.323
industry standard for real-time voice, video and data communications over packet
networks. During 2000, we expanded our enabling technology product family to
include additional key IP protocols. Our current suite of IP communication
protocol toolkits include H.323, SIP, MGCP, MEGACO and H.324M. We believe that
IP networks will be designed with components built around each of

                                       26

<PAGE>


these protocols. If these expectations ultimately prove to be incorrect, our
investments may be of little or no value.

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

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

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

        The markets for our products and technology are highly competitive and
we expect competition to intensify in the future. We may not be able to compete
effectively in these markets and we may lose market share to our competitors.
The principal competitors in the market for our products currently include
Polycom Inc., which acquired Accord Networks Inc., First Virtual Communications,
which merged with CUseeMe Networks Inc. (formerly known as White Pine Software
Inc.), Ezenia (formerly known as Video-Server), and the in-house developers
employed by manufacturers of telecommunications equipment and systems. Our
principal competitors in the market for our technology which is primarily sold
in the form of software development kits, currently include DynamicSoft,
Trillium Digital Systems (acquired by Intel in late 2000 and by Continuous
Computing in late 2002) and Hughes Software Systems. Additional competitors may
enter each of our markets at any time. Moreover, our customers may seek to
develop internally the products that we currently sell to them and compete with
us.

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

        Both Vovida Networks, Inc. (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.

                                       27

<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,

                                       28

<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.

                                       29

<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

                                       30

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

Risks Relating to Our Location in Israel

Conditions in Israel affect our operations and may limit our ability to produce
and sell our products, which could decrease our revenues.

    We are incorporated under the laws of 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. 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 additional peace

                                       31
<PAGE>


agreements with such countries or with Syria or Lebanon. Since September 2000,
there has been a significant deterioration in the relationship between Israel
and the Palestinian Authority, and as a result of riots in Gaza and the West
Bank and a spate of terrorist attacks inside Israel, the peace process between
the parties has stagnated. Efforts to resolve the problem have failed to result
in an agreeable solution. Since the beginning of 2002, there has been a marked
acceleration in the number and frequency of hostile incidents, which culminated
in numerous lethal suicide attacks in Israeli. In response, the Israeli Army
made incursions into Palestinian-controlled cities and towns and refugee camps.
Since then, acts of terrorism have continued to occur in various locations in
Israel. 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 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. Moreover, any war in Iraq might result in direct
damage to Israel and may have a harmful effect on the Israeli economy, our
business and us.

Economic conditions in Israel have deteriorated.

        As a result of political instability, the increased level of hostilities
with the Palestinian Authority and the world-wide economic crisis in the hi-tech
and communication industries, during 2001 and 2002, the Israel rate of economic
growth has deteriorated, the Israeli currency has been devaluated and the rate
of inflation has increased. The Israeli Government has proposed certain
budgetary cuts and other changes, including increasing the value added tax rate
by 1% to 18%, which were recently adopted by the Israeli Parliament. However,
the impact on the Israeli economy of these and other measures that may
eventually be adopted is uncertain. In addition, certain credit agencies have
stated that they are reviewing Israel's credit rating. Should such agencies
lower Israel's credit rating, the ability of the Israeli government to generate
foreign financial and economic assistance may be adversely affected. 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.
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.

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<PAGE>


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 operations. In 1997 and 1998, the rate of devaluation of the NIS
against the dollar exceeded the rate of inflation, a reversal from prior years.
However, in 1999 and 2000 while the rate of inflation was low, there was a
devaluation of the dollar against the NIS. In the years 2001 and 2002 the rate
of devaluation of the NIS against the dollar exceeded the rate of inflation. 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.

                                       33

<PAGE>


Risks Relating to Our Ordinary Shares

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

        There is a substantial risk that we will be classified as a passive
foreign investment company, 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 excess
of gains over losses from the disposition of assets which produce passive
income. If we were determined to be a PFIC for U.S. federal income tax purposes,
highly complex rules would apply to U.S. Holders owning ordinary shares.
Accordingly, you are urged to consult your tax advisors regarding the
application of such rules.

        As a result of our substantial cash position and the decline in the
value of our stock, there is a substantial risk that we will be classified as a
PFIC under the asset test described in the preceding paragraph. However, based
on an independent third party opinion, we believe that we were not deemed to be
classified as a PFIC in 2002. 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;


                                       34

<PAGE>



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

          o    additions or departures of key personnel;

          o    future sales of our ordinary shares; and

          o    stock market price and volume fluctuations.

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

        In the past, securities class action litigation has 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
$ 1,178,000 in 2002. 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 also lease
approximately 2,651 square feet in Hong Kong expiring in May 2004, approximately
872 square feet in China expiring in

                                       35

<PAGE>


April 2003 and approximately 500 square feet in the United Kingdom expiring in
February 2004. The aggregate annual rent for our sales and service offices in
the United States, Hong Kong, China and the United Kingdom was approximately
$378,000 in 2002.

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
Paramus, New Jersey for a period of 5 years, which space we subsequently
surrendered. The parties disagree as to the extent of damages caused by this
action, if any. We cannot predict the final outcome of this dispute. Other than
the above, we are not involved in any legal proceedings that are material to our
business or financial condition.

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

        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, 2002.


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<PAGE>



                                     PART II

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

        Our ordinary shares are 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
                           ----            ---            ----              ---
2001
----
First Quarter........     $16.25          $6.16        $  --             $  --
Second Quarter.......       8.34           5.02           --                --
Third Quarter........       5.84           4.70           --                --
Fourth Quarter.......       8.85           4.85           --                --

2002
----
First Quarter........      $7.9           $5.39        $  --             $  --
Second Quarter.......       6.8            4.4            --                --
Third Quarter........       5.45           4.05           --                --
Fourth Quarter.......       6.71           4.48         5.95              4.70


        As of March 24, 2003 we had approximately 3,029 beneficial shareholders
including 46 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.

                                       37

<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.

                                       38

<PAGE>







    Securities Authorized for Granting 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, 2002:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                              Weighted average         Number of securities
                    Number of Securities      exercise price of       remaining available for
Compensation          to be issued upon     outstanding options,       future issuance under
Plans*                   exercise of         warrants and rights        equity compensation
                     outstanding options                                      plans**
------------------------------------------------------------------------------------------------
<S>                       <C>                      <C>                        <C>
1996 Stock Option
Plan                      1,511,684                $10.03                           0
------------------------------------------------------------------------------------------------
2000 Stock Option
Plan                      2,862,052                 $5.42                     455,280
------------------------------------------------------------------------------------------------
Consultants
Option Plan                  37,200                 $1.18                      12,660
------------------------------------------------------------------------------------------------
Total                     4,410,936                 $6.99                     467,940
=================-==============================================================================
</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, 2002. None of such expenses were
paid directly or indirectly to directors,

                                       39

<PAGE>


officers, persons owning 10% or more of any class of equity securities of our
company or to our affiliates.

                                                  Direct or indirect payments to
                                                   persons other than affiliated
                                                              persons
                                                  ------------------------------
                                                          $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 to
Purpose                                          affiliated persons
-----------------------------------------------  ---------------------------
 Acquisition of other companies and
  business(es) ..............................            N/A
 Construction of plant, building and facilities          N/A
 Purchase and installation of machinery
   and equipment ............................            N/A
 Purchase of real estate ....................            N/A
 Repayment of indebtedness ..................            N/A
 Working capital ............................        $58,448,000
 Temporary investments ......................            N/A
 Other purposes .............................            N/A


Item 6. Selected Financial Data

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

                                       40

<PAGE>

<TABLE>
<CAPTION>

                                                      Year ended December 31,
                                      1998        1999       2000         2001         2002
                                      ----        ----       ----         ----         ----
                                               (in thousands, except per share data)
<S>                                 <C>         <C>          <C>        <C>          <C>
Consolidated Statement of
Operations Data:
Revenues.........................   $  8,894    $ 17,550     $ 45,911   $ 46,227     $ 49,095
Cost of revenues.................      1,412       2,853       11,446     10,362       10,946
                                       -----       -----       ------     ------       ------
Gross profit.....................      7,482      14,697       34,465     35,865       38,149
                                       -----      ------       ------     ------       ------
Operating expenses:
Research and development.........      4,379       7,667       14,263     17,933       15,338
Less participation by the Chief
  Scientist......................      1,140       1,097          353          -            -
                                       -----       -----          ---        ---          ---
Research and development, net....      3,239       6,570       13,910     17,933       15,338
Marketing and selling, net.......      4,425       9,502       17,358     16,735       18,624
General and administrative.......        670       1,426        3,458      4,438        4,098
Restructuring costs..............          -           -            -      3,023            -
Royalties to Chief Scientist.....          -           -        3,666          -            -
                                         ---         ---        -----        ---          ---
Total operating expenses.........      8,334      17,498       38,392     42,129       38,060
                                       -----      ------       ------     ------       ------
Operating income (loss)..........       (852)     (2,801)      (3,927)    (6,264)          89
Financial income, net............         23         105        4,176      4,652         2667
                                          --         ---        -----      -----         ----
Net income (loss)................   $   (829)   $ (2,696)    $    249   $ (1,612)    $  2,756
                                    ========    ========     ========   ========     ========
Basic net earnings (loss) per
ordinary share...................   $  (0.08)   $  (0.26)    $  0.014   $  (0.09)    $   0.15
Weighted average number of
   ordinary shares...............     10,492      10,538       17,174     18,943       18,353
Diluted net earnings (loss) per
   ordinary share................   $  (0.08)   $  (0.26)    $  0.013   $  (0.09)    $   0.15
Weighted average number of
   ordinary shares...............     10,492      10,538       19,873     18,943       18,983

</TABLE>
<TABLE>
<CAPTION>
                                                           December 31,
                                    ------------------------------------------------------------
                                       1998       1999        2000        2001         2002
                                       ----       ----        ----        ----         ----
                                                          (in thousands)
<S>                                 <C>         <C>          <C>        <C>         <C>

Consolidated Balance Sheet Data:
Cash and cash equivalents........   $  3,305    $ 2,605     $  41,617   $  6,717    $ 13,825
Working capital..................      4,318        814        73,660     53,377      38,158

Total assets.....................      9,371     13,261       116,351     99,767     106,671
Total bank debt, less current            130         67            19          -           -
maturities.......................
Shareholders' equity.............      5,450      3,481        94,345     83,549      85,015

</TABLE>


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

Operating Results

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

                                       41

<PAGE>


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 remeasured into dollars according to the
principles in Financial Accounting Standards Board Statement No. 52. Gains and
losses arising from remeasurment are reflected in the statements of operations
as financial income or expenses as appropriate.

