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

                                    FORM 10-K
(Mark One)

  X   ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
----  ACT OF 1934


                   For the fiscal year ended December 31, 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 0-30827
--------------------------------------------------------------------------------


                         CLICKSOFTWARE TECHNOLOGIES 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 No.)

           34 Habarzel Street
            Tel Aviv, Israel                                    69710
----------------------------------------                  -------------------
(Address of principal executive offices)                      (Zip Code)


Registrant's telephone number, including area code 972-3) 765-9400
                                                  ----------------

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act:


                      Ordinary Shares, NIS 0.02 par value
                      -----------------------------------
                                (Title of class)

<PAGE>

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  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.


        X   Yes        No
      ----        ----

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K (ss.  229.405 of this chapter) 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.
                                               ----

The aggregate  market value of the ordinary shares held by  nonaffiliates of the
Registrant,  based upon the closing sale price of the  ordinary  shares on March
15,  2002,  as  reported  by  the  Nasdaq  National  Market,  was  approximately
$9,379,225.  Ordinary shares held by each executive  officer and director and by
each  person  who owns 5% or more of the  outstanding  voting  stock  have  been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate  status is not  necessarily  a conclusive  determination  for other
purposes.

As of March 15, 2002, there were approximately 26,251,964 Ordinary Shares of the
Registrant outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K into which the document is incorporated:  (1) any annual report
to  security  holders;  (2) any  proxy  or  information  statement;  and (3) any
prospectus  filed  pursuant  to Rule 424(b) or (c) under the  Securities  Act of
1933.

None.

                                       2
<PAGE>



                                TABLE OF CONTENTS


                                                                            PAGE
                                                                           -----


PART I
     Item 1.  Business....................................................    4
     Item 2.  Properties..................................................   14
     Item 3.  Legal Proceedings...........................................   14
     Item 4.  Submission of Matters to a Vote of Security Holders.........   14

PART II
     Item 5.  Market for the Registrant's Common Equity and Related
              Stockholder Matters.........................................   14
     Item 6.  Selected Consolidated Financial Data........................   15
     Item 7.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations...................................   17
     Item 7A. Quantitative and Qualitative Disclosures About Market
              Risk........................................................   32
     Item 8.  Financial Statements........................................   34
     Item 9.  Changes In and Disagreement With Accountants on Accounting
              and Financial Disclosure....................................   52

PART III
     Item 10. Directors and Executive Officers of the Registrant..........   52
     Item 11. Executive Compensation......................................   53
     Item 12. Security Ownership of Certain Beneficial Owners and
              Management..................................................   56
     Item 13. Certain Relationships and Related Transactions..............   57

PART IV
     Item 14. Exhibits, Financial Statement Schedules and Reports on Form
              8-K.........................................................   58
SIGNATURES................................................................   59



                                       3
<PAGE>
                                     PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements (as such term is defined
in Section 27A of the  Securities  Act of 1933 and Section 21E of the Securities
Exchange  Act of 1934)  and  information  relating  to us that are  based on the
beliefs  of our  management  as well  as  assumptions  made  by and  information
currently available to our management, including statements related to products,
markets,  and future  results of operations and  profitability,  and may include
implied statements concerning market acceptance of our products, and our growing
leadership role in the marketplace.  In addition,  when used in this report, the
words  "likely,"  "will,"  "suggests,"  "may," "would,"  "could,"  "anticipate,"
"believe,"   "estimate,"  "expect,"  "intend,"  "plan,   "predict"  and  similar
expressions  and their  variants,  as they relate to us or our  management,  may
identify forward-looking  statements. Such statements reflect our judgment as of
the date of this annual report on Form 10-K with respect to future  events,  the
outcome of which is subject to certain  risks,  including  the risk  factors set
forth  herein,  which may have a significant  impact on our business,  operating
results  or   financial   condition.   Investors   are   cautioned   that  these
forward-looking statements are inherently uncertain. Should one or more of these
risks or  uncertainties  materialize,  or should  underlying  assumptions  prove
incorrect,  actual results or outcomes may vary  materially from those described
herein. We undertake no obligation to update forward-looking statements, whether
as a result of new information, future events or otherwise.

ITEM 1. BUSINESS

We provide  software for  optimizing  service  operations by improving  customer
responsiveness and the utilization of service resources.  Our products allow our
clients to respond  quickly to customers'  demands for service while  maximizing
utilization of service personnel and minimizing operational costs.

We offer  solutions  to support  the  various  levels of  management  hierarchy,
including  execution,  operational  planning,  tactical  planning and  strategic
planning levels.  Our Service  Optimization  suite of products allows clients to
concentrate on both micro and macro level scheduling,  service  execution,  real
time monitoring,  short term resource planning, and long term capacity planning.
Our solution is designed to enable our clients to increase the  productivity  of
their  service  resources,  resulting  in reduced  costs and  increased  revenue
opportunities that would otherwise be lost.

We were  incorporated  in  Israel  in 1979.  We have a  wholly-owned  subsidiary
incorporated  in  California,  ClickSoftware,  Inc., a  wholly-owned  subsidiary
incorporated  in  the  United  Kingdom,  ClickSoftware  Europe,  Limited  and  a
wholly-owned  subsidiary in Belgium,  ClickSoftware Belgium, N.V. On January 21,
2002 our U.S.  subsidiary  incorporated a wholly owned  subsidiary in Australia,
ClickSoftware  Australia  Pty  Limited.  Our  product  development  efforts  are
conducted  primarily  in  Israel.  Our sales and  marketing  and  implementation
efforts in North America are conducted by our California  subsidiary.  Our sales
and marketing and  implementation  efforts in Europe are conducted by our United
Kingdom subsidiary.

PRODUCTS

We provide  solutions for end-to-end  service chain  optimization  that maximize
revenue  and  customer   responsiveness  while  minimizing  costs.  Our  Service
Optimization suite includes strategic and tactical workforce planning, optimized
service  scheduling,   intelligent   problem   resolution,   wireless  workforce
management, and business analytics, connecting all organizational levels and all
functions from executive strategy to operational execution.

Our service optimization solutions are utilized by leading service organizations
in several service industry segments including: telecommunications, computer and
office equipment,  industrial equipment, medical equipment, building automation,
utilities,   financial  services,   aerospace  &  defense,  and  home  services.
ClickSoftware's  solutions  deliver  rapid  improvements  in:

     *    field workforce productivity
     *    responsiveness to customers

                                       4
<PAGE>

     *    quality of service delivered
     *    profitability of the service operation
     *    reduction in missed customer commitments

We have achieved our leadership in service chain  optimization  through years of
experience in a variety of service  operations.  The result is a highly advanced
technology with the flexibility to model and accommodate  varying business types
and processes.  The ease with which it can be integrated  with leading  customer
relationship  management (CRM) and enterprise resource planning (ERP) solutions,
often with  standard  interface  adaptors,  enables  ClickSoftware  customers to
accelerate the deployment of the solution.

SERVICE OPTIMIZATION SUITE OF PRODUCTS

Our solution  provides an end-to-end  solution for improving the  efficiency and
effectiveness  of service  operations.  All of our products  utilize an advanced
optimization  engine to drive decisions  within service  organizations  based on
common  business  goals and policies from the CEO to the field  technician.  Our
Service Optimization suite includes:

CLICKPLAN  provides  interactive  and automated  workforce  planning for optimal
staffing and  deployment of the field  workforce  based on forecasted  workload.
ClickPlan  enables  service  organizations  to resolve  workforce  shortages and
surpluses  weeks  and  months  in  advance.  Comparing  available  resources  to
forecasted workloads, ClickPlan determines the best strategy to ensure the right
people are in the right place, at the right time.

CLICKSCHEDULE  provides  optimized service scheduling and routing for maximizing
workforce productivity and customer loyalty by balancing customer, resource, and
organizational  preferences including contractual  commitments,  priority, drive
time,  skills,  and  resource  availability.   Easy  configuration,   very  high
scalability  and use of standard  eXtensible  Markup  Language (XML)  interfaces
enable  seamless  integration  with  enterprise  systems  and  rapid  deployment
according to organizational business policies and processes.

CLICKFIX provides intelligent  diagnostics and problem resolution for minimizing
service  costs  while  increasing  customer  loyalty.  ClickFix  enables  faster
resolution of customer issues at every level of service  contact,  from the call
center to the field.  Based on an  intelligent  engine  that  utilizes  specific
knowledge about customers' equipment,  ClickFix quickly and accurately diagnoses
and  resolves  problems  independent  of  the  user's  skills,  experience,  and
knowledge.  Accessibility  via the Web empowers  customers  to resolve  problems
themselves  at any time of day, and often  without a resource,  requiring  fewer
onsite visits.

CLICKMOBILE   provides  wireless  workforce   management  for  monitoring  field
workforce activities and reducing the labor of dispatching.  ClickMobile enables
instant,  automatic job detail  notification from the field and allows for field
updates even when resources are out of wireless coverage. Assignments created in
ClickSchedule  are dispatched to field devices based on  configurable  workflows
while  enabling  real-time  visibility  into  workforce  activity  including job
status, start, and end time.

CLICKANALYZE  provides  service  business  analytics for  workforce  performance
measurement and strategic  decision  support.  ClickAnalyze  enables  drill-down
analysis  of  key  performance   indicators  including  resource   productivity,
operational  costs,  and  responsiveness  to  customers.  Integrated  within the
Service Optimization suite,  ClickAnalyze  provides executive level summaries as
well as detailed analysis by territory, job type, time frame and other criteria.

SERVICEMARKETPLACE    provides   inter-enterprise   service   optimization   for
streamlining   communication   with  service   contractors   and   subsidiaries.
ServiceMarketPlace  overcomes organizational boundaries,  enabling immediate and
reliable customer  commitments via automated and  Internet-based  communication.
Contractors  can be  scheduled  based on  capacity,  skills,  coverage and other
configurable  criteria.  Control over service  delivery for  contracted  work is
further improved with online monitoring and performance measurement.

                                       5
<PAGE>

TECHNOLOGY

The Service  Optimization  suite utilizes a foundation of core technologies that
we  developed  over a period  of more  than 10 years  in the  service  industry.
Originally  brought  to market as W-6  Service  Scheduler  and  TechMate,  these
technologies   include    sophisticated    algorithms   and   business   process
representation  tools. Our research and development  personnel have been working
on service optimization  technology solutions since 1985, including  algorithmic
software  solutions,   system  integration  and  implementations.   The  Service
Optimization  suite, with its unique depth and breadth,  reflects our experience
and   investment   into  the   complex   optimization   and   decision   support
troubleshooting needs of service organizations.

Analogous to, but more complex than the supply chain, the service chain involves
far more  variables and  challenges  including the  scheduling of personnel with
varying skills in different  locations to simple and complex tasks. All of these
variables must be considered in constantly  changing conditions to meet the fast
pace typical of service-level and profit driven organizations.

Our  applications  are  standards-based,  facilitating  rapid  integration  with
related Customer  Relationship  Management (CRM),  Enterprise  Resource Planning
(ERP) or supply chain functions. Service Optimization client applications run on
standard  web browsers  and  Windows-based  computers.  The  application  server
supports  leading  database  management  systems,  including Oracle (Windows and
non-Windows)  and Microsoft SQL Server.  The stateless  server  architecture  of
Service Optimization enables web-based  applications to work effectively through
local and wide area networks,  over standard Internet  communication  protocols.
Scalable   enough  to  meet  the   demands  of  the  world's   largest   service
organizations,  Service  Optimization  delivers inherent  scalability based on a
dynamic load balancing  architecture that uses thin clients,  a stateless server
model, multi-threaded application servers and relational databases.

our proprietary  optimization algorithms provide efficient solutions for complex
problems arising from, among others, the following:
     *    the vast number of possible  solutions for evaluation  when optimizing
          the scheduling of personnel;
     *    the number of service  organization-specific  resources  and variables
          including  skills,   availability,   location,   customer  preference,
          workload balancing,  contractual  commitments,  employee  preferences,
          customer priority, and others;
     *    the need to instantly respond to concurrent users' service requests in
          a highly dynamic decision-making environment;
     *    the vast number of potential routes within a specific geographic area,
          each having an impact on the cost of service; and
     *    various time zone considerations in large service organizations.

Service  Optimization  also includes  sophisticated  service  business  scenario
modeling power. We have developed models based on a vast number of variables and
resource  characteristics  common to service  organizations.  By employing these
models, Service Optimization addresses the market needs of different segments of
the service industry and broadens the customer base for our products.

Service  Optimization  incorporates  several  critical  technologies  to provide
intelligent decision support in a scalable and open architecture:

     *    Application software and web servers capable of performing  high-speed
          optimization,   problem   resolution,   and  Internet  access  to  the
          application host system; and
     *    Application  Programming  Interfaces (APIs) based on eXtensible Markup
          Language  (XML),  enable other  application  to  integrate  and access
          Service  Optimization data and services without additional training or
          applications for users to adopt.

our optimization merges  mathematical  disciplines and experience with real-life
service  operations.  The result is a powerful  algorithm that combines the best
traits of several optimization disciplines including adaptive learning,  genetic
algorithms,  taboo search, and geographic clustering. Our optimization overcomes
the  challenge  of  a  vast  number  of  possible  schedules  by  first  rapidly
identifying all feasible schedules,  and then selecting the best schedules.  The


                                    6
<PAGE>
best schedule is selected by evaluating each feasible  schedule by weighted cost
of service,  job revenue,  and customer  satisfaction to create a business value
for the schedule.  The business value is then used to compare the quality of all
schedules,  constantly maintaining an optimized schedule.  ClickFix's diagnostic
and problem  resolution engine includes  algorithms for fast problem  resolution
based  on  equipment  design  and  field   knowledge,   a  knowledge  base  with
self-learning  capabilities,  and an  intelligent  component  that  creates  new
trouble  shooting  solutions  based on modeling  both  equipment  structure  and
historic data.

Our development  methodology is based on techniques that facilitate  development
of components  that can be  incorporated in future  products.  This  methodology
enables us to reduce the time required to introduce functional  enhancements and
new products. The development methodology involves direct analysis of customers'
business  requirements,  software  module  design  to meet  these  requirements,
software development and coding,  testing,  and quality assurance.  Our research
and development group and their processes are ISO 9001 certified.

PROFESSIONAL SERVICES AND CUSTOMER SUPPORT

Our  professional   services  organization  is  staffed  by  professionals  with
significant  experience  in the  resource  optimization  field.  We provide  our
clients with consulting and deployment  services,  upgrades,  and  comprehensive
training  and  support to help  achieve  business  goals with a quick  return on
investment. Our consulting services include:

     *    Business   Analysis.   Our  consultants   assess  current  or  planned
          scheduling  needs,  develop and document the project plan, and deliver
          the   design   specification.   We   provide   a   configuration   and
          implementation  roadmap  to help meet  business  goals,  including  an
          analysis of return on investment.

     *    Project   Implementations.   Our  professional   services  consultants
          individually,  or as  members of our  clients'  teams,  implement  and
          assist in the configuration of our solutions to accelerate the project
          deployment schedule and ensure a successful implementation process.

     *    CLICKSCHEDULE  FAST  TRACK.  In order to  increase  the  number of our
          implementations  and facilitate market acceptance of our CLICKSCHEDULE
          solution,   we   introduced   CLICKSCHEDULE   FAST  TRACK  to  provide
          accelerated ClickSchedule implementation.  We believe this methodology
          enables clients to achieve benefits quickly from rapid implementation.
          Once the  CLICKSCHEDULE  FAST TRACK  implementation  is completed,  we
          offer   enhancements  and   customizations   that  provide  additional
          functionality to our CLICKSCHEDULE product.

Customer  support is  available  by telephone  and over the  Internet.  Customer
support is billed as a percentage  of license fees  depending  upon the level of
support coverage requested by the customer. Support is provided by the technical
support  team  in our  product  development  group,  ensuring  detailed  product
knowledge  and access to experts  and  testing  facilities  when  required.  The
customer support team works closely with the professional  services organization
in  providing  technical  support  during  client  project  implementations  and
transferring  completed projects from professional  services organization to the
client support team.

                                       7
<PAGE>
SALES AND MARKETING

We market and sell our products  primarily through our direct sales force, which
is located in North America,  Europe,  the Asia Pacific  region and Africa.  Our
multidisciplinary  sales teams consist of field sales executives,  sales support
engineers and internal sales staff.  The internal sales staff is responsible for
generating leads and qualifying  prospective  clients.  Sales support  engineers
assist the sales  executives  in the  technical  aspects  of the sales  process,
including preparing demonstrations and technical proposals. Our sales executives
are  responsible  for  completing  the sales  process and managing the post-sale
client relationship,  which consists of ongoing relationship  management and the
sale of  additional  licenses,  as clients  require  additional  resources.  Our
management also takes an active role in our sales efforts.  The knowledge gained
by our sales and marketing force is also  communicated to our product  marketing
group which guides our development  team. This enables our organization to align
the functionality of our products with customer needs.

We typically  direct our sales efforts to the client's chief executive  officer,
the chief information officer, the vice presidents of customer service and other
senior  executives  responsible for improving  customer  service at our clients'
organizations.  We focus our  marketing  efforts on  identifying  potential  new
clients,  generating  new sales  opportunities,  and  creating  awareness in our
target  markets  about the value of our  products  and their  applications.  Our
programs  target  prospective  clients  across  a wide  variety  of  industries,
business relationships and geographies.  In order to effectively promote product
awareness,  we  engage  in  marketing  activities  in a wide  variety  of  areas
including public relations and analyst relations,  email campaigns, web seminars
with our customers and industry analysts,  a newsletter and advertising creation
and  placement,  direct  mailings and trade shows.  As of December 31, 2001,  we
employed over 51 individuals in our sales and marketing department.

Our business development  organization  supports joint marketing activities with
our business partners. Our business relationships enable us to use our partners'
market presence and sales channels to create additional  revenue  opportunities.
We have entered into  co-marketing  arrangements  with leading ERP companies and
CRM vendors.  We  participate  in joint sales  efforts.  A partial list of these
vendors  includes  Amdocs  Limited/Clarify,  JD  Edwards &  Company,  PeopleSoft
Inc./Vantive, SAP AG, and Siebel Systems, Inc.

We have  also  established  relationships  with  large  System  Integrator  (SI)
organizations such as Accenture,  Anderson  Consulting,  PriceWaterhouseCoopers,
Deloitte Consulting,  Logica SA/NV, KPMG Consulting,  Inc. and Computer Sciences
Corporation.  These  partners  have  committed  various  levels of  resources to
integrate,  customize and implement our solutions.  Depending on the strength of
the  relationship,   we  have  co-invested  in  training  and  certifying  their
professional services teams,  developed  co-marketing programs, and incorporated
our products into their marketing/referral strategies.

We  also  have a  focused  reseller  program.  Our  formal  reseller  agreements
generally  provide  the  parties  with the  right to use  each  other's  name in
marketing and advertising  materials,  and to conduct joint marketing  programs.
These  agreements  are  generally  for a one-year  period and are  automatically
renewable.  We  provide  sales  materials  and  training  to  resellers  on  the
marketing,  selling and implementation of our software solutions.  A sampling of
these partners includes: i2 Technologies, Inc., Metrix, Inc., AST, Planwell Pty.
Limited and Axiom  Corporation.  We believe these  relationships will extend our
presence and brand name in new and existing markets.

CUSTOMERS

We sell our  products  to a broad  base of  clients  representing  a variety  of
industries   with  unique  needs,   including   telecommunications,   utilities,
high-technology service providers and home equipment retailers. The following is
a representative list of our clients or end-users using our products.  This list
of clients is  representative of the  geographically  dispersed client base, the
various  industries  utilizing our products and the various stages of deployment
of our product lines.  Each of these clients  accounted for at least $500,000 of
product  and/or  service  revenues  for  2001  and,  as a group,  these  clients
accounted for approximately 41% of our total revenues for 2001:

                                       8
<PAGE>
Expanets Inc.
London Electricity plc
NRC Benelux B.V. (Nashuatec)
Philips Medical Systems Nederland B.V.
Siemens Building Technologies AG
Telekom Austria AG
Telstra Corporation


One customer  accounted  for greater than 10% of revenues  during the year ended
December 31, 2001.

RESEARCH AND DEVELOPMENT

We believe that strong  product  development  capabilities  are essential to our
strategy of enhancing our core technology,  developing  additional  products and
maintaining the  competitiveness of our product and service  offerings.  We have
invested  significant  time and  resources in creating a structured  process for
undertaking all product development projects.  These include documenting product
requirements, specifying product features and workflow, developing the software,
performing  quality  assurance,  and creating  documentation and packaging.  Our
research and development center in Israel is ISO 9000 compliant and continuously
updates its software  development  procedures to maintain an ongoing improvement
process and high quality products.

Our future research and development strategies will concentrate on strengthening
our product  offerings in decision support,  forecasting,  capacity planning and
monitoring,  schedule optimization and installations scheduling,  and continuing
to enhance the scalability of our products, and in continuing the development of
offerings for specific vertical industries.

Our research and development  expenses,  prior to participation  grants from the
Office of the Chief Scientist of the Government of Israel,  totaled $4.4 million
for the year ended  December 31, 2001,  $5.4 million for the year ended December
31, 2000,  and $3.9 million for the year ended December 31, 1999. As of December
31, 2001, we employed 41 individuals in our research and development group.

COMPETITION

The market for our  products  is  competitive  and rapidly  changing.  We expect
competition  to  increase  in the future as  current  competitors  expand  their
product offerings and new companies enter the market.

Our current and potential competitors include:

     *    independent  systems integrators and in-house  information  technology
          departments;
     *    traditional ERP and CRM software application vendors;
     *    software vendors in the utility, telecommunications,  Internet access,
          field services, home delivery and other markets;
     *    providers of service scheduling  software and components and logistics
          solutions providers; and
     *    providers of  supply-chain  optimization  solutions for  manufacturing
          organizations.

Some of our current and  potential  competitors  have greater name  recognition,
longer  operating  histories,  larger customer bases and  significantly  greater
financial, technical, marketing, public relations, sales, distribution and other
resources than we do.

Competition  could result in price  reductions,  fewer customer orders,  reduced
gross margin and loss of market share,  any of which could cause our business to
suffer. We may not be able to compete  successfully,  and competitive  pressures
may harm our  business.  In  addition,  our  market  is  characterized  by rapid
technological  change,  dynamic client needs and frequent  introductions  of new
products and product enhancements,  which can make existing products,  including
ours, obsolete or unmarketable.


                                       9
<PAGE>
INTELLECTUAL PROPERTY

Our future  success  depends  in part on legal  protection  of our  intellectual
property. To protect our intellectual  property, we rely on a combination of the
following among others:

     *    preventing access to source code and technical documentation;
     *    copyright laws;
     *    patent laws;
     *    trademark laws; and
     *    trade secret laws.

We have two patent  applications  pending  with the Israeli  Patent  Office.  We
intend to file similar  applications with United States and other  international
patent authorities.  As we continue to develop new applications of our products,
we will consider additional patent applications.  We can offer no assurance that
patents  will issue  from any of these  pending  applications  or, if patents do
issue,  that the  claims  allowed  will be  sufficiently  broad to  protect  our
technology. In addition, we can offer no assurance that any patents issued to us
will not be challenged,  invalidated or circumvented, or that the rights granted
thereunder will adequately protect us.

We own a U.S.  trademark  registration  for the  mark  AITEST,  and  have  filed
applications   for   registration   of  the   marks   CLICKANALYZE,   CLICKPLAN,
CLICKFORECAST,  CLICKSCHEDULE,  and  CLICKFIX.  In the European  Union,  we have
recently obtained registrations for CLICKFIX and CLICKSCHEDULE, and have pending
applications for registration of CLICKANALYZE, CLICKFORECAST, and CLICKPLAN.

