================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   ----------

                                    FORM 10-Q

                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934




[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934.

      For the quarterly period ended JUNE 30, 2001
                                     -------------

                                       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 0-30828

                         PRECISE SOFTWARE SOLUTIONS LTD.
             (Exact Name of Registrant as Specified in Its Charter)


          Israel                                             Not Applicable
     (State or Other                                        (I.R.S. Employer
Jurisdiction of Organization)                              Identification No.)

                                1 Hashikma Street
                        P.O. Box 88 Savyon, 56518 Israel
               (Address of Principal Executive Offices) (Zip Code)


Registrant's Telephone Number, Including Area Code  972-(3)-635-2566


     Indicate by check |X| whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   Yes  |X|    No
                                                -----      -----

     At August 10, 2001, 26,725,450 of the registrant's ordinary shares (par
value, 0.03 NIS per share) were outstanding.

================================================================================
<PAGE>
                                    FORM 10-Q

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

                                TABLE OF CONTENTS



                                                                           PAGE


PART I:  FINANCIAL INFORMATION

         ITEM 1. Consolidated Financial Statements:

                 Condensed Consolidated Balance Sheets as of
                 June 30, 2001 (unaudited) and December 31, 2000............4-5

                 Condensed Consolidated Statements of Operations
                 (unaudited) for the three and six months ended
                 June 31, 2001 and 2000.......................................6

                 Condensed Consolidated Statements of Cash Flows
                 (unaudited) for the three and six months ended
                 June 30, 2001 and 2000.....................................7-8

                 Notes to Condensed Consolidated Financial
                 Statements (unaudited)....................................9-13

         ITEM 2. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations......................14-19

         ITEM 3. Quantitative and Qualitative Disclosures
                 About Market Risk...........................................19


PART II. OTHER INFORMATION

         ITEM 1. Legal Proceedings...........................................20

         ITEM 2. Changes in Securities and Use of Proceeds....................*

         ITEM 3. Defaults Upon Senior Securities..............................*

         ITEM 4. Matters Submitted to a Vote of Security Holders.............20

         ITEM 5. Other Information............................................*

         ITEM 6. Exhibits and Reports on Form 8-K............................21


SIGNATURES...................................................................22


*No information provided due to inapplicability of item.


                                                                               2
<PAGE>
                         PRECISE SOFTWARE SOLUTIONS LTD.
                                    FORM 10-Q
                           QUARTER ENDED JUNE 30, 2001

PART I. FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                                PRECISE SOFTWARE SOLUTIONS LTD. AND SUBSIDIARIES

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

<TABLE><CAPTION>
                                                               DECEMBER 31,     JUNE 30,
                                                                   2000           2001
                                                                ----------     ----------
                                                                               UNAUDITED
                                                                               ----------
<S>                                                             <C>            <C>
                                     ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                     $   82,218     $   79,222
  Marketable securities                                             39,261         40,784
  Trade receivables, net of allowance for doubtful accounts
   (2000 - $74, 2001 - $99)                                          5,834          7,808
  Other accounts receivable and prepaid expenses                     3,688          3,247
                                                                ----------     ----------

Total current assets                                               131,001        131,061
                                                                ----------     ----------

MARKETABLE SECURITIES, NON CURRENT                                  27,931         32,113
                                                                ----------     ----------

SEVERANCE PAY FUND                                                     540            596
                                                                ----------     ----------

PROPERTY AND EQUPIMENT, NET                                          2,696          3,454
                                                                ----------     ----------

OTHER ASSETS, NET OF ACCUMULATED AMORTIZATION
  (2000 - $99, 2001 - $1,391)                                       16,513         15,128
                                                                ----------     ----------

                                                                $  178,681     $  182,352
                                                                ==========     ==========
</TABLE>

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




                                                                               4
<PAGE>
                                PRECISE SOFTWARE SOLUTIONS LTD. AND SUBSIDIARIES

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

<TABLE><CAPTION>
                                                               DECEMBER 31,     JUNE 30,
                                                                   2000           2001
                                                                ----------     ----------
                                                                               UNAUDITED
                                                                               ----------
<S>                                                             <C>            <C>
                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Trade payables                                                $    1,452     $    1,240
  Deferred revenues                                                  3,351          4,095
  Employees and payroll accruals                                     3,903          4,194
  Accrued expenses                                                   1,342          1,384
  Other accounts payable                                               806            659
                                                                ----------     ----------

Total current liabilities                                           10,854         11,572
                                                                ----------     ----------

LONG-TERM LIABILITIES:
  Long-term debt                                                       120            106
  Accrued severance pay                                                831            977
                                                                ----------     ----------

Total long-term liabilities                                            951          1,083
                                                                ----------     ----------

SHAREHOLDERS' EQUITY:
  Ordinary shares and additional paid-in capital                   195,610        196,746
  Deferred stock compensation                                       (2,717)        (1,536)
  Accumulated other comprehensive income                               330            595
  Accumulated deficit                                              (26,347)       (26,108)
                                                                ----------     ----------

Total shareholders' equity                                         166,876        169,697
                                                                ----------     ----------

                                                                $  178,681     $  182,352
                                                                ==========     ==========
</TABLE>
                   The accompanying notes are an integral part
               of the condensed consolidated financial statements.