Overview

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

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

Critical Accounting Policies

        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 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, inventories write-offs and
write-down provisions are provided to cover risks arising from slow-moving items
or technological obsolescence.

        Revenue Recognition. Revenues from sales of products and technology are
recognized in accordance with Statement of Position (SOP) 97-2, as amended by
SOP 98-9, upon delivery, when collection is probable, the vendor's fee is fixed
or determinable and persuasive evidence of an arrangement exists. Provided that
all other elements of SOP 97-2 are met, revenues are recognized upon delivery,
whether the customer is a distributor or the final end user. Revenues for
maintenance and support services are deferred and recognized ratably over the
service period.

        In accordance with SOP 97-2, revenues for multi-element arrangements,
that is, sales of products or technology in conjunction with post-contract
customer support services, are

                                       42

<PAGE>


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

        Revenues from products sales are recognized in accordance with Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB
No. 101") when the following criteria are met: persuasive evidence of an
arrangement exists, delivery of the product has occurred, the fee is fixed or
determinable and collectibility is probable. We have no obligation to customers
after the date on which products are delivered. Revenues from maintenance and
updates are recognized over the term of agreement.

        Deferred revenues include unearned amounts received under maintenance
contracts, and amounts billed to customers but not yet recognized as revenues.

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, 2002, approximately 49.0% of our revenues were generated in the United
States.

                                       43

<PAGE>


Significant Costs and Expenses

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

        Research and development expenses, net. Our research and development
expenses consist primarily of compensation and related costs for research and
development personnel, expenses for testing facilities and depreciation of
equipment.

        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.

        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.

                                       44

<PAGE>




        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 remeasurment 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.

Results of Operations

        The following discussion of our results of operations for the years
ended December 31, 2000, 2001 and 2002, 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:

                                              2000        2001      2002
                                              ----        ----      ----
Revenues..................................   100.0%      100.0%    100.0%
Cost of revenues..........................    24.9        22.4      22.3
Gross profit..............................    75.1        77.6      77.7
Operating expenses:
  Research and development................    31.1        38.8      31.2
  Less participation by the Chief Scientist    0.8         -         -
  Research and development, net...........    30.3        38.8      31.2
  Marketing and selling, net..............    37.8        36.2      37.9
  General and administrative..............     7.5         9.6       8.4
  One time charge/repayment of future          8.0         6.5       -
    royalties.............................
 Total operating expenses.................    83.6        91.1      77.5
Operating profit (loss)...................    (8.5)      (13.5)      0.2
Financial income, net.....................     9.1        10.1       5.4
                                               ---        ----       ---
Net income (loss).........................     0.6%       (3.4)%    5.6%
                                               ====     =======    =====



                                       45

<PAGE>




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 $29.7million 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
$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 $0.4
million, 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 $0.5 million, 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, Net. Research and development expenses, net
decreased from $17.9 million for the year ended December 31, 2001 to $15.3
million for the year ended

                                       46

<PAGE>


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, net 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, Net. Marketing and selling expenses, net
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,
or11.4%. 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, net 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 $0.3 million 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.

        Operating Profit (Loss). Our operating results shifted from a loss of
$6.3 million for the year ended December 31, 2001 to a profit of $89,000 for the
year ended December 31, 2002.

        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.

        Net Income(Loss). We reported net income of $2,756,000, for the year
ended December 31, 2002 as compared to a net loss of $1.6 million for the year
ended December 31, 2001.

Year Ended December 31, 2001 as Compared with Year Ended December 31, 2000

        Revenues. Revenues increased from $45.9 million for the year ended
December 31, 2000 to $46.2 million for the year ended December 31, 2001. This
increase was due to a $3.1 million increase in sales of our networking products
offset by a decrease of $2.8 million from technology products.

        Revenues from networking products increased from $26.6 million for the
year ended December 31, 2000 to $29.7million for the year ended December 31,
2001. 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 OEM agreements
that generated additional product sales. Revenues from technology products
decreased from $19.3 million for the year ended December 31, 2000 to $16.5
million for the year ended December 31, 2001. 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 increased from
$27.9 million, or 60.9% of revenue, for the year ended December 31, 2000, to
$28.3 million, or 61.3% of revenue,

                                       47

<PAGE>


for the year ended December 31, 2001, an increase of $0.4 million, or 1.4%.
Revenue from sales to customers in Europe increased from $7.3 million, or 16.0%
of revenue, for the year ended December 31, 2000, to $8.1 million, or 17.5% of
revenue, for the year ended December 31, 2001, an increase of $0.8 million, or
11.0%. This increase in sales to customers in Europe was primarily attributable
to increased market demand for our products in this region.

        Revenue from sales to customers in the Asian/Pacific region increased
from $5.3 million, or 11.5% of revenue, for the year ended December 31, 2000, to
$6.9 million, or 15.0% of revenue, for the year ended December 31, 2001, an
increase of $1.6 million, or 30.2%. 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 decreased from $4.5 million,
or 9.7% of revenue, for the year ended December 31, 2000, to $1.9 million, or
4.2% of revenue, for the year ended December 31, 2001, a decrease of $2.6
million, or 57.8%. This decrease in sales to customers in Israel was primarily
attributable to the depressed economy in this region.

        Cost of Revenues. Cost of revenues decreased from $11.4 million for the
year ended December 31, 2000 to $10.3 million for the year ended December 31,
2001, a decrease of $1.1 million, or 9.6%. Gross profit as a percentage of
revenues increased from 75.1% for the year ended December 31, 2000 to 77.6% for
the year ended December 31, 2001, due to the increased proportion of new
networking products sales with higher profit margins.

        Research and Development, Net. Research and development expenses, net
increased from $13.9 million for the year ended December 31, 2000 to $17.9
million for the year ended December 31, 2001, an increase of $4.0 million, or
28.8%. This increase was primarily attributable to an increase in the number of
research and development personnel whom we employed. We have increased our
research and development personnel to support our existing and expected new
product lines and to accommodate, the expected future growth of our business.
Research and development expenses, net as a percentage of revenues increased
from 30.3% for the year ended December 31, 2000 to 38.8% for the year ended
December 31, 2001.

        Marketing and Selling, Net. Marketing and selling expenses, net
decreased from $17.4 million for the year ended December 31, 2000 to $16.7
million for the year ended December 31, 2001, a decrease of $623,000, or 35.9%.
This decrease was primarily attributable to a reduction of our marketing
activities in the second half of the year as we reduced our sales and marketing
expenses in response to current conditions. Marketing and selling expenses, net
as a percentage of revenues decreased from 37.8% for the year ended December 31,
2000 to 36.2% for the year ended December 31, 2001.

        General and Administrative. General and administrative expenses
increased from $3.5 million for the year ended December 31, 2000 to $4.4 million
for the year ended December 31, 2001, an increase of $980,000 or 28.0%. This
increase was primarily attributable to an increase of $581,000, or 29.3%, in
personnel expenses. General and administrative expenses as a percentage of
revenues increased from 7.5% for the year ended December 31, 2000 to 9.6% for
the year ended December 31, 2001.

                                       48

<PAGE>




        One Time Charge / Royalty Payments to the Chief Scientist. In 2000 we
determined to repay all future royalty payments due to the Chief Scientist. This
decision made as part of our strategy to discontinue the relationship with the
Chief Scientist to reduce the growing restrictions imposed by the Chief
Scientist on our business. By doing so, we will also save the increased interest
rates that are imposed by the Chief Scientist on part of the royalties due. In
2001 we recorded a charge of $3.0 million, mainly for severance costs associated
with a 13.0% reduction in our workforce that was implemented as part of our
efforts to reduce operating expenses in light of the worsening economic climate.

        Operating Loss. Our operating loss increased from $3.9 million for the
year ended December 31, 2000 to $6.3 million for the year ended December 31,
2001.

        Financial Income, net. Financial income increased from $4.2 million for
the year ended December 31, 2000 to $4.7 million for the year ended December 31,
2001 principally as a result of the investment for a full year of the proceeds
of our March 2000 initial public offering and private placement.

        Net Income(Loss). We reported net income of $249,000, for the year ended
December 31, 2000 as compared to a net loss of $1.6 million for the year ended
December 31, 2001.

Consolidated Balance Sheet Data

        Trade Receivables. Trade receivables increased from $5.1 million at
December 31, 2001 to $9.5 million at December 31, 2002, an increase of $4.4
million, or $86.3%. This increase was primarily attributable to one-time event
associated with the FastWeb deal in the fourth quarter of 2002.

        Allowance for Doubtful Accounts. Allowance for doubtful accounts
increased from $1,126,000 at December 31, 2001 to $1,593,000 at December 31,
2002, an increase of $467,000, or 41.5%. Allowance for doubtful accounts as a
portion of trade receivables decreased from 18.1% as of December 31, 2001 to
14.4% as of December 31, 2002.

