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þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the Fiscal Year Ended December 31, 2004
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from           to

Israel		51-2198508
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
10 Ha’amal Street, Park Afek, Rosh Ha’ayin, Israel (Address of principal executive offices)		48092 (Zip Code)

Title of Each Class		Name of Each Exchange on Which Registered
None		None

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				Page
PART I
Item 1		Business			1
Item 2.		Properties			9
Item 3.		Legal Proceedings			9
Item 4.		Submission of Matters to a Vote of Security Holders			10
PART II
Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			10
Item 6.		Selected Financial Data			11
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			12
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk			38
Item 8.		Financial Statements and Supplementary Data			39
Item 9.		Changes in and Disagreements With Accountants On Accounting and Financial Disclosure			69
Item 9A.		Controls and Procedures			69
Item 9B.		Other Information			70
PART III
Item 10.		Directors and Executive Officers of the Registrant			70
Item 11.		Executive Compensation			72
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			75
Item 13.		Certain Relationships and Related Transactions			77
Item 14.		Principal Accountant Fees and Services			77
PART IV
Item 15.		Exhibits and Financial Statement Schedules			78
Signatures					79
EXHIBIT 10.8
EXHIBIT 10.18
EXHIBIT 10.19
EXHIBIT 10.20
EXHIBIT 21.1
EXHIBIT 23.1
EXHIBIT 23.2
EXHIBIT 23.3
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

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Item 1.	Business

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	•	Improved on-the-road productivity by adapting the online Web to offline usage by mobile users, enabling them to access and transact with Web content and applications while offline;
	•	Acceleration of business processes by allowing offline data entry submission for items, such as service orders, expense reports, sales forecasts, time sheets and collaboration sessions, enabling users to productively use “forced down time” while traveling;
	•	Increased customer satisfaction by providing our customers’ field workforce access to important business information when servicing a customer in the field, enabling them to respond to their customers more quickly and effectively;
	•	Decreased costs through the reduction of the costs incurred in manually distributing information, and the costs associated with unnecessary repeat service calls resulting from the inability of users to access service data;
	•	Elimination of costly development projects because BackWeb can enable existing web applications for mobile use and eliminate the need for projects to develop special mobilized version of those applications.
	•	Improved Web and portal effectiveness through tracking and reporting offline interactions, to analyze what content, information, and applications mobile users need most often;
	•	Increased end user productivity by enabling offline synchronization to be done in the background, taking advantage of unused bandwidth, without degrading the end user experience when remotely connected; and
	•	Leveraging current IT investments and lower total cost of ownership by deploying in a matter of weeks, and integrating with a customer’s existing portal environment to maintain the existing Web user interface and eliminate the need to rewrite code.

	Technology

	Polite Synchronization

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	•	Polite Agent monitors the network activity of the plug-in and communicates with BackWeb Polite Sync Servers only when the connection is idle. It is able to interrupt BackWeb communications when other applications request use of the user’s network connection.
	•	Polite Proxy allows communication between the BackWeb proxy server and BackWeb Polite Sync Servers only when wide area network, or WAN, bandwidth utilization is below a specified threshold. It achieves this by monitoring the WAN.
	•	Polite Neighborcast enables the automatic transmission of digital data from one BackWeb plug-in to others on the same local area network, or LAN, eliminating the need for transmission of the data from the server to each BackWeb plug-in. The transmission from BackWeb plug-in to BackWeb plug-in on the same LAN enables fast, efficient and cost-effective transmission of data.
	•	Polite Upstream enables the automatic transmission of digital data from BackWeb plug-ins to the BackWeb Polite Sync Server when the network connection is idle.

	OTML Offline Web Integration

	Products

	BackWeb Offline Access Server

	•	The Web Integration Server, which is also known as Content Acquistion Server, is a component of the OAS that is designed for highly scalable Web content acquisition from corporate portal, intranet, and Web applications. On an ongoing basis, the OAS logs into the portal, intranet or Web application as if it were an individual user and retrieves HTML pages using standard HTTP or HTTPS protocols (either secure or non-secure). Each page links to additional Web pages or documents that are retrieved once the links are identified. Content transformation and OTML tags parse the HTML pages and create an offline equivalent of the page that is sent to users. The Content Acquisition Server retrieves additional pages when it identifies links to additional portal pages, external documents or Web pages. Since the presentation of content sometimes changes, it is necessary to keep the content transformation

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		correct regardless of visual presentation changes. Content transformation is accomplished by embedding OTML tags into the portal, intranet, or Web application page, which tags control the optimized transformation of the pages for offline viewing. OTML is an extension to HTML and applications other than OAS software, such as the browser, will ignore the HTML tags. Although portals, for example, include both personalized and non-personalized content, our OAS acquires content in the context of individual users and creates a single personalized information package for each user. Because a large portion of the content is shared among many users and because that content may be very large, it is necessary to consolidate shared information so that it can be retrieved and stored once for all targeted users. The OAS stores content, including documents and Web pages, in separate information packages that are sent to more than one user. Once content has been acquired, transformed and consolidated, it is packaged for offline delivery into units called InfoPaks. Such packaging includes the creation of database records for targeting, delivery tracking, user interaction reporting and version control of the content, calculating byte-level differences between versions of the content, which is critical when only a small portion of a document is modified, and optimized storage and communication with users’ plug-ins.
	•	The BackWeb Polite Sync Server, which is also available as a separate product as described below, is a highly scalable content delivery engine for desktops and laptops that enables offline access to Web content via BackWeb plug-ins. The BackWeb Polite Sync Server is designed to manage the delivery of thousands of gigabytes of data every day to end users. The server consults the BackWeb OAS database to find out whether there is new content relevant to the corresponding user. The BackWeb plug-in then begins downloading InfoPaks incrementally via the Polite Sync Server to enable scalable content delivery. The Polite Sync Server includes several key features:
	•	Interruptible content delivery activates only when the network connection is idle;
	•	Byte-level differentiation determines which content has been modified based on the content already stored on the user’s computer and ensures the delivery of only the changes rather than the entire content item; and
	•	Polite Neighborcast distributes content over a LAN using the distributed client-based caching system, thereby reducing the amount of WAN traffic.

	BackWeb Polite Sync Server

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	Sales

	Marketing

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	•	small companies attempting to address the needs of mobile or disconnected Web users such as iOra;
	•	large enterprise software companies attempting to address the needs of mobile or disconnected Web users that have announced or may have plans to develop mobile technology, such as IBM, Siebel, Microsoft, and SAP;
	•	mobile middleware vendors such as Sybase iAnywhere and Everypath; and
	•	synchronization software companies such as Intellisynch.

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	•	be time-consuming to defend;
	•	result in costly litigation;
	•	divert management’s attention and resources;
	•	cause product shipment delays; or
	•	require us to enter into royalty or licensing agreements.