Although we rely on  copyright,  trade secret and  trademark  law to protect our
technology,  we believe  that  factors  such as the  technological  and creative
skills of our personnel, new product developments, frequent product enhancements
and  reliable  product  maintenance  are  more  essential  to  establishing  and
maintaining  a technology  leadership  position.  We can give no assurance  that
others  will not  develop  technologies  that are  similar  or  superior  to our
technology. See "Risks Related to Our Business" and "Competition".

We generally enter into nondisclosure  agreements with our customers,  employees
and  consultants  and  generally  control  access  to  and  distribution  of our
software, documentation and other proprietary information.

Our end-user  licenses are designed to prohibit  unauthorized  use,  copying and
disclosure of our software and technology in the United States, Israel and other
foreign countries. However, these provisions may be unenforceable under the laws
of some jurisdictions and foreign  countries.  Unauthorized third parties may be
able to copy some portions of our products or reverse engineer or obtain and use
information and technology  that we regard as  proprietary.  Third parties could
also independently develop competing technology or design around our technology.
If we are unable to  successfully  detect  infringement  and/or to  enforce  our
rights to our technology,  we may lose  competitive  position in the market.  We
cannot assure you that our means of protecting our intellectual  property rights
in the United  States,  Israel or elsewhere  will be adequate or that  competing
companies will not independently develop similar technology.  In addition,  some
of our  licensed  users  may  allow  additional  unauthorized  users  to use our
software,  and if we do not detect  such use,  we could lose  potential  license
fees.

From  time to time,  we may  encounter  disputes  over  rights  and  obligations
concerning  intellectual  property.  We also  indemnify  some  of our  customers
against claims that our products infringe on the intellectual property rights of
others.  We believe  that our  products do not  infringe  upon the  intellectual
property  rights of third  parties.  However,  we cannot assure you that we will
prevail in all future intellectual  property disputes.  We have not conducted an
exhaustive  search  for  existing  patents  and  other   intellectual   property
registrations,  and we cannot  assure you that our  products do not infringe any
issued patents.  In addition,  because patent  applications in the United States
and Israel are not publicly  disclosed until the patent is issued,  applications
may have been filed which would relate to our products.


                                       10
<PAGE>
Substantial  litigation  regarding  technology  rights  exists  in the  software
industry,  and we expect that software  products may be increasingly  subject to
third-party  infringement  and ownership  claims as the number of competitors in
our  industry  segment  grows and the  functionality  of products  in  different
industry segments overlap.  In addition,  our competitors may file or have filed
patent  applications,  which are covering  aspects of their technology that they
may claim our technology  infringes.  Third parties may assert  infringement  or
competing ownership claims with respect to our products and technology. Any such
claims,  with or without merit,  could be  time-consuming  to defend,  result in
costly  litigation,  and divert  management's  attention  and resources or cause
product  shipment  delays.  In the  event  of an  adverse  ruling  in  any  such
litigation, we might be required to pay substantial damages, discontinue the use
and  sale of  infringing  products,  expand  significant  resources  to  develop
non-infringing  technology or obtain licenses to or pay royalties to use a third
party's technology. Such royalty or licensing agreements may not be available on
terms  acceptable  to us, if at all. A  successful  claim of patent or copyright
infringement against us could significantly harm our business.

EMPLOYEES

As of December 31, 2001, we had 157 full-time employees,  41 engaged in research
and  development,  51  in  sales,  marketing  and  business  development,  37 in
professional  services and technical  support and 28 in finance,  administration
and  operations.  None of our  employees is  represented  by a labor  union.  We
consider our relations with our employees to be good.

80 of our employees are located in Israel. Israeli law and certain provisions of
the nationwide  collective  bargaining agreements between the Histadrut (General
Federation  of  Labor  in  Israel)  and  the  Coordinating  Bureau  of  Economic
Organizations (the Israeli federation of employers'  organizations) apply to our
Israeli employees.  These provisions  principally  concern the maximum length of
the  work  day  and  the  work  week,   minimum  wages,  paid  annual  vacation,
contributions  to  a  pension  fund,   insurance  for  work-related   accidents,
procedures for dismissing  employees,  determination  of severance pay and other
conditions of  employment.  We provide our  employees  with benefits and working
conditions  above  the  required   minimums.   Furthermore,   pursuant  to  such
provisions,  the wages of most of our  employees  are  subject to cost of living
adjustments,  based on changes in the Israeli CPI. The amounts and  frequency of
such adjustments are modified from time to time.  Israeli law generally requires
the payment of severance pay upon the retirement or death of an employee or upon
termination of employment by the employer or, in certain  circumstances,  by the
employee.  We currently fund our ongoing  severance  obligations for our Israeli
employees by making monthly payments for insurance policies and severance funds.
Severance  pay  expenses  amounted to $202,000  in 1999,  $562,000 in 2000,  and
$266,000 in the year 2001.

Israeli law provides that employment  arrangements  with employees not in senior
managerial  positions,  or whose working  conditions  and  circumstances  do not
facilitate  employer  supervision  of  their  hours of work,  must  provide  for
compensation which  differentiates  between compensation paid to employees for a
43 hour work week or for maximum daily work hours and  compensation for overtime
work. The maximum number of hours of overtime is limited by law.  Certain of our
employment compensation  arrangements are fixed and do not differentiate between
compensation  for  regular  hours  and  overtime  work.  Therefore,  we may face
potential  claims from these employees  asserting that the fixed salaries do not
compensate for overtime work; however, we do not believe that these claims would
have a material adverse effect on us.



                                       11
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS

Our executive  officers and directors and certain  information  about them as of
March 15, 2002 are as follows:

<TABLE>
<CAPTION>
<S>                          <C>     <C>
Name                          Age     Position
-----                         ---     ----------
Dr. Moshe BenBassat           54      Chief Executive Officer and Chairman of the Board
Shimon M. Rojany              54      Senior Vice President and Chief Financial Officer
Corey Leibow                  47      Chief Operating Officer
David Schapiro                43      Executive Vice President, Markets & Products
Hannan Carmeli                43      Senior Vice President, Product Services and Operations
Amit Bendov                   37      Senior Vice President, Product Marketing
Roni A. Einav                 57      Director
Dr. Israel Borovich           60      Director
Nathan Gantcher               61      Director
Eddy Shalev                   54      Director
James W. Thanos               53      Director
Janet Schinderman             50      Director

</TABLE>
DR.  MOSHE  BENBASSAT  co-founded  ClickSoftware  and has served as Chairman and
Chief Executive  Officer since our inception.  From 1987 to 1999, Dr.  BenBassat
served as a professor of  Information  Systems at the Faculty of  Management  of
Tel-Aviv  University.  Dr.  BenBassat  has also held  academic  positions at the
University  of Southern  California  and the  University  of  California  at Los
Angeles.  From 1996 to January 1999, Dr. BenBassat also served as a board member
of Tadiran  Telecommunications Inc., a telecommunications  company. From 1990 to
1996, Dr. BenBassat served as a board member of Tadiran Electronic Systems Ltd.,
a defense electronics company.  Dr. BenBassat holds Bachelor of Science,  Master
of  Science  and PhD.  degrees  in  Mathematics  and  Statistics  from  Tel-Aviv
University.

SHIMON M.ROJANY co-founded ClickSoftware and has served as Senior Vice President
and Chief  Financial  Officer since November 1999. From 1990 to 1999, Mr. Rojany
served as a Senior Associate with Adizes Institute,  Inc., a consulting company.
Mr.  Rojany holds a Bachelor of Science  degree in  Accounting  from  California
State  University  at  Northridge  and a Master of  Business  Administration  in
Management  Decision  Systems from the  University of Southern  California.  Mr.
Rojany and is a certified public accountant.

COREY LEIBOW has served as our Chief  Operating  Officer  since  November  2000.
Beginning  in 1999,  Mr.  Leibow  was the Vice  President  of World  Wide  Sales
Business Development & Professional  Services for Ajuba Solutions.  Beginning in
1995,  Mr.  Leibow was the Vice  President  of World Wide Sales  Operations  for
Cadence Design  Systems.  From 1992 to 1994, Mr. Leibow was a Senior Manager for
KPMG Peat  Marwick  in the  Sales and  Marketing  Reengineering  and  Automation
Practice.  Mr. Leibow has a Bachelor of Arts degree from State University of New
York at Courtland in Political Science with a minor in Communications.

DAVID  SCHAPIRO  has served as our  Executive  Vice  President  of  Markets  and
Products  since April 2001.  Prior to this role and since 1999,  he held various
executive  roles  in  our  product  development  group,  including  Senior  Vice
President of Product  Development.  From October 1996 through 1998, Mr. Schapiro
served  as the  ClickSchedule  Division  General  Manager  and  prior to that in
various  management  and marketing  positions at  ClickSoftware  including  Vice
President of Business  Development.  Since 1984 to 1996, Mr.  Schapiro served in
positions at Applied  Materials,  a semiconductor  equipment  manufacturer,  and
Scitex Corporation,  a digital printing system company.  Mr. Schapiro received a
B.S. in mathematics and computer  science from Tel Aviv  University,  and a M.S.
degree in computer science from Bar Ilan University.

HANNAN CARMELI has served as our Senior Vice President,  Worldwide  Professional
Services since January 2001. From August 1996 to December 2000, Mr. Carmeli held
various  executive roles including  General Manager of the TechMate  Division as
well as Manager of Product  Services  and  Operations.  Prior to joining us, Mr.
Carmeli held R&D and field positions with software vendors ranging from software
development through product management and sales management. Mr. Carmeli holds a
Bachelor of Science  degree from the Technion  Institute and a Master of Science
degree in Computer Science from Boston University.

                                       12
<PAGE>
AMIT BENDOV has served as our Vice  President  of Product  Marketing  since July
1998.  From  September  1996 to June 1998,  Mr. Bendov served as our Director of
Customer  Support and  Integration.  From August 1994 to August 1996, Mr. Bendov
served as our Research and Development  Manager.  Mr. Bendov holds a Bachelor of
Science degree in Computer Science and Statistics from Tel Aviv University.

RONI A. EINAV has served as a director of  ClickSoftware  since April 2000. From
1983 to April  1999,  Mr.  Einav  founded and served as Chairman of the Board of
Directors  and  president of New Dimension  Software,  Ltd., a systems  software
company, subsequently acquired by BMC Software. Mr. Einav has also played a role
in founding  other  Israeli  high-tech  companies,  including  Liraz  Computers,
Jacada,  UDS-Ultimate Distribution Systems, XciTel, CePost,  CeDimension,  ComDa
and Einav Systems. Mr. Einav was a Major in the Israeli Defense Forces,  serving
in the Systems Analysis  Division.  Mr. Einav holds a Bachelor of Science degree
in  Management  and  Industrial  Engineering  and a Master of Science  degree in
Operations Research from the Technion Institute.

DR. ISRAEL BOROVICH has served as a director of  ClickSoftware  since July 1997.
Since  1988,  Dr.  Borovich  has served as  President  and CEO of Arkia  Israeli
Airlines and Knafaim-Arkia  Holdings Ltd. Dr. Borovich also serves as a director
of Knafaim-Arkia  Holdings,  Ltd.,  Maman-Cargo Terminals & Handling Ltd., Issta
Lines Israel  Students Travel Company Ltd., Dr. Borovich serves as a chairman of
Granit  Hacarmel  Investments,  Ltd.,  Sonol Israel,  Ltd., and Ayalon  Highways
(Israel) Ltd. Dr. Borovich is a full professor at the Faculty of Management, Tel
Aviv University. Dr. Borovich holds Bachelor of Science, Master of Science and a
PhD. in Industrial Engineering from the Polytechnic Institute in Brooklyn.

NATHAN  GANTCHER  has served as a director  of  ClickSoftware  since April 2000.
Since January 2002, Mr. Gantcher has served as Co-Chairman, President and CEO of
Alpha Investment management LLC. From October 1997 to October 1999, Mr. Gantcher
served as Vice Chairman of CIBC World Markets Corp.  From 1983 to November 1997,
Mr. Gantcher served as President, Chief Operating Officer and Co-Chief Executive
Officer of Oppenheimer & Co. Since 1983, Mr.  Gantcher has served as Chairman of
the Board of Trustees of Tufts University. Mr. Gantcher is a member of the Board
of Overseers at the Columbia University Graduate School of Business,  a director
of  Mack-Cali  Realty Corp and the Jewish  Communal  Fund,  and a trustee of the
Anti-Defamation League Foundation.  Mr. Gantcher holds a Bachelor of Arts degree
in Business from Tufts University and a Master of Business Administration degree
from the Columbia University Graduate School of Business.

EDDY SHALEV has served as a director of  ClickSoftware  since April 1997.  Since
April  1997.  Since  April  1997,  Mr.  Shalev has also  served as a director of
Fundtech Corp. and other publicly traded high tech companies.  Mr. Shalev is the
Managing  General  Partner of Genesis  Partners.  Mr.  Shalev  holds a Master of
Science degree in Management Information Systems from Tel Aviv University.

JAMES W. THANOS has served as a director of ClickSoftware  since May 2000. Since
October 1999, Mr. Thanos has served as Executive Vice President, Worldwide Field
Operations of  BroadVision,  Inc.  From March 1998 to October  1999,  Mr. Thanos
served as BroadVision's Vice President and General Manager,  Americas.  Prior to
working for BroadVision, Mr. Thanos served as Senior Vice President of Worldwide
sales  at  Aurum  Software.  Mr.  Thanos  holds a  Bachelor  of Arts  degree  in
International  Relations  and a Bachelor of Arts degree in  Behavioral  Sciences
from Johns Hopkins University.

JANET  SCHINDERMAN has served as a director of ClickSoftware  since August 2001.
Ms.  Schinderman has served as associate dean for special projects and secretary
to the Board of Overseers  at Columbia  Business  School of Columbia  University
since 1990. Ms.  Schinderman serves on the Board of Directors of four CIBC World
Markets mutual funds, the Columbia University Knight-Bagehot Business Journalist
Board of Advisors and the  Department of  Education's  Center for  International
Business  Education and Research (CIBER) operating  committee.  Ms.  Schinderman
holds a Bachelor of Arts degree from Newcomb College of Tulane  University and a
Masters of Business Administration degree from Tulane University.

                                       13
<PAGE>
Executive  officers  serve at the  discretion  of the  Board  and are  appointed
annually.  The  employment  of  each  of our  officers  is at  will  and  may be
terminated at any time, with or without cause. There are no family relationships
between any of the directors or executive officers of ClickSoftware.

ITEM 2. PROPERTIES

We have a seven year lease for approximately  17,130 square feet of office space
in Campbell,  California.  The office  space is leased  pursuant to a lease that
expires in June 2003 with an option to extend the lease  until  April  2008.  We
also lease approximately 19,720 square feet of office space in Tel Aviv, Israel.
Our U.K.  subsidiary  currently operates from a leased facility of approximately
2,700  square feet in Slough,  near  London.  We also lease  additional  smaller
offices in various sites throughout North America and the European continent. We
consider that our current  office space is  sufficient  to meet our  anticipated
needs for the foreseeable future.

Anticipated  minimum  net rents  for these  facilities  are  approximately  $1.3
million for the twelve months ending  December 31, 2002,  $1.3 million for 2003,
$1.2 million for 2004 and $985,000 for 2005.

ITEM 3. LEGAL PROCEEDINGS

We are not currently involved in any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Our  ordinary  shares have been quoted on the Nasdaq  National  Market under the
symbol  "CKSW"  since June 22,  2000.  Prior to that  time,  there was no public
market for our Ordinary  Shares.  The following table sets forth for the periods
indicated,  the high and low closing prices of our ordinary  shares as quoted by
the Nasdaq National Market:

<TABLE>
<CAPTION>
<S>                                                                             <C>                 <C>
Fiscal year ended December 31, 2001                                               HIGH               LOW
-----------------------------------                                               ----               ---
First Quarter                                                                    $ 2.72            $ 0.75
Second Quarter                                                                   $ 1.43            $ 0.56
Third Quarter                                                                    $ 1.82            $ 0.70
Fourth Quarter                                                                   $ 1.47            $ 0.82
Fiscal year ended December 31, 2000
-----------------------------------
Second Quarter (from June 22, 2000)                                              $ 7.38            $ 5.81
Third Quarter                                                                    $ 8.75            $ 3.00
Fourth Quarter                                                                   $ 3.66            $ 1.75

</TABLE>
As of March 4, 2002,  there were 1,148  stockholders  of record of our  Ordinary
Shares.

Our present policy is to retain earnings,  if any, to finance future growth.  We
have  never  paid  cash  dividends  and have no  present  intention  to pay cash
dividends.

On June 22,  2000,  we  commenced  an initial  public  offering of our  ordinary
shares, NIS 0.02 par value. Ordinary shares sold in the offering were registered
under the  Securities Act of 1933, as amended,  on a  Registration  Statement on
Form S-1 (File No. 333-30274) that was declared effective by the SEC on June 22,
2000.

The  offering  commenced  on June 22, 2000  whereby  4,000,000  ordinary  shares
registered  under the  registration  statement were sold at a price of $7.00 per
share.  Underwriters  exercised their overallotment option and purchased 600,000
additional ordinary shares at a price of $7.00 per share. The aggregate price of
the offering amount registered was $32,200,000. In connection with the offering,
we paid an aggregate of $2,254,000 in underwriting  discounts and commissions to
the underwriters and incurred other expenses of approximately $1.8 million.

                                       14
<PAGE>
As of December 31, 2001, we have used a portion of the aggregate net proceeds of
$28.3  million  from our initial  public  offering  of  ordinary  shares for the
following purposes:

     *    approximately  $8  million  to  expand  our  international  operations
          including infrastructure and sales and marketing expenses;
     *    approximately $7.6 million to expand our domestic operations by hiring
          additional  employees,  leasing  additional office space and expanding
          our infrastructure; and
     *    approximately $3.9 million for domestic sales and marketing.

The remaining  proceeds will be used for general corporate  purposes,  including
working  capital,  expansion  of  our  sales  and  marketing  capabilities,  and
acquisitions of, or investments in,  businesses,  products and technologies that
are  complementary  to our  business.  We have no current  plans,  agreements or
commitments  with  respect  to any such  acquisition,  and we are not  currently
engaged in any negotiations with respect to any such transaction.

None of our net proceeds of the offering were paid directly or indirectly to any
directors,  officers,  or general  partners or their  associates,  or to persons
owning  10%  or  more  of any  class  of our  equity  securities,  or any of our
affiliates.

We have invested the net proceeds of the offering in interest-bearing short-term
investments or bank deposits.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.

The  selected  consolidated  statement  of  operations  data for the years ended
December 31, 1997,  1998,  1999,  2000 and 2001,  and the selected  consolidated
balance sheet data as of December 31, 1997,  1998, 1999, 2000 and 2001 have been
derived from our audited financial  statements.  The consolidated  statements of
operations  data for the years ended  December  31,  1997,1998  and 1999 and the
selected  consolidated  balance  sheet data as of December 31, 1997 and 1998 are
derived from audited  consolidated  financial  statements  that are not included
herein.  These  financial  statements  have been  prepared  in  accordance  with
accounting  principles  generally  accepted in the United States.  The following
selected  financial  data are  qualified  by  reference to and should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" included elsewhere in this statement.

                                       15
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:

                                                                  YEAR ENDED DECEMBER 31,
                                            ------------ ------------ ------------- ------------- --------------
                                               1997         1998          1999          2000          2001
                                               ----         ----          ----          ----          ----
                                                      (in thousands except share and per share data)

<S>                                              <C>          <C>           <C>         <C>            <C>
Revenues:
  Software license                               $1,235       $3,932        $5,414      $ 10,500       $ 11,676
  Service and maintenance                         1,080        2,139         4,912         5,242          6,528
                                            ------------ ------------ ------------- ------------- --------------
      Total Revenues                              2,315        6,071        10,326        15,742         18,204
                                            ------------ ------------ ------------- ------------- --------------
Cost of Revenues:
  Software License                                   13           25            71           272            352
  Service and Maintenance                         1,035        2,301         4,299         5,156          5,418
                                            ------------ ------------ ------------- ------------- --------------
    Total cost of revenues                        1,048        2,326         4,370         5,428          5,770
                                            ------------ ------------ ------------- ------------- --------------
Gross Profit                                      1,267        3,745         5,956        10,314         12,434
Operating Expenses:
  Research and Development
       expenses, net                              1,339        2,284         2,910         4,300          3,246
  Sales and Marketing expenses                    3,172        6,019         8,274        14,106         13,391
  General and Administrative                      1,120        1,333         1,759         4,397          4,854
       Expenses
  Reorganization expenses                             -            -             -             -            294
  Share based Compensation                            -            -           738         1,237            437
                                            ------------ ------------ ------------- ------------- --------------
Total Operating Expenses                          5,631        9,636        13,681        24,040         22,222
Loss from Operations                            (4,364)      (5,891)       (7,725)      (13,726)        (9,788)
Interest and other income(expenses), net
                                                  (148)           33         (254)           680            649
                                            ------------ ------------ ------------- ------------- --------------
Net Loss                                       $(4,512)     $(5,858)      $(7,979)     $(13,046)       $(9,139)

Dividend related to convertible
  preferred shares                                    -            -       (4,989)             -              -
                                            ------------ ------------ ------------- ------------- --------------
Net loss attributable to ordinary
shareholders                                   $(4,512)     $(5,858)     $(12,968)     $(13,046)       $(9,139)
                                            ------------ ------------ ------------- ------------- --------------

Basic and diluted net loss per ordinary         $(0.80)      $(0.99)       $(2.18)       $(0.58)        $(0.36)
share
Shares used in computing basic and
diluted net loss per share                    5,657,728    5,914,735     5,948,816    22,312,554     25,098,321


CONSOLIDATED BALANCE SHEET DATA:

                                                                         DECEMBER 31,
                                                ----------------------------------------------------------------
                                                   1997         1998         1999        2000          2001
                                                   ----         ----         ----        ----          ----
                                                                        (in thousands)

Cash and cash equivalents                             $ 301      $ 3,770     $ 7,838      $ 4,438       $ 8,125
Short-term Investments                                    -            -           -       16,878       1,846
Working capital                                       (604)        4,178       8,007       23,610        15,272
Total assets                                          2,604        7,983      14,195       31,455        22,367
Long-term liabilities, net of current portion
                                                      1,530        1,254       1,112        1,446         1,400
Shareholders' equity (net capital
  deficiency)                                       (3,177)        4,657       8,821       26,462        17,974

</TABLE>
                                       16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Except for  historical  information,  the  discussion  in this  report  contains
forward-looking   statements  that  involve  risks  and   uncertainties.   These
forward-looking statements include, among others, those statements including the
words, "expects," "anticipates," "intends," "believes" and similar language. Our
actual results could differ materially from those discussed herein. Factors that
could cause or contribute to such  differences  include,  but are not limited to
the risks discussed in the section titled "Risk Factors" in this document.

OVERVIEW

Prior to 1996,  our operations  were primarily  related to consulting and custom
software solutions. In late 1996, we engaged in a comprehensive reexamination of
our strategy and changed our strategic focus to concentrate on providing service
optimization  software  products based on our W-6 Service Scheduler and TechMate
technologies.  This change in focus was intended to allow us to license software
products useable by multiple clients, rather than developing customized software
for each client.  In connection with this change of strategy,  we  de-emphasized
our  consulting  business.  At that time we also spun off our  textile  software
operations  to our then  existing  shareholders  and  discontinued  our  defense
application  business.  Since early 1997, we have invested significant resources
in  developing  products  based  on  our  W-6  Service  Scheduler  and  TechMate
technologies,  including  increasing  the number of our  employees  involved  in
research and development, sales and marketing, and professional services.