        Other Receivables and Prepaid Expenses. Other receivables and prepaid
expenses increased from $1.3 million at December 31, 2001 to $2.3 million at
December 31, 2002, an increase of $1.5 million, or 115.4%. This increase was
primarily attributable to an increase in prepaid rental expenses in
consideration for a discount on payment due.

         Inventories. Inventories decreased from $1.9 million at December 31,
2001 to $1.0 million at December 31, 2002, a decrease of $0.9 million, or 47.4%.
This decrease was primarily attributable to our effort to reduce inventory
levels in light of the uncertain economic conditions.

        Trade Payables. Trade payables increased from $765,000 at December 31,
2001 to $3.3 million at December 31, 2002, an increase of $2.5 million, or
326.8%, primarily due to the one time FastWeb deal that increased our trade
payables and trade receivables balances.

        Other Payables and Accrued Expenses. Other payables and accrued expenses
increased from $13.6 million at December 31, 2001 to $15.2 million at December
31, 2002, an increase of

                                       49

<PAGE>


$1.6 million, or 11.8%. This increase was primarily attributable to an increase
of accruals, relating to a commitment to replace old products.

        Quarterly Results of Operations

        The following tables present consolidated statements of operations data
for each of the eight fiscal quarters ended December 31, 2002, in dollars and as
a percentage of revenues. In management's opinion, this unaudited information
has been prepared on the same basis as our audited consolidated financial
statements and includes all adjustments, consisting only of normal recurring
adjustments, necessary for fair presentation of the unaudited information for
the quarters presented. The results of operations for any quarter are not
necessarily indicative of results that we might achieve for any subsequent
periods.
<TABLE>
<CAPTION>
                         Mar.31,     June 30,  Sept. 30,  Dec. 31,  Mar. 31, June 30,  Sept. 30,  Dec. 31,
                          2001        2001       2001       2001      2002     2002      2002       2002
                          ----        ----       ----       ----      ----     ----      ----       ----

<S>                     <C>         <C>       <C>        <C>       <C>      <C>       <C>        <C>
 Revenues.............. $14,895     $10,430   $10,208    $10,694   $11,557  $11,707   $12,158    $13,673
 Cost of revenues......  (3,725)     (2,240)   (2,099)     (2,298)   (2,558)  (2,571)   (2,615)    (3,202)
 Gross profit..........  11,170       8,190     8,109       8,396     8,999    9,136     9,543     10,471
 Operating expenses:
   Research and
    development........   4,757       4,563     4,319       4,294     4,041    3,870     3,815      3,612
   Marketing and
    selling, net.......   4,840       4,365     3,690       3,840     4,469    4,587     4,642      4,926
   General and
    administrative.....   1,169       1,308     1,057         904       969    1,073     1,071        985
   One time
    charge/repayment
    of future royalties       -       3,023         -           -         -        -         -          -
 Operating income
   (loss)..............     404      (5,069)     (957)       (642)     (480)    (394)       15        948
 Financial income, net.   1,404       1,264     1,118         866       752      686       634        595
     Net income (loss). $ 1,808     $(3,805)     $161       $ 224      $272     $292      $649     $1,543


 As a percentage of
 revenues:
 Revenues..............     100%        100%      100%        100%      100%     100%      100%       100%
 Cost of revenues......     (25)        (21)      (21)        (21)      (22)     (22)      (22)       (23)
 Gross profit..........      75          79        79          79        78       78        78         77
 Operating expenses:
   Research and
   development.........      32          44        42          40        35       33        31         27
   Marketing and
   selling, net........      32          42        36          36        39       39        38         36
   General and
   administrative......       8          13        10           9         8        9         9          7
   One time
     charge/repayment
     of future
     royalties.........       -          29         -           -         -        -         -          -
 Operating income
 (loss) ...............       3         (49)       (9)         (6)       (4)      (3)        -          7
 Financial income, net.       9          12        11           8         6        6         5          4
     Net income (loss).      12%        (37)%       2%          2%        2%       3%        5%        11%

</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.

                                       50

<PAGE>


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, 2002, we had approximately $13.8 million in cash
and cash equivalents, $29.6 million in short term investments and our working
capital was approximately $38.2 million. Taking into account long-term liquid
investments, we had $88.4 million in cash and liquid investments as of December
31, 2002.

        Capital expenditures for the years ended December 31, 2000, 2001 and
2002 were approximately $4.2 million, $2.0 million and $1.7 million
respectively. These expenditures were principally for research and development
equipment, motor vehicles, office furniture and equipment and leasehold
improvements. We currently do not have significant capital spending or purchase
commitment, but we expect to continue to engage in capital spending consistent
with anticipated growth in our operations, infrastructure and personnel. Net
cash provided by operating activities was approximately $5.5 million for the
year ended December 31, 2002. This amount was primarily attributable to a net
profit of $2.8 million, an increase of $2.6 million in trade payables, an
increase of $1.7 million in other payables and accrued expenses and an increase
in depreciation of $2.7 million. These increases in cash provided by operating
activities were offset in part by an increase in trade receivables of $4.4
million and an increase in other receivables of $1.6 million.

        The increase in accounts receivable and trade payables for the year
ended December 31, 2002 was primarily attributable to a one time FastWeb deal.
Net cash provided by investing activities was approximately $3.1 million for the
year ended December 31, 2002. For the year ended December 31, 2002, $23.2
million of cash provided by investing activities were from sales of short-term
deposits and $18.6 million were invested in long term investments. During the
year ended December 31, 2002, $1.7 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. Through December 31,
2002 we did not initiate the repurchase program. At the beginning of 2003, we
started to reissue the repurchased shares upon exercise of employee stock
options.

                                       51

<PAGE>




        Net cash use by financing activities was $1.5 million for the year ended
December 31, 2002. For the year ended December 31, 2002, cash used in financing
activities was attributable principally to repurchase of ordinary shares for a
total of $1.9 million.

        As of December 31, 2002, 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.

        As of December 31, 2002, 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, 2002, our net operating loss carry-forwards for
Israeli tax purposes amounted to approximately $18.0 million. Under Israeli law,
these net-operating losses may be carried forward indefinitely and offset
against future taxable income. We expect that, during the period in which these
tax losses are utilized, our income will be substantially tax-exempt. Therefore,
there will be no tax benefit available from these losses and no deferred income
taxes

                                       52

<PAGE>


have  been  included  in our  financial  statements.  Deferred  taxes  for other
temporary differences are immaterial.

        As of December 31, 2002, the net operating loss carry-forwards of our
U.S. subsidiary for U.S. tax purposes amounted to approximately $8.5 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 2015.

Impact of Inflation and Currency Fluctuations

        The dollar cost of our operations is influenced by the extent to which
any inflation in Israel is offset, is offset on a lagging basis, or is not
offset by the devaluation of the NIS in relation to the dollar. When the rate of
inflation in Israel exceeds the rate of devaluation of the NIS against the
dollar, companies experience increases in the dollar cost of their operations in
Israel. Unless offset by a devaluation of the NIS, inflation in Israel will have
a negative effect on our profitability as we receive payment in dollars or
dollar-linked NIS for all of our sales while we incur a portion of our expenses,
principally salaries and related personnel expenses, in NIS.

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

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


        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

                                       53

<PAGE>


comparisons of our results.  The effects of foreign currency re-measurements are
reported in our consolidated financial statements in current operations.

Recent Accounting Pronouncements

        The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards ("SFAS") No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 136"). SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
and Activity (including Certain Costs Incurred in a Restructuring)". SFAS 146
improves financial reporting by requiring that a liability for a cost associated
with an exit or disposal activity be recognized and measured initially at fair
value only when the liability is incurred. The provisions of SFAS 146 are
effective for exit or disposal activities that are initiated after December 31,
2002. Adoption of SFAS 146 is not expected to have a material effect on the
Company's financial position or operating results.


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, 2002, we had cash and cash equivalents and short-term
investments of $43.4 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 2002, the NIS has devalued approximately 7.3%
against the dollar. Among the factors contributing to the devaluation are the
political instability in Israel and uncertain economic conditions. The
devaluation has resulted in an increase in the rate of

                                       54

<PAGE>


inflation in Israel, which was approximately 6.5% for the year 2002 and higher
than the annual inflation rate for 2001.

        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 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

        On April 26, 2002, our Board of Directors in accordance with the
recommendation of our Audit Committee decided to no longer utilize the services
of Luboshitz Kasierer, a Member Firm of Arthur Andersen, as our independent
auditors and engaged Kost Forer & Gabbay, a member of Ernst & Young
International, to serve as our independent auditors for the fiscal year ending
December 31, 2002. We had no disagreements with our former auditors on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure. The appointment of Kost Forer & Gabbay was ratified
by our shareholders at the 2002 Annual Meeting of Shareholders that was held on
June 9, 2002.

                                       55




<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..................    54   Chairman of the Board of Directors
Gad Tamari.....................    58   Chief Executive Officer and Director
David Seligman.................    44   Chief Financial Officer
Dan Goldstein..................    49   Director
Liora Katzenstein..............    47   Director
Andreas Mattes.................    42   Director
Efraim Wachtel.................    58   Director

        Zohar Zisapel, Gad Tamari, Andreas Mattes and Efraim Wachtel will serve
as directors until our 2003 annual general meeting of shareholders. Liora
Katzenstein is serving as outside director pursuant to the provisions of the
Israeli Companies Law for a three-year term ending December 2003. Dan Goldstein
served as outside director pursuant to the provisions of the Israeli Companies
Law for a three-year term ending January 2003. Their terms of service may be
renewed for one additional three-year term. Our company has renewed the
appointment of Dan Goldstein for a term ending in January 2006 and intends to
renew the appointment of Prof. Katzenstein for a term ending December 2006.

        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 Communications 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 telecommunications 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.