                                                                               5
<PAGE>
                                PRECISE SOFTWARE SOLUTIONS LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
U.S. DOLLARS IN THOUSANDS (EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
                                                         THREE MONTHS ENDED              SIX MONTHS ENDED
                                                              JUNE 30,                        JUNE 30,
                                                     --------------------------      --------------------------
                                                        2000            2001            2000            2001
                                                     ----------      ----------      ----------      ----------
                                                                             UNAUDITED
                                                     ----------------------------------------------------------
<S>                                                  <C>             <C>             <C>             <C>
Revenues:
  Software licenses                                  $    4,875      $    9,995      $    8,463      $   19,441
  Services                                                  870           2,712           1,824           4,776
                                                     ----------      ----------      ----------      ----------
          Total revenues                                  5,745          12,707          10,287          24,217
                                                     ----------      ----------      ----------      ----------

Cost of revenues:
  Software licenses                                         181              42             297             112
  Services                                                  411             702             767           1,447
                                                     ----------      ----------      ----------      ----------
          Total cost of revenues                            592             744           1,064           1,559
                                                     ----------      ----------      ----------      ----------

Gross profit                                              5,153          11,963           9,223          22,658
                                                     ----------      ----------      ----------      ----------
Operating expenses:
  Research and development                                1,032           2,688           2,051           4,924
  Sales and marketing                                     4,555           8,121           8,309          15,754
  General and administrative                                740           1,586           1,337           3,138
  Amortization of goodwill and intangible assets             18             654              30           1,292
  Amortization of deferred stock compensation             2,938             469           3,718           1,182
                                                     ----------      ----------      ----------      ----------
Total operating expenses                                  9,283          13,518          15,445          26,290
                                                     ----------      ----------      ----------      ----------
Operating loss                                           (4,130)         (1,555)         (6,222)         (3,632)
Financial income, net                                        99           1,765             136           3,871
                                                     ----------      ----------      ----------      ----------

Net income (loss)                                    $   (4,031)     $      210      $   (6,086)     $      239
                                                     ==========      ==========      ==========      ==========
Net income (loss) per share:
  Basic and diluted net income (loss) per share      $    (1.21)     $     0.01      $    (1.83)     $     0.01
                                                     ==========      ==========      ==========      ==========
  Weighted average number of shares used in
  computing basic net income (loss) per share             3,336          26,405           3,318          26,114
                                                     ==========      ==========      ==========      ==========
  Weighted average number of shares used in
  computing diluted net income (loss) per share           3,336          29,959           3,318          29,688
                                                     ==========      ==========      ==========      ==========
</TABLE>
                   The accompanying notes are an integral part
               of the condensed consolidated financial statements.
                                                                               6
<PAGE>
                                PRECISE SOFTWARE SOLUTIONS LTD. AND SUBSIDIARIES

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

<TABLE><CAPTION>
                                                                   SIX MONTHS ENDED
                                                                        JUNE 30,
                                                               --------------------------
                                                                  2000            2001
                                                               ----------      ----------
                                                                        UNAUDITED
                                                               --------------------------
<S>                                                            <C>             <C>
Cash flows from operating activities:

   Net income (loss)                                           $   (6,086)     $      239
   Adjustments to reconcile net income (loss) to net cash
        provided by (used in) operating activities:
      Depreciation                                                    233             573
      Amortization of debenture premium                              --              (133)
      Amortization of deferred stock-based compensation             3,718           1,181
      Amortization of goodwill and intangible assets                   30           1,292
      Decrease (increase) in trade receivables, net                 1,489          (1,996)
      Decrease (increase) in other accounts receivable and
        prepaid expenses                                             (321)            428
      Decrease in trade payables                                      (38)           (194)
      Increase in deferred revenues                                   261             766
      Increase in employees and payroll accruals                      412             307
      Increase (decrease) in other accounts payable and
        accrued expenses                                               53            (197)
      Increase in accrued severance pay, net                          101              90
      Other                                                             8            --
                                                               ----------      ----------

Net cash provided by (used in) operating activities                  (140)          2,356
                                                               ----------      ----------

Cash flows from investing activities:

   Purchase of property and equipment                                (508)         (1,340)
   Purchase of marketable securities                                 --           (33,260)
   Purchase of other assets                                          --              (490)
   Payment for acquisition of consolidated subsidiary                (507)           --
   Proceeds from sale of short term deposits                          888            --
   Proceeds from redemption of marketable securities                               24,210
   Proceeds from sale of marketable securities                       --             3,785
   Prepaid issuance expenses                                         (479)           --
                                                               ----------      ----------

Net cash used in investing activities                          $     (606)     $   (7,095)
                                                               ----------      ----------
</TABLE>
                   The accompanying notes are an integral part
               of the condensed consolidated financial statements.

                                                                               7
<PAGE>
                                PRECISE SOFTWARE SOLUTIONS LTD. AND SUBSIDIARIES

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

<TABLE><CAPTION>
                                                                   SIX MONTHS ENDED
                                                                        JUNE 30,
                                                               --------------------------
                                                                  2000            2001
                                                               ----------      ----------
                                                                        UNAUDITED
                                                               --------------------------
<S>                                                            <C>             <C>
Cash flows from financing activities:

   Short-term bank credit, net                                 $      (27)     $     --
   Proceeds from issuance of shares, net                              196            --
   Proceeds from exercise of options, net                            --             1,819
   Repayment of long-term debt                                        (17)            (14)
                                                               ----------      ----------

Net cash provided by financing activities                             152           1,805
                                                               ----------      ----------

Effect of exchange rate change on cash and cash equivalents          --               (62)
                                                               ----------      ----------

Decrease in cash and cash equivalents                                (594)         (2,996)
Cash and cash equivalents at the beginning of the period            6,693          82,218
                                                               ----------      ----------