We  believe  that in  today's  economy  successful  businesses  must  constantly
increase the performance of existing service  resources.  Our products emphasize
the  use of  optimization  tools  for  performance  enhancement  in the  service
environment and also offer the ability to capture the benefits and  efficiencies
of the internet.  Accordingly, in September 1999, we began marketing our product
lines under new names,  CLICKSCHEDULE  and CLICKFIX and in May 2000,  we changed
our company name to ClickSoftware Technologies Ltd.

We derive revenues from software licensing and service and maintenance fees. Our
operating history shows that a significant  percentage of our quarterly revenues
come from orders placed toward the end of a quarter.  Software  license revenues
are comprised of perpetual or annual  software  license fees  primarily  derived
from  contracts  with our direct  sales  clients and our  indirect  distribution
channels.  We recognize  revenues in accordance  with the American  Institute of
Certified  Public  Accountants  Statement of Position  97-2,  "Software  Revenue
Recognition,"  or SOP 97-2, as amended by Statement of Position 98-4.  Under SOP
97-2, we recognize  software license revenues when a software license  agreement
has been  executed or a  definitive  purchase  order has been  received  and the
product has been  delivered  to our clients,  no  significant  obligations  with
regard  to  implementation  remain,  the  fee is  fixed  and  determinable,  and
collectability is probable.

Service and maintenance  revenues are comprised of revenues from implementation,
consulting,  training,  release  updates  and  customer  service  support  fees.
Consulting  services are billed at an agreed-upon  rate plus incurred  expenses.
Clients licensing our products generally purchase consulting agreements from us.
Consulting revenues are recognized on a straight-line basis over the life of the
agreement. Customer support is charged as a percentage of license fees depending
upon the level of support  coverage  requested by the customer.  A fee of 18% of
license fees is typically  charged for five day a week,  eight hour coverage and
24% of license fees is typically charged for seven day a week,  twenty-four hour
coverage.  Our products are marketed worldwide through a combination of a direct
sales  force,  consultants  and  various  business  relationships  we have  with
implementation and technology companies and resellers.

Cost of  revenues  consists  of cost of software  license  revenues  and cost of
service and maintenance revenues.  Cost of software license revenues consists of
expenses related to media duplication and packaging of our products and costs of
software  purchased  or  licensed  for resale.  Cost of service and  maintenance
revenues   consists  of  expenses  related  to  salaries  and  expenses  of  our
professional services organizations,  costs related to third-party  consultants,
and equipment costs.

                                       17
<PAGE>
Operating expenses are categorized into research and development expenses, sales
and marketing  expenses,  general and administrative  expenses,  and share based
compensation.

Research and  development  expenses  consist  primarily  of  personnel  costs to
support product development, net of grants received from the Chief Scientist. In
return for some of these grants, we are obligated to pay the Israeli  Government
royalties as described below which are included in sales and marketing expenses.
Software  research and development  costs incurred prior to the establishment of
technology  feasibility  are  included in research and  development  expenses as
incurred.

General and  administrative  expenses consist primarily of personnel and related
costs  for  corporate  functions,   including  information  services,   finance,
accounting, human resources,  facilities, legal and costs related to activity as
public company.

Share based  compensation  represents the aggregate  difference,  at the date of
grant,  between the  respective  exercise  price of stock options and the deemed
fair market value of the underlying stock. Share based compensation is amortized
over the vesting period of the underlying options, generally four years.

Interest and other income (expenses) include interest income earned on our cash,
cash equivalents and short-term  investments,  offset by interest  expense,  and
also includes the effects of foreign currency translations.

The  functional  currency of our  operations  is the U.S.  dollar,  which is the
primary currency in the economic environment in which we conduct our business. A
significant portion of our research and development  expenses is incurred in New
Israeli  Shekels ("NIS") and a portion of our revenues and expenses are incurred
in British Pounds and the European Community Euro. The results of our operations
are subject to  fluctuations  in these  exchange  rates which are  influenced by
various global economic factors.

The effects of foreign currency  exchange rates on our results of operations for
the years ended December 31, 1999, 2000 and 2001 were immaterial.

Our tax rate will  mainly  reflect a mix of the U.S.  statutory  tax rate on our
U.S. income, the U.K statutory tax rate on our U.K income, the Belgium statutory
tax rate on our Belgium income and the Israeli tax rate discussed below. Israeli
companies  are  generally  subject  to income  tax at the rate of 36% of taxable
income.  The  majority of our income,  however,  is derived  from our  company's
capital investment  program with "Approved  Enterprise" status under the Law for
the  Encouragement  of Capital  Investments,  and is eligible  therefore for tax
benefits.  As a result of these benefits, we will have a tax exemption on income
derived  during the first two years in which this  investment  program  produces
taxable  income,  and a reduced tax rate of 15-25% for the next 5 to 8 years. In
the event of a  distribution  of a cash  dividend out of retained  earnings that
were exempt from tax due to its Approved Enterprise status, we would be required
to  pay  25%  corporate  income  tax on  income  from  which  the  dividend  was
distributed.  All of these tax  benefits are subject to various  conditions  and
restrictions.  There  can be no  assurance  that we  will  obtain  approval  for
additional Approved Enterprise Programs,  or that the provisions of the law will
not change.

CRITICAL ACCOUNTING POLICIES

The  Company's  critical  accounting  policies,  including the  assumptions  and
judgments  underlying  them,  are  disclosed  in the  Notes to the  Consolidated
Financial  Statements.  These  policies  have been  consistently  applied in all
material  respects and address such  matters as revenue  recognition,  including
assessing  clients'  credit  worthiness.   While  the  estimates  and  judgments
associated  with the  application of these policies may be affected by different
assumptions  or  conditions,  the Company  believes the  estimates and judgments
associated with the reported amounts are appropriate in the circumstances.

RESULTS OF OPERATIONS

FISCAL YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

REVENUES.  Revenues increased $2.5 million or 16% to $18.2 million in 2001, from
$15.7 million in 2000. In 2000,  revenues increased $5.4 million or 52% to $15.7
million from $10.3 million in 1999. In 2001,  44% of our revenues were generated
in North America,  37% in Europe,  2% in Israel and 17% in all other  geographic

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<PAGE>
locations  ("Asia  Pacific  and  Africa").  In 2000,  62% of our  revenues  were
generated in North America,  32% in Europe,  3% in Israel and 3% in Asia Pacific
and Africa. In 1999, 67% of our revenues were generated in North America, 21% in
Europe,  9% in  Israel  and 3% in Asia  Pacific  and  Africa.  The  increase  in
percentage  of  revenues  from  Europe  and the Asia  Pacific  region is largely
attributable to an increase in sales by our European  subsidiary to customers in
Europe as well as expansion of our sales effort in Europe and the Asian  Pacific
region.

SOFTWARE  LICENSE.  Software  license  revenues  were  $11.7  million  or 64% of
revenues in 2001,  $10.5 million or 67% of revenues in 2000, and $5.4 million or
52% of revenues in 1999.  The increase in software  license  revenues was due to
increased  average  sales per client,  growth of our client base,  and recurring
sales to our installed  base of clients.  The  variability  in software  license
revenues as a percentage  of total  revenues was due to the fact that while many
of our  implementations  require higher  initial  service and  maintenance,  our
average deal size also  increased,  and these factors changed  independently  of
each other.

SERVICE AND MAINTENANCE.  Service and maintenance  revenues were $6.5 million or
36% of revenues  in 2001,  $5.2  million or 33% of  revenues  in 2000,  and $4.9
million or 48% of revenues  in 1999.  The  increase  in service and  maintenance
revenues  from  2000 to 2001 is  primarily  due to the  increase  in the sale of
software  licenses.  The relatively  small  increase in service and  maintenance
revenues  from  1999  to  2000  was  primarily  due to an  increase  in  license
distribution  through  third  parties  also  providing  implementation,  and the
release of CLICKSCHEDULE FAST TRACK which offers a more rapid  implementation of
CLICKSCHEDULE reducing the cost of implementation.

COST OF REVENUES. Cost of revenues were $5.8 million or 32% of revenues in 2001,
$5.4 million or 35% of revenues in 2000,  and $4.4 million or 42% of revenues in
1999.  This increase in the cost of revenues on an absolute  basis was due to an
increased  number of  clients  which  resulted  in an  increased  demand for our
professional  services.  Gross profit was 68% in 2001 as compared to 66% in 2000
and 58% in 1999.  The change in gross profit  percentages  are  primarily due to
both an  increase  in high  margin  software  license  revenues,  as well as the
improved productivity of our professional services personnel.

COST OF SOFTWARE  LICENSES.  Cost of software  license revenues were $352,000 in
2001,  $272,000 in 2000 and $71,000 in 1999. Cost of software  license  revenues
were less than 2% of  revenues  in 2001 and 2000 and less than 1% of revenues in
1999.

COST OF SERVICE AND MAINTENANCE.  Cost of service and maintenance  revenues were
$5.4  million or 30% of  revenues  in 2001,  $5.2  million or 33% of revenues in
2000,  and  $4.3  million  or 42% of  revenues  in  1999.  Cost of  service  and
maintenance  increased  by 5% from 2000 to 2001 while  service  and  maintenance
revenues increased by 25% during the same period. This is directly attributed to
the  increased   service  and  maintenance   productivity  and  the  release  of
CLICKSCHEDULE   FAST  TRACK  which  offers  a  more  rapid   implementation   of
CLICKSCHEDULE  reducing the cost of implementation.  The increase in the cost of
service  and  maintenance  revenues  from 1999 to 2000 was due  primarily  to an
increase in the sale of licenses,  which resulted in an increase of $0.1 million
in personnel  related costs,  an increase of $0.6 million in third party related
costs and an increase of $0.2  million in other  expenses.  The total  number of
professional  services  employees employed by us was 37 on December 31, 2001, 44
on December 31, 2000, and 35 on December 31, 1999.

OPERATING  EXPENSES.  Total  operating  expenses  were $22.2  million or 122% of
revenues in 2001,  $24.0 million or 153% of revenues in 2000,  and $13.7 million
or 132% of revenues in 1999.

RESEARCH AND DEVELOPMENT EXPENSES,  NET. Research and development expenses,  net
of related grants, were $3.2 million or 18% of revenues in 2001, $4.3 million or
27% of  revenues  in 2000,  and $2.9  million  or 28% of  revenues  in 1999.  We
received  or  accrued  grants  from the Chief  Scientist  in the  amount of $1.2
million in 2001, $1.1 million in 2000, and $1.0 million in 1999. The decrease in
research and  development  expenses from 2000 to 2001 is directly  attributed to
the high costs associated with the introduction of the full  optimization  suite
in 2000. The increase in research and development  expenses on an absolute basis
from 1999 to 2000 was  primarily  due to an increase of personnel  related costs
related to  improvements  of our  CLICKSCHEDULE  and CLICKFIX  product lines and

                                       19
<PAGE>
development  of CLICKPLAN  and  CLICKANALYZE  as part of our  introduction  of a
complete suite of service optimization management products.

SALES AND MARKETING  EXPENSES.  Sales and marketing expenses were $ 13.4 million
or 74% of revenues in 2001,  $14.1 million or 90% of revenues in 2000,  and $8.3
million or 80% of revenues in 1999. The decrease in 2001 is attributed primarily
to cost  reductions in our North American  operations and overall cost controls.
Personnel  related costs  decreased $0.5 million,  and other expenses  decreased
$0.2  million  from 2000 to 2001.  The  increase  in 2000 was  primarily  due to
additional  sales and marketing  efforts  related to the new marketing focus for
our  ClickSoftware  product line and the  expansion  of our sales and  marketing
efforts  worldwide during 2000.  Personnel  related costs increased $3.3 million
from 1999 to 2000 and other  expenses  increased  $2.6  million.  We expect that
sales and  marketing  expenses  will  increase  on an  absolute  basis in future
periods,  as we hire  additional  sales and  marketing  personnel,  continue  to
promote our brand and establish sales in additional  geographic areas. The total
number of sales and  marketing  employees  employed by us was 51 on December 31,
2001, 71 on December 31, 2000, and 44 on December 31, 1999.

GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses were
$4.9  million or 27% of  revenues  in 2001,  $4.4  million or 28% of revenues in
2000,  and $1.8 million or 17% of revenues in 1999.  General and  administrative
expenses  included  $2.0  million in bad debt  charges in 2001,  $1.1 million in
2000,  and $0.1 million in 1999.  We expect that the absolute  dollar  amount of
general and administrative  expenses exclusive of bad debt charges will continue
to increase as we expand our operations.

SHARE BASED  COMPENSATION.  Share based compensation for the year ended December
31, 2001 amounted to $0.4 million. Deferred compensation as of December 31, 2001
amounted to $0.4 million  which will be amortized  over the period  during which
the options vest,  generally four years.  Share based  compensation for the year
ended  December 31, 2000  amounted to $1.2  million.  Deferred  compensation  at
December 31, 2000 amounted to $1.1  million.  Share based  compensation  for the
year ended December 31, 1999 amounted to $0.7 million.  Deferred compensation as
of December 31, 1999 amounted to $2.7 million.

REORGANIZATION  COSTS.  Reorganization costs were $0.3 million or 2% of revenues
in 2001. These expenses were primarily costs associated with severance  payments
to terminated employees. There were no reorganization costs in 2000 and 1999.

INTEREST  AND OTHER  INCOME  (EXPENSES),  NET.  Interest  income net of interest
expenses,  were $0.6  million or 4% of revenues in 2001,  $0.7  million or 4% of
revenues in 2000, and ($0.3) million or 2% of revenues in 1999.

INCOME  TAXES.  As of December 31, 2001, we had  approximately  $12.9 million of
Israeli net operating loss  carryforwards,  approximately  $23.9 million of U.S.
federal net  operating  loss  carryforwards  and  approximately  $5.7 million of
British net operating  loss  carryforwards  available to offset  future  taxable
income.  The  Israeli  and  British net  operating  loss  carryforwards  have no
expiration  date.  The U.S.  net  operating  loss  carryforwards  will expire in
various amounts in the years 2008 through 2014.

PREFERRED  SHARE  DIVIDEND.  During the quarter  ended  December  31,  1999,  we
recorded a preferred share dividend of approximately  $5.0 million  representing
the value of the  beneficial  conversion  feature on the issuance of convertible
preferred  shares in  December  1999.  The  beneficial  conversion  feature  was
calculated at the commitment date based on the difference between the conversion
price of $6.277 per share and the estimated fair value of the ordinary shares at
that date.

LIQUIDITY AND CAPITAL RESOURCES

As of December  31, 2001 we had cash and cash  equivalents  of $8.1  million and
short- term investments of $1.9 million.

From  inception  through our IPO on June 22, 2000,  we financed  our  operations
primarily  through the private  placement  of equity  securities  which  through
December 31, 1999 totaled  approximately  $32.0 million,  net of issuance costs.
Our initial public stock offering of ordinary shares realized $28.3 million, net
of underwriter discount and other issuance costs.


                                       20
<PAGE>
Net  cash  used in  operating  activities  for  each of  these  years  primarily
consisted  of net losses in  addition  to  increases  in trade  receivables  and
prepaid  expenses,  partially offset by increases in accounts  payable,  accrued
liabilities,   amortization  of  deferred  compensation,  non-cash  compensation
expenses,  depreciation  and  amortization,  as  applicable.  For the year ended
December 31, 2001,  cash used in operations was $10.5 million,  comprised of our
net loss of $9.1  million,  an increase in trade  receivables  of $2.2  million,
increase in other  receivables of $0.2 million,  decrease in accounts payable of
$0.5 million, decrease in deferred revenue of $0.1 million,  partially offset by
non-cash  charges of $1.6 million.  For the year ended  December 31, 2000,  cash
used in  operations  was  $13.0  million,  comprised  of our net  loss of  $13.0
million,  an increase in trade  receivables  of $0.4 million,  increase in other
receivables  of $1.0  million,  increase  in accounts  payable of $0.5  million,
decrease in deferred revenue of $1 million, partially offset by non-cash charges
of $1.9 million.  For the year ended December 31, 1999,  cash used in operations
was $6.5  million,  comprised  of our net loss of $8.0  million,  an increase in
trade receivables of $1.9 million, increase in accounts payable of $1.1 million,
increase in deferred revenue of $1 million, partially offset by non-cash charges
of $1.3 million

Net cash  provided by investing  activities  was $14.0 million in 2001, of which
$14.6  million was provided by investment  in  short-term  investments  and $0.6
million invested primarily in leasehold  improvements and purchases of equipment
and systems,  including computer equipment and fixtures and furniture.  Net cash
used in investing  activities  was $19.5 million in 2000, of which $16.6 million
was used to invest in short term investments and $2.9 million invested primarily
in leasehold  improvements  and  purchases of equipment  and systems,  including
computer  equipment  and  fixtures  and  furniture.  Net cash used in  investing
activities for 1999 was $0.7 million,  which was primarily invested in leasehold
improvements  and  purchases  of  equipment  and  systems,   including  computer
equipment and fixtures and furniture.

There were no  material  financing  activities  in 2001.  Net cash  provided  by
financing  activities  was $29.1  million in 2000 and $11.3  million in 1999. In
June 2000, we completed an initial public offering of 4,000,000  ordinary shares
at a price of $7.00 per share.  In July 2000, the  Underwriters  exercised their
overallotment option and purchased 600,000 additional ordinary shares at a price
of $7.00 per share.  The  proceeds to us from the  offering  were  approximately
$28.3 million (net of  underwriters  discount and issuance  expenses).  Net cash
from  financing  activities  during 1999 included  proceeds from the issuance of
preferred shares of $11.4 million.

As of December 31, 2001 we had outstanding  trade  receivables of  approximately
$6.6 million which represented  approximately 36% of 2001 total revenues.  As of
December 31, 2000 we had outstanding  trade  receivables of  approximately  $4.4
million  which  represented  approximately  28% of 2000  total  revenues.  As of
December 31, 1999, we had outstanding  trade  receivables of approximately  $4.0
million which represented  approximately  38% of 1999 total revenues.  Our trade
receivables typically have 30 to 60 day terms; although we also negotiate longer
payment plans with some of our clients.

Since inception,  we have received aggregate payments from the Government of the
State  of  Israel  in the  amount  of  $5.4  million  related  to  research  and
development.  As of December 31, 2001, we have paid or accrued royalties related
to these funds in the amount of $1.9  million.  See Note 12 to our  Consolidated
Financial Statements.

We have a $1.0 million unsecured line of credit with an Israeli bank. No amounts
were outstanding under this line of credit as of December 31, 2001.

We also have an aggregate of $161,000 in term loans  relating to borrowings  for
working capital.  We have a loan in US Dollars bearing an interest rate of LIBOR
plus 1% and a loan in New Israeli  Shekels linked to the Israeli CPI,  currently
bearing an interest rate of 5.4%.  Additional  loans bearing an average interest
rate of 5.5% are in British Pounds or in US Dollars.

Our bank in Israel has issued two standby  letters of credit on our behalf.  One
is for $125,000 for tenant improvements related to our facilities in Israel. The
other is for $921,000 and secures our performance  pursuant to projects with the
Government of Israel.  Additionally,  Silicon Valley Bank has issued a letter of
credit on our behalf in the amount of $205,560 to assure  performance  under the
terms of our Campbell, CA lease.


                                       21
<PAGE>
Our capital requirements depend on numerous factors, including market acceptance
of our products, the resources we devote to developing,  marketing,  selling and
supporting  our  products,  the  timing and  extent of  establishing  additional
international  operations  and other  factors.  We intend to continue  investing
significant  resources in our sales and marketing  and research and  development
operations  in the future.  We believe  that our current cash  balances  will be
sufficient to fund our expenses until we reach profitability. However, we cannot
assure you that we will  attain  sufficient  revenues  to  achieve  or  maintain
profitability,  particularly  given current  economic  conditions  and potential
reductions in  information  technology  spending by our current and  prospective
customers.  We may need to raise additional capital to finance our operations or
for strategic  purposes,  and we may do so by selling  additional equity or debt
securities or by increasing the size of our credit facility. If additional funds
are raised through the issuance of equity or debt  securities,  these securities
could have  rights;  preferences  and  privileges  senior to those of holders of
ordinary shares, and the terms of these securities could impose  restrictions on
our  operations.  The sale of additional  equity or convertible  debt securities
could result in additional dilution to our shareholders.  In addition, we cannot
be certain that  additional  financing  will be available in amounts or on terms
acceptable  to us,  if at  all.  If we are  unable  to  obtain  this  additional
financing,  we may be  required  to  reduce  the  scope of our  planned  product
development  and marketing  efforts,  which could harm our  business,  financial
condition or operating results.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations", and SFAS
No. 142, "Goodwill and Other Intangible Assets".  The new rules require business
combinations  initiated  after  June 30,  2001 to be  accounted  for  using  the
purchase  method of  accounting  and goodwill  acquired  after this date will no
longer be amortized,  but will be subject to annual  impairment tests. All other
intangible  assets will  continue to be amortized  over their  estimated  useful
lives.  Companies are required to adopt SFAS No. 142 for fiscal years  beginning
after December 15, 2001. We did not complete any business  combinations  through
the year ended  December  31,  2001,  and as a result  these  standards  are not
expected  to have a  material  impact on our  financial  position  or  operating
results.

          In August  2001,  the  Financial  Accounting  Standards  Board  issued
Statement  of  Financial  Accounting  Standards  No.  144,  Accounting  for  the
Impairment  or Disposal of Long-Lived  Assets  ("SFAS  144").  Although SFAS 144
supersedes  FASB  Statement  No. 121, it retains  the  requirements  of SFAS 121
regarding  recognition of impairment  loss for long-lived  assets to be held and
used (based on  undiscounted  cash flows) and  resolves  certain  implementation
issues.  Also, the accounting model used in SFAS 121 for long-lived assets to be
disposed of by sale  (lower of carrying  amount or fair value less cost to sell)
is broadened by SFAS 144 to include  discontinued  operations and supersedes APB
Opinion No. 30. Therefore, discontinued operations will no longer be measured on
a net  realizable  value  basis and future  operating  losses  will no longer be
recognized  before  they  occur.  SFAS 144 also  broadens  the  presentation  of
discontinued  operations  to include a  component  of an entity  (rather  than a
segment of a business).  The  provisions of SFAS 144 are effective for financial
statements  issued for fiscal years  beginning  after  December  15,  2001,  and
interim  periods  within those  years.  We believe that the adoption of SFAS 144
will not have a material impact on our consolidated financial statements.

FACTORS THAT MAY AFFECT FUTURE RESULTS

You should  carefully  consider the following  factors and other  information in
this statement before you decide to invest in our ordinary shares. If any of the
negative events referred to below occur, our business,  financial  condition and
results of operations  could suffer.  In any such case, the trading price of our
ordinary shares could decline, and you may lose all or part of your investment.


                                       22
<PAGE>
RISKS RELATED TO OUR BUSINESS

THE ECONOMIC  OUTLOOK MAY ADVERSELY  AFFECT THE DEMAND FOR OUR CURRENT  PRODUCTS
AND THE COMPANY'S  RESULTS OF OPERATIONS.  Current  predictions  for the general
economy indicate uncertain  economic  conditions.  Weak economic  conditions may
cause a reduction in information  technology spending  generally.  Consequently,
there may be an  adverse  impact on the  demand for our  products,  which  would
adversely affect our results of operations.  In addition,  predictions regarding
economic  conditions have a low degree of certainty,  and further predicting the
effects of the changing  economy is even more  difficult.  We may not accurately
gauge the effect of the general economy on our business. As a result, we may not
react to such  changing  conditions  in a timely  manner  that may  result in an
adverse  impact on our results of  operations.  Any such adverse  impacts to our
results  of  operations  from a  changing  economy  may  cause  the price of our
ordinary shares to decline.