                                       56

<PAGE>




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

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

        Liora Katzenstein has served as an outside director of RADVISION since
December 2000. Prof. Liora Katzenstein specializes in Business Administration
and Entrepreneurship. During the last five years she founded, and serves as the
President and CEO of, ISEMI - Israel School of Entrepreneurial Management and
Innovation. Prof. Katzenstein has also served as a Senior Lecturer in various
academic institutions in Israel and abroad including the Harvard Business
School, Nanyang University and the Technion, Israel Institute of Technology.
Prof. Katzenstein currently serves as a director of Clal Industries &
Investments Ltd., Discount Issuers Ltd., Amanat Ltd. and Palafric Investments
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.

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

                                       57

<PAGE>




        Other key managers are as follows:

  Name                        Age  Position
  --------------------------  ---  -------------------------------------------
  Boaz Raviv................  43   General Manager of the Technology Group
  Avinoam Barak.............  41   General Manager of the Networking Group
  Ofer Shapiro..............  34   Senior Vice President, Business Development
  Eli Doron.................  50   Chief Technical Officer and Executive Vice
                                   President
  Irit Machtey..............  47   Senior Vice President Organization &
                                   Human Resources
  Arnie Taragin.............  47   Vice President and General Counsel

        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.

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

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

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

        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 communications companies in Israel. Prior to joining My Time
and since 1986, Ms. Machtey held a series of senior level

                                       58

<PAGE>


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.

        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.

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

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<PAGE>


the time outside directors are to be appointed, all current members of the Board
of Directors are of the same gender, then at least one outside director must be
of the other gender.

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

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

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

Audit Committee

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

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

Other Committees

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

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<PAGE>




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

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.

        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,

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<PAGE>


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 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

                                       62

<PAGE>


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;

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<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.

     Item 11. Executive Compensation

        The following table sets forth information concerning the total
compensation paid to our executive officers in fiscal 2002:

                                         Salaries,          Pension,
                                           fees,         retirement and
                                        commissions       other similar
Name and Principal Position             and bonuses         benefits
-------------------------------------   -----------      --------------
All officers and directors as a group
(7 persons)..........................     $334,413           $17,433

        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, 2003:

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<PAGE>


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


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

Plan Administration

        The share incentive committee of our board of directors administers the
plan 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. The trustee may not release the options or ordinary shares
to the beneficiaries of these options or shares before the second anniversary of
the registration of the options in the name of the trustee.

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

Termination and Amendment

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

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<PAGE>




Consultants Option Plan

        In March 1999, we adopted our consultants option plan. Our employees and
directors and consultants employed by us are eligible to participate in the
plan. Options granted under the 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, 2003:



       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.

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.

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.

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<PAGE>


2000 Stock Option Plan

        Our 2000 Employee Stock Option Plan, or the 2000 Plan, currently
authorizes the grant of options to purchase up to 3,321,552 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 and 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
will be authorized for grant in 2003 based on 3.3% of our share capital at
December 31, 2002. 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;

     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

                                       67


<PAGE>


          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, 2003:

       Ordinary shares                            Range of exercise
 reserved for option grants   Options granted           prices
 --------------------------   ---------------     -----------------
          3,321,552               2,853,612         $4.57- $28.00



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<PAGE>


Exercise of Options During 2002

        During the year ended December 31, 2002, we issued 262,355 ordinary
shares, par value NIS 0.1 per share each, at an average exercise price of $1.61
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 ordinary    Percentage of
                                                shares           outstanding
                                              beneficially       ordinary
Name                                           owned   (1)        shares (2)
---------------------------------------   ------------------    -------------
Yehuda Zisapel (3)(4)..................        1,964,561           10.69%
Zohar Zisapel (5)(6)...................        2,028,041           11.03%
Siemens Venture Capital GmbH (7).......        1,389,378            7.56%
Samsung entities (8)...................        1,000,000            5.44%
The Baupost Group, L.L.C. (9) .........        3,377,975            18.37%

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

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

(2)     The percentages shown are based on 18,384,404 ordinary shares issued and
        outstanding as of March 26, 2003.

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

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<PAGE>




(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 13, 2003.



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 (7 persons).  2,467,254               13.42%

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

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

(2)     The percentage of ordinary shares for each person and the group shown in
        this table is based on the 18,384,404 ordinary shares outstanding on
        March 26, 2003.

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:

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<PAGE>



<TABLE>
<S>                               <S>                             <S>
AB-NET Ltd.                       Ceragon Networks Ltd.           RADView Software Ltd.
Axerra Networks Inc.              Modules INC.                    RADWARE Ltd.
BYNET Data Communications Ltd.    RADCOM Ltd.                     RADWIN Ltd.
BYNET Electronics Ltd.            RAD Data Communications Ltd.    RIT Technologies Ltd.
BYNET Properties Ltd.             RADLAN Computer                 RND  Operation Services Ltd.
BYNET SEMECH Outsourcing Ltd.       Communications Ltd.           Sanrad Inc.
BYNET Systems Applications Ltd.                                   SILICOM Ltd.
BYNET Personal Computers Ltd.                                     WISAIR Inc.
</TABLE>

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

        Members of the RAD-BYNET group provide us with 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 $107,000 and $54,000 in 2001 and 2002, 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.

Lease Arrangements

        We leased from RAD Data Communications, an affiliated company controlled
by Yehuda Zisapel and Zohar Zisapel and a member of the RAD-BYNET group,
approximately 11,000 square feet of office space for our facility in New Jersey,
for a monthly rent of approximately $8,800. The lease terminated in May 2002.
The monthly rent payments included a 15% intra-group discount.

Supply Arrangement

        We purchase from RAD Data Communications components that we integrate
into our multimedia RADVISION products. The aggregate purchase price of these
components was approximately $114,000 for the year ended December 31, 2001 and
$133,000 for the year ended December 31, 2002.

        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

                                       71

<PAGE>




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

Registration Rights

        In a private placement of our ordinary shares in April 1995, several of
our shareholders were granted registration rights for their ordinary shares. We
granted registration rights to Yehuda Zisapel, Zohar Zisapel, RAD Data
Communications Ltd. and the employees' trust, as a group.

        This shareholder group as well as other groups who purchased our
ordinary shares in the private placement, have the right to make a single demand
for the registration of their ordinary shares outstanding at the time of our
public offering in March 2000 provided that:

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

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

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

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

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

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

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

                                       72

<PAGE>


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

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

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 have
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 expires in March 2003, except that it will be
automatically extended for two additional one-year periods, unless any of the
parties to the agreement notifies each of the other parties 60 days before the
expiration date of the then current term that such party wishes to terminate the
agreement. 4,427,554 ordinary shares, representing approximately 24.21 % of the
outstanding shares, are currently subject to the voting agreement.

Item 14. Controls and Procedures

        Within the 90 days prior to the date of the filing of this Form 10-K, 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 the our internal controls or
other factors which could significantly affect internal controls subsequent to
the date we carried out the evaluation.

                                       73

<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, 2000,
1999 and 1998).

(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 Communications Ltd. and Yehuda Zisapel and Zohar Zisapel

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

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

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

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

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

                                       74



<PAGE>


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

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

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

10.1***   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 Communications 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        Consent  of  Kost   Forer  &  Gabbay,   a  member  of  Ernst  &  Young
          International,  with respect to the  Registration  Statements  on Form
          S-8.

99.1      Certification  by Chief Executive  Officer  Pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.

99.2      Certification  by Chief Financial  Officer  Pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.

99.3      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.

99.4      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.

                                       75

<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.

         1.    On November 4, 2002 the Registrant filed with the Securities and
               Exchange Commission a Form 8-K, announcing the INVISION product
               line.

         2.    On November 18, 2002 the Registrant filed with the Securities and
               Exchange Commission a Form 8-K, announcing the sale and
               successful roll out 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.

         3.    On November 26, 2002 the Registrant filed with the Securities and
               Exchange Commission a Form 8-K, reporting the receipt from the
               Israeli court to commence its second program to repurchase up to
               $10 million or 2 million of its common shares under the share
               repurchase program that was announced on August 28, 2002.

                                       76


<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    Charged to                  Balance at
                                          beginning    costs and       other                         end
Description                               of period     expenses      accounts      Deductions   of period
-----------                               ---------     --------      --------      ----------   ---------
<S>                                     <C>              <C>                                     <C>
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
                                          ========                                               ==========
Year ended December 31, 2000:
Allowance for doubtful accounts....       $225,000       $352,000                                  $577,000
                                          ========                                                 ========

</TABLE>




                                       77
<PAGE>

                       RADVISION LTD. AND ITS SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                             AS OF DECEMBER 31, 2002

                                 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-31



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

                                       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 the
related consolidated  statements of operations,  changes in shareholders' equity
and cash flows for the year ended December 31, 2002. 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 audit.

      We conducted our audit 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 audit provides a reasonable  basis
for our opinion.

      In our opinion,  the consolidated  financial  statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company and its  subsidiaries as of December 31, 2002, and the  consolidated
results of their operations and cash flows for the year ended December 31, 2002,
in  conformity  with  accounting  principles  generally  accepted  in the United
States.