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Item 2.	Properties

Item 3.	Legal Proceedings

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

Item 5.	Market for Our Common Stock and Related Stockholder Matters

			High				Low
2003
	First Quarter		$	0.51			$	0.16
	Second Quarter		$	0.82			$	0.23
	Third Quarter		$	1.24			$	0.42
	Fourth Quarter		$	2.04			$	0.84

			High				Low
2004
	First Quarter		$	1.77			$	0.84
	Second Quarter		$	1.24			$	0.62
	Third Quarter		$	0.84			$	0.30
	Fourth Quarter		$	0.88			$	0.32

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Item 6.	Selected Consolidated Financial Data

				Years Ended December 31,
				2004				2003				2002				2001				2000
				(In thousands, except per share data)
Consolidated Statements of Operations
Revenue:
	License			$	1,593			$	3,232			$	2,119			$	13,807			$	29,294
	Service				3,906				3,270				4,228				6,831				9,052
		Total revenue			5,499				6,502				6,347				20,638				38,346
Cost of revenue:
		License			72				128				213				443				249
		Service			1,170				1,057				3,050				5,238				6,051
		Total cost of revenue			1,242				1,185				3,263				5,681				6,300
Gross profit					4,257				5,317				3,084				14,957				32,046
Operating expenses:
	Research and development				3,298				4,487				6,059				9,230				8,672
	Sales and marketing				4,071				6,272				10,298				22,882				28,479
	General and administrative				1,958				3,939				4,557				10,494				7,480
	Restructuring charges				469				443				4,678				2,825				—
	Write-off and amortization of intellectual property, other intangibles and deferred stock compensation				—				—				3,546				3,806				11,377
		Total operating expenses			9,796				15,141				29,138				49,237				56,008
Loss from operations					(5,539	)			(9,824	)			(26,054	)			(34,280	)			(23,962	)
Interest and other income, net					396				98				1,172				2,037				4,749
Write down of equity investments					—				(1,000	)			—				(2,500	)			—
Net loss				$	(5,143	)		$	(10,726	)		$	(24,882	)		$	(34,743	)		$	(19,213	)
Basic and diluted net loss per share				$	(0.13	)		$	(0.27	)		$	(0.63	)		$	(0.91	)		$	(0.52	)
Weighted average number of shares used in computing basic and diluted net loss per share(1)					40,711				40,000				39,284				38,225				37,205

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		As of December 31,
		2004				2003				2002				2001				2000
		(In thousands)
Consolidated Balance Sheets Data:
Cash, cash equivalents and short-term investments		$	10,320			$	14,457			$	23,757			$	41,824			$	64,734
Working capital			7,903				12,301				20,334				37,905				63,916
Total assets			12,555				18,515				29,409				56,512				90,374
Total shareholders’ equity		$	7,938			$	12,961			$	22,521			$	46,581			$	78,430

(1)	For the calculation of the weighted average number of shares used to calculated basic and diluted net loss per share, please see Note 2 of the Notes to Consolidated Financial Statements, “Net Loss Per Share.”

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

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	•	revenue recognition;
	•	estimating valuation allowances and accrued liabilities, specifically the trade receivable allowances for doubtful accounts; and
	•	accrued restructuring charges.

	Revenue Recognition

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	Estimating Valuation Allowances and Accrued Liabilities, Including the Allowance for Doubtful Accounts

	Accrued Restructuring Costs

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				Year Ended December 31,
				2004				2003				2002
Revenue:
	License				29	%			50	%			33	%
	Service				71				50				67
		Total revenue			100				100				100
Cost of revenue:
	License				1				2				3
	Service				21				16				48
		Total cost of revenue			23				18				51
Gross profit					77				82				49
Operating expenses:
	Research and development				60				69				95
	Sales and marketing				74				96				162
	General and administrative				36				61				72
	Restructuring charges				8				7				74
	Write-off and amortization of intellectual property, other intangibles, and deferred stock compensation				—				—				56
		Total operating expenses			178				233				459
Loss from operations					(101	)			(151	)			(410	)
Interest and other income, net					7				2				18
Write down of equity investments					—				(15	)			—
Net loss					(94	)%			(165	)%			(392	)%

	Revenue

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
										(In thousands, except percentages)
Total revenue		$	5,499			$	(1,003	)			(15.4	)%		$	6,502			$	155				2.4	%		$	6,347

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	License Revenue

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
License revenue		$	1,593			$	(1,639	)			(50.7	)%		$	3,232			$	1,113				52.5	%		$	2,119
As a percentage of total revenue			29.0	%			—				—				49.7	%			—				—				33.4	%

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	Service Revenue

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
Service revenue		$	3,906			$	634				19.4	%		$	3,270			$	(958	)			(22.7	)%		$	4,228
As a percentage of total revenue			71.0	%			—				—				50.3	%			—				—				66.6	%

	Cost of Revenue

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
Cost of revenue		$	1,242			$	57				4.8	%		$	1,185			$	(2,078	)			(63.7	)%		$	3,263
As a percentage of total revenue			22.6	%			—				4.4	%			18.2	%			—				(33.2	)%			51.4	%

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	Cost of License Revenue

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
Cost of license revenue		$	72			$	(56	)			(43.8	)%		$	128			$	(85	)			(39.9	)%		$	213
As a percentage of license revenue			6.5	%			—				2.5	%			4.0	%			—				(6.1	)%			10.1	%
As a percentage of total revenue			1.3	%			—				(0.7	)%			2.0	%			—				(1.4	)%			3.4	%

	Cost of Service Revenue

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
Cost of service revenue		$	1,170			$	113				10.7	%		$	1,057			$	(1,993	)			(65.3	)%		$	3,050
As a percentage of service revenue			30	%			—				(2.3	)%			32.3	%			—				(39.8	)%			72.1	%
As a percentage of total revenue			21.3	%			—				5	%			16.3	%			—				(31.8	)%			48.1	%

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	Operating Expenses

	Research and Development

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
Research and development		$	3,298			$	(1,189	)			(26.5	)%		$	4,487			$	(1,572	)			(25.9	)%		$	6,059
As a percentage of total revenue			59.9	%			—				(9.1	)%			69.0	%			—				(26.5	)%			95.5	%

	Sales and Marketing

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
Sales and marketing		$	4,071			$	(2,201	)			(35.1	)%		$	6,272			$	(4,026	)			(39.1	)%		$	10,298
As a percentage of total revenue			74.0	%			—				(22.5	)%			96.5	%			—				(65.8	)%			162.3	%

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	General and Administrative

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
General and administrative		$	1,958			$	(1,981	)			(50.3	)%		$	3,939			$	(618	)			(13.6	)%		$	4,557
As a percentage of total revenue			35.6	%			—				(25.0	)%			60.6	%			—				(11.2	)%			71.8	%