WE HAVE NOT ACHIEVED  PROFITABILITY.  We expect to continue to incur significant
sales and marketing and research and development expenses. Some of our expenses,
such as administrative and management payroll and rent and utilities,  are fixed
in the short  term and cannot be quickly  reduced  to  respond to  decreases  in
revenues.  As a result, we will need to generate significant revenues to achieve
and maintain profitability, which we may not be able to do.

OUR QUARTERLY  OPERATING  RESULTS ARE SUBJECT TO FLUCTUATIONS  AND IF WE FAIL TO
MEET THE EXPECTATIONS OF SECURITIES  ANALYSTS OR INVESTORS,  OUR SHARE PRICE MAY
DECREASE. Our quarterly operating results are difficult to predict and are not a
good measure for  comparison.  Our  operating  history  shows that a significant
percentage of our quarterly revenues come from orders placed toward the end of a
quarter. From time to time, we anticipate a sale of significant size to a single
customer.  A delay in the  completion  of any sale past the end of a  particular
quarter could  negatively  impact  results for that  quarter,  and such negative
impact could be significant  for the delay of a sale of significant  size.  Even
without the delay of a significant sale, our future quarterly  operating results
may  fluctuate  significantly  and may not meet the  expectations  of securities
analysts or  investors.  If this occurs,  the price of our  ordinary  shares may
decrease.  The factors that may cause  fluctuations  in our quarterly  operating
results include the following:

     *    the volume and timing of customer orders;
     *    internal budget  constraints and approval processes of our current and
          prospective clients;
     *    the length and unpredictability of our sales cycle;
     *    the mix of revenue  generated  by product  licenses  and  professional
          services;
     *    the mix of revenue between domestic and foreign sources;
     *    announcements or introductions of new products or product enhancements
          by us or our competitors;
     *    changes in prices of and the adoption of different pricing  strategies
          for our products and those of our competitors;
     *    timing and amount of sales and marketing expenses;
     *    changes in our business and partner relationships;
     *    technical  difficulties  or  "bugs"  affecting  the  operation  of our
          software;
     *    foreign currency exchange rate fluctuations; and
     *    general economic conditions.


FAILURE  OF THE  MARKET  TO ACCEPT  OUR  PRODUCTS  WOULD  ADVERSELY  AFFECT  OUR
PROFITABILITY.  Historically,  all of our operating  revenue has come from sales
of, and services related to, our ClickSchedule product and our ClickFix product,
to clients seeking application  software that enables efficient  provisioning of
services in enterprise environments. During the year ended December 31, 2000, we
introduced three products that, together with our existing products,  constitute
a suite of products that offers a more comprehensive  solution to our customers.
On November 28, 2001 we released version 7.0 of our Service  Optimization  Suite
that utilizes dynamic load balancing  architecture,  which dynamically redirects
requests   among  a  group  of   ClickSoftware   servers   running  our  product
applications.  This  increases the  scalability  of our products by enabling our

                                       23
<PAGE>
customers to optimize  additional  resources by adding hardware to this group of
ClickSoftware  servers.  The  growth  of our  company  depends  in  part  on the
development of market  acceptance of these  products.  We have no guarantee that
the sales of these products will develop as quickly as we anticipate, or at all.
Lack of  long-term  demand for our new  products  would have a material  adverse
effect on our business and operating results.


OUR SALES AND IMPLEMENTATION CYCLES DEPEND ON FACTORS OUTSIDE OUR CONTROL, WHICH
MAY CAUSE QUARTERLY LICENSE AND SERVICE FEES REVENUES TO VARY SIGNIFICANTLY FROM
PERIOD TO PERIOD.  To date, our customers have taken typically from three months
to nine months to evaluate our offering before making their purchase  decisions.
In  addition,  depending  on the  nature  and  specific  needs of a client,  the
implementation  of our  products  typically  takes two to six  months.  Sales of
licenses  and  implementation  schedules  are  subject to a number of risks over
which we have little or no control,  including clients'  budgetary  constraints,
clients' internal acceptance reviews, the success and continued internal support
of clients' own  development  efforts,  the efforts of businesses  with which we
have  relationships,  the nature,  size and  specific  needs of a client and the
possibility of cancellation of projects by clients. The uncertain outcome of our
sales  efforts and the length of our sales cycles  could  result in  substantial
fluctuations in license  revenues.  Historically,  a significant  portion of our
sales in any given quarter occur in the last two weeks of the quarter;  if sales
forecasted from a specific  client for a particular  quarter are not realized in
that quarter,  we are unlikely to be able to generate  revenues  from  alternate
sources in time to compensate  for the  shortfall.  As a result,  and due to the
relatively  large  size of some  orders,  a lost or  delayed  sale  could have a
material  adverse  effect  on  our  quarterly  revenue  and  operating  results.
Moreover,  to the extent that  significant  sales occur  earlier than  expected,
revenue  and  operating  results  for  subsequent  quarters  could be  adversely
affected.

FAILURE TO EXPAND OUR SALES AND MARKETING  ORGANIZATIONS COULD LIMIT OUR ABILITY
TO SELL ADDITIONAL PRODUCTS AND SERVICES, WHICH WOULD IMPAIR OUR ABILITY TO GROW
OUR BUSINESS AND INCREASE  REVENUES.  We are  expanding  our direct and indirect
sales  operations  to increase  market  awareness  of our  products and generate
increased  revenues.  We cannot be certain that we will be  successful  in these
efforts.  In addition to normal  turnover of  personnel,  we are  attempting  to
expand our direct  sales force in Asia  Pacific and Africa.  As of December  31,
2001,  we  employed 51  individuals  in our sales and  marketing  organizations.
Because  16 of these  sales and  marketing  personnel  joined us within the last
twelve  months,  we will be  required  to devote  significant  resources  to the
training of these new sales personnel. In addition, we might not be able to hire
or retain the kind and number of sales and marketing  personnel we are targeting
because competition for qualified sales and marketing personnel in our market is
intense.

WE DEPEND ON KEY PERSONNEL,  AND THE LOSS OF ANY KEY PERSONNEL  COULD AFFECT OUR
ABILITY TO COMPETE AND OUR ABILITY TO ATTRACT  ADDITIONAL  KEY  PERSONNEL MAY BE
IMPAIRED.  We believe our future success will depend on the continued service of
our executive  officers and other key sales and marketing,  product  development
and professional  services personnel.  Dr. Moshe BenBassat,  our Chief Executive
Officer,  has  individually   participated  in  and  has  been  responsible  for
overseeing much of the research and development of our core technologies. At the
beginning of 2001, Mr. Shimon Rojany, our CFO, announced his plan to retire, but
has recently decided to indefinitely  withdraw his retirement  plans. Mr. Rojany
is committed to continuing his employment with the Company.  The services of Dr.
BenBassat  and other  members of our senior  management  team and key  personnel
would be very difficult to replace and the loss of any of these  employees could
harm our business  significantly.  We have  employment  agreements  with,  among
others,  Dr. BenBassat,  Mr. Rojany,  and Mr. Corey Leibow,  our Chief Operating
Officer.  Although these  agreements  request sixty days  notification  prior to
departure,  relationships with these officers and key employees are at will. The
loss of any of our key personnel  could harm our ability to execute our business
strategy and compete.

IF WE FAIL TO EXPAND OUR PROFESSIONAL SERVICES ORGANIZATION,  WE MAY NOT BE ABLE
TO SERVICE  ADDITIONAL  CLIENTS AND INSTALL  ADDITIONAL  LICENSES.  We cannot be
certain  that we can attract or retain a sufficient  number of highly  qualified
professional services personnel to meet our business needs. Clients that license
our software typically engage our professional  services  organization to assist
with  the  installation  and  operation  of  our  software   applications.   Our
professional  services  organization  also  provides  assistance  to our clients

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<PAGE>
related to the maintenance,  management and expansion of their software systems.
Growth in licenses of our software will depend in part on our ability to provide
our clients with these services.  In addition, we will be required to expand our
professional  services  organization  to enable us to  continue  to support  our
existing  installed  base of  customers.  As a result,  we plan to increase  the
number of our service  personnel in order to meet these needs.  Competition  for
qualified  services  personnel  with the relevant  knowledge  and  experience is
intense, and we may not be able to attract and retain necessary personnel. If we
were not able to grow our  professional  services  organization,  our ability to
expand our service business would be limited.  In addition,  we could experience
delays in  recognizing  revenue  if our  professional  services  group  fails to
complete implementations in a timely manner.

IF WE FAIL TO EXPAND OUR  RELATIONSHIPS  WITH  THIRD  PARTIES  THAT CAN  PROVIDE
IMPLEMENTATION  AND  PROFESSIONAL  SERVICES TO OUR CLIENTS,  WE MAY BE UNABLE TO
INCREASE OUR REVENUES AND OUR BUSINESS COULD BE HARMED. In order for us to focus
more  effectively  on our core  business of developing  and  licensing  software
solutions,  we need to continue to establish  relationships  with third  parties
that can  provide  implementation  and  professional  services  to our  clients.
Third-party  implementation  and consulting firms can also be influential in the
choice of resource optimization applications by new clients. If we are unable to
establish and maintain  effective,  long-term  relationships with implementation
and professional services providers, or if these providers do not meet the needs
or  expectations  of our clients,  we may be unable to grow our revenues and our
business  could suffer.  As a result of the limited  resources and capacities of
many third-party implementation providers, we may be unable to attain sufficient
focus and resources from the  third-party  providers to meet all of our clients'
needs,  even  if  we  establish  relationships  with  these  third  parties.  If
sufficient  resources  are  unavailable,  we will be required  to provide  these
services internally,  which could limit our ability to meet other demands.  Even
if we are successful in developing relationships with third-party implementation
and professional services providers,  we will be subject to significant risk, as
we cannot  control  the level and  quality of service  provided  by  third-party
implementation and professional services partners.

OUR MARKET IS HIGHLY  COMPETITIVE AND ANY REDUCTION IN DEMAND FOR, OR PRICES OF,
OUR PRODUCTS COULD NEGATIVELY IMPACT OUR REVENUES,  REDUCE OUR GROSS MARGINS AND
CAUSE OUR SHARE PRICE TO DECLINE. The market for our products is competitive and
rapidly  changing.  We expect  competition  to increase in the future as current
competitors expand their product offerings and new companies enter the market.

Because the market for service and delivery  optimization  software is evolving,
it is  difficult  to  determine  what  portion  of the  market  each  competitor
currently controls. However, competition could result in price reductions, fewer
customer  orders,  reduced gross margin and loss of market  share,  any of which
could cause our business to suffer. We may not be able to compete  successfully,
and  competitive  pressures  may  harm our  business.  Some of our  current  and
potential competitors have greater name recognition, longer operating histories,
larger customer bases and significantly greater financial, technical, marketing,
public relations,  sales, distribution and other resources than us. In addition,
some  of  our  potential  competitors  are  among  the  largest  and  most  well
capitalized software companies in the world.

FAILURE TO FULLY DEVELOP OR MAINTAIN KEY BUSINESS  RELATIONSHIPS COULD LIMIT OUR
ABILITY  TO SELL  ADDITIONAL  LICENSES  THAT COULD  DECREASE  OUR  REVENUES  AND
INCREASE  OUR  SALES  AND  MARKETING  COSTS.  We  believe  that our  success  in
penetrating  our target  markets  depends in part on our  ability to develop and
maintain  business  relationships  with  software  vendors,  resellers,  systems
integrators,  distribution  partners  and  customers.  If we  fail  to  continue
developing  these  relationships,  our growth could be limited.  We have entered
into agreements  with third parties  relating to the integration of our products
with their product  offerings,  distribution,  reselling and consulting.  We are
currently  deriving  revenues  from these  agreements  but we may not be able to
derive  significant  revenues in the future from these agreements.  In addition,
our growth may be limited  if  prospective  clients do not accept the  solutions
offered by our strategic partners.


                                       25
<PAGE>
OUR MARKET MAY  EXPERIENCE  RAPID  TECHNOLOGICAL  CHANGES  THAT COULD  CAUSE OUR
PRODUCTS TO FAIL OR REQUIRE US TO REDESIGN OUR  PRODUCTS,  WHICH WOULD RESULT IN
INCREASED  RESEARCH AND DEVELOPMENT  EXPENSES.  Our market is  characterized  by
rapid technological change;  dynamic client needs and frequent  introductions of
new  products  and product  enhancements.  If we fail to  anticipate  or respond
adequately to technology developments and client requirements, or if our product
development  or  introduction  is delayed,  we may have lower  revenues.  Client
product  requirements  can change  rapidly as a result of computer  hardware and
software innovations or changes in and the emergence,  evolution and adoption of
new  industry  standards.  For  example,  we offer  Windows NT  versions  of our
products due to the market acceptance of Windows NT over the last several years.
While we interface smoothly with UNIX systems,  we currently do not provide UNIX
versions of our software. The actual or anticipated introduction of new products
has resulted and will  continue to result in some  reformulation  of our product
offerings. Technology and industry standards can make existing products obsolete
or  unmarketable  or result in delays in the  purchase  of such  products.  As a
result,  the life cycles of our  products are  difficult  to  estimate.  We must
respond  to  developments  rapidly  and  continue  to make  substantial  product
development  investments.  As is  customary in the  software  industry,  we have
previously  experienced delays in introducing new products and features,  and we
may  experience  such  delays in the future  that could  impair our  revenue and
operating results.

OUR PRODUCTS COULD BE SUSCEPTIBLE TO ERRORS OR DEFECTS THAT COULD RESULT IN LOST
REVENUES,  LIABILITY OR DELAYED OR LIMITED MARKET  ACCEPTANCE.  Complex software
products such as ours often contain errors or defects,  particularly  when first
introduced or when new versions or enhancements are released.  In the past, some
of  our  products   have   contained   errors  and  defects  that  have  delayed
implementation  or required  us to expend  additional  resources  to correct the
problems. Despite internal testing and testing by current and potential clients,
and despite the history of use by our installed  base of customers,  our current
and future products may contain as yet undetected serious defects or errors. Any
such defects or errors could  result in lost  revenues,  liability or a delay in
market acceptance of these products,  any of which would have a material adverse
effect on our business, operating results and financial condition.

The  performance  of our  products  also  depends in part upon the  accuracy and
continued  availability  of  third-party  data.  We rely on third  parties  that
provide  information such as street and address  locations and mapping functions
that we incorporate into our products.  If these parties do not provide accurate
information,  or if we are unable to maintain our  relationships  with them, our
reputation and competitive position in our industry could suffer and we could be
unable to develop or enhance our products as required.

OUR  INTELLECTUAL  PROPERTY  COULD BE USED BY THIRD PARTIES  WITHOUT OUR CONSENT
BECAUSE  PROTECTION  OF OUR  INTELLECTUAL  PROPERTY IS LIMITED.  Our success and
ability to compete are  substantially  dependent upon our  internally  developed
technology,  which we protect  through a combination of copyright,  trade secret
and  trademark  law.  However,  we may  not be able to  adequately  protect  our
intellectual  property  rights,  which  may  significantly  harm  our  business.
Specifically,  we may not be able to protect our trademarks for our company name
and our product names, and unauthorized parties may attempt to copy or otherwise
obtain and use our  products or  technology.  Policing  unauthorized  use of our
products and  technology is  difficult,  particularly  in countries  outside the
U.S.,  and we  cannot  be  certain  that the steps we have  taken  will  prevent
infringement or misappropriation of our intellectual property rights.

Our  end-user  licenses are designed to prohibit  unauthorized  use,  copying or
disclosure of our software and technology in the United States, Israel and other
foreign countries. However, these provisions may be unenforceable under the laws
of some jurisdictions and foreign  countries.  Unauthorized third parties may be
able to copy some portions of our products or reverse engineer or obtain and use
information and technology  that we regard as  proprietary.  Third parties could
also independently develop competing technology or design around our technology.
If we are unable to  successfully  detect  infringement  and/or to  enforce  our
rights to our technology,  we may lose  competitive  position in the market.  We
cannot assure you that our means of protecting our intellectual  property rights
in the United  States,  Israel or elsewhere  will be adequate or that  competing

                                       26
<PAGE>
companies will not independently develop similar technology.  In addition,  some
of our  licensed  users  may  allow  additional  unauthorized  users  to use our
software,  and if we do not detect  such use,  we could lose  potential  license
fees.

OUR TECHNOLOGY AND OTHER  INTELLECTUAL  PROPERTY MAY BE SUBJECT TO  INFRINGEMENT
CLAIMS.   Substantial   litigation   regarding   technology   rights  and  other
intellectual  property  rights exists in the software  industry both in terms of
infringement and ownership  issues.  A successful claim of patent,  copyright or
trademark infringement or conflicting ownership rights against us could cause us
to make changes in our business or significantly  harm our business.  We believe
that our  products do not  infringe the  intellectual  property  rights of third
parties.  However,  we cannot  assure  you that we will  prevail  in all  future
intellectual property disputes.

We expect that  software  products may be  increasingly  subject to  third-party
infringement  or ownership  claims as the number of  competitors in our industry
segment grows and the  functionality of products in different  industry segments
overlaps.  Third  parties  may  make a  claim  of  infringement  or  conflicting
ownership  rights  against us with respect to our products and  technology.  Any
claims, with or without merit, could:

     *    be time-consuming to defend;
     *    result in costly litigation;
     *    divert management's attention and resources; or
     *    cause product shipment delays.

Further,  if an infringement or ownership claim is successfully  brought against
us, we may have to pay damages or royalties,  enter into a licensing  agreement,
and/or  stop  selling  the product or using the  technology  at issue.  Any such
royalty or licensing agreements may not be available on commercially  reasonable
terms,  if at all. From time to time, we may encounter  disputes over rights and
obligations  concerning  intellectual  property.  We also  indemnify some of our
customers  against claims that our products  infringe the intellectual  property
rights of others.  We have only conducted a partial search for existing  patents
and other intellectual property registrations, and we cannot assure you that our
products  do not  infringe  any issued  patents.  In  addition,  because  patent
applications  in the United States and Israel are not publicly  disclosed  until
the patent is issued, applications may have been filed which would relate to our
products.

ANY FUTURE  ACQUISITIONS OF COMPANIES OR TECHNOLOGIES  MAY RESULT IN DISTRACTION
OF OUR MANAGEMENT AND DISRUPTIONS TO OUR BUSINESS.  Although not currently under
consideration,  we may acquire or make investments in complementary  businesses,
technologies, services or products if appropriate opportunities arise. From time
to time we may engage in discussions and negotiations  with companies  regarding
our acquiring or investing in such companies' businesses,  products, services or
technologies.  We cannot make assurances that we will be able to identify future
suitable  acquisition or investment  candidates,  or if we do identify  suitable
candidates,  that we will be able to make such  acquisitions  or  investments on
commercially  acceptable terms or at all. Our management has limited  experience
in  acquiring  companies  or  technologies.  If we  acquire or invest in another
company,  we  could  have  difficulty  assimilating  that  company's  personnel,
operations,  technology or products and service offerings.  In addition, the key
personnel  of the  acquired  company  may  decide  not to  work  for  us.  These
difficulties  could disrupt our ongoing  business,  distract our  management and
employees, increase our expenses and adversely affect our results of operations.
Furthermore, we may incur indebtedness to pay for any future acquisitions. As of
the date of this  statement,  we have neither begun  discussions  nor entered an
agreement to make any such material investment or acquisition transaction.

FUTURE ACQUISITIONS MAY RESULT IN DILUTION TO OUR CURRENT  SHAREHOLDERS.  In the
future we may acquire complementary  business through the issuance of additional
ordinary  shares.  Additional  issuances of ordinary  shares could  decrease the
value of our ordinary  shares and reduce the net tangible  book value per share.
Consequently,  an acquisition in which we issue additional shares could actually
decrease the value of your investment in  ClickSoftware.  As of the date of this
statement,  we have neither begun  discussions  nor entered an agreement to make
any material acquisition that would result in the issuance of additional shares.

                                       27
<PAGE>
OUR BUSINESS MAY BECOME  INCREASINGLY  SUSCEPTIBLE TO NUMEROUS RISKS  ASSOCIATED
WITH  INTERNATIONAL  OPERATIONS.  Significant  portions of our operations  occur
outside the United States. Our facilities are located in North America,  Israel,
the European continent,  and the United Kingdom,  and our executive officers and
other  key  employees  are  dispersed  throughout  the  world.  This  geographic
dispersion  requires  significant  management  resources  that may place us at a
disadvantage  compared  to our  locally  based  competitors.  In  addition,  our
international operations are generally subject to a number of risks, including:


     *    foreign currency exchange rate fluctuations;
     *    longer sales cycles;
     *    multiple, conflicting and changing governmental laws and regulations;
     *    expenses associated with customizing products for foreign countries;
     *    protectionist   laws  and   business   practices   that  favor   local
          competition;
     *    difficulties in collecting  accounts  receivable;  and o political and
          economic instability.

We expect  international  revenues  to  continue  to account  for a  significant
percentage of total  revenues and we believe that we must continue to expand our
international  sales  and  professional  services  activities  in  order  to  be
successful.  Our international  sales growth will be limited if we are unable to
expand  our   international   sales   management   and   professional   services
organizations,  hire  additional  personnel,  customize  our  products for local
markets and establish relationships with additional international  distributors,
consultants  and other third  parties.  If we fail to manage our  geographically
dispersed organization,  we may fail to meet or exceed our business plan and our
revenues may decline.

WE ARE  INCORPORATED  IN ISRAEL  AND HAVE  IMPORTANT  FACILITIES  AND  RESOURCES
LOCATED IN  ISRAEL,  WHICH  COULD BE  NEGATIVELY  AFFECTED  DUE TO  MILITARY  OR
POLITICAL  TENSIONS.  We are incorporated  under the laws of the State of Israel
and our research and  development  facilities as well as  significant  executive
offices  are  located  in Israel.  Although  substantial  portions  of our sales
currently are to customers outside of Israel,  political,  economic and military
conditions in Israel could  nevertheless  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 and a state of hostility,
varying in degree and intensity,  has led to security and economic  problems for
Israel.  Since September 2000, a continuous  armed conflict with the Palestinian
authority has been taking place.

Despite  our  history of  avoiding  adverse  effects,  in the future we could be
adversely  affected by any major hostilities  involving Israel, the interruption
or curtailment of trade between Israel and its trading  partners,  a significant
increase in inflation,  or a  significant  downturn in the economic or financial
condition of Israel.  Despite past progress towards peace between Israel and its
Arab  neighbors,  the future of these peace efforts is  uncertain.  Several Arab
countries still restrict  business with Israeli  companies,  which may limit our
ability to make sales in those  countries.  We could be  adversely  affected  by
restrictive laws or policies directed towards Israel or Israeli businesses.

CERTAIN  OF OUR  OFFICERS  AND  EMPLOYEES  ARE  REQUIRED  TO SERVE IN THE ISRAEL
DEFENSE  FORCES AND THIS COULD  FORCE THEM TO BE ABSENT  FROM OUR  BUSINESS  FOR
EXTENDED  PERIODS.  David Schapiro,  our Executive Vice  President,  Markets and
Product,  and Hannan Carmeli,  our Senior Vice President,  Product  Services and
Operations,  as well as other male  employees  located  in Israel are  currently
obligated to perform up to 39 days of annual  reserve duty in the Israel Defense
Forces and are subject to being called for active military duty at any time. The
loss or extended  absence of any of our officers and key  personnel due to these
requirements could harm our business.

