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

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

                                   Form 10-K/A
                                 Amendment No. 1

   [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 000-30828

                         PRECISE SOFTWARE SOLUTIONS LTD.
             (Exact Name of registrant as specified in its charter)

             Israel                                         Not Applicable
 (State or Other Jurisdiction of                           (I.R.S. Employer
   Incorporation or Organization)                       Identification Number)

         10 Hata'asiya Street                                   60408
            P.O. Box 1066                                     (Zip Code)
          Or-Yehuda, Israel
(Address of Principal Executive Offices)

      Registrant's telephone number, including area code: 972 (3) 735-2222

           Securities registered pursuant to Section 12(b) of the Act:

                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                  Ordinary Shares, Par Value 0.03 NIS per share

     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 report(s), 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 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.

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

     The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of February 28, 2003, was approximately $490,730,642 million
(based on the closing price of the registrant's ordinary shares on February 28,
2003, of $16.50 per share). This excludes 466,862 ordinary shares deemed to be
held by affiliates. Exclusion of shares should not be construed to indicate that
such person possesses the power, direct or indirect, to direct or cause the
direction of the management or policies of the registrant, or that such person
is controlled by or under common control with the registrant. The number of the
registrant's ordinary shares outstanding as of February 28, 2003 was 30,208,113.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None
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<PAGE>

                                EXPLANATORY NOTE

     This Amendment No.1 on 10-K/A to our Annual Report on Form 10-K for the
year ended December 31, 2002 is being filed solely for the purposes of amending
the items of our Annual Report on Form 10-K for the year ended December 31,
2002, as listed below. The amendment (1) quantifies the contribution of various
previously-disclosed factors that contributed to year-to-year changes described
in our Management's Discussion and Analysis of Financial Condition and Results
of Operations and (2) reclassifies the amortization of acquired technology from
amortization of goodwill and intangible assets to cost of revenues in our
Financial Statements and Supplementary Data.

     This report amends the following items contained in our Annual Report on
Form 10-K originally filed with the Securities and Exchange Commission on March
13, 2003:

o    Item 6 (Selected Financial Data),

o    Item 7 (Management's Discussion and Analysis of Financial Condition and
     Results of Operations),

o    Item 8 (Financial Statements and Supplementary Data), and

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

      In order to preserve the nature and character of the disclosures set forth
in such Items as originally filed, this report continues to speak as of the date
of the original filing, and we have not updated the disclosures in this report
to speak as of a later date.










<PAGE>

                                TABLE OF CONTENTS


Part II

Item 6.   Selected Consolidated Financial Data................................1
Item 7.   Management's Discussion and Analysis of Financial
           Condition and Results of Operations................................2
Item 8.   Financial Statements and Supplementary Data........................21

Part IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K....22

Index to Consolidated Financial Statements..................................F-1

SIGNATURES.................................................................II-1

INDEX TO EXHIBITS..........................................................II-2













<PAGE>

                                     PART II

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

     You should read the following selected consolidated financial data together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the related notes
included elsewhere in this Annual Report on Form 10-K/A.

     The selected consolidated statement of operations data set forth below for
the years ended December 31, 2000, 2001 and 2002, and the selected consolidated
balance sheet data as of December 31, 2001 and 2002 are derived from our audited
consolidated financial statements that are included elsewhere in this Report.
The selected consolidated statement of operations data for the years ended
December 31, 1998 and 1999 and the selected consolidated balance sheet data as
of December 31, 1998, 1999 and 2000 are derived from audited consolidated
financial statements that are not included in this Report. These financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles.
<TABLE><CAPTION>
                                                                            Year Ended December 31,
                                                         -------------------------------------------------------------
                                                            1998         1999         2000         2001         2002
                                                         ---------    ---------    ---------    ---------    ---------
                                                                  (in thousands, except per share data)

Consolidated Statement of Operations Data:
Revenues:
<S>                                                      <C>          <C>          <C>          <C>          <C>
  Software licenses ..................................   $   5,331    $   9,770    $  22,968    $  43,903    $  52,672
  Services ...........................................         858        1,844        4,580       11,694       23,328
                                                         ---------    ---------    ---------    ---------    ---------
        Total revenues ...............................       6,189       11,614       27,548       55,597       76,000
Cost of revenues:
  Software licenses ..................................         522          741          742          362          628
  Services, net ......................................         198          906        1,693        3,143        6,395
  Amortization of acquired technology ................        --           --              8        1,109        2,107
                                                         ---------    ---------    ---------    ---------    ---------
        Total cost of revenues .......................         720        1,647        2,443        4,614        9,130
                                                         ---------    ---------    ---------    ---------    ---------
Gross profit .........................................       5,469        9,967       25,105       50,983       66,870
                                                         ---------    ---------    ---------    ---------    ---------
Operating expenses:
  Research and development, net ......................       2,214        2,891        4,987       10,924       12,793
  Sales and marketing, net ...........................       5,739        7,913       20,749       34,675       43,611
  General and administrative, net ....................       1,272        1,598        3,923        7,046        8,668
  Amortization of deferred stock compensation,
    goodwill and intangible assets ...................         300          234        6,242        3,861        1,887
  In-process research and development write-off ......        --           --          2,200           86         --
  Veritas acquisition related expenses ...............        --           --           --           --            131
                                                         ---------    ---------    ---------    ---------    ---------
        Total operating expenses .....................       9,525       12,636       38,101       56,592       67,090
                                                         ---------    ---------    ---------    ---------    ---------
Operating loss .......................................      (4,056)      (2,669)     (12,996)      (5,609)        (220)
Financial income and other, net ......................          34           71        3,091        6,565        4,021
                                                         ---------    ---------    ---------    ---------    ---------
Income (loss) before income taxes ....................      (4,022)      (2,598)      (9,905)         956        3,801
Income taxes .........................................        --           --           --             33          210
                                                         ---------    ---------    ---------    ---------    ---------
Net income (loss) ....................................   $  (4,022)   $  (2,598)   $  (9,905)   $     923    $   3,591
                                                         =========    =========    =========    =========    =========
Net earnings (loss) per share:
Basic and diluted net earnings (loss) per share ......   $   (1.31)   $   (0.79)   $   (0.77)   $    0.03    $    0.12
                                                         =========    =========    =========    =========    =========
Weighted average number of shares used in computing
  basic net earnings (loss) per share ................       3,077        3,299       12,901       26,745       28,843
                                                         =========    =========    =========    =========    =========
Weighted average number of shares used in computing
  diluted net earnings (loss) per share ..............       3,077        3,299       12,901       29,971       31,210
                                                         =========    =========    =========    =========    =========

                                                                                  December 31,
                                                         -------------------------------------------------------------
                                                            1998         1999         2000         2001         2002
                                                         ---------    ---------    ---------    ---------    ---------
                                                                          (in thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities .....   $     844    $   6,693    $ 149,410    $ 135,831    $ 140,195
Working capital ......................................         242        7,709      120,147       74,904       86,521
Total assets .........................................       4,333       12,986      178,681      203,183      227,018
Shareholders' equity .................................         742        8,293      166,876      185,659      205,444
</TABLE>

                                        1
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     Except for the historical information contained herein, the matters
discussed in this Annual Report on Form 10-K/A are forward-looking statements
that involve risks and uncertainties. Precise makes such forward-looking
statements under the provisions of the "Safe Harbor" section of the Private
Securities Litigation Reform Act of 1995. Any forward-looking statements should
be considered in light of the factors described below under "Factors That May
Affect Future Results." Actual results may vary materially from those projected,
anticipated or indicated in any forward-looking statements. In this Item 7, the
words "anticipate," "believe," "expect," "intend," "future," "could," and
similar words or expressions (as well as other words or expressions referencing
future events, conditions or circumstances) identify forward-looking statements.
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the accompanying consolidated
financial statements and related notes included elsewhere in this Annual Report
on Form 10-K/A.

OVERVIEW

     Precise is a provider of software that assists organizations in monitoring
and optimizing the performance of their complex Information Technology
infrastructure. We were incorporated in 1990. Initially, we focused on
developing and marketing performance management software for mainframe computer
systems. In 1995, we shifted our focus to Application Performance Management
software for Oracle database environments. In 1996, we released the initial
version of Precise/Indepth for Oracle for database monitoring. Since 1998, we
have released or acquired new products and continually updated our product suite
making the following products generally available:

     Release   Product
     -------   -------

     1998      Precise/Inform for Alerts, Precise/Presto for EMC,
               Precise/Interpoint

     2000      Precise/Insight, Precise/Savant

     2001      Precise/Inform for Foresight, Precise/Indepth for J2EE,
               Precise/Savvy, Precise/Indepth for DB2 UDB, Precise/Crosspoint,
               Precise/StorageCentral SRM, Precise/QuotaAdvisor, Precise i3
               Suite

     2002      Precise/SiteStor SRM, Precise/Luminate, Precise/Indepth for
               Transactions, Precise/Lightpoint, Precise/Indepth for SQL Server,
               Precise/Sharkpoint

     Our consolidated financial statements, which are included elsewhere in this
report, are prepared in accordance with U.S. generally accepted accounting
principles. The functional currency of our operations is the U.S. dollar, which
is the primary currency in the economic environment in which we conduct the
majority of our business. We have operations in the U.S., the U.K., Israel,
Holland, Australia, Germany, France, China and Japan where business is usually
conducted using the local currencies. We do not engage in any currency or
exchange rate hedging activities to mitigate our exposure to these fluctuations.
We may, however, engage in these types of transactions in the future.

     CRITICAL ACCOUNTING POLICIES

     In December 2001, the SEC requested that all registrants discuss their
"critical accounting policies." A critical accounting policy is a policy that is
both important to the portrayal of our financial condition and results and
requires subjective or complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain. While our
significant accounting policies are discussed in Note 3 to our consolidated
financial statements included in this Annual Report on Form 10-K/A, we believe
the following accounting policies to be critical:

                                        2
<PAGE>

     Revenue recognition. We derive our revenues from the sale of software
licenses and from services. Our products are sold worldwide through a
combination of our direct sales force and indirect sales channels, including
original equipment manufacturers, or OEMs, and resellers. Our services revenues
consist primarily of fees derived from annual maintenance and support agreements
and consulting and training, none of which are considered essential to the
functionality of the software license.

     The Company recognizes revenue in accordance with Statement of Position
("SOP") 97-2, "Software Revenue Recognition," as amended. Revenues from software
arrangements are recognized when: o persuasive evidence of an agreement exists;
o the product has been delivered; o all license payments are due within one
year; o the license fee is fixed or determinable; and o collection of the fee is
probable o no significant obligations exist.

     Where software arrangements involve multiple elements, revenue is allocated
to each element based on vendor specific objective evidence, or VSOE, in
accordance with the "residual method" prescribed by SOP 98-9, "Modification of
SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions."
Our VSOE used to allocate the sales price to training and maintenance is based
on the price charged when these elements are sold separately. License revenues
are recorded based on the residual method. Under the residual method, revenue is
recognized for the delivered elements when (1) there is VSOE of the fair values
of all the undelivered elements and (2) all revenue recognition criteria of SOP
97-2, as amended, are satisfied. Under the residual method of accounting any
discount in the arrangement is allocated to the delivered elements. Should
changes in conditions cause management to determine these criteria are not met
for certain future transactions, revenue recognized for any subsequent reporting
period could be adversely affected.

     Maintenance-related service revenues are recognized ratably over the term
of the maintenance agreement, which is typically one year. Consulting and
training revenues are recognized as the services are rendered.

     Generally, revenues from our OEMs are recognized when we receive reports of
fees due upon the sublicensing of our products by the OEMs.

     Allowances for Doubtful Accounts. We make judgments as to our ability to
collect outstanding receivables and provide allowances for a portion of
receivables when collection becomes doubtful. Provisions are made based upon a
review of significant outstanding balances, as well as our historical collection
experience and current economic trends. If our historical experience does not
reflect our future ability to collect outstanding receivables, additional
provisions for doubtful accounts may be needed and the future results of
operations could be adversely affected.

     Goodwill and other intangible assets. As discussed in Note 3 to our
consolidated financial statements, we adopted Statement of Financial Accounting
Standards ("SFAS") No.142, "Goodwill and Other Intangible Assets," for
acquisitions on or after July 1, 2001, and have not amortized the associated
goodwill for 2001 or 2002. We adopted the pronouncement related to acquisitions
that occurred prior to June 2001 at January 1, 2002. This standard requires that
goodwill no longer be amortized, and instead, be tested for impairment on a
periodic basis. At December 31, 2002, we had $44.6 million in goodwill.


     In testing for a potential impairment of goodwill, SFAS 142 requires us to:
(1) allocate goodwill to the various businesses to which the acquired goodwill
relates; and (2) estimate the fair value of those businesses to which goodwill
relates. The process of evaluating the potential impairment of goodwill is
highly subjective and requires significant judgment. In estimating the fair
value of the businesses with recognized goodwill for the purposes of our 2002
financial statements, we made estimates and judgments about the future cash
flows of these businesses. Our cash flow forecasts were based on assumptions
that are consistent with the plans and estimates we are using to manage the
underlying businesses. We also considered our market capitalization.

                                        3
<PAGE>

     Based on our best estimates, we have concluded that there is no impairment
of our goodwill. However, changes in these estimates, including our market
capitalization, could cause one or more of the businesses to be valued
differently and may result in an impairment.

     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.

     Marketable securities. We account for investments in debt and equity
securities in accordance with SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." We determine the proper classification of
investments in obligations with fixed maturities and marketable equity
securities at the time of purchase and reevaluate such designations as of each
balance sheet date. At December 31, 2002, all securities were designated as
available-for-sale. Accordingly, the available-for-sale securities are stated at
fair value, with unrealized gains and losses reported in a separate component of
shareholders' equity, accumulated other comprehensive income. Amortization of
premium and accretion of discounts are included in financial income and other,
net. Realized gains and losses on sales of investments, as determined on a
specific identification basis, are included in the consolidated statements of
operations.

RESULTS OF OPERATIONS

     The following table presents certain consolidated statement of operations
data as a percentage of total revenues for the periods indicated:
<TABLE>
                                                                     Years Ended December 31,
                                                                 ------------------------------
PERCENT OF TOTAL REVENUES:                                           2000      2001      2002
                                                                     ----      ----      ----
Revenues:
<S>                                                                   <C>       <C>       <C>
   Software licenses........................................          83%       79%       69%
   Services ................................................          17        21        31
                                                                 ----------------------------
      Total revenues .......................................         100       100       100
Cost of revenues:
   Software licenses .......................................           3         1         1
   Services, net ...........................................           6         5         8
   Amortization of acquired technology .....................         --          2         3
                                                                 ----------------------------
      Total cost of revenues ...............................           9         8        12
                                                                 ----------------------------
Gross profit ...............................................          91        92        88
Operating expenses:
   Research and development, net ...........................          18        20        17
   Sales and marketing, net ................................          75        62        57
   General and administrative, net .........................          14        13        11
   Amortization of deferred stock compensation..............          22         3         1
   Amortization of goodwill, intangible assets and IPR&D....           9         4         2
   Veritas acquisition related expenses.....................         --        --        --
                                                                 ----------------------------
      Total operating expenses .............................         138       102        88
                                                                 ----------------------------
Operating loss .............................................        (47)       (10)         -
Financial income and other, net ............................         11         12         5
                                                                 ----------------------------
Income (loss) before income taxes ..........................        (36)         2         5
Income taxes ...............................................
                                                                     --        --        --
                                                                 ----------------------------
Net income (loss) ..........................................        (36)%        2%        5%
                                                                 ============================
</TABLE>

                                        4
<PAGE>

     YEARS ENDED DECEMBER 31, 2000, 2001, AND 2002

     REVENUES

     We derive our revenues from the sale of software licenses and from services
consisting primarily of maintenance fees, and, to a lesser extent, professional
services. Total revenues were $27.5 million, $55.6 million, and $76.0 million in
2000, 2001, and 2002, respectively, representing an increase of $28.1 million,
or 102%, from 2000 to 2001, and an increase of $20.4 million, or 37%, from 2001
to 2002. One customer accounted for 23%, 18% and 10% of total revenues for the
years ended December 31, 2000, 2001 and 2002, respectively. In addition, one
other customer accounted for 13% of total revenues for the year ended December
31, 2001 and less than 10% for the years ended December 31, 2000 and 2002.

     Revenues from sales of software licenses were $23.0 million, $43.9 million,
and $52.7 million in 2000, 2001, and 2002, respectively, representing an
increase of $20.9 million, or 91%, from 2000 to 2001, and an increase of $8.8
million, or 20%, from 2001 to 2002. The increase in software license revenue
from 2000 to 2001 is due to a $12.5 million increase from the expansion of our
direct and indirect sales channels, including $3.5 million in sales of our
acquired storage resource management products, and an increase of $8.4 million
in software license revenue attributable to our strategic relationships. The
increase in software license revenue from 2001 to 2002 is due to a $17.7 million
increase from the expansion of our direct and indirect sales channels, including
an increase of $8.6 million in storage resource management product sales, offset
by a decline of $8.9 million in software license revenue attributable to our
strategic relationships.

     Revenues from services were $4.6 million, $11.7 million, and $23.3 million
in 2000, 2001, and 2002 respectively, representing an increase of $7.1 million,
or 155%, from 2000 to 2001, and an increase of $11.6 million, or 99%, from 2001
to 2002. Of the increase in service revenue from 2000 to 2001, $5.6 million is
attributable to additional maintenance agreements from new software license
sales and renewals of annual maintenance agreements with existing customers and
$1.5 million is attributable to additional professional services. Of the
increase in service revenue from 2001 to 2002, $7.8 million is attributable to
additional maintenance agreements from new software license sales and renewals
of annual maintenance agreements with existing customers and $3.8 million is
attributable to additional professional services.

     COST OF REVENUES

     Cost of revenues consists of costs associated with generating software
license and service revenues. Cost of revenues were $2.4 million, $4.6 million,
and $9.1 million in 2000, 2001, and 2002, respectively, representing an increase
of $2.2 million, or 89%, from 2000 to 2001, and an increase of $4.5 million, or
98%, from 2001 to 2002. Cost of revenues as a percentage of total revenues were
9%, 8%, and 12% in 2000, 2001, and 2002, respectively. The decline in cost of
revenues from 2000 to 2001 is explained in the following three paragraphs. The
increase in cost of revenues from 2001 to 2002 is due to a change in revenue
mix, as our services business, which delivers lower gross margins than software
licenses, grew at a faster rate than license revenues.

     Cost of software license revenues consists primarily of royalties to the
government of Israel as consideration for royalty-bearing marketing and research
and development grants received in previous years and, to a lesser extent,
production costs and third party royalties. Cost of software license revenues
was $0.7 million, $0.4 million, and $0.6 million in 2000, 2001, and 2002,
respectively. The decrease in cost of software licenses from 2000 to 2001 is due
to a decrease in the royalty expense owed to the Chief Scientist of the Israeli
Ministry of Industry and Trade. This royalty has been fully accrued at December
31, 2001. Cost of software license revenues as a percentage of total software
license revenues were 3%, 1%, and 1% in 2000, 2001, and 2002, respectively.

     Cost of service revenues consists primarily of costs related to personnel
providing customer support and professional services. Cost of service revenues
were $1.7 million, $3.1 million, and $6.4 million in 2000, 2001, and 2002,
respectively, representing an increase of $1.4 million, or 86%, from 2000 to
2001, and an increase of $3.3 million, or 103%, from 2001 to 2002. The increase
from 2000 to 2001 and from 2001 to 2002 is due to the continued increase in the
number of customer support personnel hired to service our growing customer base
and to the hiring of additional personnel to provide professional services. Cost
of service revenues as a percentage of

                                        5
<PAGE>

service revenues were 37%, 27%, and 27% in 2000, 2001, and 2002, respectively.
The decline in the cost of service revenue from 2000 to 2001 relates primarily
to improving gross margins from our professional services business due to scale
and productivity initiatives.

     Amortization of acquired technology was $8,000, $1.1 million and $2.1
million in 2000, 2001, and 2002, respectively, representing an increase of $1.1
million from 2000 to 2001, and an increase of $1.0 million from 2001 to 2002.
The increase from 2000 to 2001 is primarily attributable to amortization of
intangible assets relating to our December 2000 acquisition of Savant
Corporation ("Savant") and our September 2001 acquisition of W. Quinn
Associates, Inc. ("W. Quinn"), which represented an increase of $900,000 and
$100,000, respectively. The increase from 2001 to 2002 is primarily attributable
to a full year of amortization of intangible assets for W. Quinn, which
accounted for an increase of $300,000, and an additional $700,000 in expense
relating to other technology purchases.