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	Restructuring Charges

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
Restructuring and other charges		$	469			$	26				5.9	%		$	443			$	(4,235	)			(90.5	)%		$	4,678
As a percentage of total revenue			8.5	%			—				1.7	%			6.8	%			—				(66.9	)%			73.7	%

	Write-off of Intellectual Property and Other Intangible Assets

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
Write-off of intellectual property and other intangible assets		$	—			$	—				0	%		$	—			$	(1,764	)			(100.0	)%		$	1,764
As a percentage of total revenue			0.0	%			—				0	%			0.0	%			—				(27.8	)%			27.8	%

	Amortization of Intellectual Property, Other Intangibles and Deferred Stock Compensation

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
Amortization of intellectual property, other intangibles and deferred stock compensation		$	—			$	—				0	%		$	—			$	(1,782	)			(100.0	)%		$	1,782
As a percentage of total revenue			0.0	%			—				0	%			0.0	%			—				(28.1	)%			28.1	%

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	Interest and Other Income, Net

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
Interest and other income, net		$	396			$	298				304	%		$	98			$	(1,061	)			(90.5	)%		$	1,172
As a percentage of total revenue			7.2	%			—				5.5	%			1.7	%			—				(16.8	)%			18.5	%

	Write-Down of Equity Investments

		December 31,
						Change												Change
		2004				$				%				2003				$				%				2002
		(In thousands, except percentages)
Write-down of equity investments		$	—			$	(1,000	)			(100	)%		$	1,000			$	1,000				100	%		$	—
As a percentage of total revenue			—	%			—				(15.4	)%			15.4	%			—				15.4	%			0.0	%

	Income Taxes

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	Off-Balance Sheet Financings and Liabilities

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	Contractual Obligations

						Payments Due by Period
						Less
						Than 1				1-3				3-5				After 5
		Total				Year				Years				Years				Years
Operating lease obligations		$	1,819			$	911			$	908			$	—			$	—

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	We have a history of losses and we expect future losses.

	Our business strategy requires that we derive a significant amount of license revenue from our OAS product. If demand for OAS does not increase, our total revenue will not increase and our business will suffer.

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	We have recently 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.

	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.

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	We are increasingly relying on our direct sales force, rather than strategic relationships, for revenue generation and this trend could negatively affect our revenues.

	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.

	Our long and unpredictable sales cycle depends on factors outside our control and may cause our license revenue to vary significantly.

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	Our quarterly operating results are subject to fluctuations.

	•	demand for our products and services;
	•	internal budget constraints and the approval processes of our current and prospective customers;
	•	the timing and mix of revenue generated by product licenses and professional services;
	•	the length and unpredictability of our sales cycle;
	•	loss of customers;
	•	new product introductions or internal development efforts by competitors or partners;
	•	costs related to acquisitions of technology or businesses; and
	•	economic conditions generally, as well as those specific to the Internet and related industries.

	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.

	If we lose a major customer, our revenue could suffer because of our customer concentration.

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	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.

	Rapid technological changes could cause our products to become obsolete.

	Our inability to integrate our products with other third-party software could adversely affect market acceptance of our products.

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	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.

	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.

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	Our business will suffer if the Internet infrastructure cannot support the demands placed on it.

	Factors outside our control may cause the timing of our license revenue to vary from quarter-to-quarter, possibly adversely affecting our operating results.

	If the economic slowdown continues, or if our revenue does not increase in the near future, we may have to implement additional plans in order to reduce our operating costs.

	We may experience tax liabilities in connection with the liquidation of wholly owned subsidiaries that have ceased trading.

	We may experience difficulties managing our expected growth and geographic dispersion.

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	Our international operations are subject to additional risks.

	•	laws and business practices favoring local competition;
	•	compliance with multiple, conflicting and changing laws and regulations;
	•	longer sales cycles;
	•	greater difficulty or delay in accounts receivable collection;
	•	import and export restrictions and tariffs;
	•	difficulties in staffing and managing foreign operations;
	•	difficulties in investing in foreign operations at appropriate levels to compete effectively; and
	•	political and economic instability.

	Our efforts to protect our proprietary rights may be inadequate.

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	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.

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	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 in research and development and export our products.

	Israeli courts might not enforce judgments rendered outside of Israel that may make it difficult to collect on judgments rendered against us.

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	•	the judgment was rendered by a court that was, according to the laws of the state of the court, competent to render the judgment;
	•	the judgment is no longer able to be appealed;
	•	the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and the substance of the judgment is not contrary to public policy; and
	•	the judgment is executory in the state in which it was given.

	•	the judgment was obtained by fraud;
	•	there was no due process;
	•	the judgment was rendered by a court not competent to render it according to the laws of private international law in Israel;
	•	the judgment is at variance with another judgment that was given in the same matter between the same parties and which is still valid; or
	•	at the time the action was brought in the foreign court a suit in the same matter and between the same parties was pending before a court or tribunal in Israel.

	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.

	The new tax reform in Israel may reduce our tax benefit, which might adversely affect our profitability.

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	Our results of operations may be negatively affected by the obligation of key personnel to perform military service.

	Our stock price has been volatile and could fluctuate in the future.

	•	in response to quarterly variations in operating results;
	•	in response to announcements of technological innovations or new products by us or our competitors or partners;
	•	because of market conditions in the enterprise software or portal industry;
	•	in reaction to changes in financial estimates by securities analysts, and our failure to meet or exceed the expectations of analysts or investors;
	•	in response to our announcements of strategic relationships or joint ventures; and
	•	in response to sales of our Ordinary Shares.

	Our stock is listed on the Nasdaq SmallCap Market and our continued listing on the Nasdaq SmallCap Market listing is not assured.

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	Holders of our Ordinary Shares who are United States residents face income tax risks.

	Our officers, directors and affiliated entities own a large percentage of BackWeb and could significantly influence the outcome of actions.