Cash and cash equivalents at the end of the period             $    6,099      $   79,222
                                                               ==========      ==========
      Supplemental disclosure of cash flows activities:

      Cash paid during the period for:
           Interest                                            $        1      $        9
                                                               ==========      ==========

      Non cash transactions:
           Adjustment to Savant Corporation acquisition, net   $     --        $      583
                                                               ==========      ==========
</TABLE>

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








                                                                               8
<PAGE>
PRECISE SOFTWARE SOLUTIONS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 1: BASIS OF PRESENTATION

        a. Company:

           Precise Software Solutions Ltd. (together with its subsidiaries, "the
           Company") was established in Israel on November 15, 1990. The Company
           is a provider of software products that assist organizations in
           monitoring and optimizing their information technology
           infrastructure, and of related consulting, training and support
           services.

        b. Accounting:

           The accompanying condensed interim consolidated financial statements
           have been prepared by Precise Software Solutions Ltd. in accordance
           with generally accepted accounting principles in the United States,
           pursuant to the rules and regulations of the Securities and Exchange
           Commission and include the accounts of Precise Software Solutions
           Ltd. and its wholly-owned subsidiaries collectively (the "Company").
           Certain information and footnote disclosures, normally included in
           financial statements prepared in accordance with generally accepted
           accounting principles in the United States, have been condensed or
           omitted pursuant to such rules and regulations. In the opinion of the
           Company, the unaudited financial statements reflect all adjustments
           (consisting only of normal recurring adjustments) necessary for a
           fair presentation of the financial position at June 30, 2001 and the
           operating results and cash flows for the six months ended June 30,
           2001 and 2000. These financial statements and notes should be read in
           conjunction with the Company's audited consolidated financial
           statements and notes thereto, included in the Company's annual report
           on Form 10-K filed, as amended, with the Securities and Exchange
           Commission. Certain prior period amounts have been reclassified to
           conform with current period representation.

           The results of operations for the three and six months ended June 30,
           2001 are not necessarily indicative of results that may be expected
           for any other interim period or for the full fiscal year ending
           December 31, 2001.


NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        a. Cash and cash equivalents:

           The Company considers all highly liquid investment securities with
           maturities from date of purchase of three months or less to be cash
           equivalents.

        b. Marketable securities:

           Management determines the proper classification of investments with
           fixed maturities and marketable equity securities at the time of
           purchase and reevaluates such designations as of each balance sheet
           date. At June 30, 2001, all securities covered by SFAS No. 115,
           "Accounting for Certain Investments in Debt and Equity Securities",
           were designated as available-for-sale. Accordingly, these 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, net. Realized gains and
           losses on sales of investments, as determined on a specific
           identification basis, are included in the consolidated statement of
           operations.

        c. Other assets:

           Acquired workforce, acquired technology, purchased customer
           relationships, internet site capitalization costs and goodwill are
           stated at amortized cost. Amortization is calculated using the
           straight-line method over the estimated useful lives, which are three
           to ten years.

                                                                               9
<PAGE>
        d. Revenue recognition:

           In December 1999, the SEC issued Staff Accounting Bulletin No. 101
           (SAB 101) "Revenue Recognition in Financial Statements," as amended
           in June 2000, which summarizes the Staff's views in applying
           generally accepted accounting principles to revenue recognition in
           financial statements. The Company adopted SAB 101 during the fourth
           quarter of 2000. The adoption did not have a significant effect on
           the Company's consolidated results of operations or financial
           position.

           Revenues from software sales are recognized in accordance with SOP
           97-2 "Software Revenue Recognition", as amended. License revenues are
           comprised of perpetual license fees, which are derived from contracts
           with original equipment manufacturers ("OEM"), resellers, and
           end-customers. The Company and its subsidiaries generally do not
           grant rights of return. When a right of return exists, the Company
           and its subsidiaries defer the revenues until such right expires. The
           Company is entitled to fees from its OEMs upon the sublicensing of
           the Company's products to end-users. Fees due from each OEM are
           recognized when such fees are reported to the Company upon the
           sublicensing of the products by the OEMs. License revenues from sales
           to resellers and end-customers are recognized upon delivery of the
           software (1) when collection is probable, (2) all license payments
           are due within one year, (3) the license fee is fixed or
           determinable, (4) vendor-specific objective evidence exists, and (5)
           persuasive evidence of an arrangement exists.

           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 support arrangements are deferred and
           recognized on a straight-line basis as service revenues over the life
           of the related agreement. Consulting and training revenues are
           recognized at the time the services are rendered. Customer advances
           in excess of revenue recognized are recorded as deferred revenues.
           The Company defers revenues associated with new products until these
           products are generally available.

           Where software arrangements involve multiple elements, revenue is
           allocated to each element based on vendor specific objective evidence
           ("VSOE") of the relative fair values of each element in the
           arrangement, in accordance with the "residual method" prescribed by
           SOP 98-9 "Modification of SOP 97-2, Software Revenue Recognition With
           Respect to Certain Transactions." The Company's VSOE used to allocate
           the sales price to consulting, 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 other than those accounted for using long-term contract
           accounting, and (2) all revenue recognition criteria of SOP 97-2, as
           amended, are satisfied.

        e. Impact of recently issued accounting standards:

           The Financial Accounting Standards Board issued SFAS No. 133 ("SFAS
           133"), "Accounting for Derivative Instruments and Hedging Activities"
           ("SFAS No. 133") in June 1999 and its amendments, statements 137 and
           138, in June 1999 and June 2000, respectively. These statements
           establish accounting and reporting standards regarding derivative
           instruments (including certain derivative instruments embedded in
           other contracts). The statement and related rule applies to all
           fiscal quarters of all fiscal years beginning after June 15, 2000.
           The Company does not expect the impact of this new statement on the
           Company's consolidated balance sheets or results of operations to be
           material.
                                                                              10
<PAGE>
           In June 2001, the Financial Accounting Standards Board issued SFAS
           No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and
           Other Intangible Assets", effective for fiscal years beginning after
           December 15, 2001. Under the rules, goodwill and intangible assets
           deemed to have indefinite lives will no longer be amortized, but will
           be subject to annual impairment tests in accordance with SFAS No.
           142. Other intangible assets will continue to be amortized over their
           useful lives.