     RESEARCH AND DEVELOPMENT

     Research and development expenses consist primarily of costs related to
research and development personnel, including salaries and other
personnel-related expenses, sub-contracting fees, facilities and computer
equipment used in our product and technology development. Research and
development expenses were $5.0 million, $10.9 million, and $12.8 million in
2000, 2001, and 2002, respectively, representing an increase of $5.9 million, or
119%, from 2000 to 2001, and an increase of $1.9 million, or 17%, from 2001 to
2002. The increase from 2000 to 2001 and from 2001 to 2002 was attributable to
the cost associated with the development of new products to enhance our software
suite, which resulted in an increase in headcount related expenses.

     SALES AND MARKETING

     Sales and marketing expenses consist primarily of salaries and other
personnel-related expenses, commission and other costs associated with our sales
and marketing efforts. Sales and marketing expenses were $20.7 million, $34.7
million, and $43.6 million in 2000, 2001, and 2002, respectively, representing
an increase of $14.0 million, or 67%, from 2000 to 2001, and an increase of $8.9
million, or 26%, from 2001 to 2002. The increase from 2000 to 2001 is primarily
due to an increase in payroll and headcount related expenses to support the
growth of our sales force, which accounted for $11.3 million of the increase, a
$1.5 million increase in commission expenses attributable to the increase in
software license revenues, and a $1.2 million increase in marketing spending
which included trade shows, seminars, promotional activities and marketing
headcount related costs. The increase from 2001 to 2002 is primarily due to an
increase in payroll and headcount related expenses to support the growth of our
sales force, which accounted for $7.4 million of the increase, a $1.3 million
increase in commission expenses attributable to the increase in software license
revenues and a $200,000 increase in marketing activities. As a percentage of
total revenue, sales and marketing expenses have declined from 75% in 2000, to
62% in 2001 and to 57% in 2002, representing the most significant factor in our
improving overall operating margins over that period. This trend reflects
improving productivity within our direct sales force as well as leveraging
marketing spending as we have grown.

     GENERAL AND ADMINISTRATIVE

     General and administrative expenses consist primarily of salaries and other
personnel-related expenses from our administrative and finance personnel,
facilities, computer equipment and professional services fees. General and
administrative expenses were $3.9 million, $7.0 million, and $8.7 million in
2000, 2001, and 2002, respectively, representing an increase of $3.1 million, or
80%, from 2000 to 2001, and an increase of $1.7 million, or 23%, from 2001 to
2002. The increase from 2000 to 2001 and from 2001 to 2002 is primarily
attributable to an increase in payroll and headcount related expenses.

     AMORTIZATION OF DEFERRED STOCK COMPENSATION

     Amortization of deferred stock compensation was $6.2 million, $1.9 million,
and $0.4 million in 2000, 2001, and 2002, respectively, representing a decrease
of $4.3 million from 2000 to 2001, and a decrease of $1.5 million from 2001 to
2002. The decrease from 2000 to 2001 and from 2001 to 2002 is attributable to
deferred stock

                                        6
<PAGE>

compensation being fully amortized and options reaching the end of the vesting
period for various individuals during this period. As of December 31, 2002, the
unamortized deferred stock compensation balance is $77,000, most of which will
be amortized during 2003.

     AMORTIZATION OF GOODWILL AND INTANGIBLE ASSETS

     Amortization of goodwill and intangible assets technology was $91,000, $1.9
million and $1.5 million in 2000, 2001, and 2002, respectively, representing an
increase of $1.8 million from 2000 to 2001, and a decrease of $400,000 from 2001
to 2002. The increase from 2000 to 2001 is primarily attributable to
amortization of goodwill and intangible assets relating to the acquisitions of
Savant and W. Quinn, which represented an increase of $1.4 million and $300,000,
respectively. The decrease from 2001 to 2002 is due to the discontinuance of
goodwill amortization in accordance with the adoption of SFAS No.142 for
acquisitions on or after July 1, 2001, which accounted for a decrease of $1.2
million, partially offset by a full year of amortization of intangible assets
relating to the acquisition of W. Quinn, which accounted for an increase of
$500,000, and an additional $300,000 in expense relating to other technology
purchases. For further discussion see Note 3 to our consolidated financial
statements.

     IN-PROCESS RESEARCH AND DEVELOPMENT WRITE-OFF

     In-process research and development write-offs were $2.2 million, $86,000,
and $0 in 2000, 2001, and 2002, respectively. The in-process research and
development write-off from 2000 was related to the one time write-off of
software from the Savant acquisition for which technological feasibility had not
yet been established and for which no alternative future use existed for the
software. The in-process research and development write-off from 2001 was
related to the one time write-off of software from the W. Quinn acquisition for
which technological feasibility had not yet been established and for which no
alternative future use existed for the software.

     FINANCIAL INCOME AND OTHER, NET

     Financial income and other, net, was $3.1 million, $6.6 million, and $4.0
million in 2000, 2001, and 2002, respectively, representing an increase of $3.5
million from 2000 to 2001, and a decrease of $2.6 million from 2001 to 2002. The
increase from 2000 to 2001 is attributable to additional interest earned on a
full year of investment of proceeds from both our initial public offering and
secondary public offering, which occurred in June 2000 and November 2000,
respectively. The decrease from 2001 to 2002 is due to lower market interest
rates earned on our investments.

                                        7
<PAGE>

QUARTERLY RESULTS OF OPERATIONS

     The following table presents certain unaudited consolidated statement of
operations data for each quarter of 2001 and 2002. We believe this information
has been prepared on the same basis as our annual consolidated financial
statements and includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information for the
quarters presented. This information should be read together with the
consolidated financial statements and the related notes included elsewhere in
this Annual Report on Form 10-K/A. The operating results for any quarter are not
necessarily indicative of the results for any future period.
<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
                                        --------------------------------------------------------------------------------------------
Revenues:
<S>                                     <C>         <C>         <C>         <C>         <C>         <C>         <C>        <C>
  Software licenses .................   $  9,446    $  9,995    $ 11,300    $ 13,161    $ 12,402    $ 13,197    $ 12,562   $ 14,511
  Services ..........................      2,064       2,712       3,028       3,891       4,692       5,023       6,788      6,825
                                        --------------------------------------------------------------------------------------------
           Total revenues ...........     11,510      12,707      14,328      17,052      17,094      18,220      19,350     21,336
Cost of revenues:
  Software licenses .................         70          42          69         181         132         121         237        138
  Services, net .....................        745         702         766         931       1,065       1,334       1,963      2,033
  Amortization of acquired
     technology .....................        219         219         255         416         463         549         549        546
                                        --------------------------------------------------------------------------------------------
           Total cost of revenues ...      1,034         963       1,090       1,528       1,660       2,004       2,749      2,717
                                        --------------------------------------------------------------------------------------------
Gross profit ........................     10,476      11,744      13,238      15,524      15,434      16,216      16,601     18,619
Operating expenses:
  Research and development, net .....      2,236       2,688       2,850       3,149       3,250       3,189       3,199      3,155
  Sales and marketing, net ..........      7,633       8,121       8,688      10,233       9,810      10,532      10,738     12,531
  General and administrative, net ...      1,552       1,586       1,887       2,020       2,165       2,188       2,152      2,163
  Amortization of deferred stock
    compensation ....................        713         469         404         345         188          75          72         19
  Amortization of goodwill,
     intangible assets and IPR&D ....        419         435         578         585         302         338         430        463
  Veritas acquisition related
      expenses ......................        --          --          --          --          --          --          --         131
                                        --------------------------------------------------------------------------------------------
           Total operating expenses .     12,553      13,299      14,407      16,332      15,715      16,332      16,951     18,462
                                        --------------------------------------------------------------------------------------------
Operating income (loss) .............     (2,077)     (1,555)     (1,169)       (808)       (281)       (106)         10        157
Financial income and
     other, net .....................      2,106       1,765       1,621       1,073       1,003       1,016       1,094        908
                                        --------------------------------------------------------------------------------------------
Income before income taxes ..........         29         210         452         265         722         910       1,104      1,065
                                        --------------------------------------------------------------------------------------------
Income taxes ........................        --          --          --           33          72          80           8         50
                                        --------------------------------------------------------------------------------------------
Net income ..........................   $     29    $    210    $    452    $    232    $    650    $    830    $  1,096   $  1,015
                                        ============================================================================================
</TABLE>

                                        8
<PAGE>
<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
                                        --------------------------------------------------------------------------------------------
Percent of Total Revenues:
Revenues:
<S>                                         <C>         <C>         <C>        <C>         <C>         <C>         <C>        <C>
   Software licenses ................        82%         79%         79%        77%         73%         72%         65%        68%
   Services .........................        18          21          21         23          27          28          35         32
                                        --------------------------------------------------------------------------------------------
          Total revenues ............       100         100         100        100         100         100         100        100
Cost of revenues:
   Software licenses ................         1         --            1          1           1           1           1          1
   Services, net ....................         6           6           5          6           6           7          10          9
   Amortization of acquired
     technology .....................         2           2           2          2           3           3           3          3
                                        --------------------------------------------------------------------------------------------
          Total cost of revenues ....         9           8           8          9          10          11          14         13
                                        --------------------------------------------------------------------------------------------
Gross margin ........................        91          92          92         91          90          89          86         87
Operating expenses:
   Research and development, net.....        19          21          20         18          19          18          17         15
   Sales and marketing, net .........        66          64          61         60          57          58          56         58
   General and administrative, net...        14          12          13         12          13          12          11         10
   Amortization of deferred stock
      Compensation ..................         6           4           3          2           1         --          --         --
   Amortization of goodwill,
      intangible assets and IPR&D....         4           3           3          4           2           2           2          2
   Veritas acquisition related
       expenses......................       --          --          --         --          --          --          --           1
                                        --------------------------------------------------------------------------------------------
          Total operating expenses...       109         104         100         96          92          90          86         86
                                        --------------------------------------------------------------------------------------------
Operating income (loss)..............       (18)        (12)         (8)        (5)         (2)         (1)        --           1
Financial income and
      other, net ....................        18          14          11          6           6           6           6          4
                                        --------------------------------------------------------------------------------------------
Income before income taxes ..........       --            2           3          1           4           5           6          5
Income taxes.........................       --          --          --         --          --          --          --         --
                                        --------------------------------------------------------------------------------------------
Net income ..........................         0%          2%          3%         1%          4%          5%          6%         5%
                                        ============================================================================================
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     Since January 1, 2000, we have funded operations primarily through cash
generated from our initial public offering in June 2000 and our secondary public
offering in November 2000, which resulted in total net proceeds of approximately
$147 million, and, to a lesser extent, borrowings from financial institutions.
As of December 31, 2002, our principal source of liquidity was $140 million of
cash, cash equivalents and marketable securities. As of December 31, 2002, we
had $136,000 of debt outstanding relating to obligations under capital leases
and an obligation for severance pay to Israeli employees of $1.2 million that is
fully provided by monthly deposits with severance pay funds, insurance policies
and by an accrual. As of December 31, 2002, our accumulated net deficit was
$21.8 million.

     Net cash provided by (used in) operating activities was $(0.7) million,
$6.2 million and $8.6 million in 2000, 2001, and 2002, respectively. Net cash
used in operating activities in 2000 was primarily the result of net losses of
$9.9 million as well as increases in trade and other receivables of $4.6
million, which more than offset various non-cash charges of $9.0 million. Net
cash provided by operating activities for both 2001 and 2002 was primarily the
result of net income of $0.9 million and $3.6 million, respectively, various
non-cash charges of $6.6 million and $7.3 million, respectively, and increases
in deferred revenues of $2.1 million and $1.9 million, respectively, which more
than offset higher trade and other receivables of $4.4 million and $5.1 million,
respectively.

                                        9
<PAGE>

     Net cash used in investing activities was $72.1 million, $57.2 million, and
$36.2 million in 2000, 2001, and 2002, respectively. Net cash used in investing
activities in 2000 consisted of $70.9 million in purchases of available-for-sale
marketable securities, $2.1 million related to capital expenditures, and $3.3
million in payments relating to the acquisitions of Savant and Knight Fisk
Software. In 2000 the net cash used was offset by $4.9 million in proceeds
received from the sale and redemption of short-term deposits and
available-for-sale marketable securities. Investing activities in 2001 consisted
of $89.4 million in purchases of available-for-sale marketable securities, $3.3
million related to capital expenditures, and $20.6 million in payments relating
to the acquisition of W. Quinn. The use of cash relating to capital expenditures
and acquisition activity was offset by $57.5 million in proceeds received from
the sale and redemption of short-term deposits and available-for-sale marketable
securities. The majority of our capital investments were for computers,
peripheral equipment and software. Investing activities in 2002 primarily
consisted of $66.2 million in purchases of available-for-sale marketable
securities, $3.3 million in payments relating to the acquisition of The
Middleware Company, a $2.6 million loan to a privately held technology company,
a $1.6 million purchase of other intangible assets and $1.5 million for capital
expenditures. The use of cash relating to capital expenditures and acquisition
activity was offset by $38.3 million in proceeds received from the redemption of
available-for-sale marketable securities and the sale of trading securities.

     Net cash provided by financing activities was $148.3 million, $4.0 million,
and $6.0 million in 2000, 2001, and 2002, respectively. Net cash provided in
2000 was primarily from the proceeds of our initial public offering in June 2000
and our secondary public offering in November 2000, offset slightly by the
repayment of capital lease obligations. Net cash provided in 2001 and 2002 was
primarily from the issuance of shares in connection with our employee stock
purchase plan and the exercise of options.

     We believe that our existing cash equivalents and available-for-sale
marketable securities will be sufficient to meet our anticipated cash needs for
working capital and capital expenditures for at least the next 12 months.
Thereafter, if we do not have available sufficient cash to finance our
operations, we may be required to obtain additional debt or equity financing. We
cannot be certain that we will be able to obtain, if required, additional
financing on acceptable terms, or at all.

     On December 19, 2002, we entered into an Agreement and Plan of Merger with
VERITAS Software Corporation and Argon Merger Sub Ltd., an indirect wholly-owned
subsidiary of VERITAS, providing for the acquisition of Precise by VERITAS
pursuant to a merger of Argon with and into Precise, with Precise surviving the
merger as an indirect wholly-owned subsidiary of VERITAS. The consummation of
the merger is subject to various conditions, including approval by the
shareholders of Precise. The merger is expected to close in the second quarter
of 2003.

ACQUISITIONS AND INVESTMENTS

     In October 2002, we entered into a loan agreement relating to a loan of up
to $3.4 million to a privately held U.S.-based company ("borrower"), which owns
technology complementary to our technology. The loan terms provide that we will
receive warrants of up to 7% of the capital stock of the borrower for nominal
consideration, depending on the total amount loaned to the borrower.
Concurrently with entering into the loan agreement, we loaned $0.6 million to
the borrower, and we loaned an additional $1.9 million in November 2002. The
loan is secured by a first lien on the assets of the borrower, bears interest at
10% and is due and payable within 30 days of a demand for payment by Precise.
Concurrently with funding the loan in November 2002, we executed an agreement
entitling us, in our discretion and upon satisfaction with a review of the
business and assets of the borrower, to acquire all of the equity interests of
the borrower through a merger for contingent payment based on the 2003 results
of the borrower (up to a maximum of $44.4 million), after applying the aggregate
amount loaned toward the purchase price. We have not performed the requisite
business review of the borrower to determine whether we would be interested in
acquiring the borrower and we are uncertain whether we will become interested in
pursuing such an acquisition. We presently have no influence on the borrower's
conduct of its business. We valued the warrants based on the total value of the
borrower, which was considered to be immaterial.

     In June 2002, we acquired all the outstanding shares of The Middleware
Company, a U.S.-based services company, for consideration of approximately $6.1
million. Middleware provides consulting, training courses and other related
services. The purchase price consisted of approximately $4.0 million paid in
cash. In addition, The

                                       10
<PAGE>

Middleware stockholders were entitled to an additional $2.1 million payable in
our ordinary shares, which equated to 126,353 shares issued in the fourth
quarter of 2002. The consideration includes $150,000 in estimated transaction
costs. The stockholders also have the right to receive additional contingent
consideration of up to an amount of $3.5 million based on achieving earnings
levels and performance targets related to the one year period subsequent to the
closing.

     The acquisition was accounted for under the purchase method, and
accordingly the purchase price has been allocated to the assets acquired and
liabilities assumed based on their estimated fair value at the date of
acquisition. The excess of the purchase price over the estimated fair value of
the net assets acquired has been recorded as goodwill.

     In September 2001, we completed the acquisition of all of the capital stock
of W. Quinn for approximately $34.1 million in a combination of cash and
ordinary shares. We issued 774,413 ordinary shares and paid $21.6 million in
cash for the acquisition, which included $1.5 million in transaction costs. In
addition, the acquisition provided the W. Quinn shareholders with a right to
receive additional ordinary shares based on achievement of certain
post-acquisition revenue and performance targets during a twelve month period
spanning five quarters, beginning in the third quarter of 2001 and ending in the
third quarter of 2002 ("earn out"). The additional consideration was paid in the
form of 675,614 ordinary shares issued in the fourth quarter of 2002 and, as a
result, we recorded approximately $7.5 million in goodwill.

     The business combination has been accounted for using the purchase method
and, accordingly, the purchase price has been allocated to the fair value of the
tangible assets acquired and the liabilities assumed. Of the total purchase
price, which included direct acquisition costs, $25.5 million was allocated to
goodwill, representing the excess of the aggregate purchase price over the fair
value of net assets assumed, and an additional $6.6 million has been allocated
to other intangible assets. An additional $7.5 million of goodwill was recorded
in 2002 related to the payment of the earn out, resulting in $33.2 million of
total goodwill relating to the W. Quinn acquisition. See note 2 of our
consolidated financial statements for further details.

     In December 2000, we completed the acquisition of all of the capital stock
of Savant for $16.7 million in a combination of cash and ordinary shares. The
total purchase price consisted of $13.9 million payable in 512,445 ordinary
shares and $2.8 million in cash. The business combination has been accounted for
using the purchase method and, accordingly, the purchase price has been
allocated to the fair value of the tangible assets acquired and the liabilities
assumed. Of the total purchase price which included direct acquisition costs,
$9.0 million was allocated to goodwill, representing the excess of the aggregate
purchase price over the fair value of net liabilities acquired, an additional
$6.1 million has been allocated to other intangible assets and a one-time charge
of approximately $2.2 million on our statement of operations for acquired
in-process research and development was taken in December 2000. In 2001, upon
the completion of the allocation of the purchase price and the resolution of
certain contingencies, the goodwill and purchase price were reduced by $1.4
million.

     In February 2000, we completed the acquisition of all of the capital stock
of Knight Fisk Software Ltd., or Knight Fisk, our U.K. based distributor, for
cash and options to purchase our ordinary shares. The business combination has
been accounted for using the purchase method and, accordingly, the purchase
price has been allocated to the fair value of the tangible assets acquired and
the liabilities assumed. Of the total purchase price, approximately $0.7 million
was allocated to goodwill, representing the excess of the aggregate purchase
price over the fair value of the net liabilities assumed. Prior to the Knight
Fisk acquisition, we sold our products to Knight Fisk at discounts of up to 45%
off our list price and we recognized revenues based on our sales to Knight Fisk
at these discounted prices. Knight Fisk, in turn, would resell these products to
third party end users and recognize revenues based on these sales. Since Knight
Fisk is now our U.K. subsidiary, we recognize revenues on Knight Fisk sales to
third party end users based on the actual price of the products sold by Knight
Fisk, as required by principles of consolidation, rather than based on our sales
to Knight Fisk at a discounted price. As a result, our total revenues from the
U.K. have increased. Our operating expenses in the U.K. have increased due to
the Knight Fisk acquisition.