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk

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Item 8.	Financial Statements and Supplementary Data

			First Qtr				Second Qtr				Third Qtr				Fourth Qtr
			Unaudited
			(In thousands, except per share data)
2004
	Total revenue		$	1,638			$	1,147			$	1,181			$	1,533
	Gross profit			1,221				910				822				1,304
	Net loss			(1,371	)			(1,323	)			(1,537	)			(912	)
	Basic and diluted net loss per share			(0.03	)			(0.03	)			(0.04	)			(0.02	)
2003
	Total revenue		$	1,527			$	1,465			$	1,754			$	1,756
	Gross profit			1,251				1,183				1,486				1,397
	Net loss			(3,638	)			(2,608	)			(2,490	)			(1,990	)
	Basic and diluted net loss per share			(0.09	)			(0.07	)			(0.06	)			(0.05	)

(b)	Financial Statements

Report of Grant Thornton LLP, Independent Registered Public Accounting Firm			40
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm			41
Report of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, Independent Registered Public Accounting Firm			42
Consolidated Balance Sheets			43
Consolidated Statements of Operations			44
Consolidated Statements of Shareholders’ Equity			45
Consolidated Statements of Cash Flows			46
Notes to the Consolidated Financial Statements			47

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	/s/ GRANT THORNTON LLP

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	/s/ ERNST & YOUNG LLP

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	/s/ KOST FORER GABBAY & KASIERER
	A Member of Ernst & Young Global

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					December 31,
					2004				2003
					(In thousands, except
					share and per share data)
ASSETS
Current assets:
	Cash and cash equivalents				$	5,213			$	4,026
	Short-term investments					5,107				10,431
	Trade accounts receivable, net of allowance for doubtful accounts of $643,000 and $2.1 million at December 31, 2004 and 2003, respectively					1,677				2,403
	Other accounts receivables and prepaid expenses					378				782
			Total current assets			12,375				17,642
Long-term investments and other long term assets						26				572
Property and equipment, net						154				301
			Total assets		$	12,555			$	18,515
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable				$	175			$	403
	Accrued liabilities					1,625				3,813
	Deferred revenue					2,672				1,125
			Total current liabilities			4,472				5,341
	Accrued severance pay, net					85				108
	Long-term deferred revenue					60				105
Commitments and contingencies
Shareholders’ equity:
Preferred Shares, nominal value NIS 0.01 per share; 50,000,000 shares authorized and zero outstanding at December 31, 2004 and December 31, 2003, Series E Preferred Shares, nominal value NIS 0.01 per share; zero and one share authorized and issued and outstanding at December 31, 2004 and December 31, 2003, respectively						—				—
		Ordinary Shares, nominal value NIS 0.03 per share; 150,067,829 shares authorized at December 31, 2004 and 2003; 40,560,182 and 39,772,254 shares issued and outstanding at December 31, 2004 and 2003, respectively				151,644				151,496
	Accumulated other comprehensive income (loss)					(19	)			9
	Accumulated deficit					(143,687	)			(138,544	)
			Total shareholders’ equity			7,938				12,961
			Total liabilities and shareholders’ equity		$	12,555			$	18,515

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				Year Ended December 31,
				2004				2003				2002
				(In thousands, except per share data)
Revenue:
	License			$	1,593			$	3,232			$	2,119
	Service				3,906				3,270				4,228
		Total revenue			5,499				6,502				6,347
Cost of revenue:
	License				72				128				213
	Service				1,170				1,057				3,050
		Total cost of revenue			1,242				1,185				3,263
Gross profit					4,257				5,317				3,084
Operating expenses:
	Research and development				3,298				4,487				6,059
	Sales and marketing				4,071				6,272				10,298
	General and administrative				1,958				3,939				4,557
	Restructuring and other charges				469				443				4,678
	Write-off of intellectual property and other purchased intangible assets				—				—				1,764
	Amortization of intellectual property and other intangible assets				—				—				1,566
	Amortization of deferred stock compensation				—				—				216
		Total operating expenses			9,796				15,141				29,138
Loss from operations					(5,539	)			(9,824	)			(26,054	)
Interest and other income, net					396				98				1,172
Write down of equity investments					—				(1,000	)			—
Net loss				$	(5,143	)		$	(10,726	)		$	(24,882	)
Basic and diluted net loss per share				$	(0.13	)		$	(0.27	)		$	(0.63	)
Weighted average number of shares used in computing basic and diluted net loss per share					40,711				40,000				39,284

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			Shareholders’ Equity
			Series E																Notes								Accumulated
			Preferred Shares								Ordinary Shares								Receivable				Deferred				Other												Total
																			from				Stock				Comprehensive				Accumulated				Comprehensive				Shareholders’
			Shares				Amount				Shares				Amount				Shareholders				Compensation				Income/(Loss)				Deficit				Income/(Loss)				Equity
			(In thousands, except share data)
Balance at December 31, 2001				1				3,454				38,613,328				147,114				(1,235	)			(216	)			400				(102,936	)			—				46,581
Issuance of Ordinary Shares pursuant to options exercised and ESPP purchases				—				—				736,714				299				—				—				—				—				—				299
Exchange of Series E preferred shares				(1	)			(3,454	)			422,212				3,454				—				—				—				—				—				—
Forgiveness of shareholder loan				—				—				—				—				221				—				—				—				—				221
Repayment of notes receivable from shareholders				—				—				—				—				508				—				—				—				—				508
Amortization of deferred stock compensation				—				—				—				—				—				216				—				—				—				216
Comprehensive loss:
	Net loss			—				—				—				—				—				—				—				(24,882	)			(24,882	)			(24,882	)
Unrealized loss on available for sale marketable securities				—				—				—				—				—				—				(382	)			—				(382	)			(382	)
Unrealized loss on forward exchange contracts																												(40	)			—				(40	)			(40	)
Total comprehensive loss				—				—				—				—				—				—				—				—				(25,304	)			—
Balance at December 31, 2002				—				—				39,772,254				150,867				(506	)			—				(22	)			(127,818	)			—				22,521
Issuance of Ordinary Shares pursuant to options exercised, ESPP purchases and exchange of Series E preferred shares, net				—				—				787,928				629				—				—				—				—				—				629
Repayment of notes receivable from shareholders				—				—				—				—				506				—				—				—				—				506
Comprehensive loss:
	Net loss			—				—				—				—				—				—				—				(10,726	)			(10,726	)			(10,726	)
Unrealized income on available for sale marketable securities				—				—				—				—				—				—				31				—				31				31
Total comprehensive loss				—				—				—				—				—				—				—				—			$	(10,695	)			—
Balance at December 31, 2003				—			$	—				40,560,182			$	151,496			$	—			$	—			$	9			$	(138,544	)			—			$	12,961
Issuance of Ordinary Shares pursuant to options exercised, ESPP purchases and exchange of Series E preferred shares, net				—				—				271,934				148				—				—				—				—				—				148
Comprehensive loss:
Net loss				—				—				—				—				—				—				—				(5,143	)			—				(5,143	)
Unrealized income on available for sale marketable securities				—				—				—				—				—				—				(28	)			—				(28	)			(28	)
Total comprehensive loss				—				—				—				—				—				—				—				—			$	(10,723	)			7,939
Balance at December 31, 2004				—			$	—				40,832,116			$	151,644			$	—			$	—			$	(19	)		$	(143,687	)			—			$	7,938