                                                    /s/Kost Forer & Gabbay
Tel-Aviv, Israel                                    KOST FORER & GABBAY
January 29, 2003                              A Member of Ernst & Young Global



                                     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

                                                               December 31,
                                                        ------------------------
                                                            2001         2002
                                                        -----------   ----------
     ASSETS
  CURRENT ASSETS:
    Cash and cash equivalents                           $  6,717     $ 13,825
    Short-term bank deposits                              27,701       14,879
    Short-term marketable securities                      25,084       14,712
    Trade receivables (net of allowance for
    doubtful accounts of $ 1,126 and $ 1,593
    at December 31, 2001 and 2002, respectively)           5,078        9,505
    Other receivables and prepaid expenses                 1,259        2,836
    Inventories                                            1,884          996
                                                         ----------   ----------
  Total current assets                                    67,723       56,753
                                                         ----------   ----------
  LONG-TERM ASSETS:
    Long-term bank deposits                                2,022        11,013
    Long-term marketable securities                       24,304        33,929
    Severance pay fund                                     1,200         1,641
                                                         ----------   ----------
  Total long-term assets                                  27,526        46,583
                                                         ----------   ----------
  PROPERTY AND EQUIPMENT, NET                              4,518         3,335
                                                         ----------   ----------
  Total assets                                          $ 99,767      $106,671
                                                         ==========   ==========
     LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES:
    Current maturities of long-term bank loans          $     19     $      -
    Trade payables                                           765         3,347
    Deferred revenues                                      3,491         2,863
    Other payables and accrued expenses                   10,071        12,385
                                                         ----------  -----------
  Total current liabilities                               14,346        18,595
                                                         ----------  -----------
  ACCRUED SEVERANCE PAY                                    1,872         3,061
                                                         ----------  -----------
  Total liabilities                                       16,218        21,656
                                                         ----------  -----------
  COMMITMENTS AND CONTINGENCIES
  SHAREHOLDERS' EQUITY:
    Ordinary shares of NIS 0.1 par value:
     Authorized - 25,000,000  shares as of
     December 31, 2001 and 2002;  Issued -
     19,889,690  and  20,152,045  shares  as of
     December  31,  2001  and  2002,
     respectively; Outstanding - 18,304,244 and
     18,285,930 shares as of December 31, 2001
     and 2002, respectively                                  182           187
    Additional paid-in capital                           104,209       104,586
    Deferred stock compensation                             (299)         (117)
    Treasury stock, at cost (1,585,446 and 1,866,115
     Ordinary shares of NIS 0.1 par value as of
     December 31, 2001 and 2002, respectively)            (9,903)      (11,757)
    Accumulated deficit                                  (10,640)       (7,884)
                                                         -----------   ---------
  Total shareholders' equity                              83,549        85,015
                                                         -----------   ---------
  Total liabilities and shareholders' equity            $ 99,767       $106,671
                                                        ============  ==========

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

                                      F-4
<PAGE>

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

                                                                       Year ended December 31,
                                                               ---------------------------------------
                                                                   2000         2001          2002
                                                               ------------ ------------- ------------
 <S>                                                           <C>          <C>           <C>
 Revenues                                                      $ 45,911     $ 46,227      $ 49,095
 Cost of revenues                                                11,446       10,362        10,946
                                                               ------------ ------------- ------------

 Gross profit                                                    34,465       35,865        38,149
                                                               ------------ ------------- ------------
  Operating expenses:
    Research and development costs                               14,263       17,933        15,338
    Less - participation by the Chief Scientist of the
      Government of Israel                                          353            -             -
                                                               ------------ ------------- ------------
    Research and development expenses, net                       13,910       17,933        15,338
    Marketing and selling expenses, net                          17,358       16,735        18,624
    General and administrative expenses                           3,458        4,438         4,098
    Restructuring costs                                               -        3,023             -
    Repayment of future royalties                                 3,666            -             -
                                                               ------------ ------------- ------------

 Total operating expenses                                        38,392       42,129        38,060
                                                               ------------ ------------- ------------

 Operating income (loss)                                         (3,927)      (6,264)           89
 Financial income, net                                            4,176        4,652         2,667
                                                               ------------ ------------- ------------
 Net income (loss)                                               $  249     $ (1,612)     $  2,756
                                                               ============ ============= ============
 Basic net earnings (loss) per Ordinary share                    $0.014     $  (0.09)     $   0.15
                                                               ============ ============= ============
 Diluted net earnings (loss) per Ordinary share                  $0.013     $  (0.09)     $   0.15
                                                               ============ ============= ============

</TABLE>



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

                                      F-5


<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
STATEMENTS OF SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share data


                               Ordinary shares    Preferred shares    Additional  Deferred                              Total
                             ------------------  -------------------   paid-in     stock      Treasury Accumulated  shareholder's
                               Number    Amount    Number    Amount     capital  compensation  stock     deficit       equity
                             ---------  -------  ---------- -------- ----------- ------------ -------- ------------ ------------
 <S>                         <C>          <C>     <C>         <C>      <C>         <C>        <C>         <C>           <C>
 Balance as of January 1,
   2000                      10,686,306   $  17   2,957,165   $   4    $ 13,789    $(1,052)   $      -    $ (9,277)     $ 3,481
   Ordinary shares issued     4,960,822     125           -       -    *)89,094          -           -           -       89,219
   Conversion of Preferred
    shares                    2,957,165       4  (2,957,165)     (4)          -          -           -           -            -
   Cancellation of Ordinary
    shares                      (58,447)      -           -       -           -          -           -           -            -
   Deferred compensation              -       -           -       -         218       (218)          -           -            -
   Options exercised            599,138      19           -       -         780          -           -           -          799
   Amortization of deferred
    compensation                      -       -           -       -         (32)       629           -           -          597
   Net income                         -       -           -       -           -          -           -         249          249
                             ----------  ------  ---------- -------  ----------    --------   --------    --------- ------------
 Balance as of December 31,
   2000                      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
                             ==========  ======  ========== ========= ===========  ========   ========    ========= ============
</TABLE>

*) Net of issuance expenses of approximately $ 8,400.

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

                                      F-6


<PAGE>



                                             RADVISION LTD. AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. dollars in thousands

                                                                     Year ended December 31,
                                                            ------------------------------------------
                                                               2000            2001           2002
                                                            -----------    ------------   ------------
 <S>                                                        <C>            <C>             <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                        $    249       $ (1,612)       $  2,756
   Adjustments required to reconcile net income (loss)
    to net cash provided by operating activities:
    Depreciation                                               1,843          2,407           2,665
    Gain on sale of property and equipment                         -              -              (2)
    Accrued interest and amortization of premium on
     held-to-maturity marketable securities                        -              -            (263)
    Accrued severance pay, net                                   107            279             748
    Amortization of deferred stock compensation                  597            328             182
    Decrease (increase) in trade receivables, net             (3,810)         1,947          (4,427)
    Decrease (increase) in other receivables and prepaid
     expenses                                                    465           (208)         (1,577)
    Decrease (increase) in inventories                        (2,522)         3,072             888
    Increase (decrease) in trade payables                      1,158         (2,951)          2,582
    Increase (decrease) in deferred revenues                   7,367         (6,807)           (628)
    Increase (decrease) in other payables and accrued
     expenses                                                  3,076          3,592           2,314
    Other                                                         34            174               -
                                                            -----------    -----------    ------------

 Net cash provided by operating activities                     8,564            221           5,238
                                                            -----------    -----------    ------------
  CASH FLOWS FROM INVESTING ACTIVITIES:
   Increase in short-term investments                        (39,550)       (13,235)              -
   Increase in long-term investments                         (15,897)       (10,429)              -
   Proceeds from redemption of held-to-maturity
    marketable securities                                          -              -          45,810
   Purchase of held-to-maturity marketable securities              -              -         (44,800)
   Proceeds from withdrawal of bank deposits                       -              -          36,998
   Purchase of bank deposits                                       -              -         (33,167)
   Purchase of property and equipment                         (4,175)        (2,045)         (1,705)
   Proceeds from sale of property and equipment                  118            146             225
                                                            -----------    -----------    ------------
 Net cash provided by (used in) investing activities         (59,504)       (25,563)          3,361
                                                            -----------    -----------    ------------
 CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of share capital                                  90,018            941               -
   Purchase of treasury stock                                      -         (9,903)         (1,854)
   Exercise of options by employees                                -              -             382
   Payment of issuance expenses                                    -           (550)              -
   Repayment of long-term bank loans                             (66)           (46)            (19)
                                                            -----------    -----------    ------------
 Net cash provided by (used in) financing activities          89,952         (9,558)         (1,491)
                                                            -----------    -----------    ------------
 Increase (decrease) in cash and cash equivalents             39,012        (34,900)          7,108

 Cash and cash equivalents at the beginning of the year        2,605         41,617           6,717
                                                            -----------    -----------    ------------
 Cash and cash equivalents at the end of the year           $ 41,617       $  6,717        $ 13,825
                                                            ===========    ===========    ============

  Supplemental disclosure of cash flow activities:
  ------------------------------------------------
     Cash paid during the year for:
       Interest                                            $       8      $       4      $        -
                                                          ===========    ===========    ============
</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

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, based on its restructured internal organization,  management
          of operations and performance  evaluation.  These segments are: 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  two largest  customers in 2002
          represented 25% and 11% of total sales (see Note 11c).

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

          The  consolidated  financial  statements  are  prepared  according  to
          generally accepted accounting  principles in the United States or U.S.
          GAAP. The significant  accounting policies followed in the preparation
          of the financial  statements,  applied on a consistent  basis,  are as
          follows:

          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

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 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 U.S. 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 aquired.

          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 any 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
               U.S.  dollars and bear interest at an average rate of 2.95%.  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 included
               in  long-term  investments,  and  presented  at their  cost  plus
               accrued  interest.  The  deposits  are in U.S.  dollars  and bear
               interest at an average rate of 3.76%.

                                       F-9


<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

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 2002 and 2003,  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, in the amount of approximately $ 864 in
               2001 and $ 396 and in 2002,  which have been included in the cost
               of revenues.

               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
                                                          Over the term of the
               Leasehold improvements                             lease

               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.  Assets to be  disposed of by sale are
               reported at the lower of the  carrying  amount or fair value less
               selling costs. As of December 31, 2002, 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

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          j.   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  expenses for the years ended  December 31, 2000,  2001
               and  2002,  amounted  to  approximately  $ 107,  $ 279 and $ 748,
               respectively.

          k.   Revenue recognition:

               The Company and its subsidiaries  generate  revenues mainly from:
               1) licensing the rights to use its software products and sales of
               systems;  2) royalty  income;  and 3)  maintenance,  support  and
               training. The Company and its subsidiaries sell their products to
               end-users  principally  through indirect channel by OEMs,  system
               integrators  and  value  added   resellers,   all  of  which  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") as amended by 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  and  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.