                                       11
<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS

      This Annual Report on Form 10-K/A contains forward-looking statements that
involve risks and uncertainties. Precise's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including, without limitation, those set forth in the
following risk factors and elsewhere in this Annual Report on Form 10-K/A. You
should consider carefully each of the following risks and all of the other
information in this Annual Report on Form 10-K/A and the documents we
incorporate by reference before investing in our ordinary shares. You should
also consider carefully the proxy statement/prospectus regarding our proposed
merger with VERITAS when it becomes available because it will contain important
information about the merger. If any of the following risks and uncertainties
develop into actual events, our business, financial condition or results of
operations could be adversely affected.

RISKS RELATED TO OUR PROPOSED MERGER WITH VERITAS

Failure to complete the proposed merger with VERITAS could harm our ordinary
share price and future business and operations.

     If our proposed merger with VERITAS is not completed, we may be subject to
     the following risks:

     o    if the merger agreement is terminated under specified circumstances,
          we will be required to pay VERITAS a termination fee of $16.2 million;

     o    the price of our ordinary shares may decline to the extent that the
          current market price of our ordinary shares reflects a market
          assumption that the proposed merger with VERITAS will be completed;

     o    costs related to the proposed merger with VERITAS, such as some legal,
          accounting and certain financial advisory fees, must be paid even if
          the merger is not completed; and

     o    if the proposed merger with VERITAS is terminated and our board of
          directors determines to seek another merger or business combination,
          we may not be able to find a partner willing to pay an equivalent or
          more attractive price than that which would be paid by VERITAS in the
          merger.

GENERAL UNCERTAINTY RELATED TO THE PROPOSED MERGER WITH VERITAS COULD HARM OUR
BUSINESS.

     Our customers may, in response to the announcement of the proposed merger
with VERITAS, delay or defer purchasing decisions. If our customers delay or
defer purchasing decisions, our revenue could materially decline or any
increases in revenue could be lower than expected. Similarly, our employees may
experience uncertainty about their future roles with the combined company. This
may harm our ability to attract and retain key management, marketing, sales and
technical personnel. Also, speculation regarding the likelihood of the closing
of the merger with VERITAS could increase the volatility of the price of our
ordinary shares.

THIRD PARTIES MAY TERMINATE OR ALTER EXISTING CONTRACTS OR RELATIONSHIPS WITH
US.

     We have contracts with some of our suppliers, distributors, customers,
licensors and other business partners. Some of these contracts require us to
obtain consent from these other parties in connection with the proposed merger
with VERITAS. If these consents cannot be obtained, we may suffer a loss of
potential future revenue and may lose rights that are material to our business
and the business of the combined company. In addition, third parties with whom
we currently have relationships may terminate or otherwise reduce the scope of
their relationship with us in anticipation or as a result of the merger.

REGULATORY AGENCIES MUST APPROVE THE PROPOSED MERGER AND COULD IMPOSE CONDITIONS
ON, DELAY OR REFUSE TO APPROVE THE MERGER.

     We intend to comply with the securities and antitrust laws of the United
States, and any other jurisdiction in which the proposed merger is subject to
review, as well as with Israeli regulatory requirements. The reviewing
authorities may seek to impose conditions before giving their approval or
consent to the merger, and those conditions could harm the combined company's
business. In addition, a delay in obtaining the necessary regulatory approvals

                                       12
<PAGE>

will delay the completion of the merger. We have not yet obtained other
governmental or regulatory approvals required to complete the merger. We may be
unable to obtain these approvals, or obtain them within the timeframe
contemplated by the merger agreement.

RISKS RELATED TO OUR BUSINESS

BECAUSE OF THE SIGNIFICANT PURCHASE PRICE OF OUR SOFTWARE PRODUCTS AND THE
CORRESPONDING CARE THAT OUR POTENTIAL CUSTOMERS EXERCISE IN MAKING A PURCHASE
DECISION, WE EXPECT THAT OUR QUARTERLY OPERATING RESULTS WILL CONTINUE TO
FLUCTUATE AND THIS COULD CAUSE THE TRADING PRICE OF OUR SHARES TO FLUCTUATE OR
DECLINE.

     Like many software and technology related companies, our quarterly
operating results have varied significantly in the past. Because of the
significant purchase price of our software products, our customers exercise care
in making a purchase decision. We believe that this caution, in combination with
the other factors listed below, exposes us to larger variability in quarterly
operating results relative to other software or technology companies. Since our
operating results are likely to vary significantly in the future, we believe
that period-to-period comparisons of our operating results are not meaningful
and you should not rely upon our results in any one quarter as an indicator of
our future performance. If our quarterly revenues and operating results fail to
meet or exceed the expectations of securities analysts or investors, the market
price of our ordinary shares could fall substantially. Our operating results
vary depending on a number of factors, many of which are outside our control,
including:

     o    varying budgeting cycles and available funds of our customers and
          potential customers;

     o    the length and variability of our sales cycle;

     o    varying size, timing and contractual terms of enterprise-wide orders
          for our software;

     o    changes in demand for databases with which our software operates, and
          related enterprise application software;

     o    acceptance of new products in the marketplace;

     o    seasonality in our revenues, which have been lower historically in the
          first and third quarters;

     o    changes in gross margins resulting from the mix of U.S. and
          international sales or license sales and services;

     o    software defects and other product quality problems that may not
          become known until customer trials or after installation;

     o    changes in gross margins depending on whether our software is sold
          directly or through indirect sales channels; and

     o    the revenue performance of third party sales channels.

In addition, a significant portion of our software license revenues in any
quarter is often derived from orders booked and shipped in the last weeks or
days of that quarter. A delay in an order, even from just one customer, could
negatively impact our quarterly revenues and operating results.

      A substantial portion of our expenses, including most software development
and sales and marketing expenses, must be incurred in advance of generating
revenues. In addition, our operating expenses are largely based on anticipated
organizational growth and revenue trends and a high percentage of our expenses
are, and will continue to be, fixed. As a result, if our projected revenues do
not meet our expectations, for the reasons above or for any other reasons, then
we will still incur these fixed expenses and are likely to experience an even
larger shortfall in our quarterly operating results relative to expectations.

WE HAVE A HISTORY OF LOSSES, AND WE ANTICIPATE OUR EXPENSES WILL INCREASE IN THE
FORESEEABLE FUTURE AS A RESULT OF PLANNED EXPANSION OF OUR SALES AND MARKETING
CHANNELS AND RESEARCH AND DEVELOPMENT ACTIVITIES.

     We incurred net losses of approximately $4.0 million for the year ended
December 31, 1998, $2.6 million for the year ended December 31, 1999, $9.9
million for the year ended December 31, 2000 and had net income of $923,000 for
the year ended December 31, 2001 and $3.6 million for the year ended December
31, 2002. As of December 31, 2002,

                                       13
<PAGE>

we had an accumulated deficit of approximately $21.8 million. We cannot predict
the extent of our future losses and profitability. We anticipate that our
expenses may increase substantially in the foreseeable future as we seek to
expand our distribution channels, to increase our sales and marketing
activities, and to continue to develop our technology and introduce new
software. These efforts may prove more costly than we currently anticipate and
we may not succeed in increasing our revenues sufficiently to offset these
higher expenses. If we fail to increase our revenues at a greater rate than our
expenses, we will not be able to maintain profitability.

OUR INABILITY TO DEDICATE APPROPRIATE FINANCIAL AND MANAGERIAL RESOURCES COULD
IMPAIR OUR ABILITY TO GROW OUR REVENUES AT THE SAME RATE IN THE FUTURE AS THEY
HAVE IN THE PAST AND, FOR THE SAME REASON, THEY COULD DECLINE.

      Although our revenues have grown at substantial rates in recent years, we
do not expect our revenues to grow as rapidly in the future, and our revenues
could decline. Our total revenues have grown from $27.5 million for the year
ended December 31, 2000 to $55.6 million for the year ended December 31, 2001
and to $76.0 million for the year ended December 31, 2002. As our business
develops and the market for our software products matures, it is unlikely that
our revenues will continue to grow at the same rapid pace. We may not be able to
dedicate the significant managerial time and effort required to develop
additional strategic relationships, and we may not be able to hire sufficient
numbers of sales personnel to expand our sales channels and increase penetration
of our existing markets. In addition, we may not have the financial liquidity
required to develop and introduce, on a timely basis, new products that achieve
broad market acceptance.

OUR FAILURE TO DEDICATE APPROPRIATE RESOURCES TO OUR BUSINESS COULD STRAIN OUR
EXISTING SYSTEMS OR MANAGEMENT CAPABILITIES, LIMIT OUR GROWTH AND HARM OUR
BUSINESS AND FINANCIAL PERFORMANCE.

     We currently have employees based in Israel, the United Kingdom, France,
Holland, Germany, Australia, Canada, China, Japan and throughout the United
States. We increased our employee base significantly during 2001 and 2002.
Furthermore, we have recently established subsidiaries and joint ventures in
Europe and Japan and expect to continue to establish additional distribution
channels through third-party relationships. Our growth, coupled with rapid
changes in our market, has placed, and is likely to continue to place,
significant strains on our administrative, operational and financial resources
and places significant demands on our internal systems, procedures and controls.
In order to manage growth effectively, we must implement and improve our
operational systems and controls. The failure to invest in and establish systems
with sufficient capacity to handle expanded operations or failure to dedicate
appropriate managerial resources could restrain our potential future growth and
may harm the efficiency of our operations. If we fail to manage our growth
effectively, the quality of our products and services and our operating results
could be seriously harmed.

WE WILL NEED TO RECRUIT AND RETAIN ADDITIONAL QUALIFIED PERSONNEL TO
SUCCESSFULLY GROW OUR BUSINESS.

     Our future success will depend in large part on our ability to attract and
retain experienced sales, marketing, research and development, customer support
and management personnel. If we do not attract and retain such personnel, we may
not be able to expand our sales coverage or develop and introduce new or
enhanced products on the scale and schedule that we intend. Competition for
qualified personnel in the computer software industry is intense, especially for
technical personnel. We have experienced difficulty in the past recruiting
qualified personnel, especially technical and sales personnel. Moreover, we
intend to expand the scope of our international operations and these plans will
require us to hire experienced management, service, marketing, sales and
customer support personnel abroad. We expect competition for qualified personnel
to remain intense and we may not succeed in attracting or retaining these
personnel. In addition, new employees generally require substantial training in
the use of our products, which in turn requires significant resources and
management attention. There is a risk that even if we invest significant
resources in attempting to attract, train and retain qualified personnel, we
will not be successful in our efforts. Our costs of doing business would
increase without the expected increase in revenues. Our inability to recruit,
hire, train and retain qualified employees could cause our business to suffer.

ANY ACQUISITIONS OR ATTEMPTED ACQUISITIONS WILL DIVERT MANAGEMENT ATTENTION AND
FINANCIAL RESOURCES AND MAY HARM OUR RESULTS OF OPERATIONS AND FINANCIAL
CONDITION.

     As part of our growth strategy, we intend to consider acquiring
complementary technologies, products and businesses. Attempted acquisitions may
divert management, operational and financial resources from the conduct of our

                                       14
<PAGE>

core business. As a result, if we pursue this growth strategy, the efforts of
management will be diverted from their other operational responsibilities, and
we may not complete any attempted acquisition. If we use capital stock, our
existing shareholders may experience dilution. If we use cash or debt financing,
our financial liquidity will be reduced, the holders of our debt would have
claims on our assets ahead of holders of our ordinary shares and our business
operations may be restricted by the terms of any debt, including restrictions on
our ability to pay dividends on our ordinary shares. In addition, an acquisition
may involve nonrecurring charges or amortization of significant amounts of
goodwill and other intangible assets, which would adversely affect our ability
to achieve and maintain profitability.

ACQUISITIONS MAY NOT PRODUCE THE REVENUES, EARNINGS OR BUSINESS SYNERGIES THAT
WE ANTICIPATED AND MAY CAUSE OUR REVENUES TO DECLINE.

     Past or future acquisitions may not produce the revenues, earnings or
business synergies that we anticipate, and acquired businesses or technologies
may not perform as expected for a variety of reasons, including:

     o    difficulties in the integration of the operations, technologies,
          products and personnel of the acquired company;

     o    risks of entering markets in which we have no or limited prior
          experience;

     o    potential loss of key employees of the acquired entity; and

     o    expenses of any undisclosed or potential legal liabilities of the
          acquired company.

     In addition, management's attention and resources may be diverted during
any attempted integration. Any one or a combination of these factors may cause
our revenues or earnings to decline.

WE DEPEND UPON KEY PERSONNEL, THE LOSS OF WHOM WOULD HARM OUR OPERATIONS.

     Our success depends, to a significant extent, upon the continued
performance and services of our executive officers and other key sales,
marketing, engineering and support personnel. The loss of the services of any of
our executive officers or key personnel, including Shimon Alon, our Chief
Executive Officer, and Itzhak "Aki" Ratner, our President, would be disruptive
to our operations. It would be difficult and time consuming to replace them. We
do not maintain key person life insurance policies on any of our officers. Any
of these individuals may voluntarily terminate his employment with Precise. Our
inability to retain these employees could harm the growth and success of our
business.

IF THE MARKETS FOR THE DATABASES AND RELATED APPLICATIONS SOFTWARE WE SUPPORT DO
NOT CONTINUE TO EXPAND, OUR ABILITY TO GROW OUR BUSINESS MAY BE ADVERSELY
AFFECTED.

     If the market for the databases and related applications software we
support declines or expands more slowly than we currently anticipate, our
ability to grow our business, sell our software and achieve and maintain
profitability may be impaired. Although the market for these databases and
related applications has grown rapidly, this growth may not continue at the same
rate, or at all.

THE SOFTWARE MARKET WE ADDRESS IS EXPECTED TO RAPIDLY EVOLVE, AND IF WE ARE NOT
ABLE TO ACCURATELY PREDICT AND RESPOND TO MARKET DEVELOPMENTS OR CUSTOMER NEEDS,
OUR COMPETITIVE POSITION WILL BE IMPAIRED.

     The market for the software we provide is relatively new and is expected to
evolve rapidly. However, estimates of our market's expected growth are
inherently uncertain and are subject to many risks and assumptions. Moreover,
many of our customers operate in markets characterized by rapidly changing
technologies and business plans. These customers look to our software products
to monitor application performance in this environment. Rapid changes in the
needs of these customers and changing technologies make it difficult for us to
predict their demands. We are particularly susceptible to those changes since
our software is used in a wide array of operating environments, which are
constantly evolving. As a result, we may not be able to develop, on a timely
basis or at all, software that meets our customers' needs or desires. In
addition, various sectors of our market are served by competitors who may
respond more effectively to market developments and customer needs. We cannot
assure you that the market for our software will grow or that we will be able to
respond to changes in the market, evolving customer needs or our competition. If
the market for our software does not develop as we expect or if we fail to
respond to market and competitive developments, our business prospects and
competitive position will be impaired.

                                       15
<PAGE>

THE FAILURE OF OUR NEW SOFTWARE TO ACHIEVE MARKET ACCEPTANCE OR DELAYS IN OUR
CURRENT OR FUTURE SOFTWARE DEVELOPMENT EFFORTS COULD ERODE OUR COMPETITIVE
POSITION.

     The failure to successfully develop, enhance or modify our software, or the
failure to do so on a timely basis, could limit our revenue growth and
competitive position. We have expanded our product line to allow the monitoring
of an organization's application performance across the IT infrastructure and
continue to develop new releases of our core products that incorporate
additional features. We may need to rapidly develop and introduce additional
software and enhancements to our existing software to satisfy our current
customers and maintain our competitive position in the marketplace. We may also
need to modify our software so that it can operate with new or enhanced software
introduced by other software vendors. The failure to introduce new, enhanced or
modified software on a timely basis could prevent our software from achieving
market acceptance. We have in the past, and may in the future, experience delays
in the timing of new software introductions. To support our software
development, enhancement or modification, we may find it necessary to license or
acquire new technologies, which may not be available to us on acceptable terms,
if at all.

OUR FAILURE TO ESTABLISH AND EFFECTIVELY MANAGE INDIRECT DISTRIBUTION CHANNELS
COULD CAUSE OUR REVENUES TO DECLINE.

     Our ability to sell our software in new markets and to increase our share
of existing markets will be impaired if we fail to expand significantly our
indirect distribution channels. Our sales strategy involves the establishment of
multiple distribution channels domestically and internationally through
value-added resellers, systems integrators and original equipment manufacturers.
We have entered into agreements with EMC, Amdocs and several other companies to
bundle a version of our software with their products or to sell our software
along with their product. Although these relationships have been successful to
date, we cannot predict the extent to which these companies will continue to be
successful in marketing or selling our software or the effect of our proposed
merger on these relationships. These agreements could be terminated on short
notice and they do not prevent any of these parties from selling the software of
other companies, including our competitors. Our OEMs or resellers could give
higher priority to other companies' software or to their own software than they
give to ours.

OUR INABILITY TO DEVELOP AND EXPAND OUR DIRECT SALES FORCE WOULD LIMIT OUR
REVENUE GROWTH.

     If we do not expand and retain our direct sales force, revenue growth could
be seriously harmed. Competition for qualified sales personnel is intense and we
may not be able to hire and retain as many qualified individuals as we may
require in the future. To the extent we hire personnel from competitors, we may
be subject to allegations that they have been improperly solicited or divulged
proprietary or other confidential information. In addition, sale of our software
requires sales personnel, experienced in our market, who target and gain access
to the senior management of our prospective customers. Newly hired sales
personnel require extensive training and may take six months or longer to
achieve full productivity. This training period, along with the difficulty in
attracting and retaining qualified individuals, makes it difficult to grow the
size of our sales force rapidly and utilize them effectively.

IF EXISTING CUSTOMERS DO NOT MAKE SUBSEQUENT PURCHASES FROM US OR IF OUR
RELATIONSHIPS WITH OUR LARGEST CUSTOMERS ARE IMPAIRED, OUR REVENUE GROWTH COULD
DECLINE.

     Our revenue growth could decline if our current customers do not purchase
additional licenses from us. As we deploy new versions of our existing software
or introduce new software, our current customers may not require the
functionality of this new software and may not license it.

     We also depend on our installed customer base for future service revenue
from maintenance renewal fees. The terms of our standard license arrangements
provide for a one-time license fee and a prepayment of one year of software
maintenance. Our maintenance agreements are renewable annually at the option of
our customers but there are no obligations to renew. If customers choose not to
continue their maintenance service, our revenues may decline.

     In addition, our strategic channel represents a large portion of our total
revenues. These revenues are derived from EMC, Amdocs and, to a lesser extent,
other strategic partners. If our sales from these customers were impaired, our
revenue growth could decline.

                                       16
<PAGE>

DEFECTS IN OUR SOFTWARE WOULD HARM OUR BUSINESS AND DIVERT RESOURCES.

     Because our software is complex, it may contain errors that can be detected
at any point in its life cycle. Any errors or defects in our software could
result in:

     o    delayed or lost revenue;

     o    failure to attract new customers or achieve market acceptance;

     o    claims against us;

     o    diversion of development resources;

     o    increased service, warranty and insurance costs; and

     o    negative publicity resulting in damage to our reputation.

     While we continually test our software for errors and work with customers
to identify and correct them, errors in our software may be found in the future.
Testing for errors is complicated because it is difficult to simulate the
breadth of operating systems, user applications and computing environments that
our customers use and because our software is becoming increasingly complex
itself. The costs we may incur in addressing software errors could be
substantial.

WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN SIGNIFICANT
COSTS TO US.

     Because our customers rely on our software to monitor and improve the
performance of their critical software applications, they are sensitive to
potential disruptions that may be caused by the use of, or any defects in, our
software. As a result, we may be subject to claims for damages related to
software errors in the future. Liability claims could require us to spend
significant time and money in litigation or to pay significant damages.
Regardless of whether we prevail, diversion of key employees' time and attention
from the business, incurrence of substantial expenses and potential damage to
our reputation might result. Our license agreements with our customers typically
contain provisions designed to limit our exposure to potential product liability
claims. Limitation of liability provisions like those in our license agreements,
however, may not be effective under the laws of some jurisdictions. In addition,
although we maintain general liability insurance, we cannot assure you that this
coverage will be available in amounts sufficient to cover one or more large
claims, or that the insurer will not disclaim coverage as to any future claim

OUR FAILURE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY COULD HARM OUR
COMPETITIVE MARKET POSITION.