           The Company will apply the new rules on accounting for goodwill and
           other intangible assets beginning in the first quarter of 2002.
           Application of the non-amortization provisions of SFAS No. 142 may
           result in an increase in net income. During 2002, the Company will
           perform the first of the required impairment tests of goodwill and
           indefinite lived intangible assets as of January 1, 2002 and has not
           yet determined what the effect of these tests will be on the earnings
           and financial position of the Company.


NOTE 3: SHAREHOLDERS' EQUITY

        Stock options plans:

           The following table summarizes information about stock options
           outstanding as of June 30, 2001:

                                                    NUMBER OF   WEIGHTED AVERAGE
                                                     OPTIONS     EXERCISE PRICE
                                                    ----------     ----------
           Outstanding at December 31, 2000          5,384,175     $     6.10
           Granted                                   1,669,252     $    15.44
           Exercised                                (1,037,330)    $     1.71
           Forfeited                                  (237,468)    $    13.44
                                                    ----------     ----------
           Outstanding at June 30, 2001(unaudited)   5,778,629     $     9.28
                                                    ==========     ==========


NOTE 4: NET INCOME (LOSS) PER SHARE

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










                                                                              11
<PAGE>
        The following table presents the calculation of unaudited basic and
        diluted net income (loss) per share (in thousands, except per share
        amounts):
<TABLE><CAPTION>
                                                THREE MONTHS ENDED JUNE 30,     SIX MONTHS ENDED JUNE 30,
                                                --------------------------     --------------------------
                                                   2000            2001           2000            2001
                                                ----------      ----------     ----------      ----------
                                                                        UNAUDITED
                                                ---------------------------------------------------------
        <S>                                     <C>             <C>            <C>             <C>
        Net Income (loss)                       $   (4,031)     $      210     $   (6,086)     $      239
                                                ----------      ----------     ----------      ----------
        Shares used in computing basic net           3,336          26,405          3,318          26,114
        income (loss) per share
        Effect of dilutive stock options              --             3,554           --             3,574
                                                ----------      ----------     ----------      ----------
        Shares used in computing diluted             3,336          29,959          3,318          29,688
        net income (loss) per share

        Basic and diluted net income (loss)
         per share                              $    (1.21)     $     0.01     $    (1.83)     $     0.01
                                                ==========      ==========     ==========      ==========
</TABLE>


NOTE 5: COMPREHENSIVE INCOME (LOSS)

        The components of comprehensive income (loss), are as follows:

<TABLE><CAPTION>
                                                THREE MONTHS ENDED JUNE 30,     SIX MONTHS ENDED JUNE 30,
                                                --------------------------     --------------------------
                                                   2000            2001           2000            2001
                                                ----------      ----------     ----------      ----------
                                                                        UNAUDITED
                                                ---------------------------------------------------------
        <S>                                     <C>             <C>            <C>             <C>

        Net Income (loss)                       $   (4,031)     $      210     $   (6,086)     $      239
                                                ----------      ----------     ----------      ----------
        Other comprehensive income (loss):
           Change in net unrealized gains
              on investments                           --             (122)           --              307
           Change in accumulated foreign
              currency translation adjustment          --              (11)           --              (42)
                                                ----------      ----------     ----------      ----------
                                                $   (4,031)     $       77     $   (6,086)     $      504
                                                ==========      ==========     ==========      ==========

</TABLE>







                                                                              12
<PAGE>
NOTE 6: SEGEMENTS INFORMATION


        a. Summary information about geographical areas (in thousands):

           The Company operates in one industry segment, the development and
           marketing of performance software products. Operations in Israel and
           the United States include research and development, sales and
           marketing. Operations in the Europe and Australia include selling and
           marketing. The following is a summary of operations within geographic
           areas based on customer location.
<TABLE><CAPTION>
                                                           THREE MONTHS ENDED JUNE 30,      SIX MONTHS ENDED JUNE 30,
                                                           --------------------------      --------------------------
                                                              2000            2001            2000            2001
                                                           ----------      ----------      ----------      ----------
                                                                                    UNAUDITED
                                                           ----------------------------------------------------------
        <S>                                                <C>             <C>             <C>             <C>
        Revenues from sales to unaffiliated customers:
           U.S.A                                           $    4,065      $    8,692      $    7,353      $   14,622
           North and South America (except U.S.A.)                142             824             249           1,413
           Asia                                                   489             856             869           2,512
           Europe and others                                    1,049           2,335           1,816           5,670
                                                           ----------      ----------      ----------      ----------
                                                           $    5,745      $   12,707      $   10,287      $   24,217
                                                           ==========      ==========      ==========      ==========
</TABLE>

        b. Summary information about geographical areas (in thousands):
<TABLE><CAPTION>
                                                          DECEMBER 31,      JUNE 30,
                                                              2000            2001
                                                           ----------      ----------
                                                                           UNAUDITED
                                                                           ----------
        <S>                                                <C>             <C>
          Long-lived assets, by geographic region:
              Israel                                       $    1,187      $    2,018
              United States                                    16,613          14,958
              Europe and others                                 1,409           1,606
                                                           ----------      ----------
                                                           $   19,209      $   18,582
                                                           ==========      ==========