               Revenues  from  short-term  time-based  licenses  are  recognized
               ratably over the terms of software agreement.

                                      F-11


<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               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  paid  to the  Company  by  these  customers.  Non-refundable
               payments on account of future  royalties from similar  agreements
               are recognized upon payment,  provided that no future  obligation
               exists.

               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 elements when sold separately.

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

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

               Sales of systems:

               Revenues  from systems sales are  recognized  in accordance  with
               Staff  Accounting  Bulletin  No.101,   "Revenue   Recognition  in
               Financial Statements" ("SAB No.101"), when delivery has occurred,
               persuasive  evidence of an agreement exists,  the vendor's fee is
               fixed  or  determinable,   no  further   obligation   exists  and
               collectability is probable.

               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, 2000, 2001 and 2002.

          l.   Research and development costs:

               Research  and  development  costs,  net of grants  received,  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.

                                      F-12


<PAGE>
                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               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.

               The  Company  received  grants  from the  Israel  U.S  Binational
               Industrial Research and Development  Foundation (see Note 8b) and
               the Chief  Scientist  Office.  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 expenses.

          m.   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.

          n.   Fair value of financial instruments:

               The Company and its subsidiaries, in estimating the fair value of
               its  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,
               trade  payables and current  maturities  of long-term  bank loans
               approximate their fair values due to the short-term maturities of
               such instruments.

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

          o.   Accounting for stock-based compensation:

               The  Company has elected to follow  Accounting  Principles  Board
               Opinion No. 25,  "Accounting for Stock Issued to Employees" ("APB
               No.  25") and FASB No.  Interpretation  No. 44,  "Accounting  for
               Certain Transactions Involving Stock Compensation" ("FIN No. 44")
               in accounting for its employee stock option plans.  Under APB No.
               25, when the exercise  price of the  Company's  stock  options is
               less than the market price of the  underlying  shares on the date
               of grant, compensation expense is recognized.

                                      F-13
<PAGE>
                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               Under  Statement  of  Financial   Accounting   Standard  No.  123
               "Accounting for Stock-Based  Compensation  ("SFAS No. 123"),  pro
               forma information regarding net income and net earnings per share
               is  required,  and has  been  determined  as if the  Company  had
               accounted  for its employee  stock  options  under the fair value
               method of SFAS No.  123.  The fair  value for  these  options  is
               amortized  over their vesting period and estimated at the date of
               grant  using a Black - Scholes  Option  Valuation  Model with the
               following  weighted-average  assumptions for 2000, 2001 and 2002:
               risk-free interest rates of 5.0% for 2000, 2.5% for 2001 and 3.0%
               for  2002;  dividend  yields  of 0%  for  2000,  2001  and  2002;
               volatility  factors of the expected market price of the Company's
               Ordinary shares of 0.8 for 2000, 0.98 for 2001 and 0.48 for 2002;
               and an expected  life of the option of 2.5 years after the option
               is vested for 2000, 2.63 years for 2001 and 4 years for 2002.

              Pro forma information under SFAS No. 123:
<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                                                          ---------------------------------------
                                                             2000          2001          2002
                                                          -----------   -----------   -----------
              <S>                                            <C>           <C>           <C>
              Net income (loss) as reported                 $    249      $ (1,612)     $  2,756
                                                          ===========   ===========   ===========
              Add: stock based compensation expense
                determined under APB 25                     $    596      $    328      $    193
                                                          ===========   ===========   ===========
              Deduct: stock-based compensation expense
              determined under fair value method for
              all  awards                                   $ (4,042)     $ (6,687)     $ (5,440)
                                                          ===========   ===========   ===========
              Pro forma net loss                            $ (3,197)     $ (7,971)     ($ 2,491)
                                                          ===========   ===========   ===========
              Basic and diluted earnings (loss) per
                share, as reported                          $  0.013     $   (0.09)     $   0.15
                                                          ===========   ===========   ===========
              Pro forma basic and diluted net loss per
                share                                       $  (0.19)     $  (0.42)     $  (0.14)
                                                          ===========   ===========   ===========
</TABLE>

          p.   Concentration of credit risk:

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

               The  majority  of the  Company's  cash and cash  equivalents  and
               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 investments that hold the Company's investments are
               financially  sound and  accordingly,  minimal  credit risk exists
               with respect to these investments.

                                      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 Company and its subsidiaries'  marketable  securities 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 Company and its subsidiaries'  trade  receivables  related to
               NBU   business   are  derived  from  sales  to  large  and  solid
               organizations  located mainly in North America,  Europe,  the Far
               East and Israel. The Company and its subsidiaries perform ongoing
               credit  evaluations  of  its  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 its customers and when uncertainty of  collectability  exists,
               the Company defers revenues until such uncertainty expires.

               As of  December  31,  2002,  current  balances  of two  customers
               accounted for 41.6% and 9.1% of the Company's trade  receivables,
               or a total of approximately $ 4,819.

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

          q.   Basic net earnings (loss) per share:

               Basic net  earnings  (loss)  per share is  computed  based on the
               weighted  average  number of shares of Common  Stock  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".

          r.   Recently issued accounting pronouncements:

               FASB  recently  also issued SFAS No. 146,  "Accounting  for Costs
               Associated with Exit or Disposal  Activities"  ("SFAS 136"). SFAS
               146  addresses  financial  accounting  and  reporting  for  costs
               associated  with  exit  or  disposal   activities  and  nullifies
               Emerging  Issues Task Force  (EITF)  Issue No.  94-3,  "Liability
               Recognition for Certain Employee  Termination  Benefits and Other
               Costs to Exit an Activity  (including Certain Costs Incurred in a
               Restructuring)".   SFAS  146  improves  financial   reporting  by
               requiring that a liability for a cost  associated with an exit or
               disposal  activity be recognized  and measured  initially at fair
               value only when the liability is incurred. The provisions of SFAS
               146 are  effective  for  exit or  disposal  activities  that  are
               initiated  after  December 31, 2002.  Adoption of SFAS 146 is not
               expected  to  have a  material  effect  on the  Company  and  its
               subsidiaries' financial position or operating results.

                                      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 3:- MARKETABLE SECURITIES

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

<TABLE>
<CAPTION>
                                                             Amortized     Unrealized     Estimated
                                                               cost      gains (losses)   fair value
                                                           ------------- -------------- --------------
             <S>                                             <C>           <C>          <C>
             Obligations of state and political
              subdivisions                                   $  21,501     $   821      $  22,322
             Corporate obligations                              27,140        (876)        26,264
                                                           ------------- -------------- --------------
                                                             $  48,641     $   (55)     $  48,586
                                                           ============= ============== ==============
</TABLE>

          At December 31, 2001, the carrying  amount of securities  approximated
          the fair  value  and the  amount  of  unrealized  gain or loss was not
          significant.  Gross realized gains or losses for 2002,  2001, and 2000
          were not significant.

          The amortized cost of held-to-maturity debt and securities at December
          31, 2002, by contractual maturities, are shown below:

                                                      Amortized      Estimated
                                                        cost        fair value
                                                    -------------  -------------
          Due in one year or less                    $   14,712     $   15,526
          Due after one year through five years          33,929         31,060
                                                    -------------  -------------
                                                      $  48,641     $   48,586
                                                    =============  =============

NOTE 4:- INVENTORIES

          Inventories are composed of the following:

                                                   December 31,
                                            -----------------------------
                                                2001            2002
                                            -------------   -------------
            Raw materials                     $  991          $  194
            Work-in-progress                     391             720
            Finished products                    502              82
                                            -------------   -------------
                                              $1,884          $  996
                                            =============   =============

                                      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 5:- PROPERTY AND EQUIPMENT

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

                                                             December 31,
                                                       -------------------------
                                                           2001           2002
                                                       -------------  ----------

              Computers and peripheral equipment        $ 3,651        $ 5,780
              Office furniture and equipment              3,781          3,272
              Motor vehicles                              1,001            591
              Leasehold improvements                      1,487          1,536
                                                       ------------- -----------
                                                          9,920         11,179
              Less - accumulated depreciation             5,402          7,844
                                                       ------------- -----------
              Depreciated cost                          $ 4,518        $ 3,335
                                                       ============= ===========

          Depreciation expense amounted to $ 1,843, $ 2,407 and $ 2,665, for the
          years ended December 31, 2000, 2001 and 2002, respectively.

NOTE 6:- OTHER PAYABLES AND ACCRUED EXPENSES

                                                      December 31,
                                              ----------------------------
                                                  2001            2002
                                              -------------  --------------

           Employees and employee accruals      $  2,369      $   1,617
           Tax withholding payable                   284              -
           Accrued expenses                        7,418         10,768
                                              ------------   ------------
                                                $ 10,071      $  12,385
                                              ============   ============


NOTE 7:- LONG-TERM BANK LOANS

                                                            December 31,
                                                    ----------------------------
                                                        2001            2002
                                                    -------------  -------------

             Loans linked to the U.S. dollar          $   19         $    -
             Less - current maturities                    19              -
                                                    -------------   ------------
                                                      $    -         $    -
                                                    =============   ============

          The loans bore an annual interest rate of LIBOR plus 1%.

          As of December 31,  2002,  the Company had an unused line of credit in
          the amount of $2,500.

