1082064--3/31/2006--BACKWEB_TECHNOLOGIES

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If we require additional financing for our future capital needs but are not able to obtain it, we may be unable to develop or enhance our products, expand operations or respond to competitive pressures. We have restructured our company, which could make it more difficult for us to achieve our business objectives or could result in further restructurings if we don t meet the goals of the restructuring. Our quarterly license revenue typically depends on a small number of large orders, and any failure to complete one or more substantial license sales in a quarter could materially and adversely affect our operating results. The economic outlook has adversely affected, and may continue to adversely affect, the demand for our current products and our results of operations. Our business is difficult to evaluate because our operating history is limited, and we have changed our strategic focus and repositioned our product line. We are increasingly relying on sales and marketing partnerships, rather than direct sales and marketing, for revenue generation and failure to establish successful partnerships could negatively affect our revenues. Our long and unpredictable sales cycle depends on factors outside our control and may cause our license revenue to vary significantly. Our quarterly operating results are subject to fluctuations. If we lose a major customer, our revenue could suffer because of our customer concentration. Failure to successfully develop versions and updates of our products that run on the operating systems used by our current and prospective customers could reduce our sales. We depend on increased business from new customers, as well as additional business from existing customers, and if we fail to grow our customer base or generate repeat business, our operating results could be harmed. Factors outside our control may cause the timing of our license revenue to vary from quarter-to-quarter, possibly adversely affecting our operating results. Our inability to integrate our products with other third-party software could adversely affect market acceptance of our products. Competition in the Internet communications market may reduce the demand for, or price of, our products. The loss of our right to use software licensed to us by third parties could harm our business. Changes in existing financial accounting standards or practices or taxation rules or practices may adversely affect our results of operations. Our growth may suffer because of the complexities involved in implementing our products. Our business will suffer if the Internet infrastructure cannot support the demands placed on it. We may experience tax liabilities in connection with the liquidation of wholly owned subsidiaries that have ceased operations. We may experience difficulties managing our expected growth and geographic dispersion. Our international operations are subject to additional risks. Our efforts to protect our proprietary rights may be inadequate. Our products may be used in an unintended and negative manner. We may not have sufficient insurance to cover all potential product liability and warranty claims. Our financial performance and workforce reductions may adversely affect the morale and performance of our personnel and our ability to hire new personnel. Legislation and regulatory changes may cause us to incur increased costs, limit our ability to obtain director and officer liability insurance, and make it more difficult for us to attract and retain qualified officers and directors. Risks Relating to Our Location in Israel Any major developments in the political or economic conditions in Israel could cause our business to suffer because we are incorporated in Israel and have important facilities and resources located in Israel. Any future profitability may be diminished if tax benefits from the State of Israel are reduced or withheld. Israeli regulations may limit our ability to engage encryption research and development and export our products that incorporate encryption. Israeli courts might not enforce judgments rendered outside of Israel that may make it difficult to collect on judgments rendered against us. We have adopted anti-takeover provisions that could delay or prevent an acquisition of BackWeb, even if an acquisition would be beneficial to our shareholders. Our results of operations may be negatively affected by the obligation of key personnel to perform military service. Risks Relating to Our Ordinary Shares Our stock price has been volatile and could fluctuate in the future. Our stock is listed on the Nasdaq Capital Market and our continued listing on the Nasdaq Capital Market listing is not assured.

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1082064--3/31/2006--BACKWEB_TECHNOLOGIES_LTD