     Our success and ability to compete are substantially dependent upon our
internally developed technology, consisting primarily of computer programs and
instructions stored on digital media that can be easily reproduced. If we are
unable to protect that technology, our market position will be harmed. Other
than our trademarks, most of our intellectual property consists of proprietary
or confidential information that is not subject to patent or similar protection.
Unauthorized third parties may attempt to copy or otherwise obtain and use the
technology protected by those rights. Furthermore, policing unauthorized use of
our software is difficult and costly, particularly in countries where the laws
may not protect our proprietary rights as fully as in the U.S. If competitors or
potential customers are able to use our technology, our ability to compete
effectively would be harmed.

     We have placed, and in the future may place, source code for our software
in escrow. The source code may, under certain circumstances, be made available
to certain of our customers. This may increase the likelihood of
misappropriation or other misuse of our software.

CLAIMS THAT OUR SOFTWARE INFRINGES THE PROPRIETARY RIGHTS OF OTHERS COULD HARM
OUR BUSINESS AND CAUSE US TO INCUR SIGNIFICANT COSTS.

     Software products are increasingly subject to third-party infringement
claims as the functionality of products in different industry segments overlaps.
As a result, third parties may claim that our software infringes on their
proprietary rights. The application of patent law to the software industry is
particularly uncertain as the U.S. Patent and Trademark

                                       17
<PAGE>

Office has only recently begun to issue software patents in large numbers. Any
potential intellectual property claims against us, with or without merit, could:
o be expensive and time consuming to defend;

     o    cause us to cease making, licensing or using software that
          incorporates the challenged intellectual property;

     o    cause software shipment and installation delays;

     o    require us to redesign our software, if feasible;

     o    divert management's attention and resources; or

     o    require us to enter into royalty or licensing agreements in order to
          obtain the right to use a necessary product or component.

     Royalty or licensing agreements, if required, may not be available on
acceptable terms, if at all. A successful claim of software infringement against
us and our failure or inability to license the infringed or similar technology
could prevent us from distributing our software or cause us to incur great
expense and delay in developing non-infringing software.

WE RELY ON SOFTWARE LICENSES FROM THIRD PARTIES, THE LOSS OF WHICH COULD
INCREASE OUR COSTS AND DELAY SOFTWARE SHIPMENTS.

     We integrate various third-party software products as components of our
software. Our business would be disrupted if this software, or functional
equivalents of this software, were either no longer available to us or no longer
offered to us on commercially reasonable terms. In either case, we would be
required to either redesign our software to function with alternate third-party
software or develop these components ourselves, which would result in increased
costs and could result in delays in our software shipments. Furthermore, we
might be forced to limit the features available in our current or future
software offerings.

WE ARE SUBJECT TO RISKS OF OPERATING WORLDWIDE THAT COULD IMPAIR OUR ABILITY TO
GROW OUR REVENUES ABROAD.

     We market and sell our software in North America, South America, Europe,
Asia, South Africa and Australia and we plan to establish additional facilities
in these and other parts of the world. Therefore, we are subject to risks
associated with having worldwide operations. Sales to customers located outside
of North America accounted for approximately 29% of our total revenues in the
year ended December 31, 2000, approximately 36% of our total revenues in the
year ended December 31, 2001 and approximately 34% of our total revenues in the
year ended December 31, 2002. In addition, our principal research and
development facility is located in Israel. The expansion of our existing
operations and entry into additional worldwide markets will require significant
management attention and financial resources. We are also subject to a number of
risks customary for worldwide operations, including:

     o    economic or political instability in worldwide markets;

     o    greater difficulty in accounts receivable collection and longer
          collection periods;

     o    unexpected changes in regulatory requirements;

     o    difficulties and costs of staffing and managing foreign operations;

     o    import and export controls;

     o    the uncertainty of protection for intellectual property rights in some
          countries;

     o    multiple and possibly overlapping tax structures; and

     o    foreign currency exchange rate fluctuations.

     To date, a substantial portion of our sales have been denominated in U.S.
dollars, and we have not used risk management techniques or "hedged" the risks
associated with fluctuations in foreign currency exchange rates. In the

                                       18
<PAGE>

future, if we do not engage in hedging transactions, our results of operations
will be subject to losses from fluctuations in foreign currency exchange rates.

OUR SHARE PRICE HAS BEEN VOLATILE AND COULD DROP UNEXPECTEDLY.

     The price at which our ordinary shares trade has been and is likely to
continue to be volatile. The stock market from time to time experiences
significant price and volume fluctuations that affect the market prices of
securities, particularly securities of technology and computer software
companies. As a result, investors may experience a significant decline in the
market price of our ordinary shares, regardless of our operating performance.
Price declines in our stock could result from many factors outside of our
control, including:

     o    announcements by our competitors of financial results, acquisitions,
          new products or technological innovations;

     o    disputes concerning patents or other proprietary rights;

     o    conditions in Israel; and

     o    general market conditions.

     In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation has often
been brought against that company. We may become involved in this type of
litigation in the future. Litigation of this type, regardless of its merit, is
often extremely expensive and diverts management's attention and resources.

RISKS RELATED TO OUR OPERATIONS IN ISRAEL

POTENTIAL POLITICAL, ECONOMIC AND MILITARY INSTABILITY IN ISRAEL MAY ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS.

     Our largest research and development facility and the third party
manufacturer of many of our products are located in Israel and a small portion
of our sales is currently being made to customers in Israel. Accordingly,
political, economic and military conditions in Israel directly affect our
operations. Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its Arab neighbors. A state
of hostility, varying in degree and intensity, has led to security and economic
problems for Israel. Since September 2000, there has been a high level of
violence between Israel and the Palestinians. Any armed conflicts or political
instability in the region and, specifically, the impending war in Iraq, could
negatively affect business conditions and harm our results of operations. We
cannot predict the effect on the region of the increase in the degree of
violence between Israel and the Palestinians. Parties with whom we have done
business have declined to travel to Israel during periods of heightened unrest
and tension, forcing us to make alternative arrangements when necessary.
Furthermore, several countries restrict business with Israel and Israeli
companies, and additional countries may restrict doing business with Israel and
Israeli companies as a result of the recent increase in hostilities. These
restrictive laws and policies may seriously harm our operating results,
financial condition and the expansion of our business.

OUR OPERATIONS MAY BE NEGATIVELY AFFECTED BY THE OBLIGATIONS OF OUR PERSONNEL TO
PERFORM MILITARY SERVICE.

     Many of our employees in Israel are obligated to perform military reserve
duty. In addition, in the event of a war, military or other conflict, including
the ongoing conflict with the Palestinians and, specifically, the impending war
in Iraq, individuals could be required to serve in the military for extended
periods of time. Our operations could be disrupted by the absence for a
significant period of time of one or more of our key employees or a significant
number of our other employees due to military service. Any such disruption in
our operations could harm our business.

BECAUSE MOST OF OUR REVENUES ARE GENERATED IN NON-ISRAELI CURRENCIES, BUT A
PORTION OF OUR EXPENSES ARE INCURRED IN NEW ISRAELI SHEKELS, INFLATION AND
CURRENCY FLUCTUATIONS COULD SERIOUSLY HARM OUR RESULTS OF OPERATIONS.

                                       19
<PAGE>

     We generate most of our revenues in U.S. dollars but a portion of the costs
associated with our Israeli operations is in New Israeli Shekels, or NIS. We
also pay some of our international-based sales and support staff in local
currencies, such as the British pound sterling and the Euro. As a result, we are
exposed to risks to the extent that the rate of inflation in Israel, in the U.K.
or in Europe exceeds the rate of devaluation of the NIS, the British pound
sterling or the Euro in relation to the U.S. dollar or if the timing of such
devaluations lags behind inflation in Israel, in the U.K. or in Europe. In that
event, the cost of our operations in Israel, the U.K. and Europe measured in
terms of U.S. dollars will increase and our U.S. dollar-measured results of
operations will suffer. Historically, Israel has experienced periods of high
inflation. Our results of operations also could be harmed if we are unable to
guard against currency fluctuations in Israel, the U.K. or other countries in
which we may employ sales or support staff in the future.

YOU MAY HAVE DIFFICULTIES IN ENFORCING A U.S. JUDGMENT AGAINST US, OUR EXECUTIVE
OFFICERS AND DIRECTORS OR IN ASSERTING U.S. SECURITIES LAWS CLAIMS IN ISRAEL.

     Because a significant portion of our assets and the assets of our directors
and executive officers are located outside the United States, a judgment
obtained in the United States against us or any of them may not be collectible
in the United States and may not be enforced by an Israeli court. Further, if a
foreign judgment is enforced by an Israeli court, it will be payable in Israeli
currency.

U.S. INVESTORS IN OUR COMPANY COULD SUFFER ADVERSE TAX CONSEQUENCES IF WE ARE
CHARACTERIZED AS A PASSIVE FOREIGN INVESTMENT COMPANY.

     If, for any taxable year, our passive income or our assets that produce
passive income exceed levels provided by law, we may be characterized as a
passive foreign investment company, or PFIC, for U.S. federal income tax
purposes. This characterization could result in adverse U.S. tax consequences to
our shareholders. U.S. shareholders should consult with their own U.S. tax
advisors with respect to the U.S. tax consequences of investing in our ordinary
shares.

WE INTEND TO RELY UPON TAX BENEFITS FROM THE STATE OF ISRAEL, BUT THOSE TAX
BENEFITS MAY NOT BE AVAILABLE TO US AT THAT TIME.

     We are eligible for certain tax benefits for the first several years in
which we generate taxable income pursuant to Israel's Law for the Encouragement
of Capital Investments, 1959. Although we have not historically generated
taxable income for purposes of this law, we expect to begin to use these tax
benefits in either 2003 or 2004, depending on when we become profitable in
Israel. Our financial condition could suffer if these tax benefits were
subsequently reduced or not available to us.

     In order to receive tax benefits, we must comply with the conditions of the
certificates of approval that were granted to its approved enterprise programs.
If we fail to comply in whole or in part with these conditions, the tax benefits
that we expect to receive could be partially or fully canceled. In that event,
we could be forced to refund the amount of the benefits we have received,
adjusted for inflation and interest. From time to time, the government of Israel
has discussed reducing or eliminating the benefits available under the approved
enterprise regime. Thus, these tax benefits may not be continued with respect to
future programs at their current levels or at all.

     Additionally, in the event that we increase our activities outside of
Israel due to, for example, future acquisitions or internal restructuring, those
increased activities generally will not be eligible for inclusion in Israeli tax
benefit programs. Accordingly, our effective corporate tax rate could increase
significantly in the future as the revenues generated by the new activities will
not qualify for approved enterprise treatment.

THE TRANSFER AND USE OF PORTIONS OF OUR TECHNOLOGY ARE LIMITED BECAUSE OF
RESEARCH AND DEVELOPMENT GRANTS WE RECEIVED FROM THE ISRAELI GOVERNMENT.

     Our research and development efforts associated with the development of the
technology embedded in Precise/Indepth for Oracle software have been partially
financed through grants from the Office of the Chief Scientist of the Israeli
Ministry of Industry and Trade. We have developed software funded partially by
Chief Scientist grants that subject us to royalty payments and restrictions,
which could limit or prevent our growth and profitability. The

                                       20
<PAGE>

know-how developed with this funding may not be transferred outside of Israel.
The products incorporating the software developed with this know-how, or any
part thereof, may not be manufactured outside of Israel, without appropriate
governmental approvals. These restrictions do not apply to the sale or export
from Israel of our products incorporating software developed with this know-how.
These restrictions extend to any derivative or related products or software
containing the technologies developed with the financial assistance of the
Office of the Chief Scientist. Since our Indepth for SQL Server and Indepth for
DB2 UDB products may contain technologies present in Precise/Indepth for Oracle,
the Office of the Chief Scientist may maintain that these products are also
subject to the restrictions discussed above. If the Chief Scientist consents to
the manufacture of our software outside Israel, the regulations prescribe the
payment of an increased royalty rate and amount, which may range from 120% to
300% of the amount of the Chief Scientist grant, depending on the percentage of
foreign manufacture.

BECAUSE THIS ANNUAL REPORT ON FORM 10-K/A CONTAINS FORWARD-LOOKING STATEMENTS,
IT MAY NOT PROVE TO BE ACCURATE.

     This Annual Report on Form 10-K/A includes forward-looking statements. We
use words like "anticipate," "believe," "plan," "expect," "future," "intend" and
similar expressions to identify these forward-looking statements. We have based
these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about Precise, the market for our products and the
competition, including, among other things:

     o    our ability to complete our proposed merger with VERITAS;

     o    our inability to achieve or maintain profitability since we expect to
          incur significant expenses in the near future to grow our business,
          particularly our direct sales force and indirect sales channels;

     o    the size, timing and recognition of revenue from major customers;

     o    market acceptance of new product offerings and our ability to predict
          and respond to market developments;

     o    our ability to attract and retain key personnel;

     o    the development and expansion of our direct sales force;

     o    our ability to consummate acquisitions and to successfully integrate
          and operate the acquired businesses;

     o    risks associated with management of growth;

     o    political, economic and business fluctuations in Israel and our
          international markets; and

     o    risks of downturns in economic conditions generally, and in the
          information technology and software industries specifically.

     We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties, and assumptions, the forward-looking
events discussed in this Annual Report might not occur.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Company's consolidated financial statements, together with the related
notes and independent auditors' report thereon, appear beginning on page F-1 of
this Annual Report on Form 10-K/A.

                                       21
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a) The following documents are filed as part of this Annual Report on Form
10-K/A:

          (1)  Financial Statements: The financial statements included in Item 8
               of Part II which appear beginning on page F-1 of this Annual
               Report on Form 10-K/A.

          (2)  Financial Statement Schedules: Financial statement schedules have
               been omitted because the required information is not present or
               not present in amounts sufficient to require submission of the
               schedule, or because the information required is included in the
               financial statements or the notes thereto.

          (3)  Exhibits: The exhibits listed in the Exhibit Index immediately
               preceding the Exhibits.

     (b)  Reports on Form 8-K: Precise filed the following reports on Form 8-K
          during the fiscal year ended December 31, 2002: Report on Form 8-K on
          December 24, 2002 reporting the execution of an Agreement and Plan of
          Merger dated as of December 19, 2002 by and among VERITAS Software
          Corporation, Argon Merger Sub Ltd. and Precise Software Solutions Ltd.







                                       22
<PAGE>



              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES


                        CONSOLIDATED FINANCIAL STATEMENTS


                             AS OF DECEMBER 31, 2002


                                 IN U.S. DOLLARS







                                      INDEX


                                                                         Page
                                                                       --------

 Report of Independent Auditors                                          F-2

 Consolidated Balance Sheets                                             F-3

 Consolidated Statements of Operations                                   F-5

 Statements of Changes in Shareholders' Equity                           F-6

 Consolidated Statements of Cash Flows                                   F-8

 Notes to Consolidated Financial Statements                              F-11




                                 - - - - - - - -
<PAGE>
[ERNST & YOUNG]


                         REPORT OF INDEPENDENT AUDITORS


                             To the Shareholders of

                         PRECISE SOFTWARE SOLUTIONS LTD.

          We have audited the accompanying consolidated balance sheets of
Precise Software Solutions Ltd. ("the Company") and its subsidiaries as of
December 31, 2001 and 2002, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the three
years in the period 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 audits.


          We conducted our audits in accordance with generally accepted auditing
standards 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 financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.


          In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of the Company and its subsidiaries as of December 31, 2001 and 2002,
and the consolidated results of their operations and cash flows for each of the
three years in the period ended December 31, 2002, in conformity with generally
accepted accounting principles in the United States.




                                                /s/ Kost Forer & Gabbay

Tel-Aviv, Israel                                KOST FORER & GABBAY
January 21, 2003                                A Member of Ernst & Young Global





                                       F-2
<PAGE>
                            PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
================================================================================
U.S. DOLLARS IN THOUSANDS


                                                             DECEMBER 31,
                                                      -------------------------
                                                         2001           2002
                                                      ----------     ----------
ASSETS

Current assets:
   Cash and cash equivalents                          $   35,144     $   13,870
   Marketable securities                                  39,752         71,754
   Trade receivables, net of allowance for doubtful
    accounts (2001 - $179, 2002 - $278)                   12,156         18,065
   Other accounts receivable and prepaid expenses          3,168          3,114
                                                      ----------     ----------

Total current assets                                      90,220        106,803

Marketable securities, non-current                        60,935         54,571

Severance pay fund                                           750            951

Property and equipment, net                                5,047          4,604

Other receivables, non-current                               500          2,700

Other intangible assets, net                              12,869         12,778

Goodwill                                                  32,862         44,611
                                                      ----------     ----------

Total assets                                          $  203,183     $  227,018
                                                      ==========     ==========





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

                                       F-3
<PAGE>
                            PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
================================================================================
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)


                                                             DECEMBER 31,
                                                      -------------------------
                                                         2001           2002
                                                      ----------     ----------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Trade payables                                     $    1,394     $    1,297
   Deferred revenues                                       6,673          9,400
   Employees and payroll accruals                          5,161          5,624
   Accrued expenses                                        2,014          2,161
   Other current liabilities                               1,074          1,800
                                                      ----------     ----------

Total current liabilities                                 16,316         20,282
                                                      ----------     ----------

Long-term liabilities:
   Capital lease obligation                                   92             85
   Accrued severance pay                                   1,116          1,207
                                                      ----------     ----------

Total long-term liabilities                                1,208          1,292
                                                      ----------     ----------

SHAREHOLDERS' EQUITY
   Ordinary shares:
      NIS 0.03 par value: Authorized: 70,000,000
      shares at December 31, 2001 and 2002;
      Issued and outstanding: 27,937,776 and
      29,969,664 shares at December 31, 2001 and
      2002, respectively                                     221            234
   Additional paid-in capital                            210,215        225,764
   Deferred stock compensation                              (544)           (77)
   Accumulated other comprehensive income                  1,191          1,356
   Accumulated deficit                                   (25,424)       (21,833)
                                                      ----------     ----------

Total shareholders' equity                               185,659        205,444
                                                      ----------     ----------

Total liabilities and shareholders' equity            $  203,183     $  227,018
                                                      ==========     ==========





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

                                       F-4
<PAGE>
                            PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
U.S. DOLLARS IN THOUSANDS (EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                      ----------------------------------------
                                                         2000           2001           2002
                                                      ----------     ----------     ----------
<S>                                                   <C>            <C>            <C>
Revenues:
   Software licenses                                  $   22,968     $   43,903     $   52,672
   Services                                                4,580         11,694         23,328
                                                      ----------     ----------     ----------
Total revenues                                            27,548         55,597         76,000
                                                      ----------     ----------     ----------
Cost of revenues:
   Software licenses                                         742            362            628
   Services (1)                                            1,693          3,143          6,395
   Amortization of acquired technology (*)                     8          1,109          2,107
                                                      ----------     ----------     ----------
Total cost of revenues                                     2,443          4,614          9,130
                                                      ----------     ----------     ----------
Gross profit                                              25,105         50,983         66,870
                                                      ----------     ----------     ----------
Operating expenses:
   Research and development (2)                            4,987         10,924         12,793
   Sales and marketing (3)                                20,749         34,675         43,611
   General and administrative (4)                          3,923          7,046          8,668
   Amortization of deferred stock compensation             6,151          1,930            354
   Amortization of goodwill and intangible assets (*)         91          1,931          1,533
   In-process research and development write-off           2,200             86             --
   Veritas acquisition related expenses                       --             --            131
                                                      ----------     ----------     ----------
Total operating expenses                                  38,101         56,592         67,090
                                                      ----------     ----------     ----------

Operating loss                                           (12,996)        (5,609)          (220)
Financial income and other, net                            3,091          6,565          4,021
                                                      ----------     ----------     ----------
Income (loss) before income taxes                         (9,905)           956          3,801
Income taxes                                                  --             33            210
                                                      ----------     ----------     ----------
Net income (loss)                                     $   (9,905)    $      923     $    3,591
                                                      ==========     ==========     ==========
Net earnings (loss) per share:
   Basic and diluted net earnings (loss) per share    $    (0.77)    $     0.03     $     0.12
                                                      ==========     ==========     ==========
</TABLE>
-------------------
(*)  Reclassified
(1)  Excludes $283, $12 and $2 in amortization of deferred stock compensation in
     2000, 2001 and 2002, respectively.
(2)  Excludes $144, $59 and $34 in amortization of deferred stock compensation
     in 2000, 2001 and 2002, respectively.
(3)  Excludes $2,382, $419 and $170 in amortization of deferred stock
     compensation in 2000, 2001 and 2002, respectively.
(4)  Excludes $3,342, $1,440 and $148 in amortization of deferred stock
     compensation in 2000, 2001 and 2002, respectively.