                                      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 8:- COMMITMENTS AND CONTINGENCIES

          a.   In connection with its marketing activities, the Company received
               in prior years  participation  payments  from the  Government  of
               Israel - Fund for the  Encouragement  of Marketing  Activities in
               the  total  amount of  approximately  $ 686.  In  return  for the
               participation payments, the Company is committed to pay royalties
               at a rate of 3% of the Company's  total increase in export sales,
               from  the  end  of  the  second  year  of  implementation  of the
               marketing plan until the date at which the participation has been
               fully  repaid.  The  Company's  total  commitment  for  royalties
               payable  with respect to future  sales,  based on  Government  of
               Israel participations  received or accrued, net of royalties paid
               or accrued, totaled approximately $ 0 as of December 31, 2002.

          b.   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.
               Royalties paid or accrued to the BIRD-F amounted to $ 0.

          c.   The Company and its subsidiaries  operate from leased premises in
               Israel, United States, China, United Kingdom and Hong Kong. Lease
               agreements expire till June 2005 (some with renewal options). The
               Company rents  vehicles under  operating  lease  agreements  that
               expire on various dates, the latest of which is in 2006.

               Annual  minimum  future  rental  payments  due  under  the  above
               agreements,  at the exchange rate in effect on December 31, 2002,
               are approximately as follows:

                2003            $2,162
                2004             1,841
                2005               788
                2006                33
                                ------
                                $4,824
                                ======

               For the years ended  December  31,  2000,  2001 and 2002,  rental
               expense was $ 1,015, $ 1,424 and $ 1,556, 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 8:-COMMITMENTS AND CONTINGENCIES (Cont.)

          d.   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 per unit sold.

               The rates of royalties to the other third party are  comprised of
               (in U.S. dollars):

               (i)  Royalties  based on a fixed amount per certain  product sold
                    by the Company ranging from $ 20 to $ 48 per unit sold, and;

               (ii) a minimum aggregate royalty payment in the amount of $ 85 to
                    be paid until the earlier of May, 2005, or the completion of
                    an aggregate sales volume of 600 units of another product.

               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, 2002:

                 2003           $25
                 2004            25
                                ---
                                $50
                                ===

               The Company paid royalties in the amount of $ 25 in 2002.

          e.   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.

                                      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:-COMMITMENTS AND CONTINGENCIES (Cont.)

          f.   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 in respect to damages  caused by this  action,  if
               any.  The  Company  cannot  predict  the  final  outcome  of this
               dispute. The Company's management is unable to determine with any
               certainty  the ultimate  outcome of the  dispute,  however it had
               accrued what it believes to be sufficient funds.

NOTE 9:- 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
          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.   In January 2000, the Company  increased its  authorized  Ordinary
               share capital to 24,984,470  Ordinary  shares and 15,530 deferred
               shares  of NIS 0.1  par  value  per  share  and  all  outstanding
               Preferred  shares  were  converted  into an  identical  number of
               Ordinary shares. In January 2000, the Company effected a 211 to 1
               share split in the form of a share  dividend.  All  references to
               per share  amounts  and the  number of shares in these  financial
               statements  have been  restated  to  reflect  the  abovementioned
               changes.

          b.   The Company 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.

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

          d.   In March 2000, the Company issued 4,370,000 Ordinary shares in an
               initial public offering for $ 87,000, or $ 20 per share.

          e.   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.

                                      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 9:- SHAREHOLDERS' EQUITY (Cont.)

               As of December  31,  2002,  the Company had  purchased  1,866,115
               Ordinary shares at a cost of $ 11,757.

               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.

          f.   The Company  adopted a key employee  share  incentive  plan which
               provides  for the  grant  by the  Company  of  option  awards  to
               purchase  up to an  aggregate  of  6,485,075  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.

               As of December 31, 2002, 467,940 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, 2000, 2001 and 2002, and the weighted  average
               exercise prices per share at the date of grant, are summarized as
               follows:

<TABLE>
<CAPTION>
                                                          Year ended December 31,
                                       ---------------------------------------------------------------
                                               2000                 2001                 2002
                                       -------------------- -------------------- ---------------------
                                                  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          2,667,251    1.23    3,228,656     7.48   3,885,872     7.29

                Granted                1,390,795   16.68    2,284,095     5.65   1,167,000     5.19

                Exercised               (599,138)   1.46     (744,706)    1.31    (262,355)    1.61

                Forfeited               (230,252)   7.30     (882,173)    8.74    (379,581)    7.88
                                       ---------            ----------           ----------
                Options outstanding
                  at the end of the
                  year                 3,228,656    7.48    3,885,872     7.29   4,410,936     6.99
                                       ========= ========== ========== ========= ========== ==========
                Options exercisable
                  at the end of the
                  year                   749,225    1.69      698,842     8.01   1,485,885     7.53
                                       ========= ========== ========== ========= ========== ==========
</TABLE>
                                      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 9:- SHAREHOLDERS' EQUITY (Cont.)

     A summary of the options  outstanding and exercisable at December 31, 2002,
     is as follows:
<TABLE>
<CAPTION>
                                        Options outstanding                   Options exercisable
                             ------------------------------------------   ----------------------------
                                             Weighted-
                                              average        Weighted-    Outstanding      Weighted-
                              Outstanding     remaining      average           at           average
               Exercise       at December     contractual    exercise       December        exercise
                price          31, 2002         life          prices        31, 2002         prices
            -------------    ------------    -----------    -----------   -------------    -----------
                  $                             Years            $                              $
            -------------                    -----------    -----------                    -----------
             <S>              <C>               <C>            <C>         <C>                <C>
              0.68-1.02         186,046         6.58            0.95          98,480           0.95
              1.02-1.53         247,913         6.58            1.18         178,283           1.18
              1.53-2.3          188,441         7.50            1.58         112,486           1.58
              3.45-5.18       1,278,892         8.96            4.86         295,229           4.94
              5.18-7.77       1,675,425         8.93            5.62         365,412           6.06
              7.77-11.66        110,564         7.33           10.20          82,922          10.20
             11.66-17.49        553,155         7.50           14.64         276,573          14.65
             26.24-28           170,500         7.75           28.00          76,500          28.00
                             ------------                   -----------   -------------    -----------
                              4,410,936                         6.99       1,485,885           7.53
                             ============                   ===========   =============    ===========
</TABLE>
          A summary of the options granted whose exercise prices differ from the
          market price of the date of the stock on the date of grant as follows:
<TABLE>
<CAPTION>

                                                           Year ended December 31,
                                       ---------------------------------------------------------------
                                               2000                 2001                 2002
                                       -------------------- -------------------- ---------------------
                                                  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 less
               than fair value at
               date of grant             121,114    10.20           -         -          -          -
                                       ========= ========== ========== ========= ========== ==========
             Weighted average
               exercise prices equal
               to fair value at date
               of grant                1,269,681    17.52   2,284,095      5.65   1,167,000     5.19
                                       ========= ========== ========== ========= ========== ==========
</TABLE>

          The  amounts of  deferred  compensation  recognized  arising  from the
          difference between the exercise price and the fair market value on the
          date of the grant of $ 218,  $ 0 and $ 0 for  options  granted  in the
          years  ended  December  31,  2000,  2001 and  2002,  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, 2000,
          2001 and 2002  amounted to $ 597, $ 328 and $ 182,  respectively.  The
          weighted  average fair values,  on the grant date, for the years ended
          December  31,  2000,  2001 and 2002,  amounted to $ 7.72, $ 3.29 and $
          2.03, respectively.

                                      F-22


<PAGE>
                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 9:- SHAREHOLDERS' EQUITY (Cont.)

          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.

NOTE 10:- 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,
                                                         --------------------------------------------
                                                              2000           2001           2002
                                                         --------------  -------------  -------------
             <S>                                           <C>             <C>            <C>
             Numerator:
              Net income (loss)                            $      249      $   (1,612)    $    2,756
                                                         ==============  =============  =============
             Denominator:

              Weighted average number of Ordinary shares
                outstanding during the
                year used to compute basic net earnings
                (loss) per share                           17,174,453      18,943,014     18,353,052
              Incremental shares attributable to
                exercise of outstanding options
                (assuming proceeds would be used to
                purchase treasury stock)                    2,698,769           *)  -        630,278
                                                         --------------  -------------  -------------
               Weighted average number of Ordinary
                shares used to compute diluted net
                earnings (loss) per share                  19,873,222      18,943,014     18,983,330
                                                         ==============  =============  =============
             Basic net earnings (loss) per share            $    0.01       $   (0.09)    $     0.15
                                                         ==============  =============  =============
             Diluted net earnings (loss) per share          $    0.01       $   (0.09)    $     0.15
                                                         ==============  =============  =============
</TABLE>

            *) Anti-dilutive.

          The total weighted average number of shares related to the outstanding
          options  excluded from the  calculation of diluted net earnings (loss)
          per shares, since they had an anti-dilutive effect, were 2,226,906 for
          the year ended December 31, 2002.


                                      F-23

<PAGE>
                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 11:- SEGMENT REPORTING AND GEOGRAPHICAL INFORMATION

               a.   Beginning in the year 2001,  the Company  operates under two
                    reportable   segments   based   on  its   revised   internal
                    organization   structure,   management  of  operations   and
                    performance  evaluation.  These segments are: the technology
                    business unit and the  networking  business  unit.  Discrete
                    segment financial  information was not available or reviewed
                    by  senior  management  during  the  year  2000.   Therefore
                    corresponding information for this year is not available.

                    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,
                                                ----------------------------
                                                   2001            2002
                                                ------------  --------------

            Technology business unit            $   16,545      $   12,759
            Networking business unit                29,682          36,336
                                                ------------  --------------
            Total revenues                      $   46,227      $   49,095
                                                ============  ==============

    Business segment operating income (loss)
       is as follows:

            Technology business unit            $   (3,122)     $      552
            Networking business unit                (3,142)           (463)
                                                ------------  --------------
            Total operating income (loss)       $   (6,264)     $       89
                                                ============  ==============


                                F-24


<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 11:- SEGMENT REPORTING AND GEOGRAPHICAL INFORMATION (Cont.)

