1082064--4/2/2007--BACKWEB_TECHNOLOGIES

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{operation, international, foreign}

{product, market, service}

{stock, price, operating}

{tax, income, asset}

{regulation, change, law}

{customer, product, revenue}

{cost, operation, labor}

{personnel, key, retain}

{acquisition, growth, future}

{stock, price, share}

{product, liability, claim}

{provision, law, control}

{property, intellectual, protect}

{system, service, information}

{control, financial, internal}

{investment, property, distribution}

Rapid technological changes could cause our products to become obsolete. 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. We have restructured our company in October 2004 and further reduced headcount in 2006, 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. A lack of effective internal control over financial reporting could result in an inability to accurately report our financial results that could lead to a loss of investor confidence in our financial reports and have an adverse effect on our share price. Our business is difficult to evaluate because we have changed our strategic focus on several occasions and repositioned our product line. 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. Our growth may suffer because of the complexities involved in implementing our products. Our financial performance and workforce reductions may adversely affect the morale and performance of our personnel and our ability to hire new personnel. We may experience tax liabilities in connection with the liquidation of wholly owned subsidiaries that have ceased operations. Our products may be used in an unintended and negative manner. We may experience difficulties managing our operations and geographic dispersion. Our international operations are subject to additional risks. Our efforts to protect our proprietary rights may be inadequate. We may not have sufficient insurance to cover all potential product liability and warranty claims. 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. Because our revenues are generated in U.S. dollars but a large portion of our expenses is incurred in New Israeli Shekels (NIS), our results of operations may be seriously harmed by currency fluctuations. 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 in 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 or our directors or officers, and you may have difficulties asserting U.S. securities laws claims. 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. Tax reform in Israel may reduce our tax benefit, which might adversely affect our profitability. Our results of operations may be negatively affected by the obligation of key personnel to perform military service. Risks Relating to Our Ordinary Shares In January 2007, our Ordinary Shares were delisted from trading on The Nasdaq Capital Market, and the ability of our shareholders to trade our shares and obtain liquidity for their shares, may have been significantly impaired and the market price of our Ordinary Shares may continue to decline significantly. Our share price has been volatile and could fluctuate in the future. Holders of our Ordinary Shares who are United States residents face income tax risks.

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1082064--4/2/2007--BACKWEB_TECHNOLOGIES_LTD