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

                                       F-5
<PAGE>
                            PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
================================================================================
U.S. DOLLARS IN THOUSANDS


<TABLE><CAPTION>
                                                                                ACCUMULATED
                                                       ADDITIONAL   DEFERRED       OTHER                     TOTAL        TOTAL
                                PREFERRED   ORDINARY     PAID-IN      STOCK    COMPREHENSIVE ACCUMULATED COMPREHENSIVE SHAREHOLDERS'
                                 SHARES      SHARES      CAPITAL   COMPENSATION    INCOME      DEFICIT   INCOME (LOSS)    EQUITY
                                ---------   ---------   ---------   ---------    ---------   ---------     ---------    ---------
<S>                             <C>         <C>         <C>         <C>          <C>         <C>           <C>          <C>
Balance as of January 1, 2000   $      97   $      31   $  25,272   $    (665)   $      --   $ (16,442)    $      --    $   8,293
   Options issued pursuant to
     the acquisition of Knight
     Fisk Software Ltd.                --          --         199          --           --          --            --          199
   Issuance of shares in IPO, net
     of $ 1,628 offering costs         --          39      75,909          --           --          --            --       75,948
   Conversion of Preferred
     shares upon IPO                  (97)         97          --          --           --          --            --           --
   Issuance of shares in
     second public offering, net
     of $2,257 offering costs          --          21      71,423          --           --          --            --       71,444
   Exercise of options, net            --          12         468          --           --          --            --          480
   Issuance of shares pursuant
     to the acquisition of
     Savant Corporation                --           4      13,932          --           --          --            --       13,936
   Deferred stock compensation
     related to options
     granted to employees              --          --       8,203      (8,203)          --          --            --           --
   Amortization of deferred
     stock compensation                --          --          --       6,151           --          --            --        6,151
   Comprehensive loss:
   Unrealized holding gains on
     available-for-sale
     marketable securities             --          --          --          --          322          --     $     322          322
   Foreign currency
     translation adjustments           --          --          --          --            8          --             8            8
                                                                                                           ---------
   Total other comprehensive
     income                                                                                                      330
   Net loss                            --          --          --          --           --      (9,905)       (9,905)      (9,905)
                                ---------   ---------   ---------   ---------    ---------   ---------     ---------    ---------
Total comprehensive loss                                                                                   $  (9,575)
                                                                                                           =========
Balance as of December 31, 2000 $      --   $     204   $ 195,406   $  (2,717)   $     330   $ (26,347)                 $ 166,876
                                =========   =========   =========   =========    =========   =========                  =========
</TABLE>



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

                                       F-6
<PAGE>
                            PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
================================================================================
U.S. DOLLARS IN THOUSANDS
<TABLE><CAPTION>
                                                                                ACCUMULATED
                                                       ADDITIONAL   DEFERRED       OTHER                     TOTAL        TOTAL
                                PREFERRED   ORDINARY     PAID-IN      STOCK    COMPREHENSIVE ACCUMULATED COMPREHENSIVE SHAREHOLDERS'
                                 SHARES      SHARES      CAPITAL   COMPENSATION    INCOME      DEFICIT   INCOME (LOSS)    EQUITY
                                ---------   ---------   ---------   ---------    ---------   ---------     ---------    ---------
<S>                             <C>         <C>         <C>         <C>          <C>         <C>           <C>          <C>
Balance as of January 1, 2001   $      --   $     204   $ 195,406   $  (2,717)   $     330   $ (26,347)    $      --    $ 166,876
   Issuance of shares under ESPP       --           1         726          --           --          --            --          727
   Exercise of options, net            --          11       3,272          --           --          --            --        3,283
   Issuance of shares pursuant to
     the acquisition of W. Quinn       --           5      12,480          --           --          --            --       12,485
   Adjustments to Savant
     acquisition                       --          --      (1,426)         --           --          --            --       (1,426)
   Amortization of deferred stock
     compensation, net                 --          --        (243)      2,173           --          --            --        1,930
   Comprehensive income:
   Unrealized holding gains on
     available-for-sale marketable
     securities                        --          --          --          --          903          --     $     903          903
   Foreign currency translation
     adjustments                       --          --          --          --          (42)         --           (42)         (42)
                                                                                                                        ---------
   Total other comprehensive
     income                                                                                                      861
   Net income                          --          --          --          --           --         923           923          923
                                ---------   ---------   ---------   ---------    ---------   ---------     ---------    ---------
Total comprehensive income                                                                                 $   1,784
                                                                                                           =========
Balance as of December 31, 2001        --         221     210,215        (544)       1,191     (25,424)                   185,659
   Issuance of shares under ESPP       --          --         725          --           --          --            --          725
   Exercise of options, net            --           8       5,358          --           --          --            --        5,366
   Issuance of shares pursuant to
     the earn-out of W. Quinn          --           4       7,494          --           --          --            --        7,498
   Issuance of shares pursuant to
     the acquisition of Middleware     --           1       2,085          --           --          --            --        2,086
   Amortization of deferred stock
     compensation, net                 --          --        (113)        467           --          --            --          354
   Comprehensive income:
   Unrealized holding losses on
     available-for-sale marketable
     securities                        --          --          --          --         (298)         --     $    (298)        (298)
   Foreign currency translation
     adjustments                       --          --          --          --          463          --           463          463
                                                                                                           ---------
   Total other comprehensive
     income                                                                                                      165
   Net income                          --          --          --          --           --       3,591     $   3,591        3,591
                                ---------   ---------   ---------   ---------    ---------   ---------     ---------    ---------
Total comprehensive income                                                                                 $   3,756
                                                                                                           =========
Balance as of December 31, 2002 $      --   $     234   $ 225,764   $     (77)   $   1,356   $ (21,833)                 $ 205,444
                                =========   =========   =========   =========    =========   =========                  =========
Accumulated unrealized holding
  gains on available-for-sale                                                                              $     927
  marketable securities
Accumulated foreign currency
  translation adjustments                                                                                        429
                                                                                                           ---------
Total accumulated other comprehensive income                                                               $   1,356
                                                                                                           =========
</TABLE>
                   The accompanying notes are an integral part
                    of the consolidated financial statements.

                                       F-7
<PAGE>
                            PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
U.S. DOLLARS IN THOUSANDS
<TABLE><CAPTION>
                                                                                      YEAR ENDED DECEMBER 31,
                                                                              --------------------------------------
                                                                                 2000          2001          2002
                                                                              ----------    ----------    ----------
<S>                                                                           <C>           <C>           <C>
Cash flows from operating activities:
   Net income (loss)                                                          $   (9,905)   $      923    $    3,591
   Adjustments required to reconcile net income (loss) to net cash provided
      by (used in) operating activities:
      Depreciation                                                                   603         1,329         2,060
      Loss on sale of equipment                                                       --            61            37
      Amortization of debenture premium/(accretion of discount) on
        available-for-sale marketable securities                                     (18)          109         1,231
      Amortization of deferred stock compensation                                  6,151         1,930           354
      Amortization of acquired technology                                              8         1,109         2,107
      Amortization of goodwill and intangible assets                                  91         1,931         1,533
      In-process research and development write-off                                2,200            86            --
      Increase in trade receivables                                               (1,386)       (5,680)       (5,041)
      Decrease (increase) in other accounts receivable and prepaid expenses       (3,248)        1,315           (61)
      Decrease in other receivables                                                   --            --           447
      Increase (decrease) in trade payables                                          588          (518)         (188)
      Increase in deferred revenues                                                  958         2,111         1,896
      Increase in employees and payroll accruals                                   2,946         1,044           299
      Increase in other current liabilities and accrued expenses                     174           393           396
      Increase (decrease) in accrued severance pay, net                              102            75          (110)
      Other                                                                            9           (40)           --
                                                                              ----------    ----------    ----------
Net cash provided by (used in) operating activities                                 (727)        6,178         8,551
                                                                              ----------    ----------    ----------
Cash flows from investing activities:
   Purchase of property and equipment                                             (2,089)       (3,274)       (1,495)
   Purchase of available-for-sale marketable securities                          (70,852)      (89,440)      (66,214)
   Purchase of other intangible assets                                              (765)       (1,328)       (1,617)
   Increase in other receivables, non-current                                         --            --        (2,647)
   Payment for acquisition of consolidated subsidiary (1)                           (507)           --            --
   Payment for acquisition of consolidated subsidiary (2)                         (2,787)           --            --
   Payment for acquisition of consolidated subsidiary (3)                             --       (20,641)           --
   Payment for acquisition of consolidated subsidiary (4)                             --            --        (3,257)
   Proceeds from sale of short-term deposits                                         888            --            --
   Proceeds from redemption of available-for-sale marketable securities            4,000        53,710        38,300
   Proceeds from sale of available-for-sale marketable securities                     --         3,785           747
                                                                              ----------    ----------    ----------
Net cash used in investing activities                                            (72,112)      (57,188)      (36,183)
                                                                              ----------    ----------    ----------
Cash flows from financing activities:
   Short-term bank credit, net                                                       (24)           --            --
   Proceeds from issuance of shares, net                                         148,141           727           725
   Proceeds from exercise of options, net                                            480         3,283         5,366
   Repayment of capital lease obligation                                            (251)          (27)          (65)
                                                                              ----------    ----------    ----------
Net cash provided by financing activities                                        148,346         3,983         6,026
                                                                              ----------    ----------    ----------
Effect of exchange rate change on cash and cash equivalents                           18           (47)          332
                                                                              ----------    ----------    ----------
Increase (decrease) in cash and cash equivalents                                  75,525       (47,074)      (21,274)
Cash and cash equivalents at the beginning of the year                             6,693        82,218        35,144
                                                                              ----------    ----------    ----------
Cash and cash equivalents at the end of the year                              $   82,218    $   35,144    $   13,870
                                                                              ==========    ==========    ==========
</TABLE>
                   The accompanying notes are an integral part
                    of the consolidated financial statements.

                                       F-8
<PAGE>
                            PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
U.S. DOLLARS IN THOUSANDS
<TABLE><CAPTION>
                                                                         YEAR ENDED DECEMBER 31,
                                                                ------------------------------------------
                                                                   2000            2001            2002
                                                                ----------      ----------      ----------
<S>                                                             <C>             <C>             <C>
1.   In February 2000, the Company acquired all of the
     outstanding shares of Knight Fisk Software Ltd. The net
     estimated fair value of the assets acquired and liabilities
     assumed at the date of acquisition was as follows:
     Working deficiency, except cash and cash equivalents       $       (8)
     Property and equipment                                             41
     Long-term loans and other                                         (45)
     Goodwill                                                          718
                                                                ----------
                                                                       706
     Options granted                                                  (199)
                                                                ----------
                                                                $      507
                                                                ==========
2.   In December 2000, the Company acquired all of the
     outstanding shares of Savant Corporation. The net
     estimated fair value of the assets acquired and liabilities
     assumed at the date of acquisition was as follows:
     Working deficiency, except cash and cash equivalents       $     (687)
     Property and equipment                                            111
     Long-term loans                                                   (23)
     Goodwill and other intangible assets                           15,122
     In-process research and development                             2,200
                                                                ----------
                                                                    16,723
     Issuance of shares, net                                       (13,936)
                                                                ----------
                                                                $    2,787
                                                                ==========
3.   In September 2001, the Company acquired all of the
     outstanding shares of W. Quinn Associates, Inc. The net
     estimated fair value of the assets acquired and liabilities
     assumed at the date of acquisition was as follows:
     Working deficiency, except cash and cash equivalents                       $     (136)     $       --
     Property and equipment                                                            475              --
     Other receivables                                                                 481              --
     Goodwill and other intangible assets                                           32,134           7,498
     In-process research and development                                                86              --
                                                                                ----------      ----------
                                                                                    33,126           7,498
     Issuance of shares, net                                                       (12,485)         (7,498)
                                                                                ----------      ----------
                                                                                $   20,641      $       --
                                                                                ==========      ==========
4.   In June 2002, the Company acquired all of the
     outstanding shares of The Middleware Company. The net
     estimated fair value of the assets acquired and liabilities
     assumed at the date of the acquisition was as follows:
     Working deficiency, except cash and cash equivalents                                       $     (428)
     Property and equipment                                                                             35
     Other intangible assets                                                                         1,964
     Goodwill                                                                                        3,772
                                                                                                ----------
                                                                                                     5,343
     Issuance of shares, net                                                                        (2,086)
                                                                                                ----------
                                                                                                $    3,257
                                                                                                ==========
</TABLE>
                                       F-9
<PAGE>
                            PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
U.S. DOLLARS IN THOUSANDS


<TABLE><CAPTION>
     Supplemental disclosure of cash flows activities:
     -------------------------------------------------
     <S>                                                        <C>         <C>         <C>
     (a)   Cash paid during the years for:
           -------------------------------
           Interest                                             $     13    $     21    $     30
                                                                ========    ========    ========

           Income taxes                                         $     --    $     --    $     43
                                                                ========    ========    ========

     (b)   Non cash transactions:
           ----------------------
           Capital lease obligation                             $     97    $     --    $     67
                                                                ========    ========    ========

           Adjustment to Savant Corporation acquisition         $     --    $  1,426    $     --
                                                                ========    ========    ========

           Accrued issuance and acquisition cost                $    749    $    241    $     45
                                                                ========    ========    ========

           Purchased Technology                                 $     --    $     --    $    297
                                                                ========    ========    ========
</TABLE>













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

                                      F-10
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 1:   GENERAL

          a.   Organization:

               Precise Software Solutions Ltd. ("Precise" or "the Company") was
               established in Israel on November 15, 1990. The Company is a
               provider of software products that assist organizations in
               performance management, monitoring and tuning applications and of
               related consulting, training and support services. The Company
               has operations in the form of wholly-owned subsidiaries in the
               United States, the United Kingdom, France, Germany, Holland,
               Japan and Australia.


          b.   Public offering:

               The Company completed an initial public offering in June 2000,
               and since then, the Company's ordinary shares have been traded on
               The Nasdaq National Market in the United States.


          c.   Acquisition of the Company by VERITAS Software Corporation
               ("VERITAS"):

               On December 19, 2002, the Company entered into an Agreement and
               Plan of Merger with VERITAS and Argon Merger Sub Ltd., an
               indirect wholly-owned subsidiary of VERITAS ("the Merger
               Subsidiary"), providing for the acquisition of Precise by VERITAS
               pursuant to a merger of the Merger Subsidiary with and into
               Precise, with Precise surviving the merger as an indirect
               wholly-owned subsidiary of VERITAS. Upon completion of the
               merger, each ordinary share of the Company will be exchanged, at
               the election of the holder, for either $16.50 in cash or a
               combination of $12.375 in cash and 0.2365 of a share of VERITAS
               common stock. Shareholders of the Company who are Israeli
               holders, as defined in the merger agreement, and who properly and
               timely elect to receive the mixed consideration will receive (1)
               $12.375 in cash, plus (2) an amount of cash equal to 0.2365
               multiplied by the closing price of one share of VERITAS common
               stock, as reported on The Nasdaq National Market, on the trading
               day immediately prior to the date the merger takes effect. The
               consummation of the merger is subject to various conditions,
               including approval by the shareholders of Precise. The merger is
               expected to close in the second quarter of 2003.


NOTE 2:   ACQUISITIONS

          a.   Acquisition of The Middleware Company ("Middleware"):

               In June 2002, the Company acquired all the outstanding shares of
               Middleware, a United States based services company, for
               consideration of approximately $6.1 million. Middleware provides
               consulting, training courses and other related services. The
               total purchase price consisted of $4.0 million paid in cash and
               $2.1 million paid by the issuance of 126,353 ordinary shares,
               including $150,000 in transaction costs.

               The Middleware stockholders also have the right to receive
               additional contingent consideration up to an amount of $3.5
               million based on achieving earnings levels and performance
               targets related to the one year period subsequent to the closing.


                                      F-11
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 2:   ACQUISITIONS (Cont.)

               The acquisition of Middleware was accounted for under the
               purchase method, accordingly the purchase price has been
               allocated to the assets acquired and liabilities assumed based on
               their estimated fair value at the date of acquisition. The excess
               of the purchase price over the estimated fair value of the net
               assets acquired has been recorded as goodwill.

               According to Statement of Financial Accounting Standards ("SFAS")
               No. 142, "Goodwill and Other Intangible Assets," this goodwill
               will not be amortized, but will be subject to annual impairment
               tests in accordance with the statement.

               In connection with the Middleware acquisition intangible assets
               acquired had an estimated fair value of $5.7 million shown in the
               following table:

                                                         In thousands
                                                         ------------
               Trademarks and customer relationships     $      1,209
               Other intangible assets                            755
               Goodwill                                         3,772
                                                         ------------
                                                         $      5,736
                                                         ============

               The operations of Middleware are included in the Company's
               consolidated results of operations from June 18, 2002.

               Pro forma information was not provided as it is considered
               immaterial to the Company's consolidated operating results.

          b.   Acquisition of W. Quinn Associates, Inc. ("W. Quinn"):

               In September 2001, the Company acquired all the outstanding
               shares of W. Quinn, a United States based company, in
               consideration of approximately $34.1 million. W. Quinn develops
               and markets storage resource management software and solutions.
               The total purchase price consisted of $21.6 million paid in cash
               and $12.5 million paid by the issuance of 774,413 ordinary
               shares. The consideration included $1.5 million of transaction
               cost.

               The acquisition of W. Quinn was accounted for under the purchase
               method, accordingly the purchase price has been allocated to the
               assets acquired and liabilities assumed based on their estimated
               fair value at the date of acquisition. The excess of the purchase
               price over the estimated fair value of the net assets acquired
               has been recorded as goodwill.


                                      F-12
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 2:   ACQUISITIONS (Cont.)

               The W. Quinn acquisition provided the W. Quinn shareholders with
               a right to receive additional ordinary shares based on
               achievement of certain post-acquisition revenue and performance
               targets during a twelve month period spanning five quarters,
               beginning the third quarter of 2001 and ending in the third
               quarter of 2002. On October 16, 2002, the contingency was
               resolved and the consideration was paid by the issuance of an
               additional 675,614 ordinary shares and, as a result, the Company
               recorded approximately $7.5 million in associated goodwill.

               According to SFAS No. 142 this goodwill is not amortized, but
               will be subject to annual impairment tests in accordance with the
               statement.

               In connection with the W. Quinn acquisition, the Company recorded
               a one-time expense of $86,000 to write-off software acquired from
               W. Quinn for which technological feasibility has not yet been
               established and for which no alternative future use exists. Other
               intangible assets acquired in the acquisition had an estimated
               fair value of $32.1 million shown in the following table:

                                                         In thousands
                                                         ------------
               Goodwill                                  $     25,553
               Acquired technology                              2,147
               Patents                                          2,165
               Trademarks and customer relationship             2,269
                                                         ------------
                                                         $     32,134
                                                         ============

               The operations of W. Quinn are included in the Company's
               consolidated results of operations from September 5, 2001.

               Pro forma information:

               The following unaudited pro forma information presents the
               results of operations for the Company and W. Quinn for the years
               ended December 31, 2000 and December 31, 2001, as if the
               acquisition had been consummated as of January 1, 2000 and
               January 1, 2001, respectively. The pro forma total revenues would
               have been $36.4 million and $62.0 million for the years ended
               December 31, 2000 and 2001, respectively. The pro forma net loss
               would have been $10.2 million and $1.8 million for the years
               ended December 31, 2000 and 2001, respectively. The pro forma
               basic and diluted net loss per share would have been $0.74 per
               share and $0.07 per share for the years ended December 31, 2000
               and 2001, respectively. The pro forma financial information is
               not necessarily indicative of the consolidated results that would
               have been attained had the acquisition taken place at the
               beginning of 2000 or 2001, nor is it necessarily indicative of
               future results.