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					Year Ended December 31,
					2004				2003				2002
					(In thousands)
Operating activities
Net loss					$	(5,143	)		$	(10,726	)		$	(24,882	)
Adjustments to reconcile net loss to net cash used in operating activities:
Write-off of intellectual property and other intangibles						—				—				1,764
	Amortization of intellectual property and other intangible assets					—				—				1,566
	Amortization of deferred stock compensation					—				—				273
	Provision for bad and doubtful debts					—				104				205
	Depreciation					252				878				2,262
	(Gain)/loss on disposal of property and equipment					(260	)			—				71
	Forgiveness of shareholder loan					—				—				221
	Write down of an equity investment					—				1,000				—
	Changes in operating assets and liabilities:
		Trade accounts receivable				726				(848	)			1,665
		Other accounts receivables, prepaid expenses and other long-term assets				950				556				1,523
		Accounts payable and accrued liabilities				(2,439	)			(1,130	)			(1,978	)
		Deferred revenue				1,501				(204	)			(1,065	)
			Net cash used in operating activities			(4,413	)			(10,370	)			(18,375	)
Investing activities
Disposals/ (purchases) of property and equipment						(105	)			(96	)			(60	)
Proceeds from disposals of property and equipment						260				—				—
Purchases of short-term investments						—				—				(6,656	)
Proceeds from sales of short-term investments						5,324				8,575				11,857
			Net cash provided by investing activities			5,479				8,479				5,141
Financing activities
Proceeds from repayment of shareholders’ notes receivable						—				506				508
Proceeds from issuance of Ordinary Shares pursuant to options exercised and ESPP purchases						121				629				299
			Net cash provided by financing activities			121				1,135				807
Net increase or (decrease) in cash and cash equivalents						1,187				(756	)			12,427
Cash and cash equivalents at beginning of the year						4,026				4,782				17,209
Cash and cash equivalents at end of the year					$	5,213			$	4,026			$	4,782
Supplemental disclosure of non-cash investing and financing transactions
Exchange of Series E Preferred Stock to Ordinary Shares					$	—			$	—			$	3,454
Forfeiture of restricted shares					$	—			$	—			$	—
Interest paid					$	—			$	—			$	—
Taxes paid					$	59			$	78			$	59

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1.	Organization and Basis of Presentation

2.	Summary of Significant Accounting Policies

	Use of Estimates

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	Financial Statements in U.S. Dollars

	Principles of Consolidation

	Cash Equivalents

	Short-Term Investments

	Long-Term Investments

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	Other Long-Term Assets

	Property and Equipment, Net

		Years
Computer and peripheral equipment		2-3
Office furniture and equipment		3
Leasehold improvements		Over the shorter of term of lease or estimated life

	Intellectual Property and Other Purchased Intangible Assets

	Revenue Recognition

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	Research and Development

	Advertising Costs

	Income Taxes

	Forward Exchange Contracts

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	Concentration of Credit Risk

	Net Loss Per Share

			Year Ended December 31,
			2004				2003				2002
Net loss			$	(5,143	)		$	(10,726	)		$	(24,882	)
Basic and diluted:
	Weighted-average shares			41,144				40,299				39,339
	Less weighted-average shares subject to repurchase			(433	)			(299	)			(55	)
Shares used in computing basic and diluted net loss per share				40,711				40,000				39,284
Basic and diluted net loss per share			$	(0.13	)		$	(0.27	)		$	(0.63	)

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	Accounting for Stock-Based Compensation

		Year Ended
		December 31,
Stock Options		2004				2003				2002
Risk-free interest rates			3.6	%			3.3	%			3.8	%
Expected lives (in years)			5				5				5
Dividend yield			0	%			0	%			0	%
Expected volatility			124	%			123	%			121	%

		Year Ended
		December 31,
Stock Purchase Shares		2004				2003				2002
Risk-free interest rates			3.6	%			3.3	%			3.8	%
Expected lives (in years)			0.5				0.5				0.5
Dividend yield			0	%			0	%			0	%
Expected volatility			124	%			123	%			121	%

		December 31,
		2004				2003				2002
		(In thousands, except per share data)
Net loss as reported		$	(5,143	)		$	(10,726	)		$	(24,882	)
Add — stock based expense reported in net loss			—				—				216
Less — stock based compensation expense determined under the fair value method			(907	)			(2,155	)			(3,685	)
Pro forma net loss		$	(6,050	)		$	(12,881	)		$	(28,351	)
Pro forma basic and diluted net loss per share		$	(0.15	)		$	(0.32	)		$	(0.72	)
Basic and diluted net loss per share		$	(0.13	)		$	(0.27	)		$	(0.63	)

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	Severance Pay

	Fair Value of Financial Instruments

	Accumulated Other Comprehensive Income/ Loss

			December 31,
			2004				2003
Beginning balance			$	9			$	(22	)
	Unrealized loss on forward exchange contracts			—				—
	Unrealized gain/(loss) on available-for-sale investments			(28	)			31
	Total accumulated other comprehensive income (loss)		$	(19	)		$	9

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	Recently Issued Accounting Pronouncements

3.	Short-Term Investments

			December 31,
			2004												2003
							Unrealized				Estimated								Unrealized				Estimated
			Cost				Losses				Fair Value				Cost				Gains				Fair Value
Commercial paper			$	—			$	—			$	—			$	9,001			$	—			$	9,001
Certificates of deposit				2,738				(76	)			2,662				1,421				9				1,430
Money market				2,445				—				2,445				—				—				—
	Totals		$	5,183			$	(76	)		$	5,107			$	10,422			$	9			$	10,431

4.	Property and Equipment, net

		December 31,
		2004				2003
Computer and peripheral equipment		$	3,835			$	3,871
Office, furniture and equipment			2,487				2,613
Leasehold improvements			1,135				1,128
			7,457				7,612
Less: accumulated depreciation			(7,303	)			(7,311	)
Property and equipment, net		$	154			$	301

5.	Intellectual Property and Other Purchased Intangible Assets

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6.	Long-Term Investments

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7.	Accrued Liabilities

		December 31,
		2004				2003
Accrued employees compensation and related expense		$	765			$	1,780
Sales and marketing events			17				12
Restructuring accrual			119				534
Other			724				1,487
		$	1,625			$	3,813

8.	Related Parties

	Stock Options

9.	Restructuring and Other Charges

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		Involuntary				Facilities
		Terminations				and Other				Total
Total charge — 2002 restructuring			1,600				3,100				4,700
Cash payments — 2002 restructuring			(1,300	)			(2,000	)			(3,300	)
Balance at December 31, 2002			300				(1,100	)			(1,400	)
Change in estimate — 2002 restructuring			—				400				400
Cash payments — 2002 restructuring			(300	)			(1,000	)			(1,300	)
Balance at December 31, 2003			—				500				500
Change in estimate — 2002 restructuring			—				(300	)			(300	)
Cash payments — 2002 restructuring			—				(200	)			(200	)
Total charge — 2004 restructuring			500				—				500
Cash payments — 2004 restructuring			(400	)			—				(400	)
Balance at December 31, 2004		$	100			$	—			$	100