</TABLE>

        c. Major customer data as a percentage of total revenues:
<TABLE><CAPTION>
                                                           THREE MONTHS ENDED JUNE 30,      SIX MONTHS ENDED JUNE 30,
                                                           --------------------------      --------------------------
                                                              2000            2001            2000            2001
                                                           ----------      ----------      ----------      ----------
                                                                                    UNAUDITED
                                                           ----------------------------------------------------------
        <S>                                                <C>             <C>             <C>             <C>
           Customer A                                         5.7%            8.6%            6.3%            13.4%
           Customer B                                        27.0%           18.3%           23.3%            21.0%
</TABLE>

                                                                              13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

     This Form 10-Q contains certain statements of a forward-looking nature
relating to future events or the future financial performance of Precise
Software Solutions Ltd. ("Precise"). Precise's actual future results may differ
significantly from these statements. In evaluating these statements, the various
factors identified in the caption "Factors Affecting Future Operating Results"
should be considered.

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 November 1990. Initially, we focused on
developing and marketing performance management software for mainframe computer
systems. In 1995, we shifted our focus from performance management software for
mainframe systems to Information Technology infrastructure performance
management software for Oracle database environments. In 1996, we released the
initial version of our Precise/SQL, now called Precise Indepth for Oracle,
software for database monitoring. In 1998, we released several new products,
including our Precise/Pulse! software for proactive monitoring, Precise/Presto
for EMC software for monitoring databases along with EMC storage systems and
Precise/Interpoint software for monitoring ERP applications. We introduced
Precise/Insight and Precise/Foresight in April 2000 and February 2001,
respectively. In April 2001, we introduced Precise/Indepth for BEA WebLogic
Server targeting the growing Java application market and Precise/Savvy for SAP
R/3, which enhances Precise/Insight in ERP performance monitoring.

     We derive our revenues from the sale of software licenses and from
services, consisting primarily of annual maintenance fees, and, to a lesser
extent, professional 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 agreements.

     On January 1, 1998, we adopted American Institute of Certified Public
Accountants Statement of Position 97-2, or SOP 97-2, related to revenue
recognition for software products, and on March 15, 1999, we adopted SOP 98-9,
related to software arrangements involving multiple elements. During the fourth
quarter of 2000, we adopted Staff Accounting Bulletin No. 101 (SAB 101), which
summarizes the views of the staff of the U.S. Securities and Exchange Commission
in applying generally accepted accounting principles to revenue recognition.
Revenues from our OEM are recognized when we receive reports of fees due upon
the sublicensing of our products by the OEM. Software license revenues on sales
to resellers and end users are recognized when:

                  PERSUASIVE EVIDENCE OF AN AGREEMENT EXISTS;
                  THE PRODUCT HAS BEEN DELIVERED;
                  ALL LICENSE PAYMENTS ARE DUE WITHIN ONE YEAR;
                  VENDOR-SPECIFIC OBJECTIVE EVIDENCE EXISTS;
                  THE LICENSE FEE IS FIXED OR DETERMINABLE; AND
                  COLLECTION OF THE FEE IS PROBABLE.

     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 at the time the services are rendered.

                                                                              14
<PAGE>
     Where software arrangements involve multiple elements, revenue is allocated
to each element based on vendor specific objective evidence, or VSOE, of the
relative fair values of each element in the arrangement in accordance with the
"residual method" prescribed by SOP 98-9. 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 other than those accounted for using long term contract
accounting and (2) all revenue recognition criteria of SOP 97-2, as amended, are
satisfied.

     Our condensed 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, Benelux, Australia, Germany and France 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.

RESULTS OF OPERATIONS

     The following table presents certain condensed consolidated statement of
operations data as a percentage of total revenues for the periods indicated:
<TABLE><CAPTION>
                                                       Three months             Six months
                                                      ended June 30,           ended June 30,
                                                   -------------------       -------------------
Percent of Total Revenues:                          2000         2001         2000         2001
                                                   ------       ------       ------       ------
<S>                                                <C>          <C>          <C>          <C>
Revenues:
   Licenses ...................................      84.9%        78.7%        82.3%        80.3%
   Services ...................................      15.1         21.3         17.7         19.7
                                                   ------       ------       ------       ------
      Total revenues ..........................     100.0        100.0        100.0        100.0
Cost of revenues:
   Licenses ...................................       3.1          0.3          2.8          0.4
   Services ...................................       7.2          5.5          7.5          6.0
                                                   ------       ------       ------       ------
      Total cost of revenues ..................      10.3          5.8         10.3          6.4
                                                   ------       ------       ------       ------
Gross profit ..................................      89.7         94.2         89.7         93.6
Operating expenses:
 Research and development .....................      18.0         21.2         19.9         20.3
 Sales and marketing ..........................      79.3         63.9         80.8         65.1
 General and administrative ...................      13.2         12.5         13.3         13.0
 Amortization of goodwill and intangible assets       0.0          5.1          0.0          5.3
 Amortization of deferred stock compensation ..      51.1          3.7         36.1          4.9
                                                   ------       ------       ------       ------
      Total operating expenses ................     161.6        106.4        150.1        108.6
                                                   ------       ------       ------       ------
Operating loss ................................     (71.9)       (12.2)       (60.4)       (15.0)
Financial income, net .........................       1.7         13.9          1.3         16.0
                                                   ------       ------       ------       ------
Net income (loss) .............................     (70.2)%        1.7%       (59.1)%        1.0%
                                                   ======       ======       ======       ======
</TABLE>

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 $12.7 million for the three months ended June 30,
2001 and $5.7 million for the comparable quarter of 2000, representing an
increase of $7.0 million, or 121%, and were $24.2 million for the six months
ended June 30, 2001 and $10.3 million for the comparable period of 2000,
representing an increase of $13.9 million, or 135%.