                                      F-13
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 2:   ACQUISITIONS (Cont.)

          c.   Acquisition of Savant Corporation ("Savant"):

               In December 2000, in consideration of approximately $16.7
               million, the Company acquired all the outstanding shares of
               Savant, a United States based company. Savant develops and
               markets diagnostic and proactive performance management
               solutions. The total purchase price consisted of $2.8 million in
               cash and $13.9 million paid by the issuance of 512,445 ordinary
               shares, including $0.3 million of transaction cost.

               The acquisition of Savant was accounted for under the purchase
               method, accordingly the purchase price has been allocated to the
               assets acquired and liabilities assumed based on their estimated
               fair value at the date of acquisition. The excess of the purchase
               price over the estimated fair value of the net assets acquired
               has been recorded as goodwill.

               In connection with the Savant acquisition, the Company recorded a
               one-time expense of $2.2 million to write-off software acquired
               from Savant for which technological feasibility has not yet been
               established and for which no alternative future use exists. Other
               intangible assets acquired had an estimated fair value of $15.1
               million shown in the following table:

                                                         In thousands
                                                         ------------
               Goodwill                                  $      9,022
               Acquired technology                              4,300
               Customer relationships                           1,800
                                                         ------------
                                                         $     15,122
                                                         ============

               In 2001, upon the completion of the allocation of the purchase
               price and the resolution of certain contingencies, the company
               reduced goodwill by $1,426,000.

               Savant's results of operations are included in the Company's
               consolidated results of operations from December 5, 2000.

               Pro forma financial information:

               The following unaudited pro forma information represents the
               results of operations for the Company and Savant for the year
               ended December 31, 2000, as if the acquisition had been
               consummated as of January 1, 2000. The pro forma total revenues
               would have been $30.9 million for the year ended December 31,
               2000. The pro forma net loss would have been $10.9 million for
               the year ended December 31, 2000. The pro forma basic and diluted
               net loss per share would have been $0.81 per share for the year
               ended December 31, 2000. The pro forma financial information is
               not necessarily indicative of the consolidated results that would
               have been attained had the acquisition taken place at the
               beginning of 2000, nor is it necessarily indicative of future
               results.


                                      F-14
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 2:   ACQUISITIONS (Cont.)

          d.   Acquisition of Knight Fisk Software Ltd. ("Precise UK"):

               In February 2000, in consideration of $706,000, the Company
               acquired all the outstanding shares of Knight Fisk Software Ltd.
               ("Knight Fisk"), a U.K.-based company and the distributor of the
               Company's products in the United Kingdom. Knight Fisk changed its
               name to Precise Software Solutions UK Ltd. The acquisition was
               accounted for under the purchase method.

               The operations of Precise UK are included in the Company's
               consolidated results of operations from February 1, 2000.

               Pro forma financial information:

               The following unaudited pro forma information presents the
               results of operations for the Company and Precise UK for the year
               ended December 31, 2000, as if the acquisition had been
               consummated as of January 1, 2000. The pro forma total revenues
               would have been $27.7 million for the year ended December 31,
               2000. The pro forma net loss would have been $9.8 million for the
               year ended December 31, 2000. The pro forma basic and diluted net
               loss per share would have been $0.76 for the year ended December
               31, 2000. The pro forma financial information is not necessarily
               indicative of the consolidated results that would have been
               attained had the acquisition taken place at the beginning of
               2000, nor is it necessarily indicative of future results.


NOTE 3:   SIGNIFICANT ACCOUNTING POLICIES

          The consolidated financial statements have been prepared in accordance
          with generally accepted accounting principles in the United States
          ("U.S. GAAP").

          a.   Use of estimates:

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

          b.   Financial statements in U.S. dollars:

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

               Accordingly, monetary accounts maintained in currencies other
               than the U.S. dollar are remeasured into U.S. dollars in
               accordance with SFAS No. 52, "Foreign Currency Translations." All
               transaction gains and losses from remeasurement of monetary
               balance sheet items are reflected in the consolidated statement
               of operations as financial income or expenses as appropriate.


                                      F-15
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 3:   SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               The financial statements of subsidiaries whose functional
               currency is not the U.S. dollar, have been translated into U.S.
               dollars. All balance sheet accounts have been translated using
               the exchange rates in effect at the balance sheet date. The
               statements of operations amounts have been translated using the
               average exchange rate for the period. The resulting translation
               adjustments are reported as a component of accumulated other
               comprehensive income in shareholders' equity.

          c.   Principles of consolidation:

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

          d.   Cash equivalents:

               Cash equivalents include short-term highly liquid investments
               that are readily convertible into cash with original maturities
               of three months or less.

          e.   Marketable securities:

               The Company accounts for investments in debt and equity
               securities accordance with SFAS No. 115, "Accounting for Certain
               Investments in Debt and Equity Securities."

               Management determines the proper classification of investments in
               obligations with fixed maturities in marketable equity securities
               at the time of purchase and reevaluates such designations as of
               each balance sheet date. At December 31, 2002, all securities
               covered by SFAS No. 115 were designated as available-for-sale.
               Accordingly, the available-for-sale securities are stated at fair
               value, with unrealized gains and losses reported in a separate
               component of shareholders' equity, accumulated other
               comprehensive income (loss). Amortization of premium and
               accretion of discounts are included in financial income and
               other, net. Realized gains and losses on sales of investments, as
               determined on a specific identification basis, are included in
               the consolidated statement of operations in financial income and
               other, net.

          f.   Property and equipment:

               Property and equipment are stated at cost, less accumulated
               depreciation. Depreciation is calculated by the straight-line
               method over the estimated useful lives of the assets as follows:

               Computers and peripheral equipment     3-5 years
               Office furniture and equipment         6-14 years
               Leasehold improvements                 Over the term of the lease


          g.   Other receivables, non-current:

               A loan to a privately held U.S.-based company represented by
               secured demand notes is stated at cost, since Precise does not
               have the ability to exercise significant influence over operating
               and financial policies of the company.


                                      F-16
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3:   SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          h.   Other intangible assets:

               Acquired technology, trademarks and customer relationships,
               patents and other intangible assets are stated at amortized cost.

               Intangible assets subject to amortization that arose from
               acquisitions prior to July 1, 2001, are being amortized on a
               straight-line basis over their useful life in accordance with
               Accounting Principal Board ("APB") Opinion No. 17, "Intangible
               Assets." Acquired technology, trademarks and customer
               relationships, patents and other intangible assets are amortized
               using the straight-line method over their estimated useful life,
               which is three to seven years.

               Intangible assets acquired in a business combination on or after
               July 1, 2001 should be amortized over their useful life using a
               method of amortization that reflects the pattern in which the
               economic benefits of the intangible assets are consumed or
               otherwise used up, in accordance with SFAS No.142. Acquired
               technology, trademarks and customer relationships, patents and
               other intangible assets are amortized over a weighted average of
               three to five years.

          i.   Impairment of long-lived assets to be disposed:

               The Company's long-lived assets and certain identifiable
               intangibles are reviewed for impairment, in accordance with SFAS
               No. 144 "Accounting for the Impairment and the Disposal of
               Long-Lived Assets," 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 compared 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 exceeds the fair value of the assets. Assets
               to be disposed of are reported at the lower of the carrying
               amount or fair value less costs to sell. As of December 31, 2002,
               no impairment losses have been identified.

          j.   Goodwill:

               Goodwill represents the excess of the costs over the net assets
               of businesses acquired. Goodwill that arose from acquisitions
               prior to July 1, 2001, was amortized until December 31, 2001, on
               a straight-line basis over four to ten years. Under SFAS No. 142,
               goodwill acquired in a business combination on or after July 1,
               2001 is not amortized.

               SFAS No. 142 requires goodwill to be tested for impairment on
               adoption and at least annually thereafter or between annual tests
               in certain circumstances, and written down when impaired, rather
               than being amortized as previous accounting standards required.
               Goodwill attributable to each of the reporting units is tested
               for impairment by comparing the fair value of each reporting unit
               with its carrying value. Fair values are determined using
               discounted cash flows, market multiples and market
               capitalization. Significant estimates used in the methodologies
               include estimates of future cash flows, future short-term and
               long-term growth rates, weighted average cost of capital and
               estimates of market multiples for each of the reportable units.

               The Company's goodwill is reviewed for impairment in accordance
               SFAS No. 142. The Company performed impairment tests during the
               fourth quarter of 2002. As of December 31, 2002, no impairment
               losses have been identified.

                                      F-17
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 3:   SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          k.   Research and development costs:

               SFAS No. 86 "Accounting for the Costs of Computer Software to be
               Sold, Leased or Otherwise Marketed," requires capitalization of
               certain software development costs subsequent to the
               establishment of technological feasibility.

               Based on the Company's product development process, technological
               feasibility is established upon completion of a working model.
               The Company does not incur material costs between the completion
               of the working model and the point at which the products are
               ready for general release. Therefore, research and development
               costs are charged to the statement of operations as incurred.

          l.   Income taxes:

               The Company and its subsidiaries account for income taxes in
               accordance with SFAS No. 109, "Accounting for Income Taxes." SFAS
               No. 109 prescribes the use of the liability method whereby
               deferred tax asset 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.

          m.   Revenue recognition:

               The Company and its subsidiaries generate revenues mainly from
               licensing the rights to use their software products and services.
               The Company and its subsidiaries sell products primarily through
               a direct sales force, resellers and Original Equipment
               Manufacturers ("OEMs").

               The Company has implemented Statement of Position (SOP) 97-2,
               "Software Revenue Recognition," as amended. Revenues from
               software arrangements are recognized upon delivery of the
               product, when collection is probable, the product fee is
               otherwise fixed or determinable, persuasive evidence of an
               arrangement exists and no significant obligation exists. SOP 97-2
               requires revenue earned on software arrangements involving
               multiple elements to be allocated to each element based on the
               relative fair value of the elements. The Company has also adopted
               SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition
               with Respect to Certain Transactions," for all transactions
               entered into after January 1, 2000. The Company's Vendor Specific
               Objective Evidence ("VSOE") used to allocate the sales price to
               maintenance, support and training is based on renewal ratio and
               the prices charged when these elements are sold separately. SOP
               98-9 requires that revenue be recognized under the "residual
               method" when (1) VSOE of fair value exists for all undelivered
               elements and no VSOE exists for the delivered elements, and (2)
               all revenue recognition criteria of SOP 97-2, as amended, are
               satisfied. Under the residual method any discount in the
               arrangement is allocated to the delivered elements.

               The Company and its subsidiaries are entitled to fees from its
               OEMs upon the sublicensing of the Company's products to
               end-users. Generally, fees due from the OEMs are recognized when
               such fees are reported to the Company upon the sublicensing of
               the products by the OEMs.

                                      F-18
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 3:   SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               The Company and its subsidiaries generally do not grant a right
               of return to their customers except for time-limited warranty
               provisions. Historically, the Company has seen negligible
               returns.

               Service revenues are comprised of revenues from maintenance and
               support arrangements, consulting fees, and training, none of
               which are considered essential to the functionality of the
               software license. Revenues from maintenance and support
               agreements included in multiple element arrangements are deferred
               and recognized on a straight-line basis as service revenues over
               the life of the related agreement. Consulting fees and training
               revenues are recognized as the services are rendered.

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

          n.   Concentrations of credit risks:

               Financial instruments, which potentially subject the Company and
               its subsidiaries to concentrations of credit risk, consist
               principally of cash and cash equivalents, marketable securities,
               trade receivables and other non-current receivables.

               Cash and cash equivalents are almost entirely invested in major
               banks in the United States in U.S. dollars. Such cash and cash
               equivalents in the United States may be in excess of insured
               limits and are not insured in other jurisdictions. A small
               portion of cash and cash equivalents is invested in major banks
               in Europe and Israel. Management believes that the financial
               institutions holding the Company's investments are financially
               sound and, accordingly, minimal credit risk exists with respect
               to these investments.

               Almost all marketable securities represent investments in U.S.
               treasury notes. Management believes that those investments are
               financially secure and accordingly, minimal credit risk exists
               with respect to the investments.

               The trade receivables of the Company and its subsidiaries are
               mainly derived from sales to customers located primarily in the
               U.S., Europe and Asia. The Company and its subsidiaries perform
               periodic credit evaluations of their customers' financial
               condition and generally do not require collateral. An allowance
               for doubtful accounts is determined with respect to those
               accounts that the Company has determined to be doubtful of
               collection.

               The Company evaluated the carrying value of the loan to a
               privately held U.S.-based company in accordance with the
               provisions of SFAS No. 114, "Accounting by Creditors for
               Impairment of a Loan, an Amendment to Statements No. 5 and No.
               15," and determined that the carrying value approximates the fair
               value of the loan.

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

               See Note 14 for concentrations of credit risk as to major
               customers.

                                      F-19
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 3:   SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          o.   Accounting for stock-based compensation:

               The Company has elected to follow APB Opinion No. 25 "Accounting
               for Stock Issued to Employees," and the Financial Accounting
               Standards Board ("FASB") Interpretation No. 44 "Accounting for
               Certain Transactions Involving Stock Compensation," in accounting
               for its employee stock option plans. Under APB No. 25, when the
               exercise price of the Company's share options is less than the
               market price of the underlying shares on the date of grant,
               compensation expense is recognized. The pro forma disclosures
               required by SFAS No. 123 "Accounting for Stock-Based
               Compensation," are provided in Note 10.

               See Note 3t for adoption of SFAS No. 148, "Accounting for
               Stock-Based Compensation - Transition and Disclosure."

          p.   Severance pay:

               The Company's liability for severance pay is calculated pursuant
               to the 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 with severance pay funds, insurance
               policies and by an accrual. The value of these policies is
               recorded as an asset in the Company's balance sheets.

               The deposited funds include profits accumulated up to the balance
               sheet date. The deposited funds may be withdrawn only in
               accordance with the Israeli Severance Pay Law or labor
               agreements. The value of the deposited funds are based on the
               cash surrendered value of these policies, and include immaterial
               profits.

               Severance expenses for the years ended December 31, 2000, 2001
               and 2002 amounted to $323,000, $308,000 and $388,000,
               respectively.

          q.   Advertising:

               Advertising costs are expensed as incurred.

          r.   Fair value of financial instruments:

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

               1.   The carrying amounts of cash and cash equivalents, accounts
                    receivable and accounts payable approximate their fair value
                    due to the short-term maturity of such instruments.

               2.   The fair value for available-for-sale and trading securities
                    are based on the quoted market prices (see Note 4).

               3.   The carrying amount of the loan to the privately held
                    U.S.-based company ("company") approximates its fair value,
                    based on Precise's assessment of such company to repay the
                    loan as well as the value of the assets pledged to secure
                    such loan.

                                      F-20
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 3:   SIGNIFICANT ACCOUNTING POLICIES (Cont.)

          s.   Basic and diluted net earning (loss) per share:

               Basic net earnings (loss) per share is computed based on the
               weighted average number of ordinary shares outstanding during
               each year. Diluted net earnings (loss) per share is computed
               based on the weighted average number of ordinary shares
               outstanding during each year, plus dilutive potential ordinary
               shares considered outstanding during the year, in accordance with
               SFAS No. 128, "Earnings per Share."

               All convertible preferred shares, and outstanding stock options
               have been excluded from the calculation of the diluted net
               earnings (loss) per ordinary share for 2000 because such
               securities are anti-dilutive. The total weighted average number
               of shares related to outstanding convertible preferred shares and
               options excluded from the calculations of diluted net earnings
               (loss) per share were 4,147,968, 0 and 2,052,506 for the years
               ended December 31, 2000, 2001 and 2002, respectively.

          t.   Impact of recently issued accounting standards:

               In April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS
               No. 4, 44 and 64, Amendment of SFAS No. 13, and Technical
               Corrections," which rescinds SFAS No. 4, "Reporting Gains and
               Losses from Extinguishment of Debt," and an amendment of that
               Statement, and SFAS No. 64, "Extinguishments of Debt Made to
               Satisfy Sinking-Fund Requirements." SFAS No. 145 amends SFAS No.
               44, "Accounting for Intangible Assets for Motor Carriers." SFAS
               No. 145 amends SFAS No. 13, "Accounting for Leases," to
               eliminated an inconsistency between the required accounting for
               sale-leaseback transactions and the required accounting for
               certain lease modifications that have economic effects that are
               similar to sale-leaseback transactions. SFAS No. 145 also amends
               other existing authoritative pronouncements to make various
               technical corrections, clarify meanings, or describe their
               applicability under changed conditions. SFAS No. 145 is effective
               for fiscal years beginning May 15, 2002. The Company does not
               expect the adoption of SFAS No. 145 will have a material impact
               on the its results of operations or financial position.

               In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
               Associated with Exit of Disposal Activities," which addresses
               significant issues regarding the recognition, measurement and
               reporting of costs associated with exit and disposal activities,
               including restructuring activities. SFAS No. 146 requires that
               costs associated with exit or disposal activities be recognized
               when they are incurred rather than at the date of a commitment to
               an exit or disposal plan. SFAS No. 146 is effective for all exit
               or disposal activities initiated after December 31, 2002. The
               Company does not expect the adoption of SFAS No. 146 to have a
               material impact on our results of operations or financial
               position.

                                      F-21
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3:   SIGNIFICANT ACCOUNTING POLICIES (Cont.)

               On December 31, 2002, FASB issued SFAS No. 148, "Accounting for
               Stock-Based Compensation - Transition and Disclosure." SFAS No.
               148 amends SFAS No. 123, "Accounting for Stock-Based
               Compensation," to provide alternative methods of transition to
               SFAS No. 123's fair value method of accounting for stock-based
               employee compensation. SFAS No. 148 also amends the disclosure
               provisions of SFAS No. 123 and APB Opinion No. 28, "Interim
               Financial Reporting," to require disclosure in the summary of
               significant accounting policies of the effects of an entity's
               accounting policy with respect to stock-based employee
               compensation on reported net income and earnings per share in
               annual and interim financial statements. While SFAS No. 148 does
               not amend SFAS No. 123 to require companies to account for
               employee stock options using the fair value method, the
               disclosure provisions of SFAS No. 148 are applicable to all
               companies with stock-based compensation, regardless of whether
               they account for compensation using the fair value method of SFAS
               No. 123 or the intrinsic value method of APB Opinion No. 25. SFAS
               No. 148 is effective for companies after December 15, 2002.

               In November 2002, the FASB issued Interpretation No. 45 ("FIN No.
               45"), "Guarantor's Accounting and Disclosure Requirements for
               Guarantees, Including Indirect Guarantees of Indebtedness of
               Others, an interpretation of SFAS No. 5, 57 and 107 and
               Rescission of FASB Interpretation No. 34 ("FIN No. 34")." FIN No.
               45 elaborates on the disclosures to be made by a guarantor in its
               interim and annual financial statements about its obligations
               under certain guarantees that it has issued. It also clarifies
               that a guarantor is required to recognize, at the inception of a
               guarantee, a liability for the fair value of the obligation
               undertaken in issuing the guarantee. FIN No. 45 does not
               prescribe a specific approach for subsequently measuring the
               guarantor's recognized liability over the term of the related
               guarantee. It also incorporates, without change, the guidance in
               FIN No. 34, "Disclosure of Indirect Guarantees of Indebtedness to
               Others," which is being superseded. The disclosure provisions of
               FIN No. 45 are effective for financial statements of interim or
               annual periods that end after December 15, 2002 and the
               provisions for initial recognition and measurement are effective
               on a prospective basis for guarantees that are issued or modified
               after December 31, 2002, irrespective of a guarantor's year-end.
               The Company does not expect the adoption of FIN No. 45 to have a
               material impact on its results of operations or financial
               position.

          u.   Reclassification:

               The amortization of acquired technology has been reclassified
               from amortization of goodwill and intangible assets to cost of
               revenues. In addition, certain prior period amounts have been
               reclassified to conform to current period presentation.

NOTE 4:   MARKETABLE SECURITIES

          The following is a summary of available-for-sale securities:

                                             DECEMBER 31, 2001
                               ----------------------------------------------
                                             GROSS       GROSS     ESTIMATED
                               AMORTIZED   UNREALIZED  UNREALIZED FAIR MARKET
                                  COST       GAINS       LOSSES      VALUE
                               ----------  ----------  ----------  ----------
          Available-for-sale:                  IN THOUSANDS
          -------------------  ----------------------------------------------
          U.S. Treasury notes  $   98,716  $    1,293  $       68  $   99,941
                               ==========  ==========  ==========  ==========

                                      F-22
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 4:   MARKETABLE SECURITIES (Cont.)