WE ARE SUBJECT TO A RECENTLY  ADOPTED NEW COMPANIES  LAW, WHICH HAS NOT YET BEEN
INTERPRETED.  Because we are incorporated under the laws of the State of Israel,
the Companies Law of Israel, which became effective on February 1, 2000, governs
your  rights as a  shareholder.  Certain  obligations  and  fiduciary  duties of
directors,  officers and  shareholders  under the new  Companies Law are new and

                                       28
<PAGE>
have not been  interpreted or reviewed by the Israeli courts.  In addition,  not
all of  the  regulations  have  been  promulgated  to  date.  As a  result,  our
shareholders  may have more  difficulty  and  uncertainty  in  protecting  their
interests  in the case of  actions by our  directors,  officers  or  controlling
shareholders  or  third  parties  than  would   shareholders  of  a  corporation
incorporated in a state or other jurisdiction in the United States.

THE RATE OF  INFLATION IN ISRAEL MAY  NEGATIVELY  IMPACT OUR COSTS IF IT EXCEEDS
THE RATE OF DEVALUATION OF THE NIS AGAINST THE DOLLAR.  Substantially all of our
revenues are  denominated  in dollars or are  dollar-linked,  but a  significant
portion of our  research  and  development  expense is  incurred  in New Israeli
Shekels  ("NIS")  and a portion of our  revenues  and  expenses  is  incurred in
British  Pounds and the European  Community  Euro. The results of our operations
are subject to  fluctuations  in these  exchange  rates which are  influenced by
various global economic factors,  including  inflation rates and economic growth
within each nation. In 2000, 27%, and in 2001, 24% of our costs were incurred in
NIS.  As a result,  we are  exposed  to the risk that the rate of  inflation  in
Israel will exceed the rate of  devaluation of the NIS in relation to the dollar
or that the timing of this devaluation  will lag behind inflation in Israel.  In
that event,  the dollar cost of our  operations  in Israel will increase and our
dollar-measured results of operations will be adversely affected.

WE ARE AN INTERNATIONAL COMPANY AND OUR INTERNATIONAL  OPERATIONS ARE EXPANDING.
OUR RISK EXPOSURE TO FOREIGN CURRENCY FLUCTUATIONS IS INCREASING, AND WE MAY NOT
BE ABLE TO FULLY  MITIGATE  THE RISK.  Our revenue from the UK has grown both in
absolute  dollar  basis  as well  as a  percentage  of  total  revenues.  We are
expanding  operations  in  other  areas  of  Europe,  and  income  and  expenses
recognized in the European  Community  Euro will  increase.  In 2001, 26% of our
costs  were  incurred  in GBP and  Euro.  We incur a  portion  of our  expenses,
principally  salaries and related personnel expenses in Israel, in NIS. In 2001,
24% of our costs were  incurred  in NIS.  We are also  experiencing  a growth in
revenue and expenses in Israel, and we anticipate recognizing revenue from other
international  sources.  Presently our risk to foreign currency  fluctuations is
minimal, but if our foreign accounts receivable balances increase, the risk will
increase.  We cannot assure that we will be able to adequately protect ourselves
against such risk.

THE GOVERNMENT PROGRAMS IN WHICH WE CURRENTLY PARTICIPATE AND TAX BENEFITS WHICH
WE CURRENTLY  RECEIVE  REQUIRE US TO SATISFY  PRESCRIBED  CONDITIONS  AND MAY BE
DELAYED,  TERMINATED OR REDUCED IN THE FUTURE. THIS WOULD INCREASE OUR COSTS AND
TAXES.  We receive grants from the Government of the State of Israel through the
Office of the Chief  Scientist  of the  Ministry of Industry  and Trade,  or the
Chief Scientist,  for the financing of a significant portion of our research and
development  expenditures in Israel,  and we may apply for additional  grants in
the future. We cannot assure that we will continue to receive grants at the same
rate or at all. The Chief  Scientist  budget has been subject to reductions that
may affect the  availability of funds for Chief Scientist  grants in the future.
The  percentage  of our research and  development  expenditures  financed  using
grants from the Chief Scientist may decline in the future, and the terms of such
grants may become less  favorable.  In connection  with research and development
grants received from the Chief  Scientist,  we must make royalty payments to the
Chief Scientist on the revenues derived from the sale of products,  technologies
and services  developed with the grants from the Chief  Scientist.  From time to
time,  the Government of Israel changes the rate of royalties we must pay, so we
are  unable to  accurately  predict  this  rate.  In  addition,  our  ability to
manufacture  products or transfer technology outside Israel without the approval
of the Chief  Scientist is restricted  under law. Any manufacture of products or
transfer  of  technology  outside  Israel  will also  require the company to pay
increased  royalties to the Chief Scientist up to 300%. We currently conduct all
of our manufacturing activities in Israel and intend to continue doing so in the
foreseeable  future and  therefore do not believe  there will be any increase in
the amount of royalties we pay to the Chief  Scientist.  Currently the office of
the Chief  Scientist  does not  consider  the  licensing  of our software in the
ordinary  course of  business a transfer of  technology  and we do not intend to
transfer any technology  outside of Israel.  Consequently,  we do not anticipate
having to pay increased  royalties to the Chief  Scientist  for the  foreseeable
future. In connection with our grant applications,  we have made representations
and  covenants to the Chief  Scientist  regarding  our research and  development

                                    29
<PAGE>
activities  in Israel.  The funding  from the Chief  Scientist is subject to the
accuracy of these  representations and covenants.  If we fail to comply with any
of these conditions, we could be required to refund payments previously received
together with interest and penalties and would likely be denied receipt of these
grants thereafter.

WE ANTICIPATE RECEIVING TAX BENEFITS FROM THE GOVERNMENT OF THE STATE OF ISRAEL,
HOWEVER  THESE  BENEFITS MAY BE DELAYED,  REDUCED OR  TERMINATED  IN THE FUTURE.
Pursuant to the Law for the Encouragement of Capital Investments, the Government
of the State of Israel  through  the  Investment  Center has  granted  "Approved
Enterprise"  status  to  three  of our  existing  capital  investment  programs.
Consequently,  we are eligible  for certain tax  benefits for the first  several
years in which we  generate  taxable  income.  We have  not,  however,  begun to
generate taxable income for purposes of this law and we do not expect to utilize
these  tax  benefits  for the near  future.  Once we begin to  generate  taxable
income,  our  financial   condition  could  suffer  if  our  tax  benefits  were
significantly  reduced.  The benefits  available to an approved  enterprise  are
dependent upon the fulfillment of certain conditions and criteria. If we fail to
comply with these  conditions  and  criteria,  the tax benefits  that we receive
could be partially or fully canceled and we could be forced to refund the amount
of the benefits we received,  adjusted for inflation and interest.  From time to
time, the Government of Israel has discussed  reducing or limiting the benefits.
We cannot assess whether these benefits will be continued in the future at their
current levels or at all.

IT MAY BE  DIFFICULT  TO ENFORCE A U.S.  JUDGMENT  AGAINST US, OUR  OFFICERS AND
DIRECTORS AND THE ISRAELI  ACCOUNTANTS  NAMED AS EXPERTS IN THIS STATEMENT OR TO
ASSERT U.S.  SECURITIES LAWS CLAIMS IN ISRAEL OR SERVE PROCESS ON  SUBSTANTIALLY
ALL OF OUR OFFICERS AND DIRECTORS AND THESE ACCOUNTANTS.  We are incorporated in
Israel and maintain  significant  operations  in Israel.  Some of our  executive
officers  and  directors  and the Israeli  accountants  named as experts in this
statement  reside outside of the United States and a significant  portion of our
assets and the assets of these  persons are located  outside the United  States.
Therefore,  it may be difficult for an investor,  or any other person or entity,
to enforce a U.S. court judgment against us or any of those persons or to effect
service of process upon these persons in the United States, based upon the civil
liability  provisions of the U.S.  federal  securities laws in an Israeli court.
Additionally,  it may be  difficult  for an  investor,  or any  other  person or
entity,  to enforce civil  liabilities  under U.S.  federal  securities  laws in
original actions instituted in Israel. We have appointed ClickSoftware Inc., our
U.S.  subsidiary,  as our agent to  receive  service  of  process  in any action
against us arising out of our original June 22, 2000 initial public offering. We
have not  given  our  consent  for our agent to accept  service  of  process  in
connection with any other claim. Furthermore,  if a foreign judgment is enforced
by an Israeli court, it will be payable in NIS.

OUR OFFICERS,  DIRECTORS AND AFFILIATED  ENTITIES OWN A LARGE  PERCENTAGE OF OUR
COMPANY AND COULD SIGNIFICANTLY INFLUENCE THE OUTCOME OF ACTIONS. As of December
31, 2001, our executive  officers,  directors and entities  affiliated with them
beneficially owned approximately 33.6% of our outstanding ordinary shares. These
shareholders,  if acting together,  would be able to significantly influence all
matters  requiring  approval  by our  shareholders,  including  the  election of
directors.  This concentration of ownership may also have the effect of delaying
or  preventing a change of control of our  company,  which could have a material
adverse effect on our stock price.  These actions may be taken even if our other
investors oppose them.

WE ARE  SUBJECT  TO  ANTI-TAKEOVER  PROVISIONS  THAT  COULD  DELAY OR PREVENT AN
ACQUISITION  OF  US,  EVEN  IF  AN  ACQUISITION   WOULD  BE  BENEFICIAL  TO  OUR
SHAREHOLDERS. Provisions of Israeli corporate and tax law and of our articles of
association may have the effect of delaying, preventing or making more difficult
merger or other  acquisition  of us, even if doing so would be beneficial to our
shareholders.  In  addition,  any merger or  acquisition  of us will require the
prior  consent of the Chief  Scientist.  Israeli law  regulates  mergers,  votes
required to approve a merger,  acquisition  of shares  through tender offers and
transactions  involving significant  shareholders.  In addition, our articles of
association  provide for a staggered board of directors and for  restrictions on
business combinations with interested shareholders.  Any of these provisions may
make it more difficult to acquire our company. Accordingly, an acquisition of us
could  be  delayed  or  prevented   even  if  it  would  be  beneficial  to  our
shareholders.


                                       30
<PAGE>
OTHER ORDINARY  SHARES MAY BE SOLD IN THE FUTURE.  THIS COULD DEPRESS THE MARKET
PRICE FOR OUR ORDINARY  SHARES.  As of December 31, 2001, we had 26,246,454 (net
of 39,000  shares held in  treasury),  ordinary  shares  outstanding,  including
shares held by a trustee for issuance under outstanding options. In addition, as
of December 31, 2001, we had 1,789,804 ordinary shares issuable upon exercise of
outstanding  options,  and 2,164,857  additional  ordinary  shares  reserved for
issuance pursuant to our stock option plans and employee share purchase plan. If
our existing  shareholders or we sell a large number of our ordinary shares, the
price of our ordinary  shares could fall  dramatically.  Restrictions  under the
securities  laws limit the number of ordinary  shares  available for sale by our
shareholders  in the public market.  We have filed a  Registration  Statement on
Form S-8 to register for resale the ordinary  shares reserved for issuance under
our stock option plans.

OUR NEED FOR  ADDITIONAL  FINANCING  IS  UNCERTAIN,  AS IS OUR  ABILITY TO RAISE
FURTHER FINANCING IF REQUIRED. We believe that our current cash balances will be
sufficient to fund our expenses until we reach profitability. However, we cannot
assure you that we will  attain  sufficient  revenues  to  achieve  or  maintain
profitability,  particularly  given current  economic  conditions  and potential
reductions in  information  technology  spending by our current and  prospective
customers.  We may need to raise additional capital to finance our operations or
for strategic  purposes,  and we may do so by selling  additional equity or debt
securities or by increasing the size of our credit facility. If additional funds
are raised through the issuance of equity or debt  securities,  these securities
could have  rights;  preferences  and  privileges  senior to those of holders of
ordinary shares, and the terms of these securities could impose  restrictions on
our  operations.  The sale of additional  equity or convertible  debt securities
could result in additional dilution to our shareholders.  In addition, we cannot
be certain that  additional  financing  will be available in amounts or on terms
acceptable  to us,  if at  all.  If we are  unable  to  obtain  this  additional
financing,  we may be  required  to  reduce  the  scope of our  planned  product
development  and marketing  efforts,  which could harm our  business,  financial
condition or operating  results.  If the economy continues to weaken or, for any
other  reason,  we are unable to meet our business  goals,  we may have to raise
additional funds to respond to business  contingencies  and may include the need
to:

     *    fund additional marketing expenditures;
     *    develop new or enhance existing products and services;
     *    enhance our operating infrastructure;
     *    hire additional personnel;
     *    respond to competitive pressures;
     *    acquire complementary businesses or necessary technologies; or
     *    fund more rapid expansion.

WE CANNOT  ASSURE  YOU THAT  ADDITIONAL  FINANCING  WILL BE  AVAILABLE  ON TERMS
FAVORABLE  TO US, OR AT ALL.  If  adequate  funds are not  available  or are not
available  on  acceptable  terms,  our  ability  to fund  our  operations,  take
advantage of  unanticipated  opportunities,  develop or enhance our products and
services or otherwise  respond to competitive  pressures would be  significantly
limited. Additionally, prior to the issuance of additional equity or convertible
debt securities to entities  outside of Israel,  we will need to obtain approval
from the Chief  Scientist  of the State of Israel and there can be no  assurance
that we will be able to obtain this consent in the future.

IF WE ARE  CHARACTERIZED  AS A PASSIVE FOREIGN  INVESTMENT  COMPANY,  OUR UNITED
STATES  SHAREHOLDERS  WILL BE SUBJECT TO ADVERSE TAX  CONSEQUENCES.  If, for any
taxable year,  either,  (1) 75% or more of our gross income is passive income or
(2) 50% or more of the fair market value of our assets,  including cash (even if
held as working capital),  produce or are held to produce passive income, we may
be characterized as a "passive foreign  investment  company" ("PFIC") for United
States  federal  income tax purposes.  We do not believe that we currently are a
PFIC nor do we anticipate  that we will be  characterized  a PFIC in the future,
but, if we do, our  shareholders  will be subject to adverse  United  States tax
consequences.

If we were to be  treated  as a PFIC,  our  shareholders  will be  required,  in
certain circumstances, to pay an interest charge together with tax calculated at
maximum rates on certain "excess  distributions"  including any gain on the sale
of  ordinary  shares.  In order to avoid this tax  consequence,  they (1) may be

                                       31
<PAGE>
permitted to make a "qualified electing fund" election (however the company does
not currently intend to take the action necessary for our shareholders to make a
"qualified  electing  fund"  election,  in which case, in lieu of such treatment
they would be required to include in their taxable income certain  undistributed
amounts of our income) or (2) may elect to  mark-to-market  the ordinary  shares
and recognize ordinary income (or possible ordinary loss) each year with respect
to such investment and on the sale or other  disposition of the ordinary shares.
Prospective investors should consult with their own tax advisors with respect to
the tax  consequences  applicable  to them of investing in our ordinary  shares.

BUSINESS  INTERRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS.  Our operations are
vulnerable to interruption by fire, earthquake,  power loss,  telecommunications
failure and other events beyond our control.  In particular,  we have operations
in the San Francisco Bay Area,  an area that is known to be  susceptible  to the
risk of  earthquakes.  We do not have a detailed  disaster  recovery  plan.  Our
facilities  in the State of  California  are  currently  subject  to  electrical
blackouts as a consequence of a shortage of available  electrical  power. In the
event these blackouts  continue or increase in severity,  they could disrupt the
operations of our affected facilities.  In addition,  we do not carry sufficient
business  interruption  insurance to compensate us for losses that may occur and
any losses or damages incurred by us could have a material adverse effect on our
business.

OUR STOCK PRICE COULD BE VOLATILE AND COULD DECLINE SUBSTANTIALLY. The stock
market has experienced significant price and volume fluctuations, and the market
prices of technology companies have been highly volatile. The price at which our
ordinary shares trades is likely to be volatile and may fluctuate substantially
due to factors such as:

     *    announcements of technological innovations;
     *    announcements relating to strategic relationships;
     *    conditions affecting the software and Internet industries;
     *    trends related to the  fluctuations  of stock prices of companies such
          as ours;
     *    our historical and anticipated quarterly and annual operating results;
     *    variations   between  our  actual  results  and  the  expectations  of
          investors or published reports or analyses of ClickSoftware;
     *    announcements  by us or others  affecting  our  business,  systems  or
          expansion plans; and
     *    general conditions and trends in technology industries.

In the past,  securities  class  action  litigation  has often  been  instituted
against  companies  following periods of volatility in the market price of their
securities.  This type of  litigation  could result in  substantial  costs and a
diversion of management's attention and resources.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY EXCHANGE RATE RISK. We develop products in Israel and sell them
primarily in North America and Europe. As a result,  our financial results could
be affected by factors  such as changes in foreign  currency  exchange  rates or
weak economic  conditions in foreign markets. As most of our sales are currently
made in U.S. dollars, a strengthening of the dollar could make our products less
competitive in foreign  markets.  Our interest income is sensitive to changes in
the general level of U.S. interest rates, particularly since the majority of our
investments are in short-term  instruments.  We regularly assess these risks and
have established  policies and business practices to protect against the adverse
effects  of  these  and  other  potential  exposures.  As a  result,  we do  not
anticipate  material losses as a result of foreign  exchange rate  fluctuations.
Due to the  short-term  nature of our term  investments,  we have concluded that
there is no material market risk exposure.  Therefore,  no quantitative  tabular
disclosures are required. Additionally, although we do not presently participate
in hedging contracts related to foreign currency exchange rates, we may do so in
the future to protect against rate  fluctuations  affecting our foreign currency
accounts  receivable  balances.   We  do  not  participate  in  any  speculative
investments.

                                       32
<PAGE>
INTEREST RATE RISK. As of December 31, 2001, we had cash and cash equivalents of
$10.0 million which  consist of cash and highly liquid  short-term  investments.
Our  short-term  investments  will decline in value by an  immaterial  amount if
market interest rates increase,  and,  therefore,  our exposure to interest rate
changes has been immaterial. Declines of interest rates over time will, however,
reduce our interest income from our short-term investments.

As of December 31, 2001, we had total  short-term  debt of $89,000 and long-term
debt net of current  maturities of $21,000 which bear interest at rates that are
linked to LIBOR or the Israeli  consumer price index. As of December  31,2001 we
had $1.0 million unsecured line of credit.

The following table provides information about our investment  portfolio,  cash,
and long-term  debts as of December 31, 2001 and presents  principal  cash flows
and related weighted averages interest rates by expected maturity dates.
<TABLE>
<CAPTION>


                                                                                       TOTAL CARRYING
YEAR OF MATURITY                                     2002       2003     AFTER 2003         VALUE
(in thousands of dollars)
A) CASH AND CASH EQUIVALENTS AND INVESTMENT PORTFOLIO:
------------------------------------------------------
<S>                                                  <C>        <C>        <C>               <C>
Cash and equivalents                                 $ 6,524     -            -             $  6,524
  Average interest rate                                 2.0%     -            -                 2.0%

Commercial Papers                                    $   301     -            -             $    301
  Average interest rate                                 2.4%     -            -                 2.4%
Taxable Auction Securities                           $ 1,600     -            -             $  1,600
  Average interest rate                                 2.2%     -            -                 2.2%
Asset backed Securities                              $ 1,545     -            -             $  1,545
  Average interest rate                                 2.9%     -            -                 2.9%
B) LONG-TERM DEBTS:
-------------------
Bank Loan                                            $    30     -            -             $     30
  Average interest rate                                 L+1%     -            -                 L+1%
N.I.S indexed loans                                  $     5    $      2      -             $      7
  Average interest rate                                 5.4%        5.4%      -                 5.4%
Leases US$                                           $    15    $      1      -             $     16
  Average interest rate                                 7.1%        7.1%      -                 7.1%
Leases GBP                                           $    18    $     17    $       1       $     36
  Average interest rate                                 3.5%        3.5%         3.5%           3.5%

</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements (as such term is defined
in Section 27A of the  Securities  Act of 1933 and Section 21E of the Securities
Exchange  Act of 1934)  and  information  relating  to us that are  based on the
beliefs  of our  management  as well  as  assumptions  made  by and  information
currently available to our management, including statements related to products,
markets,  and future  results of operations and  profitability,  and may include
implied statements concerning market acceptance of our products, and our growing
leadership role in the marketplace.  In addition,  when used in this report, the
words  "likely,"  "will,"  "suggests,"  "may," "would,"  "could,"  "anticipate,"
"believe,"   "estimate,"  "expect,"  "intend,"  "plan,"  "predict"  and  similar
expressions  and their  variants,  as they relate to us or our  management,  may
identify forward-looking statements. Such statements reflect the judgment of the
Company as of the date of this annual report on Form 10-K with respect to future
events,  the outcome of which is subject to certain  risks,  including  the risk

                                       33
<PAGE>
factors set forth herein,  which may have a significant  impact on our business,
operating  results or financial  condition.  Investors are cautioned  that these
forward-looking statements are inherently uncertain. Should one or more of these
risks or  uncertainties  materialize,  or should  underlying  assumptions  prove
incorrect,  actual results or outcomes may vary  materially from those described
herein.   ClickSoftware  undertakes  no  obligation  to  update  forward-looking
statements, whether as a result of new information, future events or otherwise.

ITEM 8. FINANCIAL STATEMENTS

     The following consolidated financial statements, and the related notes
thereto, of ClickSoftware Technologies Ltd. and the Report of Independent
Auditors are filed as a part of this Form 10-K.


    Report of Independent Public Accountants....................   35
    Consolidated Balance Sheets.................................   36
    Consolidated Statements of Operations and Comprehensive
      Loss......................................................   37
    Consolidated Statements of Changes in Shareholders' Equity..   38
    Consolidated Statements of Cash Flows.......................   39
    Notes to Consolidated Financial Statements..................   40

                                       34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Shareholders of
ClickSoftware Technologies Ltd.



          We have  audited  the  accompanying  consolidated  balance  sheets  of
ClickSoftware  Technologies  Ltd. (an Israeli  Corporation) and its subsidiaries
(the  Company) as of December  31, 2000 and 2001,  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, 2001.  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 and in Israel,  including those  prescribed under
the Auditors' Regulations (Auditor's Mode of Performance), 1973. 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 the 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 ClickSoftware  Technologies Ltd. and its subsidiaries as of December
31,  2000 and 2001,  and the  consolidated  results  of  operations,  changes in
shareholders'  equity and cash  flows for each of the three  years in the period
ended  December 31, 2001, in conformity  with  accounting  principles  generally
accepted in the United States.