                                                                              15
<PAGE>

     Revenues from sales of software licenses were $10.0 million for the three
months ended June 30, 2001 and $4.9 million for the comparable quarter of 2000,
representing an increase of $5.1 million, or 105%, and were $19.4 million for
the six months ended June 30, 2001 and $8.5 million for the comparable period in
2000, representing an increase of $10.9 million, or 130%. The increase in
software license revenues during these periods is attributable to the expansion
of our direct sales force and indirect sales channels, recurring sales to our
installed customer base, an increased average deal size, and the strength of our
OEM relationship.

     Revenues from services were $2.7 million for the three months ended June
30, 2001 and $0.9 million for the comparable quarter of 2000, representing an
increase of $1.8 million, or 212%, and were $4.8 million for the six months
ended June 30, 2001 and $1.8 million for the comparable period of 2000,
representing an increase of $3.0 million, or 162%. The increase in services
revenue during the three and six month periods ended June 30, 2001 over the
comparable periods in 2000 is attributable to additional maintenance agreements
in the amount of approximately $1.4 million and $2.2 million, respectively,
resulting from new sales of software licenses and renewals of annual maintenance
agreements with existing customers. Our professional consulting business was
expanded in 2000, and resulted in an increase of approximately $0.4 million and
$0.7 million in consulting revenue for the three and six month periods ended
June 30, 2001 over the comparable periods of 2000.

COST OF REVENUES

     Cost of revenues consists of costs associated with generating software
license and service revenues. Cost of revenues was $744,000 for the three months
ended June 30, 2001 and $592,000 for the comparable quarter of 2000,
representing an increase of $152,000, or 26%, and were $1.6 million for the six
months ended June 30, 2001 and $1.1 million for the comparable period of 2000,
representing an increase of $0.5 million, or 47%. Cost of revenues as a
percentage of total revenues was 6% for the three and six month periods ended
June 30, 2001 and 10% for the comparable periods of 2000.

     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. Cost of software license revenues was $42,000 for the three
months ended June 30, 2001 and $181,000 for the comparable quarter of 2000,
representing a decrease of $139,000, or 77%, and were $112,000 for the six
months ended June 30, 2001 and $297,000 for the comparable period in 2000,
representing a decrease of $185,000, or 62%. The decrease for these periods is
due to a decrease in royalties accrued in connection with royalty-bearing
marketing grants, as these grants have been fully expensed. In addition, the
decrease is due to a decrease in the royalties accrued to the Chief Scientist of
the Ministry of Industry and Trade. The royalty was 3.5% on sales of products
developed with the funds provided by the Chief Scientist, and the last portion
of royalties owed relating to this grant were fully expensed in the first
quarter of 2001. Cost of software license revenues as a percentage of total
software license revenues was 1% for the three and six months ended June 30,
2001 and 4% for the comparable periods in 2000.

     Cost of service revenues consists primarily of costs related to personnel
providing customer support and professional services. Cost of service revenues
was $702,000 for the three months ended June 30, 2001 and $411,000 for the
comparable quarter of 2000, representing an increase of $291,000, or 71%, and
were $1.4 million for the six months ended June 30, 2001 and $0.8 million for
the comparable period of 2000, representing an increase of $0.6 million, or 89%.
The increase for these periods are 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 service revenues was 26% in the three months
ended June 30, 2001 and 47% in the comparable quarter of 2000 and was 30% for
the six months ended June 30, 2001 and 42% for the comparable period of 2000. A
majority of the services revenue increase for these periods was related to
maintenance revenue.

                                                                              16
<PAGE>

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 $2.7 million for the three months ended June 30, 2001
and $1.0 million for the comparable period of 2000, representing an increase of
$1.7 million, or 160%, and were $4.9 million for the six months ended June 30,
2001 and $2.1 million for the comparable period of 2000, representing an
increase of $2.8 million, or 140%. The increases for these periods was primarily
related to the increase in the number of software developers and quality
assurance personnel engaged in the continuing enhancement of our software suite,
which included the release of three new products in the six month period ended
June 30, 2001. Research and development expenses as a percentage of total
revenues were 21% in the three months ended June 30, 2001 and 18% in the
comparable quarter of 2000 and were 20% for both the six-month periods ended
June 30, 2001 and 2000. We expect the amount of research and development
expenses to increase as we extend the functionality and development of our
software and as we hire additional personnel.