                                             DECEMBER 31, 2002
                               ----------------------------------------------
                                                                   ESTIMATED
                                             GROSS       GROSS        FAIR
                               AMORTIZED   UNREALIZED  UNREALIZED    MARKET
                                  COST       GAINS       LOSSES      VALUE
                               ----------  ----------  ----------  ----------
                                                IN THOUSANDS
                               ----------------------------------------------
          Available-for-sale:
          -------------------
          U.S. Treasury notes  $  124,886  $      924  $       --  $  125,810
          Corporate bonds             512           3          --         515
                               ----------  ----------  ----------  ----------
                               $  125,398  $      927  $       --  $  126,325
                               ==========  ==========  ==========  ==========

          There were no realized gains from sales of available-for-sale
          securities in 2001 or 2002.

          The unrealized holding gains (losses) on available-for-sale securities
          included as a separate component of shareholders' equity, other
          comprehensive income, totaled $322,000, $903,000 and $(298,000) in,
          2000, 2001 and 2002, respectively. The unrealized holding gain on
          available-for-sale securities balance was $1,225,000 and $927,000 as
          of December 31, 2001 and 2002, respectively. The amortized cost and
          estimated fair value of debt and marketable equity securities as of
          December 31, 2002, by contractual maturity, are shown below.

                                                         DECEMBER 31, 2002
                                                       ----------------------
                                                        AMORTIZED    MARKET
                                                          COST       VALUE
                                                       ----------  ----------
                                                            IN THOUSANDS
                                                       ----------------------
          Available-for-sale:
          -------------------
          Matures in one year                          $   71,720  $   71,754
          Matures in second year                           53,633      54,017
          Matures in third year                               545         554
                                                       ----------  ----------
          Total                                        $  125,398  $  126,325
                                                       ==========  ==========

          The Company had invested $746,000 in trading securities as of December
          31, 2001, and recorded net gain of $29,000 from these investments in
          2001.

          The Company had no trading securities as of December 31, 2002.




                                      F-23
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 5:   PROPERTY AND EQUIPMENT, NET
                                                             DECEMBER 31,
                                                       ----------------------
                                                          2001        2002
                                                       ----------  ----------
                                                             IN THOUSANDS
                                                       ----------------------
          Cost:
             Computers and peripheral equipment        $    6,035       7,189
             Office furniture and equipment                   896       1,187
             Leasehold improvements                         1,079       1,148
                                                       ----------  ----------
                                                            8,010       9,524
                                                       ----------  ----------
          Accumulated depreciation                          2,963       4,920
                                                       ----------  ----------
          Depreciated cost                             $    5,047       4,604
                                                       ==========  ==========

          Depreciation expenses for the years ended December 31, 2000, 2001 and
          2002, were $603,000, $1,329,000 and $2,060,000, respectively.


NOTE 6:   OTHER RECEIVABLES, NON-CURRENT

          a.   Composed as follows:                          DECEMBER 31,
                                                       ----------------------
                                                          2001        2002
                                                       ----------  ----------
                                                            IN THOUSANDS
                                                       ----------------------
          Other receivables, non-current:
             Tax receivables                           $      447  $       --
             Other long-term deposits                          53         141
             Loan                                              --       2,559
                                                       ----------  ----------
             Other receivables, non-current            $      500  $    2,700
                                                       ==========  ==========

          In October 2002, Precise entered into a loan agreement relating to a
          loan of up to $3.4 million to a privately held U.S.-based company
          ("borrower"), which owns technology complementary to Precise's
          technology. The loan terms provide that Precise will receive warrants
          of up to 7% of the capital stock of the borrower for nominal
          consideration, depending on the total amount loaned to the company.
          Concurrently with entering into the loan agreement, Precise loaned
          $0.6 million to the borrower, and loaned an additional $1.9 million in
          November 2002. The loan is secured by a first lien on the assets of
          the borrower, bears interest at 10% and is due and payable within 30
          days of a demand for payment by Precise. Concurrently with funding the
          loan in November 2002, Precise executed an agreement entitling
          Precise, in its discretion and upon satisfaction with a review of the
          business and assets of the borrower, to acquire all of the equity
          interests of the borrower through a merger for a contingent payment
          based on the 2003 revenues of the borrower (up to a maximum of $44.4
          million), after applying the aggregate amount loaned toward the
          purchase price. Precise has not performed the requisite business
          review of the borrower to determine whether it would be interested in
          acquiring the borrower and it is uncertain whether it will become
          interested in pursuing such an acquisition. Precise presently has no
          influence on the borrower's conduct of its business. Precise valued
          the warrants based on the total value of the borrower, which was
          considered to be immaterial.

                                      F-24
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 7:   OTHER INTANGIBLE ASSETS, NET

          a.   Composed as follows:
                                                            DECEMBER 31,
                                                       ----------------------
                                                          2001        2002
                                                       ----------  ----------
                                                            IN THOUSANDS
                                                       ----------------------
               Cost:
                 Acquired technology                   $    7,655  $    9,245
                 Trademarks and customer relationships      4,754       5,959
                 Patents                                    2,165       2,165
                 Other intangible assets                      130         885
                                                       ----------  ----------
               Total intangible assets                     14,704      18,254
                                                       ----------  ----------

               Accumulated amortization:
                 Acquired technology                        1,117       3,224
                 Trademarks and customer relationships        550       1,605
                 Patents                                      103         412
                 Other intangible assets                       65         235
                                                       ----------  ----------
               Total accumulated amortization               1,835       5,476
                                                       ----------  ----------
               Amortized cost                          $   12,869  $   12,778
                                                       ==========  ==========

          b.   Amortization expenses amounted to $29,000, $1,806,000 and
               $3,640,000 for the years ended December 31, 2000, 2001 and 2002,
               respectively.

          c.   In February 2002, the Company purchased intellectual property
               from a third party for $1.6 million, which consisted of $1.3
               million in cash and $0.3 million in assigned liabilities. The
               purchase has been recorded as acquired technology and will be
               amortized over a three year period.

          d.   On October 1, 2001, the Company purchased intellectual property
               from a third party for $ 1.1 million. The purchase has been
               recorded as acquired technology and will be amortized over three
               years. In addition, the third party has the right to receive 10%
               of revenues generated up to a set maximum from the sale of
               products containing this intellectual property until October 1,
               2004 ("earn-out"). Payments made or accrued during 2002 amounted
               to $21,000 in accordance with the earn-out provisions of the
               agreement.

          e.   Estimated amortization expenses for the years ended:

               December 31,              In thousands
               ----------------          ------------
               2003                      $      4,046
               2004                             3,930
               2005                             2,850
               2006                             1,171
               2007                               574



                                      F-25
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 8:   GOODWILL

          a.   The changes in the carrying amount of goodwill for the year ended
               December 31, 2002, are as follows:
                                                                    GOODWILL
                                                                  ------------
                                                                  In thousands

               Balance as of January 1, 2002:                      $   32,862
               Goodwill acquisitions and additions during the year     11,749
                                                                   ----------
               Balance as of December 31, 2002:                    $   44,611
                                                                   ==========


          b.   Amortization expenses amounted to $70,000, $1,234,000 and $0 for
               the years ended December 31, 2000, 2001 and 2002, respectively.
               As of December 31, 2002 the accumulated amortization expense
               amounted to $1,304,000.

          c.   The unaudited results of operations presented below for the three
               years ended December 31, 2000, 2001 and 2002, respectively,
               reflect the operations had the Company adopted the
               non-amortization provisions of SFAS No. 142 effective as of
               January 1, 2000:

                                                       YEAR ENDED DECEMBER 31,
                                                     ---------------------------
                                                      2000      2001      2002
                                                     ---------------------------
                                                        (in thousands except
                                                           per share data)

          Reported net income (loss)                 $(9,905)  $   923   $ 3,591
          Goodwill amortization                           70     1,234        --
                                                     -------   -------   -------
          Adjusted net income (loss)                 $(9,835)  $ 2,157   $ 3,591

          Basic net earning (loss) per share
             Reported net earning (loss) per share   $ (0.77)  $  0.03   $  0.12
             Goodwill amortization                      0.01      0.05        --
                                                     -------   -------   -------
             Adjusted net earning (loss) per share   $ (0.76)  $  0.08   $  0.12

          Diluted net earning (loss) per share
             Reported net earning (loss) per share   $ (0.77)  $  0.03   $  0.12
             Goodwill amortization                      0.01      0.04        --
                                                     -------   -------   -------
             Adjusted net earning (loss) per share   $ (0.76)  $  0.07   $  0.12


                                      F-26
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 9:   CAPITAL LEASE OBLIGATION

          Composed as follows:
                                                                  DECEMBER 31,
                                                    INTEREST   -----------------
                                          CURRENCY    RATE      2001      2002
                                           -------   -------   -------   -------
                                                                  IN THOUSANDS
                                                               -----------------
          Capital lease obligations         U.S $    11 - 17%  $   134   $   136
          Less - current maturities                                 42        51
                                                               -------   -------
                                                               $    92   $    85
                                                               =======   =======

          The lease obligations are calculated based on the present value of
          future lease payments.

NOTE 10:  SHAREHOLDERS' EQUITY

          a.   Reverse split:

               All share and per share data, included in these financial
               statements, has been retroactively adjusted to reflect a
               two-for-three reverse stock split as approved by the Company's
               shareholders on April 12, 2000.

          b.   Automatic conversion upon IPO:

               All preferred shares were automatically converted into ordinary
               shares at the closing of the Company's initial public offering
               ("IPO") in July 2000.

          c.   Ordinary shares:

               Ordinary shares confer upon their holders voting rights, the
               right to receive cash dividends and the right to share in excess
               assets upon liquidation of the Company.

          d.   Share Option Plans:

               The Company has two share option plans, the 1995 Share Option and
               Incentive Plan ("the 1995 Plan") and the Amended and Restated
               1998 Share Option and Incentive Plan ("the 1998 Plan") (together,
               "the Plans"). In addition, as part of the acquisition of Savant
               Corporation, the Company assumed the existing stock option plan
               of Savant Corporation (the "Savant Plan"). No additional options
               may be granted under the 1995 Plan or the Savant Plan. Under the
               1998 Plan, options may be granted to employees, officers,
               directors and consultants of the Company and its subsidiaries.
               Pursuant to the Plans, the Company reserved for issuance a total
               of 9,549,000 ordinary shares. As of December 31, 2002, an
               aggregate of 637,855 ordinary shares of the Company are still
               available for future grant.

               Options granted under the Plans generally vest annually over 3-4
               years. Those options will expire ten years from the date of
               grant. Any options, which are forfeited or not exercised before
               expiration, become available for future grants. Where the Company
               has recorded deferred stock compensation for options issued with
               an exercise price below the fair value of the ordinary shares,
               the deferred stock compensation is amortized and recorded as
               compensation expense ratably over the vesting period of the
               options.

                                      F-27
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 10:  SHAREHOLDERS' EQUITY (Cont.)

<TABLE><CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                            --------------------------------------------------------------------
                                    2000                    2001                    2002
                            --------------------    --------------------    --------------------
                                         WEIGHTED                WEIGHTED                WEIGHTED
                                         AVERAGE                 AVERAGE                 AVERAGE
                            NUMBER OF    EXERCISE   NUMBER OF    EXERCISE   NUMBER OF    EXERCISE
                             OPTIONS      PRICE      OPTIONS      PRICE      OPTIONS      PRICE
                            ----------    ------    ----------    ------    ----------    ------
          <S>               <C>           <C>       <C>           <C>       <C>           <C>
          Outstanding at
            the beginning
            of the period    3,681,044    $ 1.04     5,384,175    $ 6.10     7,038,372    $11.18
          Granted            2,215,916    $13.37     3,717,448    $15.22     2,458,545    $10.19
          Exercised           (393,278)   $ 0.71    (1,521,203)   $ 2.17    (1,113,731)   $ 4.18
          Forfeited           (119,507)   $ 2.49      (542,048)   $12.54      (495,919)   $14.97
                            ----------    ------    ----------    ------    ----------    ------
          Outstanding at
            the end of
            the period       5,384,175    $ 6.10     7,038,372    $11.18     7,887,267    $11.62
                            ==========    ======    ==========    ======    ==========    ======
          Exercisable
            options          2,043,033    $ 1.10     1,772,878    $ 4.51     2,247,679    $ 8.61
                            ==========    ======    ==========    ======    ==========    ======
</TABLE>

          The options outstanding as of December 31, 2002, have been separated
          into ranges of exercise price as follows:
<TABLE><CAPTION>
                                              WEIGHTED                                    WEIGHTED
                               OPTIONS        AVERAGE                     OPTIONS         AVERAGE
                             OUTSTANDING     REMAINING     WEIGHTED     EXERCISABLE       EXERCISE
             RANGE OF           AS OF       CONTRACTUAL     AVERAGE        AS OF          PRICE OF
             EXERCISE        DECEMBER 31,       LIFE       EXERCISE     DECEMBER 31,      OPTIONS
              PRICE              2002         (YEARS)        PRICE          2002         EXERCISABLE
          --------------      ---------       -------       ------       ---------         ------
          <S>                 <C>             <C>           <C>            <C>             <C>
               $0.38            119,963         5.2         $ 0.38         119,963         $ 0.38
               $1.04            495,058         5.9         $ 1.04         465,722         $ 1.04
               $1.50            715,156         6.9         $ 1.50         488,618         $ 1.50
               $8.50            243,000         9.6         $ 8.50              --             --
               $9.68          1,660,879         9.8         $ 9.68              --             --
          $10.30 - 11.21        723,314         8.9         $10.59         142,277         $10.39
          $12.20 - 13.25        329,725         9.3         $13.15          26,062         $13.18
          $14.20 - 15.00      1,547,666         7.8         $14.83         730,514         $14.89
              $17.11          1,398,416         8.8         $17.11          18,416         $17.11
          $19.63 - 20.20        654,090         7.5         $19.87         256,107         $19.83
                              ---------                     ------       ---------         ------
                              7,887,267                     $11.62       2,247,679         $ 8.61
                              =========                     ======       =========         ======
</TABLE>



                                      F-28
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 10:  SHAREHOLDERS' EQUITY (Cont.)

          e.   Pro forma information under SFAS No. 123:

               Under SFAS No. 123, pro forma information regarding net loss and
               net loss per share required for grants issued after December 1994
               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 was estimated at the date
               of grant, using the Black-Scholes Option Valuation Model, with
               the following weighted-average assumptions for 2000, 2001 and
               2002, respectively: expected volatility of 1.1, 0.86 and 0.65;
               risk-free interest rates of 6.5%, 4% and 3%; dividend yields of
               0% for each year and a weighted-average expected life of the
               option of 2.57, 2.97 and 3.00 years.

               The weighted average fair value of options granted for the years
               ended December 31, 2000, 2001 and 2002, were:

<TABLE><CAPTION>
                                                                       FOR EXERCISE PRICE ON THE GRANT DATE THAT:
                                                            ---------------------------------------------------------------
                                                                  EQUALS MARKET PRICE          IS LESS THAN MARKET PRICE
                                                            ------------------------------   ------------------------------
                                                                YEAR ENDED DECEMBER 31,         YEAR ENDED DECEMBER 31,
                                                            ------------------------------   ------------------------------
                                                              2000       2001       2002       2000       2001       2002
                                                            --------   --------   --------   --------   --------   --------
               <S>                                          <C>        <C>        <C>        <C>        <C>        <C>
               Weighted average exercise price              $  17.73   $  15.22      10.19   $   4.41   $     --   $     --
                                                            ========   ========   ========   ========   ========   ========

               Weighted average fair values on grant date   $  11.74   $   4.91       2.97   $  12.98   $     --   $     --
                                                            ========   ========   ========   ========   ========   ========
</TABLE>

               Pro forma information under SFAS 123:
<TABLE><CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                                                  --------------------------------
                                                                    2000        2001        2002
                                                                  --------    --------    --------
                                                                IN THOUSANDS (EXCEPT PER SHARE DATA)
                                                                  --------------------------------
               <S>                                                <C>         <C>         <C>
               Net income (loss), as reported                     $ (9,905)   $    923    $  3,591
                                                                  ========    ========    ========

               Add:  stock-based employee compensation
               expense included in reported net income (loss)        6,151       1,930         354


               Deduct:  total stock-based employee compensation
               expense determined under fair value based method    (10,408)    (13,163)    (11,009)
                                                                  --------    --------    --------

               Pro forma net loss                                 $(14,162)   $(10,310)   $ (7,064)
                                                                  ========    ========    ========

               Pro forma basic and diluted net loss per share     $  (1.10)   $  (0.39)   $  (0.24)
                                                                  ========    ========    ========
</TABLE>
          f.   Employee Share Purchase Plan:

               During 2000, the Company adopted its 2000 Employee Share Purchase
               Plan ("ESPP"). The Company reserved 667,000 ordinary shares for
               issuance under the ESPP. As of December 31, 2002, an aggregate of
               520,787 ordinary shares of the Company are available for future
               issuance. The ESPP provides eligible employees with the
               opportunity to acquire the Company's ordinary shares through
               periodic payroll deductions. According to the ESPP, the Company's
               employees are entitled to purchase the Company's ordinary shares
               at an amount equal to the lower of 85% of the Company's share
               price at the beginning or at the end of the period. During 2001
               and 2002, approximately 68,000 and 78,000 ordinary shares were
               issued pursuant to the ESPP, respectively.


                                      F-29
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 10:  SHAREHOLDERS' EQUITY (Cont.)

          g.   Dividends:

               The Company does not intend to pay cash dividends in the
               foreseeable future. Dividends declared on the ordinary shares
               will be paid in NIS. Dividends paid to shareholders outside
               Israel will be converted into U.S. dollars on the basis of the
               exchange rate prevailing at the date of payment.


NOTE 11:  INCOME TAXES

          a.   Israeli income tax:

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

                    Results for tax purposes are measured in terms of earnings
                    in NIS after certain adjustments for increases in the
                    Israeli Consumer Price Index. As explained in Note 3b, the
                    financial statements are measured in U.S. dollars. The
                    difference between the annual change in the Israeli CPI and
                    in the NIS/dollar exchange rate causes a further difference
                    between taxable income and the income before taxes shown in
                    the financial statements. In accordance with paragraph 9(f)
                    of SFAS No. 109, the Company has not provided deferred
                    income taxes on the difference between the functional
                    currency balances and the tax bases of assets and
                    liabilities.

                    Starting in 2003 the Company has elected to measure its
                    taxable income and file its tax return under Israeli income
                    tax regulations (Principles Regarding the Management of
                    Books of Account of Foreign Invested Companies and Certain
                    Partnerships and the Determination of Their Taxable Income),
                    1986.

               2.   Tax benefits under the Law for Encouragement of Capital
                    Investments, 1959 ("the Law").

                    The Company has been granted an "Approved Enterprise" status
                    for four investment programs approved in 1992, 1994, 1998
                    and 2002, by the Israeli government under the Law.
                    Undistributed Israeli income derived from the first, the
                    third and the fourth "Approved Enterprise" programs entitle
                    the Company to a tax exemption for a period of two years and
                    to a reduced tax rate of 10% - 25% for an additional period
                    of five to eight years (depending on the level of foreign
                    investment in the Company). Undistributed Israeli income
                    derived from the second "Approved Enterprise" program
                    entitles the Company to a tax exemption of four years and to
                    a reduced tax rate of 10%-25% for an additional period of
                    three to six years (depending on the level of foreign
                    investment in the Company). These tax benefits must be used
                    during the earlier of twelve years from commencement of
                    operations, or fourteen years from receipt of approval.
                    Thereafter, the Company's income will be subject to the
                    regular income tax rate of 36%. Because the Company has had
                    no taxable income in Israel, the Company has not yet
                    realized any benefits under these programs.

                    The Company completed the implementation of its first,
                    second and third investment programs in 1994, 1998 and 2002,
                    respectively. The fourth investment program has not yet been
                    completed.
                                      F-30
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 11:  INCOME TAXES (Cont.)

                    The entitlement to the above benefits is conditional upon
                    the Company's fulfilling the conditions stipulated by the
                    above law, regulations published thereunder and the
                    instruments of approval for the specific investments in
                    "approved enterprises." In the event of failure to comply
                    with these conditions, the benefits may be canceled and the
                    Company may be required to refund the amount of the
                    benefits, in whole or in part, including interest. As of
                    December 31, 2002, management believes that the Company is
                    meeting all of the aforementioned conditions.