10.	Commitments and Contingencies

	Leases

2005		$	911,000
2006			844,000
2007			65,000
2008			—
		$	1,820,000

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	Contingencies

	Letter of Credit

	Line of Credit

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11.	Shareholders’ Equity

	Ordinary Shares

		December 31,
		2004				2003
Exercise of outstanding options			7,986,485				6,791,080
Ordinary Shares available for grant under stock option plans			9,444,026				6,717,446
			17,430,511				13,508,526

	Preferred Stock

	Stock Option Plans

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																			Weighted-
			Shares												Weighted-				Average Fair
			Available for				Options				Exercise Price				Average				Value of
			Grant				Outstanding				per Share				Exercise Price				Option Granted
Balance at December 31, 2001				4,789,065				10,011,082			$	0.01-$5.00			$	3.66			$	0.85
	Options authorized			1,960,000				—				—				—
	Options granted			(2,444,904	)			2,444,904			$	0.24-$1.32			$	0.93
	Options exercised			—				(276,279	)		$	0.01-$0.76			$	0.25
	Options canceled			3,406,933				(3,406,933	)		$	0.01-$35.00			$	2.68
Balance at December 31, 2002				7,711,094				8,772,774			$	0.12-$19.00			$	3.38			$	0.71
	Options granted			(1,271,388	)			1,271,388			$	0.23-$1.15			$	0.90
	Options exercised			—				(591,235	)		$	0.12-$0.77			$	0.70
	Options canceled			2,661,847				(2,661,847	)		$	0.24-$17.00			$	2.26
Balance at December 31, 2003				9,101,553				6,791,080			$	0.12-$19.00			$	3.62			$	0.78
	Options authorized			1,960,000				—				—				—
	Options granted			(3,352,500	)			3,352,500			$	0.37-$1.61			$	0.47
	Options exercised			—				(117,687	)		$	0.23-$1.05			$	0.70
	Options canceled			1,927,314				(1,927,314	)		$	0.23-$17.25			$	1.90
Balance at December 31, 2004				9,636,367				8,098,579			$	0.24-$19.00			$	2.77			$	0.38

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		Options Outstanding												Options Exercisable
		Number				Weighted Average				Weighted				Number				Weighted
Range of		Outstanding as				Remaining				Average				Exercisable as				Average
Exercise Prices		of 12/31/04				Contractual Years				Exercise Price				of 12/31/04				Exercise Price
$ 0.24 - $ 0.37			137,551				5.05			$	0.26				115,051			$	0.24
$ 0.38 - $ 0.39			2,716,500				6.84			$	0.39				0			$	0.00
$ 0.40 - $ 0.60			1,079,623				6.48			$	0.57				332,579			$	0.60
$ 0.61 - $ 0.77			932,002				3.82			$	0.74				689,647			$	0.75
$ 0.81 - $ 1.15			647,504				5.00			$	1.11				397,971			$	1.10
$ 1.16 - $ 1.32			855,834				6.86			$	1.32				237,084			$	1.30
$ 1.33 - $ 5.25			502,840				2.63			$	1.95				481,664			$	1.97
$ 5.26 - $12.56			441,675				2.73			$	8.23				441,675			$	8.23
$12.57 - $19.00			785,050				2.64			$	17.26				785,050			$	17.26
$ 0.24 - $19.00			8,098,579				5.38			$	2.77				3,480,721			$	5.64

	Restricted Shares Issued for Promissory Notes

	Stock Option Loans

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	Warrants Issued

12.	BackWeb Technologies Inc. 401(k) Plan (Plan)

13.	Income Taxes

	Israeli Income Taxes

	Measurement of Taxable Income Under the Income Tax (Inflationary Adjustments) Law, 1985:

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	Tax Benefits Under the Israeli Law for the Encouragement of Industry (Taxation), 1969:

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

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	U.S. Income Taxes

	Pretax Loss

		Year Ended December 31,
		2004				2003				2002
Domestic (Israel)		$	4,937			$	9,144			$	8,715
Foreign			206				1,582				16,167
		$	5,143			$	10,726			$	24,882

	Deferred Taxes

		December 31,
		2004				2003
U.S. net operating loss carryforwards		$	2,689			$	1,864
Reserves not currently deductible			1,471				2,659
Other, net			390				3,831
Net deferred assets before valuation allowance			4,550				8,354
Valuation allowance			(4,550	)			(8,354	)
Net deferred tax assets		$	—			$	—

14.	Geographic Information and Major Customer

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			Year Ended December 31,
			2004				2003				2002
Revenue from sales to unaffiliated customers:
	North America		$	4,537			$	4,757			$	3,705
	Israel			92				795				1,731
	Europe			870				950				911
			$	5,499			$	6,502			$	6,347

			December 31,
			2004				2003				2002
Long-lived assets:
	North America		$	123			$	193			$	704
	Israel			56				102				1,351
	Other			2				6				28
			$	181			$	301			$	2,083

Note 15.	Accounting for and Disclosure of Guarantees

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

Item 9A.	Controls and Procedures

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Item 9B.	Other Information

Item 10.	Directors and Executive Officers of the Registrant

Name		Age				Position
Eli Barkat			41			Chairman of the Board
Uday Bellary			50			Director
Amir Makleff			57			Director
Isabel Maxwell			54			Director
William Heye			44			Chief Executive Officer
Ken Holmes			39			Vice President, Finance

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Item 11.	Executive Compensation

																			Long Term
							Annual Compensation												Compensation
																			Awards
															Other Annual				Securities
															Compensation				Underlying
Name and Principal Position							Salary ($)				Bonus ($)				($)(6)				Options (#)
Eli Barkat(1)				2004				97,542				—				—				15,000
	Chairman and former Chief Executive Officer			2003				207,360				85,000				—				—
				2002				281,264				—				—				725,000
William Heye(2)				2004				180,000				44,126				11,763				700,000
	Chief Executive Officer			2003				180,000				13,771				50,977				60,000
				2002				167,250				25,001				1,752				37,500
Erez Lorber(3)				2004				177,808				12,000				193,842				—
	Former Chief Executive Officer			2003				193,500				25,755				69,600				400,000
				2002				199,771				29,812				19,377				37,500
Ken Holmes(4)				2004				155,000				25,480				—				193,000
	Vice President, Finance			2003				99,260				9,141				—				66,000
				2002				—				—				—				—
Michael A. Morgan(5)				2004				158,333				34,228				74,314				—
	Former Chief Financial Officer			2003				190,000				41,120				0				40,000
				2002				69,910				12,380				0				250,000

(1)	Mr. Barkat resigned as Chief Executive Officer on January 1, 2004. Mr. Barkat received a salary through June 30, 2004, and thereafter was compensated in similarly to other directors with no salary paid to him by us after that date.
(2)	Mr. Heye succeeded Mr. Lorber as Chief Executive Officer in October 2004.
(3)	Mr. Lorber succeeded Mr. Barkat as Chief Executive Officer in January 2004. Mr. Lorber resigned from BackWeb effective October 8, 2004.
(4)	Mr. Holmes joined BackWeb in May 2003.
(5)	Mr. Morgan resigned as Chief Financial Officer on October 8, 2004. Mr. Morgan joined BackWeb in August 2002.
(6)	The “Other Annual Compensation” includes commission payments, severance payments, and vacation payout amounts.