SALES AND MARKETING

     Sales and marketing expenses consist primarily of salaries and other
personnel-related expenses, commissions and other costs associated with our
sales and marketing efforts. Sales and marketing expenses were $8.1 million for
the three months ended June 30, 2001 and $4.6 million for the comparable quarter
of 2000, representing an increase of $3.5 million, or 78%, and were $15.8
million for the six months ended June 30, 2001 and $8.3 million for the
comparable period in 2000, representing an increase of $7.5 million, or 90%. The
increases for these periods are attributable to the additional commission
expenses resulting from the increase in software license revenues, increased
travel expenditures, and an increase in payroll and related expenses
attributable to the increase in the number of people comprising our direct sales
force. Sales and marketing expenses as a percentage of total revenues were 64%
for the three months ended June 30, 2001 and 79% for the comparable period of
2000 and were 65% for the six months ended June 30, 2001 and 81% for the
comparable period of 2000. We expect the amount of sales and marketing expenses
to increase as we expand our geographic reach and hire additional personnel.

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 $1.6 million for the three months ended June 30,
2001 and $0.7 million for the comparable quarter of 2000, representing an
increase of $0.9 million, or 114%, and were $3.1 million for the six months
ended June 30, 2001 and $1.3 million for the comparable period in 2000,
representing an increase of $1.8 million, or 130%. These increases are
attributable to the increased personnel in our finance department and the
increase in professional fees. General and administrative expenses as a
percentage of total revenues were 13% for both the three and six month periods
ended June 30, 2001 and 2000 and were 13% for both the six month periods ended
June 30, 2001 and 2000.

AMORTIZATION OF GOODWILL AND INTANGIBLE ASSETS

     The goodwill and intangible asset amortization consists primarily of
charges to expense relating to reducing the goodwill related to the purchases of
Knight Fisk and Savant Corporation. Due to acquisitions and intangible asset
purchases during 2000, our amortization expense was $0.7 million for the three
months ended June 30, 2001 and $18,000 for the comparable quarter of 2000, and
$1.3 million for the six months ended June 30, 2001 and $30,000 for the
comparable period of 2000. The increase in the three and six months ended June
30, 2001 is related to the Savant acquisition, which closed on December 25,
2000.

                                                                              17
<PAGE>

AMORTIZATION OF STOCK-BASED COMPENSATION

     Deferred stock-based compensation represents compensation costs related to
the grant of options to purchase ordinary shares at less than fair market value.
Our stock-based compensation expenses decreased to $0.5 million for the three
months ended June 30, 2001 from $2.9 million for the comparable period in 2000,
representing a decrease of $2.4 million, or 84%, and decreased to $1.2 million
for the six months ended June 30, 2001 from $3.7 million for the comparable
period of 2000, representing a decrease of $2.5 million, or 68%. The deferred
compensation is amortized over the vesting schedule of the underlying options,
generally three to four years. The decrease for these periods is due to a
portion of the deferred compensation balance being fully amortized at June 30,
2001. We had a $1.5 million deferred compensation balance at June 30, 2001.

FINANCIAL INCOME, NET

     Financial income, net was $1.8 million for the three months ended June 30,
2001 and $99,000 for the comparable quarter of 2000, representing an increase of
$1.7 million and was $3.9 million for the six months ended June 30, 2001 and
$136,000 for the comparable period in 2000, representing an increase of $3.7
million. The increase is attributable to interest earned on the investment of
the initial public offering and secondary public offering proceeds in marketable
securities.

LIQUIDITY AND CAPITAL RESOURCES

     Since our inception, we have funded operations primarily through the sales
of our equity securities, including 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, the issuance
of convertible notes to shareholders and, to a lesser extent, borrowings from
financial institutions. As of June 30, 2001, our principal source of liquidity
was $152 million of cash and cash equivalents and marketable securities. As of
June 30, 2001, we had $106,000 of debt outstanding relating to obligations under
capital leases and an obligation for severance pay to Israeli employees of $1.0
million that is fully provided for by monthly deposits with severance pay funds,
insurance policies and by an accrual. As of June 30, 2001, our accumulated net
deficit was $26.1 million.

     Net cash provided by operating activities for the six months ended June 30,
2001 was $2.4 million compared to $140,000 in cash used in operating activities
for the six months ended June 30, 2000. Net cash provided by operating
activities for the six months ended June 30, 2001 was primarily the result of
net income for the period, increases in trade payable, increases in employee and
payroll accruals, the amortization of deferred stock-based compensation,
amortization of goodwill and intangible assets, depreciation and amortization,
and an increase in deferred revenue for the period. These additive cash items
were offset primarily by an increase in accounts receivable which reduced the
cash provided by operations for the period. Net cash used in operating
activities for the six months ended June 30, 2000 was primarily the result of
the net loss of $6.1 million for the period. This loss was offset by the
amortization of deferred stock-based compensation, depreciation and
amortization, a decrease in accounts receivable, an increase in deferred
revenues, an increase in employees and payroll accruals, and an increase in
other accounts payable and accrued expenses.

     Net cash used in investing activities was $7.1 million and $0.6 million for
the six-month periods ended June 30, 2001 and 2000, respectively. Investing
activities for the six months ended June 30, 2001 consisted of $33.3 million in
purchases of short-term and long-term marketable securities, $0.5 million
related to other asset purchases, $1.3 million in capital expenditures, offset
by $28.0 million in proceeds from the redemption and sale of marketable
securities. Net cash used in investing activities for the six months ended June
30, 2000 consisted of $0.9 million in proceeds from the sale of short-term
deposits, offset by $0.5 million in capital expenditures, $0.5 million in
prepaid issuance expenses relating to our initial public offering, and $0.5
million in payments relating to the Knight Fisk acquisition. The majority of our
capital investments were for computers, peripheral equipment and software.