                    The tax-exempt profits that will be earned by the Company's
                    "Approved Enterprises" can be distributed to shareholders,
                    without imposing tax liability to the Company 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, the profits 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 10% to 25% for an "Approved
                    Enterprise." The Company's Board of Directors has determined
                    that such tax exempt income will not be distributed as
                    dividends.

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

                    The Company is entitled to claim accelerated depreciation
                    with respect to equipment in use by "Approved Enterprises"
                    during the first five years of operations of these assets.
                    The entitlement to the above benefits is conditional upon
                    the Company fulfilling the conditions stipulated by the
                    above law and regulations published thereunder and the
                    instruments of approval for the specific investments in
                    "approved enterprises." In the event of a failure to comply
                    with these conditions, the benefits may be canceled and the
                    Company may be required to refund the amount of the
                    benefits, in whole or in part, including interest.

               3.   Tax benefits under the Law for Encouragement of Industry
                    (Taxation), 1969:

                    The Company is an "industrial company" under the Law for the
                    Encouragement of Industry (Taxation), 1969, and as such is
                    entitled to certain tax benefits.

               4.   Israeli tax reform:

                    On January 1, 2003, the Law for Amendment of the Income Tax
                    Ordinance (Amendment No. 132) 5762-2002, known as the tax
                    reform, became effective. The tax reform changed the Israeli
                    tax system from a territorial tax method into a personal tax
                    method on a global basis.


                                      F-31
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



NOTE 11:  INCOME TAXES (Cont.)

               b.   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 the
                    amounts used for income tax purposes. Significant components
                    of the Company's and its subsidiary's deferred tax
                    liabilities and assets are as follows:
                                                             DECEMBER 31,
                                                      ------------------------
                                                         2001          2002
                                                      ----------    ----------
                                                            IN THOUSANDS
                                                      ------------------------
                    Operating loss carryforward       $   15,614    $   13,382
                    Reserves, allowances and other           880         3,030
                                                      ----------    ----------
                    Deferred tax asset before
                      valuation allowance                 16,494        16,412
                    Valuation allowance                  (16,494)      (16,412)
                                                      ----------    ----------
                    Net deferred tax asset            $       --    $       --
                                                      ==========    ==========

                    The Company and its subsidiaries have provided valuation
                    allowances in respect of deferred tax assets resulting from
                    tax loss carryforwards. Management currently believes that,
                    because the Company and its subsidiaries have a history of
                    losses and various tax benefits, it is more likely than not
                    that the deferred tax regarding the loss carryforwards and
                    other temporary differences will not be realized in the
                    foreseeable future. During 2002, the Company realized
                    certain deferred tax assets and reduced the valuation
                    allowance by $82 to $16,412.

               c.   Reconciliation of the theoretical tax expense (benefit) to
                    the actual tax expense (benefit):

                    Theoretical tax reconciliation was not calculated due to the
                    amount of carryforward tax losses of the Company and its
                    subsidiaries.

               d.   Net operating loss carryforwards:

                    The Company has accumulated losses for Israeli tax purposes
                    as of December 31, 2002, in the amount of approximately $30
                    million, which may be carried forward and offset against
                    taxable income in the future for an indefinite period.

                    Through December 31, 2002, Precise Software Solutions Inc.,
                    the Company's U.S. subsidiary, had a U.S. federal net
                    operating loss carryforward of approximately $26 million
                    that can be carried forward and offset against taxable
                    income for 15 to 20 years and will expire from 2009 to 2014.
                    Utilization of U.S. net operating losses may be subject to
                    substantial annual limitations due to the "change in
                    ownership" provisions of the Internal Revenue Code of 1986
                    and similar state provisions. The annual limitation may
                    result in the expiration of net operating losses before
                    utilization.

                    The Company's subsidiary in the United Kingdom has estimated
                    available carryforward tax losses of $4 million.

                                      F-32
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 11:  INCOME TAXES (Cont.)

          e.   Income (loss) before income taxes consists of the following:

                                                YEAR ENDED DECEMBER 31,
                                        --------------------------------------
                                           2000          2001          2002
                                        ----------    ----------    ----------
                                                     IN THOUSANDS
                                        --------------------------------------
               Domestic                 $      878    $    4,746    $    7,034
               Foreign                     (10,783)       (3,799)       (3,233)
                                        ----------    ----------    ----------
                                        $   (9,905)   $      956    $    3,801
                                        ==========    ==========    ==========


NOTE 12:  COMMITMENTS AND CONTINGENT LIABILITIES

          a.   Lease commitments:

               The Company and its subsidiaries lease their facilities and
               vehicles under non-cancelable operating lease agreements for
               periods through 2009.

               Future minimum commitments under non-cancelable operating leases
               as of December 31, 2002, are as follows (in thousands):

               Year ended December 31,            Operating leases
               -----------------------            ----------------
               2003                                    $     3,106
               2004                                          2,287
               2005                                            763
               2006                                            495
               2007 and thereafter                           1,241
                                                  ----------------
                                                       $     7,892
                                                  ================

               Lease and related expenses under operating leases for the years
               ended December 31, 2000, 2001 and 2002, aggregate to
               approximately $848,000, $2,450,000 and $3,335,000, respectively.

          b.   Royalties:

               1.   The Company is committed to pay royalties to the Chief
                    Scientist of the Israeli Ministry of Industry and Trade at a
                    rate of 3.5% on the sale of products developed with funds
                    provided by the Chief Scientist, up to an amount equal to
                    100%-150% of dollar-linked research and development grants
                    related to such projects.

                    Royalties paid or accrued amounted to $586,000, $151,000 and
                    $0 in 2000, 2001 and 2002, respectively, and recorded in
                    cost of revenues in the Company's statement of operations.

                    As of December 31, 2002, the Company has no outstanding
                    contingent liability to the Chief Scientist.


                                      F-33
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 12:  COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)


               2.   The Government of Israel, through the Fund for the
                    Encouragement of Marketing Activities ("the Fund"), awarded
                    the Company grants for participation in its foreign
                    marketing expenses. The Company is committed to pay
                    royalties at the rate of 4% of the increase in export sales,
                    up to the amount of the grants, and linked to the U.S.
                    dollar.

                    Royalties paid or accrued amounted to $28,000, $0 and $0 in
                    2000, 2001 and 2002, respectively.

                    As of December 31, 2002, the Company has no outstanding
                    contingent liability under these grants.

          c.   Guarantees:

               The Company has provided guarantees in the amount of $628,000 as
               of December 31, 2002 relating to leases for its Israeli
               facilities, its U.S. subsidiaries' facilities, and automobiles in
               Europe.


NOTE 13:  FINANCIAL INCOME AND OTHER, NET

                                                YEAR ENDED DECEMBER 31,
                                        --------------------------------------
                                           2000          2001          2002
                                        ----------    ----------    ----------
                                                     IN THOUSANDS
                                        --------------------------------------
          Financial income:
            Interest and others         $    3,163    $    6,845    $    5,640
            Accretion of discount on
              available-for-sale
              marketable securities             54           262            38
            Foreign currency translation
              differences                      364           201           400
                                        ----------    ----------    ----------
          Financial income                   3,581         7,308         6,078
                                        ----------    ----------    ----------

          Financial expenses:
            Interest and others                (38)         (113)         (281)
            Amortization of premium on
              available-for-sale
              marketable securities            (36)         (371)       (1,269)
            Foreign currency translation
              differences                     (416)         (198)         (470)
                                        ----------    ----------    ----------
          Financial expenses                  (490)         (682)       (2,020)
                                        ----------    ----------    ----------
          Capital loss on property and
            equipment                           --           (61)          (37)
                                        ----------    ----------    ----------
          Financial income and
            other, net                  $    3,091    $    6,565    $    4,021
                                        ==========    ==========    ==========


                                      F-34
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 14:  SEGMENT, CUSTOMERS AND GEOGRAPHIC INFORMATION

          The Company and its subsidiaries operate in one industry segment, the
          development and marketing of performance software products. See Note 1
          for a brief description of the Company's business. The following data
          is presented in accordance with SFAS No. 131, "Disclosures about
          Segments of an Enterprise and Related Information."

          a.   Summary information about geographical areas:

               The following presents total revenues by customer location for
               the years ended December 31, 2000, 2001 and 2002 and long-lived
               assets as of December 31, 2001 and 2002.

                                                YEAR ENDED DECEMBER 31,
                                        --------------------------------------
                                           2000          2001          2002
                                        ----------    ----------    ----------
                                                     IN THOUSANDS
                                        --------------------------------------
               Revenues from sales to
                 unaffiliated customers:
               U.S.A                    $   17,737    $   33,142    $   47,646
               North and South America
                 (excluding U.S.A.)          1,469         3,209         3,104
               Asia                          3,181         4,738         5,424
               United Kingdom                2,074         5,747         6,085
               Europe and others
                 (excluding the
                 United Kingdom)             3,087         8,761        13,741
                                        ----------    ----------    ----------
                                        $   27,548    $   55,597    $   76,000
                                        ==========    ==========    ==========

                                        ------------------------
                                              DECEMBER 31,
                                        ------------------------
                                           2001          2002
                                        ------------------------
                                             IN THOUSANDS
                                        ------------------------
               Long-lived assets, by
                 geographic region:
               Israel                   $    3,956    $    3,134
               United States                45,635        59,399
               Europe and others             1,687         2,160
                                        ----------    ----------
                                        $   51,278    $   64,693
                                        ==========    ==========


          b.   Major customer data as a percentage of total revenues:

                                                     DECEMBER 31,
                                        --------------------------------------
                                           2000          2001          2002
                                        ----------    ----------    ----------
               Customer A                       7%           13%            2%
               Customer B                      23%           18%           10%




                                      F-35
<PAGE>
              PRECISE SOFTWARE SOLUTIONS LTD. AND ITS SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 15:  EARNING (LOSS) PER SHARE

          The following table sets forth the computation of the basic and
          diluted net earnings (loss) per share:

          1)   Numerator
                                                YEAR ENDED DECEMBER 31,
                                        --------------------------------------
                                           2000          2001          2002
                                        ----------    ----------    ----------
                                            NUMBER OF SHARES IN THOUSANDS
                                        --------------------------------------
               Net income (loss) to
               ordinary shareholders        (9,905)          923         3,591
                                        ==========    ==========    ==========


          2)   Denominator
                                                YEAR ENDED DECEMBER 31,
                                        --------------------------------------
                                           2000          2001          2002
                                        ----------    ----------    ----------
                                            NUMBER OF SHARES IN THOUSANDS
                                        --------------------------------------
               Weighted average number
                of shares used for
                basic net earnings
               (loss) per share             12,901        26,745        28,843

               Effect of dilutive
               securities:
                Employee stock options          --         3,226         2,108
                Contingent consideration        --            --           259
                                        ----------    ----------    ----------
               Dilutive potential
               ordinary shares                  --         3,226         2,367

               Weighted average number
               of shares used for diluted
               net earnings (loss) per
               share - adjusted weighted
               average shares, assumed
               exercise of options and
               contingent consideration     12,901        29,971        31,210
                                        ==========    ==========    ==========


                              - - - - - - - - - - -



                                      F-36
<PAGE>

                                   SIGNATURES

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


                                       PRECISE SOFTWARE SOLUTIONS LTD.

Date: May 27, 2003

                                       By: /s/ Shimon Alon
                                           -------------------------------------
                                           Shimon Alon, Chief Executive Officer


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

       Signature                        Title(s)                        Date
       ---------                        --------                        ----

/s/ Shimon Alon            Chief Executive Officer and Director     May 27, 2003
------------------------   (Principal Executive Officer)
Shimon Alon

/s/ Marc J. Venator        Chief Financial Officer (Principal       May 27, 2003
------------------------   Financial and Accounting Officer)
Marc J. Venator

         *                 Director and Chairman of the Board       May 27, 2003
------------------------   of Directors
Ron Zuckerman

         *                 Director                                 May 27, 2003
------------------------
Robert J. Dolan

         *                 Director                                 May 27, 2003
------------------------
Gary L. Fuhrman

         *                 Director                                 May 27, 2003
------------------------
Michael J. Miracle

         *                 Director                                 May 27, 2003
------------------------
Mary A. Palermo

         *                 Director                                 May 27, 2003
------------------------
Anton Simunovic

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

*  By: /s/ Shimon Alon
       ------------------------
       Shimon Alon
       Attorney-in-Fact


                                      II-1
<PAGE>

                                 CERTIFICATIONS
                                 --------------

I, Shimon Alon, certify that:

1.   I have reviewed this annual report on Form 10-K/A of Precise Software
     Solutions Ltd.;

2.   Based on my knowledge, this annual report, as amended, does not contain any
     untrue statement of a material fact or omit to state a material fact
     necessary to make the statements made, in light of the circumstances under
     which such statements were made, not misleading with respect to the period
     covered by this annual report, as amended;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, as amended, fairly present in
     all material respects the financial condition, results of operations and
     cash flows of the registrant as of, and for, the periods presented in this
     annual report, as amended;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report,
          as amended, is being prepared;

     (b)  evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report, as amended (the "Evaluation Date"); and

     (c)  presented in this annual report, as amended, our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     (a)  all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officer and I have indicated in this
     annual report, as amended, whether or not there were significant changes in
     internal controls or in other factors that could significantly affect
     internal controls subsequent to the date of our most recent evaluation,
     including any corrective actions with regard to significant deficiencies
     and material weaknesses.


Date: May 27, 2003

                                                   /s/ Shimon Alon
                                                   -----------------------------
                                                   Shimon Alon
                                                   Chief Executive Officer

<PAGE>

I, Marc J. Venator, certify that:

1.   I have reviewed this annual report on Form 10-K/A of Precise Software
     Solutions Ltd.;

2.   Based on my knowledge, this annual report, as amended, does not contain any
     untrue statement of a material fact or omit to state a material fact
     necessary to make the statements made, in light of the circumstances under
     which such statements were made, not misleading with respect to the period
     covered by this annual report, as amended;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, as amended, fairly present in
     all material respects the financial condition, results of operations and
     cash flows of the registrant as of, and for, the periods presented in this
     annual report, as amended;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report,
          as amended, is being prepared;

     (b)  evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report, as amended (the "Evaluation Date"); and

     (c)  presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     (a)  all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officer and I have indicated in this
     annual report, as amended, whether or not there were significant changes in
     internal controls or in other factors that could significantly affect
     internal controls subsequent to the date of our most recent evaluation,
     including any corrective actions with regard to significant deficiencies
     and material weaknesses.

Date: May 27, 2003

                                                   /s/ Marc Venator
                                                   -----------------------------
                                                   Marc J. Venator
                                                   Chief Financial Officer

<PAGE>

                   Exhibit Index to Annual Report on Form 10-K
                     for Fiscal Year Ended December 31, 2002

Exhibit
Number                         Description of Document
------                         -----------------------

2.1(1)    Agreement and Plan of Merger dated as of October 27 2000 by and among
          Precise Software Solutions Ltd., Precise Acquisition Corporation,
          Savant Corporation and certain stockholders of Savant Corporation
2.2(1)    Amendment to Agreement and Plan of Merger dated as of November 13,
          2000 by and among Precise Software Solutions Ltd., Precise Acquisition
          Corporation, Savant Corporation and Certain Stockholders of Savant
          Corporation
2.3(2)    Agreement and Plan of Merger dated as of September 4, 2001 by and
          among Precise Software Solutions Ltd., WQ Acquisition Corporation,
          W. Quinn Associates, Inc. and certain stockholders of W. Quinn
          Associates, Inc.
2.3(3)    Agreement and Plan of Merger dated as of December 19, 2002 by and
          among VERITAS Software Corporation, Argon Merger Sub Ltd. and Precise
          Software Solutions Ltd.
3.1(4)    Memorandum of Association of Registrant (English translation)
3.2(4)    Amendment to Memorandum of Association of Registrant, dated April 12,
          2000 (English translation)
3.3(5)    Amended and Restated Articles of Association of Registrant
4.1(4)    Specimen of Ordinary Share Certificate
10.1(6)   Lease Agreement by and between Precise Software Solutions Ltd., Ness
          B.S.G. Ltd. and Ilan Gat Engineers Ltd. dated November 2001 (English
          translation)
10.2(4)   Sublease Agreement, by and between the Travelers Indemnity Company and
          Precise Software Solutions, Inc. dated June 3, 1999
10.3(4)+  Application Software Vendor Agreement by and between Precise and
          Amdocs UK Limited dated January 12, 1998 10.4(4)+ Software License
          Agreement by and between Precise and EMC Corporation dated March 19,
          1999 and the amendments thereto dated October 5, 1999 and December 13,
          1999
10.5(4)   Letter Agreement between Precise and EMC Investment Corporation dated
          April 18, 2000, as amended May 19, 2000 and June 26, 2000
10.6(7)   Registration Rights Agreement, dated as of December 5, 2000, between
          Precise Software Solutions Ltd. and Richard North as agent for the
          stockholders of Savant Corporation
10.7(3)   Registration Rights Agreement, dated as of September, 2001, between
          Precise Software Solutions Ltd. and the parties named therein as agent
          for the stockholders of W. Quinn Associates, Inc.
10.8(8)   Employment Agreement dated as of November 23, 1998, as amended,
          between Precise and Shimon Alon 10.9(9) Employment Agreement dated as
          of February 8, 2002, between Precise and Benjamin H. Nye 10.10(10)
          Employment Agreement dated as of August 1, 2002, between Precise
          Software Solutions Ltd. and Itzhak ("Aki") Ratner
10.11(10) Employment Agreement dated as of August 1, 2002, between Precise
          Software Solutions, Inc. and Itzhak ("Aki") Ratner
10.12(10) Employment Agreement dated as of September 3, 2002, between Precise
          Software Solutions, Inc. and Marc J. Venator
10.13(4)  1995 Share Option and Incentive Plan
10.14(11) Amended and Restated 1998 Share Option and Incentive Plan
10.15(9)  Amended 2000 Employee Share Purchase Plan 10.16(8) Form of
          indemnification agreement between Precise Software Solutions Ltd. and
          its executive officers
10.17(8)  Form of indemnification agreement between Precise Software Solutions,
          Inc. and its executive officers
10.18(6)  Lease Agreement by and between Campus Commons, LLC and W. Quinn
          Associates, Inc. dated May 4, 1999
21.1(12)  Subsidiaries of the Registrant
23.1      Consent of Kost, Forer & Gabbay, a member of Ernst and Young Global
24.1(12)  Powers of Attorney
99.1      Certification of Principal Executive Officer
99.2      Certification of Principal Financial Officer
------------
<PAGE>

+    The Securities and Exchange Commission granted confidential treatment as to
     certain portions, which portions were separately filed with the Securities
     and Exchange Commission pursuant to a confidential treatment request.

(1)  Incorporated by reference to the exhibits to the registrant's registration
     statement on Form F-1 (File No. 333-48878).
(2)  Incorporated by reference to the exhibits to the registrant's current
     report on Form 8-K filed September 19, 2001.
(3)  Incorporated by reference to the exhibits of the registrant's current
     report on Form 8-K filed December 24, 2002.
(4)  Incorporated by reference to the exhibits to the registrant's registration
     statement on Form F-1 (File No. 333-11992).
(5)  Incorporated by reference to the exhibits to the registrant's registration
     statement on Form F-1 (File No. 333-11992) and the registrant's definitive
     proxy statement filed on April 11, 2001.
(6)  Incorporated by reference to the exhibits to the registrant's annual report
     on Form 10-K for the year ended December 31, 2001.
(7)  Incorporated by reference to the exhibits of the registrant's current
     report on Form 8-K filed December 20, 2000.
(8)  Incorporated by reference to the exhibits to the registrant's annual report
     on Form 10-K for the year ended December 31, 2000.
(9)  Incorporated by reference to the exhibits of the registrant's quarterly
     report on Form 10-Q for the period ended March 31, 2002.
(10) Incorporated by reference to the exhibits of the registrant's quarterly
     report on Form 10-Q for the period ended June 30, 2002.
(11) Incorporated by reference to the exhibits to the registrant's definitive
     proxy statement filed April 30, 2002.
(12) Incorporated by reference to the registrant's
     annual report on Form 10-K for the year ended December 31, 2002.