                             /s/ Luboshitz Kasierer
                             ------------------------------------
                                 Luboshitz Kasierer
                                 Arthur Andersen

30 January 2002
Tel-Aviv, Israel


                                       35
<PAGE>
<TABLE>
<CAPTION>

                         CLICKSOFTWARE TECHNOLOGIES LTD.
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

                                                                                          DECEMBER 31,
                                                                                     2000             2001
                                                                              ----------------- ----------------

ASSETS
CURRENT ASSETS:
<S>                                                                                   <C>              <C>
  Cash and cash equivalents (note 3)                                                  $  4,438         $  8,125
  Short-term investments (note 4)                                                       16,878            1,846
    Trade receivables, net (note 5)                                                      4,375            6,623
  Other receivables and prepaid expenses (note 6)                                        1,466            1,671
                                                                              ----------------- ----------------
     Total current assets                                                               27,157           18,265
Property and equipment, net (note 7)                                                     3,772            3,450
Severance pay deposits (note 11)                                                           526              652
                                                                              ----------------- ----------------
     Total assets                                                                     $ 31,455         $ 22,367
                                                                              ----------------- ----------------


LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short-term debt (note 8)                                                            $    146         $    140
  Accounts payable and accrued expenses (note 9)                                         3,274            2,785
  Deferred revenues                                                                        127               68
                                                                              ----------------- ----------------
     Total current liabilities                                                           3,547            2,993
                                                                              ----------------- ----------------

LONG-TERM LIABILITIES
  Long-term debt (note 10)                                                                 103               21
  Accrued severance pay (note 11)                                                        1,343            1,379
                                                                              ----------------- ----------------
     Total long-term liabilities                                                         1,446            1,400
                                                                              ----------------- ----------------
     Total liabilities                                                                   4,993            4,393
                                                                              ----------------- ----------------

COMMITMENTS AND CONTINGENCIES (NOTE 12)

SHAREHOLDERS' EQUITY: (NOTE 13)
Convertible Preferred shares of NIS 0.02 par value:
         Authorized -- 5,000,000 as of December 31, 2000
         and 2001;
         Issued and outstanding -- none as of
         December 31,2000 and 2001.                                                          -                -
Ordinary shares of NIS 0.02 par value:
         Authorized -- 100,000,000 as of December 31, 2000 and 2001; Issued --
         26,064,539 shares as of December 31, 2000 and 26,285,464 as of December
         31,2001.Outstanding-- 26,064,539 shares as of December 31,2000 and
         26,246,464 shares as of December 31, 2001.
                                                                                           100              101
Additional paid-in capital                                                              69,169           69,143
Deferred compensation                                                                  (1,120)            (401)
Accumulated deficit                                                                   (41,687)         (50,826)
Less Treasury stock at cost                                                                  -             (43)
                                                                              ----------------- ----------------
     Total shareholders' equity                                                         26,462           17,974
                                                                              ----------------- ----------------
     Total liabilities and shareholders' equity                                       $ 31,455         $ 22,367
                                                                              ================= ================


The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                       36
<PAGE>
<TABLE>
<CAPTION>
                         CLICKSOFTWARE TECHNOLOGIES LTD.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except share and per share amounts)

                                                                              YEAR ENDED DECEMBER 31,
                                                                       1999             2000            2001
                                                                ---------------- ---------------- --------------
Revenues (note 14):
<S>                                                                     <C>             <C>            <C>
  Software license                                                      $ 5,414         $ 10,500       $ 11,676
  Service and maintenance                                                 4,912            5,242          6,528
                                                                ---------------- ---------------- --------------
     Total revenues                                                      10,326           15,742         18,204
                                                                ---------------- ---------------- --------------

Cost of revenues:
  Software license                                                           71              272            352
  Service and maintenance                                                 4,299            5,156          5,418
                                                                ---------------- ---------------- --------------
     Total cost of revenues                                               4,370            5,428          5,770
                                                                ---------------- ---------------- --------------

                                                                ---------------- ---------------- --------------
     Gross profit                                                         5,956           10,314         12,434
                                                                ---------------- ---------------- --------------

Operating expenses:
  Research and development expenses                                       3,935            5,408          4,422
  Less - participation by the Chief Scientist
     of the Government of Israel (note 11)                                1,025            1,108          1,176
                                                                ---------------- ---------------- --------------
  Research and development expenses, net                                  2,910            4,300          3,246
  Sales and marketing expenses                                            8,274           14,106         13,391
  General and administrative expenses                                     1,759            4,397          4,854
  Reorganization costs                                                        -                -            294
  Share-based compensation                                                  738            1,237            437
                                                                ---------------- ---------------- --------------
     Total operating expenses                                            13,681           24,040         22,222
                                                                ---------------- ---------------- --------------
     Operating loss                                                     (7,725)         (13,726)        (9,788)
Interest and other income (expenses), net                                 (254)              680            649
                                                                ---------------- ---------------- --------------
     Net loss                                                         $ (7,979)       $ (13,046)       $(9,139)
                                                                ---------------- ---------------- --------------
Dividend related to convertible preferred shares
                                                                      $ (4,989)             $  -           $  -
                                                                ---------------- ---------------- --------------
Net loss attributable to ordinary shareholders                        $(12,968)       $ (13,046)       $(9,139)
                                                                ================ ================ ==============

 Basic and diluted net loss per share (note 2)                          $ (2.18)         $ (0.58)       $ (0.36)
                                                                ================ ================ ==============

 Shares used in computing basic and diluted net loss per share
                                                                      5,948,816       22,312,554     25,098,321
                                                                ================ ================ ==============

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                       37
<PAGE>
<TABLE>
<CAPTION>
                         CLICKSOFTWARE TECHNOLOGIES LTD.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                        (in thousands, except share data)

                                        NUMBER OF                                                           LESS COST
                           NUMBER OF   CONVERTIBLE             ADDITIONAL                    ACCUMULATED    OF
                           ORDINARY    PREFERRED      SHARE     PAID-IN         DEFERRED      DEFICIT       TREASURY
                            SHARES      SHARES       AMOUNT    CAPITAL        COMPENSATION                  SHARES         TOTAL
                         -----------------------------------------------------------------------------------------------------------
<C>                      <C>          <C>           <C>        <C>            <C>           <C>            <C>            <C>
Balance as of January
1, 1999                   7,208,816     11,667,812   $   65    $   20,265      $       -     $ (15,673)      $     -     $   4,657
Shares issued net of
issuance costs of $126            -      1,832,086        8        11,366              -              -            -        11,374
Dividend related to
convertible preferred                                                                                              -
shares                            -              -        -         4,989              -        (4,989)                          -
Employee options
exercised                         -              -        -            31              -              -            -            31
Deferred compensation             -              -        -         3,401        (3,401)              -            -             -
Amortization of
deferred compensation             -              -        -             -            738              -            -           738
Net loss                          -              -        -             -              -        (7,979)            -       (7,979)
                         -----------------------------------------------------------------------------------------------------------
Balance as of December
31, 1999                  7,208,816     13,499,898       73        40,052        (2,663)       (28,641)            -         8,821
Shares issued net of
issuance cost of 4,030    4,600,000              -       23        28,147              -              -            -        28,170
Conversion of
preferred shares         13,499,898   (13,499,898)        -             -              -              -            -             -
Warrants exercised          459,439              -        2           577              -              -            -           579
Employee options
exercised                   273,098              -        2           638              -              -            -           640
Expired options                   -              -        -         (306)            306              -            -             -
Employee Stock
purchase plan                23,288              -        -            61              -              -            -            61
Amortization of
deferred compensation             -              -        -             -          1,237              -            -         1,237
Net loss                          -              -        -             -              -       (13,046)            -      (13,046)
                         -----------------------------------------------------------------------------------------------------------
Balance as of December
31, 2000                 26,064,539              -   $  100    $   69,169      $ (1,120)     $ (41,687)            -     $ 26,462
Employee options
exercised                    62,020              -        -           119             -              -             -          119
Expired options                   -              -        -         (282)           282              -             -            -
Employee Stock
purchase plan               158,905              -        1           137             -              -             -          138
Amortization of
deferred compensation             -              -        -             -           437              -             -          437
Net loss                          -              -        -             -             -        (9,139)             -      (9,139)
Treasury Shares            (39,000)              -        -             -             -              -          (43)         (43)
Balance as of December
31, 2001                 26,246,464              -   $  101    $   69,143      $   (401)     $(50,826)       $  (43)     $ 17,974
                         -----------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                       38
<PAGE>
<TABLE>
<CAPTION>
                         CLICKSOFTWARE TECHNOLOGIES LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                                                          YEAR ENDED DECEMBER 31,
                                                                1999                2000               2001
                                                       ------------------- -------------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                             <C>                 <C>                <C>
Net loss                                                        $ (7,979)           $ (13,046)         $(9,139)

Adjustments to reconcile net loss to net cash used in operating activities:
Expenses not affecting operating cash flows:
  Depreciation                                                        484                  654              916
  Amortization of deferred compensation                               738                1,237              437
  Unrealized (gain) loss from                                           -                (258)              395
    investments
  Severance pay                                                        40                  346             (90)
  Other                                                               (8)                    -                -
Changes in operating assets and liabilities:
  Trade receivables                                               (1,925)                (409)          (2,248)
  Other receivables                                                  (26)              (1,001)            (205)
  Accounts payable and accrued expenses                             1,112                  475            (489)
  Deferred revenues                                                 1,057              (1,016)             (59)
                                                       ------------------- -------------------- ----------------

Net cash used in operating activities                             (6,507)             (13,018)         (10,482)
                                                       ------------------- -------------------- ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (purchase) of short-term investments
                                                                        -             (16,620)           14,637
Purchases of equipment                                              (732)              (2,928)            (594)
                                                       ------------------- -------------------- ----------------
Net cash provided by (used in) investing
  activities                                                        (732)             (19,548)           14,043
                                                       ------------------- -------------------- ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net)                                                  14                (174)              (6)
Long-term debt                                                         35                    -                -
Repayments of long-term debt                                        (147)                (110)             (82)
Net proceeds from issuance of Convertible Preferred
shares                                                             11,374                    -                -
Net proceeds from issuance of Ordinary
  shares                                                                -               28,170                -
Purchase of treasury shares                                             -                    -             (43)
Net proceeds from warrants exercised                                    -                  579                -
Employee and ESPP options exercised                                    31                  701              257
                                                       ------------------- -------------------- ----------------
Net cash provided by financing activities
                                                                   11,307               29,166              126
                                                       ------------------- -------------------- ----------------

Increase (decrease) in cash and cash
  equivalents                                                       4,068              (3,400)            3,687
Cash and cash equivalents at beginning
  of year                                                           3,770                7,838            4,438
                                                       ------------------- -------------------- ----------------
Cash and cash equivalents at end of year                          $ 7,838              $ 4,438           $8,125
                                                       =================== ==================== ================

Supplemental cash flow information
Cash paid for interest                                              $ 137                 $ 86             $ 22
                                                       =================== ==================== ================

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                       39
<PAGE>

                         CLICKSOFTWARE TECHNOLOGIES LTD.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                (INFORMATION AS OF DECEMBER 31, 2000 AND 2001 AND
              FOR THE YEAR ENDED DECEMBER 31, 1999, 2000 and 2001)
                            (IN THOUSANDS OF DOLLARS)

NOTE 1 -- GENERAL

          ClickSoftware Technologies Ltd. (the "Company" or "ClickSoftware") was
incorporated in Israel and is the world's leading provider of end-to-end service
optimization  software. The ClickSoftware Service Optimization suite consists of
CLICKSCHEDULE,  which enables  companies to automate and optimize  their service
resources;  CLICKANALYZE and CLICKPLAN,  which enables corporate decision makers
the  ability  to  intelligently   analyze  past  performance,   monitor  current
performance,  and  effectively  plan for future  service  needs;  and  CLICKFIX,
CLICKMOBILE,  and  SERVICEMARKETPLACE,   which  empowers  service  personnel  by
providing  real-time  information  and  solutions  for service  related  issues.
ClickSoftware  products  are  used  by a  wide  array  of  companies,  including
customers in the telecommunications,  utilities,  financial services, aerospace,
defense, semi-conductor, and home service.

          The Company has incurred net operating  losses since inception and, as
of December 31, 2001, had an accumulated  deficit of $50.8 million.  The Company
is subject to various risks  associated with companies in a comparable  stage of
development,   including   competition  from  substitute   products  and  larger
competitors,  dependence  on key  individuals,  and the  potential  necessity to
obtain adequate financing to support its growth.

          On June 22, 2000,  ClickSoftware completed the initial public offering
of its ordinary shares (the "IPO"). A total of 4,000,000  ClickSoftware ordinary
shares were sold to the public at a price of $7.00 per share.  Cash  proceeds to
ClickSoftware  net of $1.96 million in underwriting  discounts  before expenses,
were approximately $26.04 million. Concurrent with the IPO, all of the shares of
the Company's  Series A, Series B, Series C and Series D  convertible  preferred
stock were converted into shares of the Company's ordinary shares on a share for
share basis.

          On July 20, 2000, the IPO underwriters  exercised their  overallotment
option and purchased 600,000 additional  ordinary shares from ClickSoftware at a
price of $7.00 per share.  Cash proceeds to ClickSoftware net of $0.3 million in
underwriting discounts before expenses were approximately $3.9 million.

          In January 2001,  due to  macroeconomic  and capital  spending  issues
affecting the software industry, the Company instituted a reorganization program
to prioritize its initiatives,  focus on profit  contribution,  reduce expenses,
and  improve  efficiency.  This  reorganization  program  included  a  worldwide
workforce reduction and reorganization of certain business functions.

          In fiscal 2001, the Company  recorded  reorganization  costs and other
special  charges  classified as operating  expenses and  primarily  consisted of
salary, vacation reimbursement,  and severance pay. The following table provides
detailed information relating to the status of the reorganization  during fiscal
2001:

                                        (IN THOUSANDS)
                       Balance at                                     Balance at
                         January     Reorganization                    December
                         1,2001         Expense         Cash Payments   31,2001
       Workforce
       Reduction         $  0           $ 294             $ 294           $  0


          The consolidated financial statements include the financial statements
of the Company and its wholly  owned  subsidiaries  in the U.S.  (ClickSoftware,
Inc., a California corporation),  in the U.K. (ClickSoftware Europe Limited) and
in Belgium (ClickSoftware Belgium, N.V.). The subsidiaries are primarily engaged
in the sale and marketing of the Company's products within North America, Europe
and the rest of the world.

                                       40
<PAGE>
          The  accompanying  financial  statements  have been  prepared  in U.S.
dollars,  as the  currency  of the  primary  economic  environment  in which the
operations  of the  Company  are  conducted  is the  U.S.  dollar.  Most  of the
Company's  sales are made outside Israel in non-Israeli  currencies  (mainly the
U.S.  dollar).  A majority of the purchases of materials and components are made
outside Israel in non-Israeli  currencies.  In addition, most marketing expenses
are incurred  outside Israel,  primarily in U.S.  dollars.  Thus, the functional
currency of the Company is the U.S. dollar.

          Transactions and balances  originally  denominated in U.S. dollars are
presented  at  their  original  amounts.  Transactions  and  balances  in  other
currencies are remeasured  into U.S.  dollars in accordance  with principles set
forth in  Statements  of  Financial  Accounting  Standards  (SFAS) No. 52 of the
Financial Accounting Standards Board of the United States ("FASB"). Accordingly,
items have been remeasured as follows:

 - Monetary items -- at the current exchange rate in effect at balance sheet
   date.

 - Non-monetary items -- at historical exchange rates.

 - Revenue and expense items -- at exchange  rates  in  effect as  of  date  of
recognition of those items (excluding depreciation and other items deriving from
non monetary items).

          All exchange  gains and losses from the  aforementioned  remeasurement
(which are immaterial for each reported  period) are reflected in the statements
of operations.

          The representative  rate of exchange of the U.S. dollar in relation to
the New  Israeli  Shekel  ("NIS") at  December  31, 2001 - U.S.$1.00 = NIS 4.416
(December 31, 2000 = NIS 4.041).


NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

          The  financial  statements  have  been  prepared  in  conformity  with
accounting principles generally accepted in the U.S. The significant  accounting
policies followed in the preparation of the financial  statements,  applied on a
consistent basis, are as follows:

PRINCIPLES OF CONSOLIDATION

          The financial  statements  include the accounts of the Company and its
wholly owned subsidiaries.  Material intercompany balances and transactions have
been eliminated.

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  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

          For the purpose of the statements of cash flows, the Company considers
all highly liquid investments purchased with maturity of three months or less to
be cash equivalents.

SHORT-TERM INVESTMENTS

          Short-term securities are classified as "trading" and stated at market
value.  Gains and losses are included in interest and other income  (expense) in
accordance with the principles set forth in SFAS No.115.

                                       41
<PAGE>
CONCENTRATION OF CREDIT RISK

          Financial  instruments which potentially subject the company to credit
risk  consist  principally  of cash  instruments  and accounts  receivable.  The
Company maintains cash and cash equivalents and investments with major financial
institutions  and  limits the amount of credit  exposure  with any  institution.
Credit risk with  respect to accounts  receivables  are limited due to the large
number of customers and ongoing credit  evaluations  performed by the Company in
regard to its customers and maintaining allowances for potential credit losses.

PROPERTY AND EQUIPMENT

          Property  and  equipment is stated at cost.  Depreciation  is computed
using the  straight-line  method over the estimated  useful lives of the assets,
ranging  from 3 to 16 years.  Leasehold  improvements  are  amortized  using the
straight-line  method,  over the  shorter of the lease term,  including  renewal
options, or the useful lives of the improvements.

SOFTWARE RESEARCH AND DEVELOPMENT COSTS

          Software   research  and  development  costs  incurred  prior  to  the
establishment  of  technological   feasibility  are  included  in  research  and
development  expenses.   The  Company  defines  establishment  of  technological
feasibility  as the completion of a working model.  Software  development  costs
incurred  subsequent to the establishment of technological  feasibility  through
the period of general market  availability of the products are  capitalized,  if
material,  after  consideration  of various  factors,  including net  realizable
value. To date, software  development costs that are eligible for capitalization
have not been material and have been expensed.

REVENUE RECOGNITION

          Software  license  revenues  are  recognized  in  accordance  with the
American Institute of Certified Public  Accountants  Statement of Position 97-2,
"Software Revenue Recognition," or SOP 97-2, as amended by Statement of Position
98-9.  Under SOP 97-2, we recognize  software  license  revenues when a software
license  agreement  has been  executed or a definitive  purchase  order has been
received  and the product has been  delivered  to our  clients,  no  significant
obligations  with  regard  to  implementation  remain,  the  fee  is  fixed  and
determinable,  and collectability is probable.  Revenue related to post-contract
support  (PCS)  arrangements  are  recognized  ratably  over  the  term  of  the
arrangements.  Revenues  related to services are  recognized as the services are
rendered.

BASIC AND DILUTED NET LOSS PER SHARE

          Basic and diluted net loss per share are presented in conformity  with
SFAS No. 128 "Earnings per Share" for all years presented. Basic and diluted net
loss per share have been computed using the weighted-average  number of ordinary
shares outstanding during the year,  excluding ordinary shares held by a trustee
reserved for allocation  against  employee options granted but not yet exercised
(see note 13).
<TABLE>
<CAPTION>
                                                                        FOR THE YEAR ENDED DECEMBER 31,
                                                                      1999            2000            2001
                                                                 ---------------- -------------- ---------------
                                                                (IN THOUSANDS EXCEPT SHARE DATA AND SHARE NUMBERS)

<S>                                                                   <C>            <C>              <C>
Net loss attributable to ordinary shareholders                        $ (12,968)     $ (13,046)       $ (9,139)
Basic and diluted:
  Weighted average shares used in computing
   basic and diluted net loss per ordinary share                       5,948,816     22,312,554      25,098,321
                                                                 ================ ============== ===============
  Basic and diluted net loss per Ordinary share                       $   (2.18)     $   (0.58)       $  (0.36)
                                                                 ================ ============== ===============
</TABLE>
          All convertible  preferred shares,  warrants for convertible preferred
shares, outstanding share options and shares issued and reserved for outstanding
share options have been excluded from the  calculation  of basic and diluted net
loss per  share  because  all such  securities  are  antidilutive  for all years
presented.  The total number of shares  excluded from the  calculations of basic
and diluted net loss per share were 16,577,409,  2,761,049 and 3,672,383,  as of
December 31, 1999, 2000 and 2001, respectively.

                                       42
<PAGE>
SHARE-BASED COMPENSATION

          SFAS No. 123,  "Accounting for Stock-Based  Compensation"  permits the
use of either a fair value based method of accounting  or the method  prescribed
in  Accounting  Principles  Board Opinion 25 ("APB 25"),  "Accounting  for Stock
Issued to  Employees"  to account  for  stock-based  compensation  arrangements.
Companies  that elect to employ the method  prescribed by APB 25 are required to
disclose  the pro forma net loss that  would have  resulted  from the use of the
fair value based method.  The Company has elected to account for its share-based
compensation  arrangements  under the  provisions of APB 25,  including the FASB
interpretation  No. 44,  "Accounting  for certain  transactions  involving Stock
Compensation - an  interpretation  of APB 25", and accordingly,  has included in
note 13 the pro forma disclosures required under SFAS No. 123.

FAIR VALUE OF FINANCIAL INSTRUMENTS

          Unless otherwise  noted, the carrying amount of financial  instruments
approximates fair value.

INCOME TAXES

          The  Company  accounts  for  income  taxes,  in  accordance  with  the
provisions of SFAS 109 "Accounting for Income Taxes," under the liability method
of accounting.  Under the liability method,  deferred taxes are determined based
on the differences  between the financial  statement and tax basis of assets and
liabilities at enacted tax rates in effect in the year in which the  differences
are expected to reverse.  Valuation allowances are established,  when necessary,
to reduce deferred tax assets to amounts expected to be realized.

RECENT ACCOUNTING PRONOUNCEMENTS

          In  July  2001,  the  Financial   Accounting  Standards  Board  issued
Statements  of Financial  Accounting  Standards No. 141,  Business  Combinations
("SFAS 141") and No. 142,  Goodwill and Other  Intangible  Assets  ("SFAS 142").
SFAS 141 requires all business combinations initiated after June 30, 2001, to be
accounted for using the purchase method. Under SFAS 142, goodwill and intangible
assets with indefinite lives are no longer  amortized but are reviewed  annually
(or more frequently if impairment  indicators  arise) for impairment.  All other
intangible  assets will  continue to be amortized  over their  estimated  useful
lives. The amortization  provisions of SFAS 142 apply to goodwill and intangible
assets  acquired  after June 30, 2001.  With respect to goodwill and  intangible
assets acquired prior to July 1, 2001, the Company is required to adopt SFAS 142
effective January 1, 2002. The adoption of SFAS No. 142 will not have a material
effect on the Company's consolidated financial statements.

          In August  2001,  the  Financial  Accounting  Standards  Board  issued
Statement  of  Financial  Accounting  Standards  No.  144,  Accounting  for  the
Impairment  or Disposal of Long-Lived  Assets  ("SFAS  144").  Although SFAS 144
supersedes  FASB  Statement  No. 121, it retains  the  requirements  of SFAS 121
regarding  recognition of impairment  loss for long-lived  assets to be held and
used (based on  undiscounted  cash flows) and  resolves  certain  implementation
issues.  Also, the accounting model used in SFAS 121 for long-lived assets to be
disposed of by sale  (lower of carrying  amount or fair value less cost to sell)
is broadened by SFAS 144 to include  discontinued  operations and supersedes APB
Opinion No. 30. Therefore, discontinued operations will no longer be measured on
a net  realizable  value  basis and future  operating  losses  will no longer be
recognized  before  they  occur.  SFAS 144 also  broadens  the  presentation  of
discontinued  operations  to include a  component  of an entity  (rather  than a
segment of a business).  The  provisions of SFAS 144 are effective for financial
statements  issued for fiscal years  beginning  after  December  15,  2001,  and
interim  periods within those years.  The Company  believes that the adoption of
SFAS 144 will not have a material impact on the Company's consolidated financial
statements.

                                       43
<PAGE>
<TABLE>
<CAPTION>
NOTE 3 -- CASH AND CASH EQUIVALENTS

                                                                                         DECEMBER 31,
                                                                                      2000           2001
                                                                              --------------- -------------
                                                                                         (in thousands)
<S>                                                                                 <C>           <C>
In U.S. dollars                                                                     $ 3,470       $ 7,784
In British Pounds                                                                       436           336
In NIS                                                                              $   532       $     5
                                                                              --------------- -------------
                                                                                    $ 4,438       $ 8,125
                                                                              --------------- -------------

         The cash equivalents bear an average annual interest rate of 1.8%.