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																						Potential Realizable
																						Value at Assumed
		Number of				Percent of																Annual Rates of Stock
		Securities				Total Options																Price Appreciation for
		Underlying				Granted to				Exercise or												Option Term
		Options				Employees in				Base Price								Expiration
Name		Granted (#)				Fiscal Year				($/Share)				Grant Date				Date				5%				10%
Eli Barkat			15,000				0.4	%		$	0.40				8/10/04				8/10/11			$	2,443			$	5,692
William Heye			700,000				20.9	%		$	0.39				11/4/04				11/4/11				111,138				259,000
Erez Lorber			—				—				—				—				—				—				—
Ken Holmes			193,000				5.8	%		$	0.39				11/4/04				11/4/11				30,642				71,410
Michael A. Morgan			—				—				—				—				—				—				—

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		Number of Securities								Value of Unexercised
		Underlying Unexercised								In-the-Money Options
		Options at Fiscal Year End								at Fiscal Year End
Name		Exercisable				Unexercisable				Exercisable				Unexercisable
Eli Barkat			1,114,062				600,938			$	0			$	10,500
William Heye			298,000				867,500			$	26,250			$	568,750
Erez Lorber			281,874				565,626			$	84,687			$	167,688
Ken Holmes			25,250				233,750			$	16,625			$	160,475
Michael A. Morgan			83,333				206,667			$	88,333			$	182,667

	•	A retainer fee of $1,000, per fiscal quarter;
	•	A fee of $1,000 for each meeting of the Board of Directors attended; and
	•	A fee of $1,000 for each committee meeting attended, with the Chair of the Audit Committee being paid an additional $500 for each committee meeting.

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Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

			Number of				Percentage of
			Ordinary Shares				Ordinary Shares
Beneficial Owner			Beneficially Owned				Beneficially Owned
5% or More Shareholders
	EliBarkat Holdings Ltd.(1)			3,352,342				8.2	%
	8 Hamarpe Street
	Har Hotzvim
	Jerusalem 91450 Israel
	Yuval 63 Holdings (1995) Ltd.(2)			3,352,342				8.2	%
	8 Hamarpe Street
	Har Hotzvim
	Jerusalem 91450 Israel
	NirBarkat Holdings Ltd.(3)			3,352,342				8.2	%
	8 Hamarpe Street
	Har Hotzvim
	Jerusalem 91450 Israel
Named Executive Officers and Directors
	Eli Barkat(4)			4,586,154				11.2	%
	William Heye(5)			331,542
	Ken Holmes(6)			31,000
	Isabel Maxwell(7)			25,312				*
	Uday Bellary(8)
	Amir Makleff(9)
	Michael A. Morgan(10)
	Executive officers and directors as a group (6 persons)(11)			1,613,999				3.9	%

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	*	Less than 1%

(1)	Eli Barkat substantially controls the voting power of EliBarkat Holdings Ltd. The shares listed in the table above for EliBarkat Holdings Ltd. do not include (i) 198,131 Ordinary Shares owned directly by Mr. Barkat, (ii) 1,000 Ordinary Shares owned directly by Mr. Barkat’s wife, with respect to which he disclaims beneficial ownership, (iii) and 163,285 Ordinary Shares held by BRM Technologies Ltd. in which EliBarkat Holdings Ltd. is a shareholder, with respect to which shares Mr. Barkat and EliBarkat Holdings Ltd. disclaim control and beneficial ownership.
(2)	Yuval Rakavy, a former BackWeb director, owns substantially all of the equity and voting power of Yuval Rakavy Ltd., the parent company of Yuval 63 Holdings (1995) Ltd. The shares listed in the table above for Yuval 63 Holdings (1995) Ltd. do not include 163,285 Ordinary Shares held by BRM Technologies Ltd. in which Yuval 63 Holdings (1995) Ltd. is a shareholder, with respect to which shares Mr. Rakay and Yuval 63 Holdings (1995) Ltd. disclaim control and beneficial ownership.
(3)	Nir Barkat, a former BackWeb director, owns substantially all of the equity and voting power of Nir Barkat Ltd., the parent company of NirBarkat Holdings Ltd. Nir Barkat is the brother of Eli Barkat, our Chairman and former Chief Executive Officer. The shares listed in the table above for Nir Barkat Ltd. do not include 163,285 Ordinary Shares held by BRM Technologies Ltd. in which Nir Barkat Ltd. is a shareholder, with respect to which shares Mr. Barkat and Nir Barkat Ltd. disclaim control and beneficial ownership.
(4)	The shares listed in the table above for Eli Barkat include 3,352,342 Ordinary Shares held by EliBarkat Holdings Ltd., an entity substantially controlled by Eli Barkat, 1,000 Ordinary Shares owned directly by Mr. Barkat’s wife, with respect to which he disclaims beneficial ownership or control, and options to purchase 1,232,812 Ordinary Shares that are exercisable within sixty days of March 4, 2005.
(5)	The shares listed in the table above for Mr. Heye include options to purchase 324,875 Ordinary Shares that are exercisable within sixty days of March 4, 2005.
(6)	The shares listed in the table above for Mr. Holmes include options to purchase 31,500 Ordinary Shares that are exercisable within sixty days of March 4, 2005.
(7)	The shares listed in the table above for Ms. Maxwell include options to purchase 25,312 Ordinary Shares that are exercisable within sixty days of March 4, 2005.
(8)	The shares listed in the table above for our executive officers and directors as a group include 1,613,999 Ordinary Shares subject to options which are exercisable within 60 days of March 4, 2005.