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

                                             Year ended December 31,
                                    ------------------------------------------
                                       2000            2001           2002
                                    -----------    ------------   ------------

       North America, principally
         the United States          $ 28,830       $ 29,245       $  24,599
       Europe                          7,328          8,096          12,029
       Far East                        5,287          6,940          10,200
       Israel                          4,466          1,946           2,267
                                    -----------    -----------    ------------
                                    $ 45,911       $ 46,227       $  49,095
                                    ===========    ===========    ============
      Long-lived assets by
        geographical region:

        Israel                      $ 4,852        $  3,916       $   2,576
        United States                   281             445             591
        Other                            67             157             168
                                    ---------    -----------    ------------
                                    $ 5,200        $  4,518       $   3,335
                                    =========    ===========    ============

          c.   For the  years  ended  December  31,  2000,  2001 and  2002,  one
               customer   accounted   for   approximately   22%,  35%  and  25%,
               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 12:- MARKETING AND SELLING EXPENSES, NET
<TABLE>
<CAPTION>
                                                                     Year ended December 31,
                                                            ------------------------------------------
                                                               2000            2001           2002
                                                            -----------    ------------   ------------
            <C>                                               <C>            <C>            <C>
            Marketing and selling expenses                    $ 17,492       $ 16,735       $ 18,624
            Participation by the Government of Israel              134              -              -
                                                            -----------    -----------    ------------
            Marketing and selling expenses, net               $ 17,358       $ 16,735       $ 18,624
                                                            ===========    ===========    ============

            Marketing and selling expenses include:
              Royalties to the Government of Israel           $    750       $     80       $      -
                                                            ===========    ===========    ============
</TABLE>

NOTE 13:- 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  and  onerous  lease
          commitments  arising  from a reduction  in the facility as part of its
          plan to reduce  operating  expenses.  As of  December  31,  2002,  the
          remaining  reserve  balance of  approximately  $ 1,600 is  included in
          other payables and accrued expenses in the balance sheet.

                                      F-25


<PAGE>
                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 14:- RELATED PARTY BALANCES AND TRANSACTIONS

          a.   Balances with related parties:

                                              December 31,
                                      -----------------------------
                                          2001            2002
                                      -------------   -------------
                 Receivables           $         2     $         4
                 Trade payables        $       148     $       200

          b.   Transactions with related parties:

                                                        Year ended December 31,
                                                 ------------------------------
                                                  2000        2001       2002
                                                 -------     -------    -------

          Revenues (1)                           $  251       $ 108      $ 199
          Cost of revenues (3)                   $  842       $ 188      $ 244
          Research and development expenses (2)  $  622       $ 184      $  44
          Marketing, selling, general and
            administrative expenses (2)          $1,210       $ 116      $ 157
          Purchase of property and equipment (4) $  722       $ 263      $ 576

               (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 8f.

                                      F-26


<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

          d.   The Company's Chairman and its former director and Chairman,  are
               principal shareholders of the Company.  Individually or together,
               they are also  directors  and principal  shareholders  of several
               other  companies,  which,  together  with the  Company  and other
               subsidiaries and affiliates, are known as the RAD-BYNET group and
               which are  related  parties to the  Company.  These  corporations
               include:

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

NOTE 15:- 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 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).

               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.

                                      F-27
<PAGE>
                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 15:- TAXES ON INCOME (Cont.)

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

               In  addition,  the  Company  filed  a  request  for an  "Approved
               Enterprise" status for a second expansion of the previous program
               totaling $ 160. The request is not yet approved.

               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, 2002, 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 employees
               income.

               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.

                                      F-28


<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 15:- TAXES ON INCOME (Cont.)

          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 U.S. 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",
               during the five tax years.

          e.   As of  December  31,  2002,  the  Company's  net  operating  loss
               carryforwards  for  tax  purposes  amounted  to  approximately  $
               18,000.  These  net  operating  losses  may  be  carried  forward
               indefinitely and offset against future taxable income.

          f.   The U.S.  subsidiary's  carryforward  tax losses through December
               31, 2002  amounted to  approximately  $ 8,500.  These  losses are
               available  to offset any future U.S.  taxable  income of the U.S.
               subsidiary  and will expire in the years  2010-2015.  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-29


<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands

NOTE 15:-   TAXES ON INCOME (Cont.)

          g.   Deferred income taxes:

               Deferred  income  taxes  reflect the net tax effects of temporary
               differences   between   the   carrying   amounts  of  assets  and
               liabilities for financial reporting purposes and 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
                                                           ---------------

                 Operating loss carryforward               $      9,540
                 Valuation allowance                             (9,540)
                                                           ---------------
                                                           $          -
                                                           ===============

               The Company and its subsidiaries provided valuation allowances in
               respect  of  deferred   tax  assets   resulting   from  tax  loss
               carryforward.  Deferred  taxes  in  respect  of  other  temporary
               differences are immaterial. 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, 2002 was $519.

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

                                              Year ended December 31,
                                     ------------------------------------------
                                        2000            2001           2002
                                     -----------    ------------   ------------
                Domestic (Israel)      $  72         $  (965)        $  7,880
                Foreign                  177            (647)          (5,124)
                                     -----------    ------------   ------------
                                       $ 249         $(1,612)        $  2,756
                                     ===========    ============   ============

               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,
                                                --------------------------------
                                                   2000        2001       2002
                                                ---------  ----------- ---------
      Income (loss) before taxes on income       $ 249       $(1,612)   $ 2,756
      Theoretical tax expense (benefit)
        computed at the statutory rate (36%)        90          (580)       992
      Loss and other items for which
        deferred taxes were not provided,
        net                                       (182)          418     (1,235)
      Non-deductible expenses                       92           162        243
                                                ---------  ----------- ---------
      Taxes on income                            $   -       $     -    $     -
                                                =========  =========== =========


                                      F-30


<PAGE>

                                             RADVISION LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data

NOTE 16:- 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, 2001, and 2002 are as follows:
<TABLE>
<CAPTION>
                                                                           Three months ended,
                               ------------------------------------------------------------------------------------------------
                                Mar. 31,     June 30,    Sept. 30,    Dec. 31,    Mar. 31,    June 30,     Sept. 30,   Dec. 31,
                                 2001          2001        2001        2001        2002         2002         2002        2002
                               ---------- ------------ ----------- ------------ ----------- ------------ ----------- -----------
<S>                            <C>         <C>          <C>         <C>          <C>         <C>          <C>         <C>

Revenues                       $   14,895    $ 10,430     $ 10,208    $ 10,694     $ 11,557    $ 11,707     $ 12,158    $ 13,673
Cost of revenues                    3,725       2,240        2,099       2,298        2,558       2,571        2,615       3,202
                               ---------- ------------ ----------- ------------ ----------- ------------ ----------- -----------
Gross profit                       11,170       8,190        8,109       8,396        8,999       9,136        9,543       10,471
                               ---------- ------------ ----------- ------------ ----------- ------------ ----------- -----------
Operating expenses
Research and development
  expenses                          4,757       4,563        4,319       4,294        4,041       3,870        3,815       3,612
Marketing and selling
  expenses, net                     4,840       4,365        3,690       3,840        4,469       4,587        4,642       4,926
General and administrative
  expenses                          1,169       1,308        1,057         904          969       1,073        1,071         985
Restructuring costs                    -        3,023            -           -            -           -            -           -
                               ----------  ------------ ----------- ------------ ----------- ------------ ----------- -----------
Total operating expenses           10,766      13,259        9,066       9,038        9,479       9,530        9,528       9,523
                               ----------  ------------ ----------- ------------ ----------- ------------ ----------- -----------
Operating income  (loss)              404      (5,069)        (957)       (642)        (480)       (394)          15         948
Financial income, net               1,404       1,264        1,118         866          752         686          634         595
                               ---------- ------------ ----------- ------------ ----------- ------------ ----------- -----------
Net income (loss)                   1,808      (3,805)         161         224          272         292          649       1,543
                               ========== ============ =========== ============ =========== ============ =========== ===========
Basic earnings (loss) per
  Ordinary share                 $   0.09    $   (0.2)    $   0.01        0.01       $ 0.01    $   0.02     $   0.04    $   0.08
                               ==========  ===========  =========== ============ =========== ============ =========== ===========
Weighted average number of
  Ordinary shares outstanding  19,196,316  19,199,771   18,995,041  18,431,559   18,168,617  18,063,334   18,137,900  18,218,850
                               ==========  ==========   =========== ============ =========== ============ =========== ===========
Diluted earnings (loss) per
  Ordinary share                 $   0.09    $  (0.20)    $   0.01    $   0.01     $   0.01    $   0.02     $   0.03    $   0.08
                               ==========  ============ =========== ============ =========== ============ =========== ===========
Weighted average number of
  shares                       20,750,146  19,199,771   20,226,819  19,601,742   19,400,949  18,864,264   18,792,868  18,875,238
                               ==========  ==========   =========== ============ =========== ============ =========== ===========

</TABLE>
                          - - - - - - - - - - - - - - -
                                      F-30









<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 30, 2003

                                    RADVISION LTD.

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


                                                    /S/DAVID SELIGMAN
                                    By:   -------------------------------------
                                                     David Seligman
                                                 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/Dan Goldstein
-----------------------
    Dan Goldstein            Director

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

  /s/Andreas Mattes
-----------------------      Director
    Andreas Mattes

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

Dated: March 30, 2003


                                       78





<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 Communications Ltd. and Yehuda Zisapel and Zohar Zisapel

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

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

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

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

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

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

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

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



<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 Communications 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 earnings.

     21   Subsidiaries of RADVISION Ltd.

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

     99.1 Certification  by Chief Executive  Officer  Pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.

     99.2 Certification  by Chief Financial  Officer  Pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.

     99.3 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.

     99.4 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.