                                                                              18
<PAGE>

     Net cash provided by financing activities was $1.8 million and $0.2 million
for the six-month periods ended June 30, 2001 and 2000, respectively. Net cash
provided by financing activities for the six months ended June 30, 2001 was from
the proceeds from the exercise of options. Net cash provided by financing
activities for the six months ended June 30, 2000 was from the proceeds from the
issuance of shares in the initial public offering, which was offset by the
repayment of short-term bank credit and repayment of long-term debt.

     We believe that our existing cash equivalents and 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.

FACTORS AFFECTING FUTURE OPERATING RESULTS

     This Form 10-Q contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements include management's plans and
objectives for future operations, as well as statements regarding the strategy
and plans of Precise. Precise's actual experience may differ materially from
those discussed in the forward-looking statements. Factors that might cause such
a difference include the size, timing and recognition of revenue from major
customers; the status of Precise's continuing relationship with Oracle; the
status of Precise's continuing relationships with EMC, Amdocs and other sellers
of Precise product; the ability to establish and effectively manage indirect
distribution channels; the continued development of the market for Oracle
databases and related applications software; market acceptance of new product
offerings and Precise's ability to predict and respond to market developments;
the failure to keep pace with the rapidly changing requirements of its
customers; Precise's ability to attract and retain key personnel; the
development and expansion of Precise's direct sales force; risks associated with
management of growth; Precise being held liable for defects or errors in its
products; political, economic and business fluctuations in Israel and Precise's
international markets; as well as risks of downturns in economic conditions
generally, and in the information technology and software industries
specifically, and risks associated with competition, and competitive pricing
pressures. For a more detailed description of the risk factors associated with
Precise, please refer to Precise's Annual Report on Form 10-K filed, as amended,
with the Securities and Exchange Commission.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

     We own financial instruments that are sensitive to market risks as part of
our investment portfolio. The investment portfolio is used to preserve our
capital until it is required to fund operations, including research and
development activities. None of these market-risk sensitive instruments are held
for trading purposes. We do not own derivative financial instruments in our
investment portfolio. The investment portfolio contains instruments that are
subject to the risk of a decline in interest rates.

     Our investment portfolio includes debt instruments that are United States
government obligations. These investments are subject to interest rate risk, and
could decline in value if interest rates fluctuate. We do not engage in currency
hedging activities and hold no foreign currency related derivative instruments
that would subject our financial condition or results of operations to risks
associated with foreign currency exchange rate fluctuations. We do, however,
incur a portion of our expenditures in foreign currencies, such as NIS and
British pound sterling, that could cause our results of operations to fluctuate.

                                                                              19
<PAGE>
                           PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

     Precise is not a party to any material pending legal proceedings, other
than ordinary routine litigation incidental to its business.


ITEM 4. MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS

     At our Annual Meeting of Shareholders, held on May 15, 2001, the following
members were re-elected to the Board of Directors for:

                                      Affirmative      Negative
                                         Votes           Votes
                                      -----------    ------------
     TERMS EXPIRING IN 2004

     Shimon Alon                       22,582,905         20,159
     Gary L. Fuhrman                   22,582,905         20,159


     The following proposals were approved at our Annual Meeting of
     Shareholders:

<TABLE>
<CAPTION>
                                          Affirmative    Negative                    Broker
                                            Votes          Votes     Abstentions    Non-Votes
                                          ----------    ----------   -----------   -----------
<S>                                      <C>            <C>           <C>          <C>
1.   Amendment to the Company's 1998
     Share Option and Incentive Plan
     (the "Plan") increasing the number
     of Ordinary Shares, par value NIS
     0.03 per share, of the Company
     available for issuance under the     13,101,930     6,910,266       133,828     2,457,040
     Plan from 6,793,168 to 8,993,168
     shares, and to ratify the 1998
     Plan, as amended and restated.

2.   The compensation of the Chief
     Executive Officer of the Company,    20,973,327     1,494,762       134,975
     as required by Israeli law, for
     2001.

3.   Grant of options to Yoseph Sela,
     as required by Israeli law.          18,516,200     1,494,848       134,976     2,457,040

4.   Grant of options to Anton
     Simunovic, as required by Israeli    18,565,014     1,445,944       135,066     2,457,040
     law.

5.   Grant of options to Ron Zuckerman,
     as required by Israeli law.          18,565,114     1,446,034       134,876     2,457,040

6.   Grant of options to Gary L.
     Fuhrman, as required by Israeli law. 18,565,684     1,445,464       134,876     2,457,040


                                                                              20
<PAGE>


7.   Amendment to the Amended and
     Restated Articles of Association     21,961,147       504,023       137,894
     of the Company to change permitted
     record date for meetings of
     shareholders of the Company

8.   Ratify the selection of the firm of
     Kost, Forer & Gabbay, a member of
     Ernst & Young International, as the
     Company's independent auditors for   22,225,634       376,460           970
     the fiscal year ending December 31,
     2001 and authorize the Board of
     Directors to set their compensation
</TABLE>





ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     Precise did not file any current reports on Form 8-K during the six-month
period ended June 30, 2001.






























                                                                              21
<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                 PRECISE SOFTWARE SOLUTIONS LTD.


Date     8/14/01                 By  /S/ Shimon Alon
      -------------                  -------------------------------------------
                                     Shimon Alon, Chief Executive Officer


Date     8/14/01                 By  /S/ J. Benjamin Nye
      -------------                  -------------------------------------------
                                     J. Benjamin H. Nye, Chief Financial Officer


Date     8/14/01                 By  /S/ Dror Elkayam
      -------------                  -------------------------------------------
                                     Dror Elkayam, Chief Accounting Officer



























                                                                              22