Number of Securities

Remaining Available

for Future Issuance

Number of Securities

under Equity

to be Issued upon

Weighted-Average

Compensation Plans

Exercise of

Exercise Price of

(Excluding Securities

Outstanding Options,

Outstanding Options,

Reflected in the

Plan Category

Warrants and Rights

Warrants and Rights

First Column)

Equity compensation plans approved by security holders(1)

8.084,829

$

2.77

7,257,677

Equity compensation plans not approved by security holders

-0-

-0-

-0-

Total

8,084,829

$

2.77

7,257,677

(1)	Includes our 1996 Israel Stock Option Plan and 1998 United States Stock Option Plan, which provide for an annual increase in the number of Ordinary Shares available for issuance thereunder, on July 1 of each

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fiscal year, equal to the lesser of (a) 1,960,000 Ordinary Shares or (b) 5% of the Ordinary Shares outstanding on that date, with 30% of the Ordinary Shares being allocated to the 1996 Israel Stock Option Plan and 70% of such Shares being allocated to the 1998 United States Stock Option Plan. Also includes 1,820,608 Ordinary Shares reserved for issuance under our 1999 Employee Stock Purchase Plan, which provides for an annual increase in the number of shares available for issuance thereunder, on July 1 of each fiscal year, equal to the lesser of (a) 833,333 Ordinary Shares or (b) 2% of the Ordinary Shares outstanding on that date.

Item 13.	Certain Relationships and Related Transactions

Item 14.	Principal Accountant Fees and Services

		2004				2003
Audit Fees		$	235,000			$	240,000
Audit-Related Fees			—				24,000
Tax Fees			4,000				166,000
All Other Fees			7,000				198,000
Total		$	246,000			$	628,000

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Item 15.	Exhibits and Financial Statement Schedules

	1. Financial Statements.

	2. Financial Statement Schedules.

										Write-off of
		Balance at				Provision For				Previously				Balance at
		Beginning				Doubtful				Provided				End of
		of Period				Accounts				Accounts				Period
						(In thousands)
Year Ended December 31, 2004 Allowance for Doubtful Accounts		$	2,150			$	0			$	(1,507	)		$	643
Year Ended December 31, 2003 Allowance for Doubtful Accounts		$	2,046			$	104			$	0			$	2,150
Year Ended December 31, 2002 Allowance for Doubtful Accounts		$	2,957			$	205			$	(1,116	)		$	2,046

	3. Exhibits.

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	BACKWEB TECHNOLOGIES LTD.

	By:	/s/ WILLIAM HEYE

	William Heye,
	Chief Executive Officer

Signature				Title		Date
/s/ WILLIAM HEYE   William Heye				Chief Executive Officer (Principal Executive Officer)		March 31, 2005
/s/ KEN HOLMES   Ken Holmes				Vice President, Finance (Principal Financial and Accounting Officer)		March 31, 2005
/s/ ELI BARKAT   Eli Barkat				Chairman of the Board of Directors		March 31, 2005
/s/ UDAY BELLARY   Uday Bellary				Director		March 31, 2005
/s/ AMIR MAKLEFF   Amir Makleff				Director		March 31, 2005
/s/ ISABEL MAXWELL   Isabel Maxwell				Director		March 31, 2005

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Exhibit
No.				Description
	3	.1		Articles of Association of BackWeb Technologies Ltd., as amended(1)
	3	.2		Memorandum of Association of Registrant (English translation)(2)
	4	.1		Specimen of Ordinary Share Certificate.(2)
	10	.1*		1996 Israel Stock Option Plan (English translation)(2)
	10	.2*		Appendix A to Israeli Stock Option Plan, effective January 1, 2003(3)
	10	.3*		Form of Option Agreement for Israeli Stock Option Plan(3)
	10	.4*		1996 U.S. Stock Option Plan(4)
	10	.5*		1998 U.S. Stock Option Plan (Amended and Restated as of January 1, 2002)(5)
	10	.6*		Form of Option Agreement for 1998 U.S. Stock Option Plan(3)
	10	.7*		1999 Employee Stock Purchase Plan(6)
	10	.8		Lease Agreement for 10 Ha’amal Street, Park Afek, Rosh Ha’ayin, Israel (English translation).
	10	.9		Master Lease Agreement between BackWeb Technologies Inc. handspike Properties, L.P. for the premises located at 2077 Gateway Place, Suite 500, San Jose, California.(7)
	10	.10		1st Amendment to Lease — Expansion, made May 12, 2000, between Speiker Properties, L.P. and BackWeb Technologies, Inc.(8)
	10	.11		2nd Amendment to Lease — Expansion, made November 7, 2000, between Speiker Properties, L.P. and BackWeb Technologies, Inc.(9)
	10	.12		3rd Amendment to Lease, made between CA-Gateway Office Limited Partnership, as successor by conversion to EOP-Gateway Office, L.L.C., as successor in interest to Speiker Properties, L.P., and BackWeb Technologies Inc.(3)
	10	.13		Promissory Note by BackWeb Technologies Inc., as Maker, to CA-Gateway Office Limited Partnership, as Payee, date October 27, 2003(3)
	10	.14		Guaranty of Lease by BackWeb Technologies Ltd.(3)
	10	.15		Guaranty of Note by BackWeb Technologies Ltd.(3)
	10	.16		Warrant to Purchase 200,000 Ordinary Shares, issued by BackWeb Technologies Ltd. to CA-Gateway Office Limited Partnership(3)
	10	.17		Form of Agreement by and among Interad (1995) Ltd. and NirBarkat Holdings Ltd., Eli Barkat Holdings Ltd., Yuval 63Holdings (1995) Ltd., and Lior Hass and Iftah Sneh.(10)
	10	.18*		Offer letter with William Heye
	10	.19*		Offer letter with Ken Holmes
	10	.20*		Director Cash Compensation Arrangement
	21	.1		Subsidiaries of the Registrant.
	23	.1		Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm
	23	.2		Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
	23	.3		Consent of Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young Global: Independent Registered Public Accounting Firm
	31	.1		Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) Under the Securities Exchange Act of 1934
	31	.2		Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) Under the Securities Exchange Act of 1934
	32	.1		Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	(1)	Incorporated herein by reference to the corresponding Exhibit from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, filed November 14, 2002.

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	(2)	Incorporated herein by reference to the corresponding Exhibit from the Company’s Registration Statement on Form F-1 (File No. 333-10358).
	(3)	Incorporated herein by reference to the corresponding Exhibit from the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, filed March 30, 2004.
	(4)	Incorporated herein by reference to Exhibit 10.2 from the Company’s Registration Statement on Form F-1 (File No. 333-10358).
	(5)	Incorporated herein by reference to the corresponding Exhibit from the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed April 2, 2002.
	(6)	Incorporated herein by reference to Exhibit 10.4 from the Company’s Registration Statement on Form F-1 (File No. 333-10358).
	(7)	Incorporated herein by reference to Exhibit 10.7 from the Company’s Registration Statement on Form F-1 (File No. 333-10358).
	(8)	Incorporated herein by reference to Exhibit 10.18 from the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, filed April 1, 2001.
	(9)	Incorporated herein by reference to Exhibit 10.19 from the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, filed April 1, 2001.

(10)	Incorporated herein by reference to Exhibit 10.8 from the Company’s Registration Statement on Form F-1 (File No. 333-10358).

	*	Indicates management contract or compensatory plan or arrangement.

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