NOTE 4 - SHORT-TERM INVESTMENTS
                                                                                        DECEMBER 31,
                                                                                    2000           2001
                                                                              --------------- -------------
                                                                                         (in thousands)

Asset-backed Securities (average annual interest rate of 2.9%)                      $  5,440      $  1,545
Euro Dollar Bonds                                                                      5,121             -
Taxable Securities                                                                     4,026             -
Corporate Bonds                                                                        2,291             -
Commercial Papers                                                                   $      -      $    301
                                                                              --------------- -------------
                                                                                    $ 16,878      $  1,846
                                                                              =============== =============


The Short-term investments bear an average annual interest rate of 2.8%.

NOTE 5 - ALLOWANCE FOR DOUBTFULL ACCOUNTS
                                                                                      DECEMBER 31,
                                                                                   2000           2001
                                                                              --------------- -------------
                                                                                         (in thousands)

Balance at Beginning of Year                                                        $    130       $ 742
Charged to expenses                                                                    1,109       2,035
Deductions                                                                               497       1,865
                                                                              --------------- -------------
Balance at Year end                                                                 $    742      $  912
                                                                              =============== =============



NOTE 6 - OTHER RECEIVABLES AND PREPAID EXPENSES
                                                                                      DECEMBER 31,
                                                                                   2000           2001
                                                                              --------------- -------------
                                                                                         (in thousands)
Government participations and other government receivables                          $    421      $    329
Employees                                                                                 78            58
Other receivables and prepaid expenses                                                   967          1284
                                                                              --------------- -------------
                                                                                    $  1,466      $  1,671
                                                                              =============== =============
</TABLE>
                                       44
<PAGE>
<TABLE>
<CAPTION>
NOTE 7 -- PROPERTY AND EQUIPMENT
                                                                                      DECEMBER 31,
                                                                                    2000           2001
                                                                              --------------- -------------
                                                                                     (in thousands)
<S>                                                                                 <C>           <C>
Cost
Computers and office equipment                                                      $  4,264      $  4,916
Leasehold improvements                                                                 1,551         1,664
Motor vehicles                                                                           580           409
                                                                              --------------- -------------

                                                                                    $  6,395      $  6,989
Accumulated Depreciation                                                               2,623         3,539
                                                                              --------------- -------------
NET BOOK VALUE                                                                      $  3,772      $  3,450
                                                                              =============== =============

          For the  years  ended  December  31,1999,  2000 and 2001  depreciation
expense was $484,000, $654,000 and 916,000, respectively.

NOTE 8 -- SHORT-TERM DEBT
                                                                                      DECEMBER 31,
                                                                                   2000           2001
                                                                              --------------- -------------
                                                                                     (in thousands)

Short-term debt                                                                     $      -      $     72
Current maturities on long-term debt (note 10)                                           146            68
                                                                              --------------- -------------
                                                                                    $    146      $    140
                                                                              =============== =============

NOTE 9 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
                                                                                      DECEMBER 31,
                                                                                   2000           2001
                                                                              --------------- -------------
                                                                                     (in thousands)

Suppliers                                                                           $  1,335      $    732
Employee and related expenses                                                          1,075           941
Accrued royalties                                                                        389           567
Other                                                                                    475           545
                                                                              --------------- -------------
                                                                                    $  3,274      $  2,785
                                                                              =============== =============

NOTE 10 -- LONG-TERM DEBT
                                                                                      DECEMBER 31,
                                                                                   2000           2001
                                                                              --------------- -------------
                                                                                     (in thousands)
Bank Loans
  In U.S. dollars                                                                   $    113      $     46
  In British Pounds                                                                       89            36
  Linked to the Israeli CPI                                                               47             7
                                                                              --------------- -------------
                                                                                    $    249      $     89
Less - current maturities (note 8)                                                       146            68
                                                                              --------------- -------------
                                                                                    $    103      $     21
                                                                              =============== =============
</TABLE>
          A U.S.  dollar loan in the amount of $30,000 bears annual  interest of
LIBOR plus 1% (3% as of December 31, 2001). The loan, linked to the Israeli CPI,
bears  interest at 5.4% per annum.  The loans in British  Pounds bear an average
annual interest rate of 3.5%.

                                       45
<PAGE>
Long-term  debt as of December 31, 2001,  the amount that is  repayable,  net of
current maturities, is as follows:
<TABLE>
<CAPTION>
                                                                                         DECEMBER 31,
                                                                                      2000           2001
                                                                              --------------- -------------
                                                                                       (in thousands)
<S>                                                                                 <C>           <C>
2002                                                                                $    72             -
2003                                                                                     26       $    20
2004                                                                                      5             1
                                                                              -------------- -------------
                                                                                    $   103       $    21
                                                                              ============== =============
</TABLE>

NOTE 11 - ACCRUED SEVERANCE PAY

          Under  Israeli  law and labor  agreements,  the Company is required to
make  severance  payments to its dismissed  employees and employees  leaving its
employment  in  certain  other   circumstances.   The  Company's  severance  pay
obligation to its  employees,  which is calculated on the basis of the salary of
each employee for the last month of the reported period  multiplied by the years
of such  employee's  employment,  is reflected  by the accrual  presented in the
balance sheet and is partially  funded by deposits with insurance  companies and
provident funds.

          Severance pay expenses amounted to $202,000, $562,000 and $266,000 for
the years ended December 31, 1999, 2000 and 2001 respectively.

NOTE 12 -- COMMITMENTS AND CONTINGENCIES

          In connection with its research and development,  the Company received
participation  payments  from  the  State  of  Israel  in the  total  amount  of
$5,370,000. In return for the Government of Israel participation, the Company is
committed  to pay  royalties  at a rate of 3% to 5% of  sales  of the  developed
product,  up to 100% --  150% of the  amount  of  grants  received  with  annual
interest of LIBOR as of the date of approval for programs approved from 1999 and
thereafter.  The Company has paid or accrued royalties through December 31, 2001
of $1,927,000.

          Long-term bank debt and  liabilities to banks in respect of guarantees
given for the benefit of the Company are secured by fixed charges on vehicles in
the amount of $62,000.

          The Company  operates  from leased  facilities  in Israel,  the United
States and the U.K.,  for periods  expiring in the years 2002 through 2005 (some
with a renewal option ending in May 2008) Minimum future rental payments,  as of
December 31 are as follows:

                                            (in thousands)
                                       ----------------------
                2002                                 $ 1,257
                2003                                   1,258
                2004                                   1,155
                2005                                     985
                                       ----------------------
                                                     $ 4,655
                                       ======================


Rent expense amounted to $722,000, $1,039,000 and $1,138,000 for the years ended
December 31, 1999, 2000 and 2001, respectively.

                                       46
<PAGE>
NOTE 13 -- SHAREHOLDERS' EQUITY

A. SHARE CAPITAL -- COMPRISES OF SHARES OF NIS 0.02 PAR VALUE.
<TABLE>
<CAPTION>
                                                                                NUMBER OF SHARES
                                       ---------------------------------------------------------------------------------------
                                                AUTHORIZED                    ISSUED (*)                OUTSTANDING (*)
                                               DECEMBER 31,                  DECEMBER 31,                DECEMBER 31,
                                           2000            2001           2000          2001          2000          2001
                                       -------------- --------------- ------------- ------------- ------------- --------------
<S>                                      <C>             <C>            <C>           <C>           <C>            <C>
Ordinary shares                          100,000,000     100,000,000    26,064,539    26,285,464    26,064,539     26,246,464
Special preferred shares                   5,000,000       5,000,000             -             -             -              -
                                       -------------- --------------- ------------- ------------- ------------- --------------
Total shares                             105,000,000     105,000,000    26,064,539    26,285,464    26,064,539     26,246,464
                                       ============== =============== ============= ============= ============= ==============

</TABLE>
----------------
(*) Includes shares reserved for allocation against employee options granted but
not yet exercised,  held by a trustee.  The total number of Ordinary shares held
by the trustee are 911,230 as of December 31,  2000,  and 791,031 as of December
31,2001.

          On March 20, 2000 the  shareholders of the Company  approved a 1 for 2
reverse  share  split and  thereafter  a share  dividend  of 1 share for every 5
outstanding ordinary shares and preferred  convertible shares. All references to
per share amounts and number of shares in these  financial  statements have been
retroactively  restated to reflect this reverse share split and share  dividend.
The combined  reversed  share split and share  dividend is the equivalent of a 3
for 5 reverse share split.

B. ISSUANCES

          In March  2000 the  Company  granted  a  warrant  to  purchase  76,200
ordinary  shares  at an  exercise  price of $0.01 per  share to an  investor  in
connection with the issuance of preferred  convertible  shares in December 1999.
This warrant was exercised in March 2000.

          In  February  2000,   15,329  ordinary  shares  were  allocated  to  a
consultant in accordance with an agreement for services  provided in 1997 valued
at $15,000. These shares were released from ordinary shares held in reserve by a
trustee.

          In March 2000,  a  shareholder  exercised a warrant to acquire  18,926
Ordinary shares at an exercise price of $0.58 per share.

          In June 2000, prior to the IPO, the March 1998 warrants were exercised
as follows:  289,131 shares at exercise price of $1.96 and 75,182 shares without
cash consideration.

          On June 22, 2000, the Company completed the initial public offering of
its ordinary shares (the "IPO"). A total of 4,000,000  ordinary shares were sold
to the public at a price of $7.00 per share.  Cash proceeds to ClickSoftware net
of $1.96 million in underwriting  discounts before expenses,  were approximately
$26.04 million.

          On July 20, 2000 the IPO  underwriters  exercised their  overallotment
Option and purchased 600,000 additional  ordinary shares from ClickSoftware at a
price of $7.00 per share.  Cash proceeds to ClickSoftware net of $0.3 million in
underwriting discounts before expenses, were approximately $3.9 million.

          During the year ended December 31, 2000,  certain employees  exercised
their options to acquire 631,091 ordinary shares. Of the ordinary shares 357,474
had been  previously  issued and held by the  trustee  and were  included in the
number of issued and outstanding  ordinary shares,  whereas 273,617  represented
newly issued shares.

          In November 2000,  certain employees  purchased 23,288 ordinary shares
at a price of $2.60 per share  according  to the 2000  Employee  Share  Purchase
Plan.

          During the year ended December 31, 2001,  certain employees  exercised
their options to acquire 150,287 ordinary shares.  Of the ordinary shares 88,267
had been  previously  issued and held by the  trustee  and were  included in the
number of issued and outstanding  ordinary  shares,  whereas 62,020  represented
newly issued shares.
                                       47
<PAGE>
          During the year ended December 31,2001,  certain  employees  purchased
158,905  ordinary  shares at an average  price $0.87 per share  according to the
2000 Employee Share Purchase Plan.


C. WARRANTS

          Warrants to purchase 393,552 preferred  convertible shares were issued
on March 31, 1998 in conjunction  with the  conversion to preferred  convertible
shares of a convertible subordinated promissory note. The warrants were recorded
at their fair market  value and  included in  additional  paid-in  capital.  The
exercise price for the purchase of 393,552 shares is $1.96.

          A total of 364,313 shares were exercised prior to the Company's IPO.

D. EMPLOYEE, DIRECTORS, AND CONSULTANT OPTION PLANS

          During the year ended  December  31,2001  the Board of  Directors  and
Shareholders at the annual meeting approved the grants of stand-alone options to
purchase 144,036 ordinary shares to directors.

          The Company has adopted new option plans in 2000 under which they have
granted during the year ended December 31,2000,  1,015,213 options at a weighted
average  exercise  price of $5.75 per share and a vesting  period of four years.
Under the same  program  during  the year  ended  December  31,2001,the  Company
granted  1,375,652  options at a weighted  average  exercise  price of $1.50 per
share

          In connection  with the grant of certain  options to employees  during
fiscal  1999,  the  Company  recorded  deferred  compensation  of  approximately
$3,401,000,  representing the difference between the estimated fair value of the
Ordinary  shares and the exercise  price of these  options at the date of grant.
Such amount is presented as a part of  shareholders'  equity and amortized  over
the vesting period of the applicable options. The Company recorded  amortization
of deferred  compensation  of  approximately  $738,000,  $1,237,000 and $437,000
during the years ended December 31, 2001,2000 and 1999, respectively.

          During 2001 a total of 93,910 options  expired which reduced  deferred
compensation by approximately  $282,000.  During 2000, a total of 91,571 options
expired which reduced  deferred  compensation by approximately  $306,000.  As of
December 31, 2001, the remaining deferred compensation of approximately $401,000
will be amortized as follows:  $300,000 and $101,000 during the years ended 2002
and 2003,  respectively.  The amortization expense relates to options awarded to
employees  in  all  operating  expense   categories.   The  amount  of  deferred
compensation  expense to be recorded in future periods could decrease if options
for which accrued but unvested compensation has been recorded, are forfeited.

          If deferred  compensation  had been  determined  under the alternative
fair value  accounting  method provided for under SFAS No. 123,  "Accounting for
Stock-Based Compensation", the Company's net loss and basic and diluted net loss
per share would have been  increased  or  decreased  to the  following  proforma
amounts:
<TABLE>
<CAPTION>
                                                1999                 2000                 2001
                                             ----------           ----------           ----------
<S>                                          <C>                  <C>                   <C>
Net loss
     As reported                             $ (12,968)           $ (13,046)            $  (9,139)
     Proforma                                  (13,039)             (13,172)               (9,329)
Basic and diluted net loss per
   share
     As reported                             $  (2.18)            $  (0.58)             $  (0.36)
     Proforma                                   (2.19)               (0.59)                (0.37)
</TABLE>
          Under  SFAS  123,  the  fair  market  value  of each  option  grant is
estimated on the date of grant using the  "Black-Scholes  option pricing" method
with the following  weighted-average  assumptions:(1) expected life of 1.2 years
(1999 - 1.3, 2000 - 1.3);  (2) dividend  yield of 0% (3) expected  volatility of
122% (1999 - 0%, 2000 - 152%) and (4)  risk-free  interest rate of 1.75% (1999 -
5%, 2000 - 5%).
                                       48
<PAGE>
          Transactions  related  to the above  discussed  options  and  warrants
granted to employees and  consultants  during the years ended 2000 and 2001, and
the weighted  average  exercise prices per share and weighted average fair value
of the options at the date of grant are summarized as follows:
<TABLE>
<CAPTION>
                                                                                  WEIGHTED AVERAGE
                                                         OPTIONS                      EXERCISE      WEIGHTED AVERAGE
                                                      AVAILABLE FOR    OUTSTANDING    PRICE PER         FAIR VALUE
                                                          GRANT        OPTIONS (*)      SHARE           OF OPTION
                                                     -------------------------------------------------------------------
<S>                                                          <C>           <C>              <C>        <C>
Outstanding December 31, 1999                                335,695       2,665,034        1.16
Authorized                                                 3,800,000
Granted                                                  (1,015,213)       1,015,213        5.75         $ 1.57
Forfeited                                                    288,189       (288,107)        2.99
Exercised                                                          -       (631,091)        1.01
Exercised Employee Stock Purchase Plan                      (23,288)               -
                                                     ---------------- --------------- -----------
Outstanding December 31, 2000                              3,385,383       2,761,049        2.65
Granted                                                  (1,519,688)       1,519,688        1.51         $ 0.72
Forfeited                                                    458,067       (458,067)        2.20
Exercised                                                                  (150,287)        0.79
Exercised Employee Stock Purchase plan                     (158,905)
                                                     ---------------- --------------- -----------
Outstanding December 31, 2001                              2,164,857       3,672,383        2.31
                                                     ================ =============== ===========
</TABLE>
-----------------
(*) As of  December  31,  1999,  2000 and 2001,  1,206,920,  912,228 and 791,031
Ordinary  shares are held by a trustee  and have been  reserved  for  allocation
against certain employee options granted but not yet exercised.

          The following table summarizes  information about options  outstanding
and exercisable as of December 31, 2001:
<TABLE>
<CAPTION>
                                           OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                            --------------------------------------------------- --------------------------------
                                 NUMBER       WEIGHTED-AVERAGE                      NUMBER
                             OUTSTANDING AT      REMAINING     WEIGHTED-AVERAGE OUTSTANDING AT   WEIGHTED-AVERAGE
         RANGE OF             DECEMBER 31,      CONTRACTUAL    EXERCISE PRICE    DECEMBER 31,    EXERCISE PRICE
      EXERCISE PRICE              2001             LIFE                              2001
            $
----------------------------------------------------------------------------------------------------------------
<S>         <C>                      <C>                 <C>       <C>                  <C>          <C>
            0.58                     657,601             3.09      $ 0.58               599,534      $ 0.58
            0.83                     280,408             5.91      $ 0.83               142,604      $ 0.83
            1.83                     496,390             4.96      $ 1.83               285,660      $ 1.83
            3.67                      90,000             3.85      $ 3.67                62,500      $ 3.67
            8.50                     227,133             7.08      $ 8.50                68,750      $ 8.50
           10.00                      65,000             8.25      $10.00                27,083      $10.00
            8.00                      15,000             8.41      $ 8.00                 7,917      $ 8.00
            4.37                     205,538             7.85      $ 4.37                40,058      $ 4.37
            3.06                     275,000             8.86      $ 3.06                63,638      $ 3.06
            1.69                     787,090             9.08      $ 1.69               339,715      $ 1.69
            1.21                     224,010             9.58      $ 1.21               149,340      $ 1.21
        0.75 - 1.81                  349,213             9.58      $ 1.22                 3,005      $ 1.26
                            -----------------                                   ----------------
                                   3,672,383                                          1,789,804
                            =================                                   ================
</TABLE>
NOTE 14 -- SEGMENT REPORTING

          In accordance  with SFAS No. 131,  "Disclosures  About  Segments of an
Enterprise  and Related  Information",  the Company is organized and operates as
one  business  segment,  the  design,  development,  and  marketing  of software
solutions.

                                       49
<PAGE>
<TABLE>
<CAPTION>
            The Company's revenue by geographic area is as follows:

                                                                          YEAR ENDED DECEMBER 31,
                                                                              2000          2001
                                                                           ------------- ------------
           <S>                                                <C>                <C>         <C>
           Revenue                                                       (in thousands)
           North America                                         $ 6,978        $ 9,766      $ 7,956
           Europe                                                  2,163          5,027        6,751
           Israel                                                    905            440          455
           Asia Pacific and Africa                                   280            509        3,042
                                                             ------------ -------------- ------------
                                                                $ 10,326       $ 15,742     $ 18,204
                                                             ------------ -------------- ------------

           Sales to a single customer exceeding 10%
                                                                  %             %             %
                                                             ------------ -------------- ------------
           Customer A                                                  -              -          12%

            Long lived Assets by geographical areas is as follows:
</TABLE>
<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                              2000          2001
                                                                           ------------- ------------
                                                                               (in thousands)
           Net Property and Equipment
          <S>                                                                <C>          <C>
           North America                                                         $2,373       $2,255
           Europe                                                                   183          198
           Israel                                                                 1,216          997
                                                                            ------------ ------------
                                                                                 $3,772       $3,450
                                                                            ============ ============
</TABLE>
NOTE 15 -- TAXES ON INCOME

          The  Company is subject to the  Israeli  Income Tax Law  (Inflationary
Adjustments),  1985,  measuring  income on the basis of changes  in the  Israeli
Consumer Price Index.

          Part of the Company's  investment in equipment has received  approvals
in accordance with the Law for the  Encouragement of Capital  Investments,  1959
("approved  enterprise"  status). The Company has chosen to receive its benefits
through the "Alternative  Benefits" track, and, as such, is eligible for various
benefits.  These benefits include accelerated  depreciation of fixed assets used
in the  investment  program,  as well as a full tax  exemption on  undistributed
income in relation to income derived from the first plan for a period of 2 years
and for the second and third plans for a period of 4 years. Thereafter a reduced
tax rate of 25% will be applicable for an additional period of up to 5 years for
the first plan and 3 years for the second and third plans,  commencing  with the
date on which taxable  income is first earned but not later than certain  dates.
In the case of  foreign  investment  of more  than  25%,  the tax  benefits  are
extended to 10 years, and in the case of foreign  investment ranging from 49% to
100% the tax rate is reduced on a sliding scale to 10%. The benefits are subject
to the  fulfillment  of the  conditions  of the letter of approval.  The benefit
periods of the second and third  plans have not yet  commenced.  The regular tax
rate applicable to the Company is 36%.

          In the event of  distribution by the Company of a cash dividend out of
retained earnings which were tax exempt due to its approved  enterprise  status,
the Company  would have to pay a 25%  corporate tax on the income from which the
dividend was  distributed.  A 15% withholding tax may be deducted from dividends
distributed to the recipients.

          Final tax assessments in Israel have been received up to and including
the 1998 tax year.

          The  Company  has  net  operating  loss  carryforwards  in  Israel  of
approximately  $12.9  million as of December  31,  2001.  In addition  losses of
approximately  $23.9 million are attributable to the U.S.  subsidiary which will
expire between 2008 and 2014. The UK subsidiary has  carryforward  tax losses of
approximately  $5.7 million as of December 31, 2001. The carryforward tax losses
for Israel and the UK have no expiration date.

                                       50
<PAGE>
          The Company  expects  that during the period in which these tax losses
are utilized,  its income would be substantially  tax exempt.  Accordingly there
will be no tax benefit  available  from such  losses and no deferred  tax assets
have been included in these financial  statements.  Deferred taxes in respect of
other temporary differences are immaterial.

Israel and International components of income profit (loss) before taxes are:



                                              YEAR ENDED DECEMBER 31,
                                         1999           2000           2001
                                    --------------- -------------- -------------
                                                  (in thousands)
   Israel
                                          $(2,980)       $(5,153)       $ 1,250
   International                           (9,988)        (7,893)      (10,389)
                                    --------------- -------------- -------------
                                        $ (12,968)     $ (13,046)     $ (9,139)
                                    --------------- -------------- -------------

NOTE 16 -- BALANCES AND TRANSACTIONS WITH RELATED PARTIES

          On January 1, 1997, the Company transferred its "Nester" division to a
company  under  common  control.  The  majority of the  following  balances  and
transactions are with that affiliated company.


                                                              DECEMBER 31,
                                                           2000         2001
                                                       ----------  ------------
                                                             (in thousands)
 Balances:
      Other Receivables                                 $  121        $   294



                                                  YEAR ENDED DECEMBER 31,
                                              1999         2000         2001
                                            --------     --------     --------
                                                      (in thousands)
  Transactions:
    Management fee income from Nester         $  48       $  48        $  48
    Other transactions                        $ 105       $ 208        $ 165



                                       51
<PAGE>
NOTE 17 - UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL DATA

          The following table presents the quarterly information for fiscal 2001
and 2000:
<TABLE>
<CAPTION>
                                                            First        Second        Third         Fourth
                                                           Quarter       Quarter      Quarter        Quarter
                                                        --------------------------------------------------------
                                                                (in thousands except per share amounts)
                                                                              (Unaudited)
2001
<S>                                                            <C>          <C>           <C>            <C>
Net sales                                                    $  4,516     $  5,044      $  2,739       $  5,905
Gross profit                                                 $  3,070     $  3,328      $  1,352       $  4,684
Net Loss                                                     $(2,529)     $(1,844)      $(4,147)       $  (619)
----------------------------------------------------------------------------------------------------------------

Basic and diluted net loss per share:                        $ (0.10)     $ (0.07)      $ (0.16)       $ (0.02)
Shares used in computing basic and
  diluted net loss per share                                   24,976       25,097        25,155         25,211
Price per ordinary share - high                              $  2.719     $   1.43      $   1.82       $   1.47
Price per ordinary share - low                               $   0.75     $  0.563      $    0.7       $   0.82

2000
Net sales                                                    $  3,511     $  4,308      $  4,789       $  3,134
Gross profit                                                 $  2,188     $  2,934      $  3,319       $  1,873
Net Loss                                                     $(3,352)     $(2,737)      $(1,851)       $(5,106)


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

Basic and diluted net loss per share                         $ (0.17)     $ (0.14)      $ (0.07)       $ (0.20)

Shares used in computing basic and
  Diluted net loss per share                                   19,502       20,266        24,699         24,928
Price per ordinary share - high                                   N/A     $  7.375      $  8.750       $  3.656
Price per ordinary share - low                                    N/A     $  5.813      $  3.000       $  1.750

</TABLE>
          The company's ordinary shares are traded on the NASDAQ. As of March 4,
2002, there were approximately 1,148 registered holders of ordinary shares.

ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Directors - See the section entitled "Executive Officers and Directors" in
Part I, Item 1 hereof.

(b)  Executive  Officers - See the  section  entitled  "Executive  Officers  and
Directors" in Part I, Item 1 hereof.

(c) Significant employees - None.

(d) Family relationships - None.

(e)  Business  experience  - See the section  entitled  "Executive  Officers and
Directors" in Part I, Item 1 hereof.

(f) Legal proceedings - See the section entitled "Legal  Proceedings" in Part I,
Item 3 hereof.

(g) Promoters and control persons - None.

SECTION 16(a) BENEFICIAL  OWENERSHIP  REPORTING COMPLIANCE - Based solely on its
review of copies of filings under Section 16(a) of the  Securities  Exchange Act
of 1934,  as amended,  received by it, or written  representations  from certain

                                       52
<PAGE>
reporting persons, the Company believes that during the year ending December 31,
2000, all Section 16 filing  requirements were met, except that Ms.  Schinderman
filed one late report on Form 3 to report her initial holdings and all directors
and officers filed annual statements on Form 5 one day late.

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION ARRANGEMENTS

We have entered into employment  agreements with Dr. Moshe BenBassat,  our Chief
Executive  Officer,  Shimon M. Rojany,  our Chief Financial  Officer,  and Corey
Leibow, our Chief Operating Officer. The agreements provide that the executives'
employment  relationships  are  "at-will"  and may be  terminated at any time by
either us or the  executive  with or  without  cause or notice.  The  agreements
provide that in the event the executive is terminated by us without  cause,  the
executive  shall be entitled to severance  payments (to be paid in a lump sum or
monthly at the  executive's  discretion)  in amounts  equal to twelve  months of
annual base salary as of the date of termination for Dr.  BenBassat,  six months
of the annual  base salary as of the date of  termination  for Mr.  Rojany,  and
three  months of the annual  base salary as of the date of  termination  for Mr.
Leibow.  Dr. BenBassat is entitled to full acceleration of option vesting in the
event of a change in control,  and Mr. Leibow is entitled to 50% vesting or 100%
vesting  depending on the  conditions  of a change of control.  The  executive's
right to receive the benefits set forth above will immediately  terminate if the
executive competes with us during the six or twelve months following termination
of employment with us.

COMPENSATION COMMITTEE

The Compensation  Committee (the  "Committee") is comprised of Mr. Eddie Shalev,
Mr.  James  Thanos  and,  Mr.  Israel  Borovich.   All  have  been  independent,
non-employee  members of the Board of Directors.  No  interlocking  relationship
exists between our board of directors or compensation committee and the board of
directors  or  compensation  committee  of any  other  company,  nor has such an
interlocking  relationship existed in the past. The Committee is responsible for
setting  and  administering  the  policies  governing  annual   compensation  of
executive  officers,  considers  their  performance  and  makes  recommendations
regarding  their  cash  compensation  and  stock  options  to the full  Board of
Directors.  As we only  established the Committee in connection with our initial
public  offering in 2000,  there is a limited  history;  however  the  Committee
expects,  pursuant  to its  charter,  to  periodically  review the  approach  to
executive  compensation  and make changes as  competitive  conditions  and other
circumstances warrant.

COMPENSATION PHILOSOPHY

In July 2000, we completed the initial public  offering of our ordinary  shares.
In reviewing  the  compensation  for the upcoming  fiscal  year,  the  Committee
addressed  two  distinct  areas in order to meet the needs of the  Company as we
continue to grow and mature.  The Committee  recognizes  that in order for us to
develop new products and scale the business, the ability to attract,  retain and
reward  executive  officers  who will be able to operate  effectively  in a high
growth complex  environment is vital. In that regard, we must offer compensation
that (a) is competitive  in the industry;  (b) motivates  executive  officers to
achieve our  strategic  business  objectives;  and (c) aligns the  interests  of
executive officers with the long-term interests of stockholders.

We currently use salary,  a management  incentive plan and stock options to meet
these requirements.  For incentive-based  compensation,  the Committee considers
the desirability of structuring such compensation  arrangements so as to qualify
for  deductibility  under  Section  162(m) of the Internal  Revenue Code. As the
Committee  applies  this  compensation  philosophy  in  determining  appropriate
executive  compensation  levels and other  compensation  factors,  the Committee
reaches its decisions with a view towards our overall performance.

                                       53
<PAGE>
COMPENSATION

The following table sets forth all compensation  received for services  rendered
to us and our subsidiaries in all capacities  during the last three years by (i)
our Chief  Executive  Officer  and (ii) our four other most  highly  compensated
executive officers (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
                               COMPENSATION TABLE


NAME                                  ANNUAL COMPENSATION               LONG TERM COMPENSATION AWARDS
----
     POSITION                                                                        SECURITIES       ALL OTHER
     --------                                                    OTHER ANNUAL        UNDERLYING       COMPENSATION
                        YEAR       SALARY           BONUS        COMPENSATION        OPTIONS              ($)
                        ----       ------           -----        ------------        -------               ---
<S>                      <C>       <C>              <C>      <C>                     <C>               <C>
Moshe BenBassat,
     CEO
                         1999      178,989           189,112       -                  720,000               -
                         2000      225,000           239,709      83,594 (1)           -                    -
                         2001      222,188            22,500      79,449 (1)           -                    -

Shimon Rojany
     CFO
                         1999       88,333            32,083       -                   73,227               -
                         2000      185,833            68,083       4,362 (2)           30,000               -
                         2001      211,542            10,000       1,587 (2)           79,000               -

Corey Leibow
     COO
                         1999      -              -                -                        -               -
                         2000       27,865        -                -                  275,000               -
                         2001      203,438            34,000       1,298 (2)           24,000               -

David Schapiro
     Executive V.P. - Markets and Products
                         1999      103,080            12,397      23,142 (3)           31,036               -
                         2000      131,858            14,714      29,006 (3)           30,000               -
                         2001      128,538        -               39,744 (3)           20,000               -

Hannan Carmeli
     Sr. V.P. Product Services and
Operations

                         1999       88,477             9,169      26,347 (3)           18,000               -
                         2000      102,625            12,175      28,370 (3)           18,000               -
                         2001      116,411        -               31,132 (3)           25,000               -

</TABLE>
-----------------------------
(1) Other compensation to Dr. BenBassat includes $75,000 housing allowance.
(2) Executive disability insurance.
(3) Contributions to employee benefit programs.

OPTION GRANTS IN YEAR 2001

The following table sets forth information concerning grants of stock options to
each of the Named  Executive  Officers  during the year ended December 31, 2001.
All such options were granted  under our various  option plans  approved  during
2000, and these options generally vest over two to four years.

                                       54
<PAGE>
<TABLE>
<CAPTION>
                           Number of       % of Total
                             Shares         Options       Weighted
                           Underlying      Granted to     Exercise
                        Options Granted    Employees in     Price     Expiration                  Present Value
                                            2001            ($/sh)        Date     Grant Date         (1)
                       ----------------   -------------  ----------  -----------  -----------    --------------
<S>                    <C>                <C>            <C>          <C>          <C>            <C>
Moshe BenBassat             -                0.00%            -             -                              -
Shimon Rojany                  79,000        5.92%       $     1.66      2/8/11        2/8/01         $ 60,974
Corey Leibow                   24,000        1.80%       $     1.61      2/8/11        2/8/01         $ 17,184
Hannan Carmeli                 25,000        1.87%       $     1.59      2/8/11        2/8/01         $ 17,499
David Schapiro                 20,000        1.50%       $     1.69      2/8/11        2/8/01         $ 15,924
</TABLE>
----------------------------
(1) Computed  using the  Black-Scholes  option  pricing  model.  Full vesting of
options is six months to two years from grant date. Assumes the average expected
life of the option is between 0.29 and 1.042 years,  a  volatility  of 122%,  an
annual dividend yield of 0.0% risk free interest rate of 1.75%.


AGGREGATE OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUES

The following table sets forth certain information  concerning options exercised
by the Named Executive  Officers in year 2001, and exercisable and unexercisable
stock  options held by each of the Named  Executive  Officers as of December 31,
2001.
<TABLE>
<CAPTION>
                                                     Number of Securities
                                                 Underlying Unexercised Options     Value of Unexercised
                                                     as of December 31, 2001      In-the-Money Options at
                   Shares Acquired     Value                                      December 31, 2001 (1)
                                                 ------------------------------------------------------------
                     on Exercise      Realized     Exercisable   Unexercisable   Exercisable  Unexercisable
                  -------------------------------------------------------------------------------------------
<S>                  <C>              <C>           <C>             <C>              <C>         <C>
Moshe BenBassat            18,000   $   (10,499)        268,099         228,293       -             -
Shimon Rojany            -               -               89,890          45,515       $ 23,482      $  9,170
Corey Leibow             -               -               85,478         213,522       $    159      $     80
David Schapiro           -               -              194,952          83,047       $124,487      $ 24,320
Hannan Carmeli           -               -               81,963          51,036       $ 46,348      $ 11,254
</TABLE>
(1) Based upon the Closing Price of the ordinary shares on December 31, 2001 of
$1.27 less the exercise price per share.

DIRECTORS' COMPENSATION

In 2001 outside  directors  were not  compensated  for either  membership on the
board member or  attendance  at board  meetings,  though  expenses for attending
Board and committee meetings were reimbursed.

Under  our  2000  Share  Option  Plan,  as  amended  in 2001,  new  non-employee
directors,  except for certain directors  designated as External Directors under
Israeli  law,  are  automatically  granted an option to  purchase  30,000 of our
ordinary shares, when they first become a director.  Each year after the initial
grant, they are entitled to receive an additional option grant to purchase up to
7,500 ordinary  shares.  All options are granted at the fair market value on the
date of grant vest one quarter each year over four years from the date of grant.

Pursuant to Israeli law restrictions on director compensation,  Ms. Schinderman,
as an External  Director,  received an option to purchase 24,036 ordinary shares
at the time of her election to our board in September  2001. All other directors
received  grants of option to purchase  30,000  ordinary  shares in 2001.  These
grants, all separately approved at our 2001 annual meeting of shareholders, vest
monthly over two years from the date of grant.

                                       55
<PAGE>
COMPARISON OF TOTAL CUMULATIVE STOCKHOLDER RETURN

The following graph compares the quarterly share price of the Company's ordinary
shares with the index  return of the NASDAQ  National  Market Index and with the
NASDAQ  Index of Computer  Stocks for the period from June 23, 2000 (the date on
which the  Company's  ordinary  shares  began  trading  on the  NASDAQ)  through
December  31, 2001.  The Company has paid no  dividends on its Ordinary  shares.
Historical  stock price  performance  should not be relied upon as indicative of
future stock price performance:


                    CKSW        Nasdaq USA                 Nasdaq Computer
                                                          & Data Processing
    6/30/00         -5%              3%                           5%
    9/29/00        -46%             -5%                          -3%
   12/29/00        -76%            -36%                         -40%
    3/30/01        -86%            -52%                         -56%
    6/29/01        -82%            -44%                         -43%
    9/28/01        -86%            -61%                         -65%
   12/31/01        -83%            -49%                         -52%


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

OWNERSHIP OF ORDINARY SHARES

The  following  table  sets forth  information  with  respect to the  beneficial
ownership of our ordinary shares as of December 31, 2001 for:

     *    each of our Named Executive Officers;
     *    each of our directors;
     *    each person or group known by us to  beneficially  own more than 5% of
          our outstanding ordinary shares; and
     *    all of our executive officers and directors as a group.

Beneficial  ownership of ordinary  shares is determined  in accordance  with the
rules of the  Securities  and Exchange  Commission  and  generally  includes any
ordinary  shares  over  which a  person  exercises  sole  or  shared  voting  or
investment  powers, or of which a person has a right to acquire ownership at any
time within 60 days of December 31, 2001.  Except as  otherwise  indicated,  and
subject to applicable  community  property laws, the persons named in this table
have sole voting and investment  power with respect to all ordinary  shares held
by them.  Applicable  percentage  ownership in the  following  table is based on
27,251,964 shares outstanding as of March 15, 2002.

Unless  otherwise  indicated  below,  the  address  of  each  of  the  principal
shareholders is c/o  ClickSoftware  Technologies  Ltd., 34 Habarzel Street,  Tel
Aviv, Israel.

                                       56
<PAGE>
<TABLE>
<CAPTION>
                                                                                         ORDINARY SHARES
                                                                                        BENEFICIALLY OWNED
NAME AND ADDRESS                                                                      NUMBER        PERCENTAGE
-------------------------                                                         ------------   -------------
SHAREHOLDERS
                                                                                  --------------- ---------------
<S>                                                                                    <C>                 <C>
Entities affiliated with Worldview Technology Partners (11)                            2,254,121           8.13%
     435 Tasso Street, Suite 120
     Palo Alto, CA 94301
Entities affiliated with Genesis Partners (13)                                         2,871,270          10.36%
     50 Dizengoff Street
     Tel-Aviv 64332, Israel
Entities affiliated with Oak Investments Partners (12)                                 4,724,027          17.04%
     525 University Avenue, Suite 1300
     Palo Alto, CA  94301
Entities affiliated with Meritech Capital Associates LLC (12)                          1,828,629           6.59%
     90 Middlefield Road, Suite 201
     Menlo Park, CA  94025
Liberty Wanger Asset Management (11)                                                   1,660,000           5.99%
     227 West Monroe Street, Suite 3000
     Chicago, IL 60606-5016

NAMED EXECUTIVE OFFICERS AND DIRECTORS
Moshe BenBassat (1)                                                                    5,115,286          18.45%
Shimon Rojany (2)                                                                        457,872           1.65%
Corey Leibow (3)                                                                         132,625           0.48%
David Schapiro (4)                                                                       227,595           0.82%
Hannah Carmeli (5)                                                                       105,036           0.38%
Israel Borovich (6)                                                                       30,833           0.11%
Nathan Gantcher (7)                                                                       94,791           0.34%
Roni Einav (8)                                                                            26,562           0.10%
James W. Thanos (9)                                                                       33,750           0.12%
Janet Schinderman (10)                                                                     8,012           0.03%
Eddy Shalev                                                                            2,871,270        10.36%
                                                                                  --------------- ---------------

All executive officers and directors as a group (12 persons)                           9,316,756          33.60%
                                                                                  =============== ===============
</TABLE>
---------------------
(1)  Includes 2,246,887 shares held by Dr. BenBassat's  spouse,  Idit BenBassat.
     Also  includes  options to purchase  355,904  ordinary  shares  exercisable
     within 60 days of March 31, 2002 held by Dr. BenBassat.
(2)  Includes options to purchase 118,227 Ordinary Shares  exercisable within 60
     days of March 31, 2002 held by Mr. Rojany.
(3)  Includes options to purchase 119,625 Ordinary Shares  exercisable within 60
     days of March 31, 2002 held by Mr. Leibow
(4)  Includes options to purchase 227,595 Ordinary Shares  exercisable within 60
     days of March 31, 2002 held by Mr. Schapiro.
(5)  Includes options to purchase 101,934 Ordinary Shares  exercisable within 60
     days of March 31, 2002 held by Mr. Carmeli.
(6)  Includes options to purchase 30,833 Ordinary Shares  exercisable  within 60
     days of March 31, 2002 held by Mr. Borovich.
(7)  Includes options to purchase 44,791 Ordinary Shares  exercisable  within 60
     days of March 31, 2002 held by Mr. Gantcher.
(8)  Includes options to purchase 26,562 Ordinary Shares  exercisable  within 60
     days of March 31, 2002 held by Mr. Einav.
(9)  Includes options to purchase 28,750 Ordinary Shares  exercisable  within 60
     days of March 31, 2002 held by Mr. Thanos.
(10) Includes  options to purchase 8,012 Ordinary Shares  exercisable  within 60
     days of March 31, 2002 held by Ms. Schinderman.
(11) Based on schedule 13G-A filed on February 14, 2002.
(12) Based on Schedule 13G filed on February 14, 2001.
(13) Based on the Registrant's report on Form-3, filed on February 14, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During  the  fiscal  year  ended  December  31,  2001,  members  of the board of
directors and executive  officers of the Company  received grants of options for
the  Company's  ordinary  shares  as  set  forth  under  "Item  11  -  Executive
Compensation".

                                       57
<PAGE>
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) EXHIBITS
                                  EXHIBIT INDEX

   EXHIBIT                       DESCRIPTION OF DOCUMENT
   NUMBER

3.1  (1)       Articles of Association of ClickSoftware Technologies Ltd.
4.1  (1)       Specimen of Ordinary Share Certificate
4.2  (1)       Fourth Amended and Restated Registration Rights Agreement,
               dated December 15, 1999
10.1 (2)       Form of 2000 Share Option Plan, as amended
10.2 (1)       Form of 2000 Employee Share Purchase Plan
10.3 (1)       Employment Agreement between ClickSoftware Technologies Ltd.
               and Moshe BenBassat
10.4 (1)       Employment Agreement between ClickSoftware Technologies Ltd. and
               Shimon Rojany
10.5 (1)       Form of Indemnification Agreement
10.6 (1)       Form of 1996 Option Plan
10.7 (1)       Form of 1997 Option Plan
10.8 (1)       Form of 1998 Option Plan
10.9 (1)       Form of 1999 Option Plan
10.10(1)       Form of 1999 Option Plan
10.12(1)       Form of 2000 Israeli Plan
10.13(1)       Form of 2000 Unapproved U.K. Share Scheme
10.14(1)       Form of 2000 Approved U.K. Share Scheme
10.15(3)       Employment Agreement between ClickSoftware Technologies Ltd. and
               Corey Leibow
10.16(4)       Lease made on January 21, 2000 by and between WTA Campbell
               Technologies Park, LLC and ClickSoftware, Inc.
21.1           Subsidiaries of the Registrant
23.1           Consent of Luboshitz Kasierer, Arthur Andersen
99.1           Letter from the Registrant to the SEC regarding Arthur Andersen's
               representation

(1)   Incorporated by reference to the Registrant's Registration Statement on
      Form S-file no. 333-30274), as amended.
(2)   Incorporated by reference to the Registrants definitive proxy statement
      filed on August 6, 2001.
(3)   Incorporated by reference to the Registrant's report on form 10-K filed on
      March 30, 2001.
(4)   Incorporated by reference to the Registrant's report on form 10-Q filed on
      August 14, 2001.

(a)(1) FINANCIAL STATEMENTS
         Consolidated Balance Sheets
         Consolidated Statements of Operations and Comprehensive Loss
         Consolidated Statements of Shareholders' Equity
         Consolidated Statements of Cash Flows

(a)(2) FINANCIAL STATEMENTS SCHEDULES

         Schedule II - Valuation and Qualifying Accounts and Reserves

         All other financial statements and schedules not listed have been
omitted because the required information is included in the consolidated
financial statements or notes thereto, or is not applicable or required.

(b) REPORTS ON FORM 8-K:

None.
                                       58
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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,  in  Campbell,
California, on March 25, 2002.

                                          CLICKSOFTWARE TECHNOLOGIES LTD.

                                          By:     /s/ Shimon M. Rojany
                                            ------------------------------------
                                                     Shimon M. Rojany
                                                  Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this report has been
signed by the following  persons on behalf of the  Registrant in the  capacities
and on the dates indicated.
<TABLE>
<CAPTION>

             SIGNATURE                               TITLE                  DATE
             ---------                               -----                  ----
<S>                                 <C>                                <C>
        /s/ Moshe BenBassat          Chief Executive Officer and        March 25, 2002
------------------------------------ Chairman of the Board of Directors
           Moshe BenBassat            (Principal Executive Officer)


        /s/ Shimon M. Rojany         Chief Financial Officer            March 25, 2002
------------------------------------ Principal Financial and Accounting
           Shimon M. Rojany          Officer)

        /s/ Roni Einav                Director                           March 25, 2002
------------------------------------
           Roni Einav

        /s/ Dr. Israel Borovich      Director                           March 25, 2002
------------------------------------
            Dr. Israel Borovich

        /s/ Nathan Gantcher          Director                           March 25, 2002
------------------------------------
            Nathan Gantcher

        /s/ Eddy Shalev              Director                           March 25, 2002
------------------------------------
            Eddy Shalev

        /s/ James W. Thanos          Director                           March 25, 2002
------------------------------------
               James W. Thanos

        /s/ Janet Schinderman        Director                           March 25, 2002
------------------------------------
           Janet Schinderman
</TABLE>
                                       59
<PAGE>
                                  EXHIBIT INDEX

   EXHIBIT
   NUMBER                                          DESCRIPTION OF DOCUMENT

3.1  (1)       Articles of Association of ClickSoftware Technologies Ltd.
4.1  (1)       Specimen of Ordinary Share Certificate
4.2  (1)       Fourth Amended and Restated Registration Rights Agreement, dated
               December 15, 1999
10.1 (2)       Form of 2000 Share Option Plan, as amended
10.2 (1)       Form of 2000 Employee Share Purchase Plan
10.3 (1)       Employment Agreement between ClickSoftware Technologies Ltd.
               and Moshe BenBassat
10.4 (1)       Employment Agreement between ClickSoftware Technologies Ltd. and
               Shimon Rojany
10.5 (1)       Form of Indemnification Agreement
10.6 (1)       Form of 1996 Option Plan
10.7 (1)       Form of 1997 Option Plan
10.8 (1)       Form of 1998 Option Plan
10.9 (1)       Form of 1999 Option Plan
10.10(1)       Form of 1999 Option Plan
10.12(1)       Form of 2000 Israeli Plan
10.13(1)       Form of 2000 Unapproved U.K. Share Scheme
10.14(1)       Form of 2000 Approved U.K. Share Scheme
10.15(3)       Employment Agreement between ClickSoftware Technologies Ltd. and
               Corey Leibow
10.16(4)       Lease made on January 21, 2000 by and between WTA Campbell
               Technologies Park, LLC and
               ClickSoftware, Inc.
21.1           Subsidiaries of the Registrant
23.1           Consent of Luboshitz Kasierer, Arthur Andersen
99.1           Letter from the Registrant to the SEC regarding Arthur Andersen's
               representation

(1) Incorporated by reference to the Registrant's Registration Statement on Form
    S- file no. 333-30274), as amended.
(2) Incorporated by reference to the Registrants definitive proxy statement
    filed on August 6, 2001.
(3)   Incorporated by reference to the Registrant's report on form 10-K filed on
      March 30, 2001.
(4)   Incorporated by reference to the Registrant's report on form 10-Q filed on
      August 14, 2001.

                                       60