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, 2000

                                       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
  -----------------------------------                 -------------------
(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:

     Title of each class              Name of each exchange on which registered
----------------------------------    -----------------------------------------
Securities registered pursuant to section 12(g) of the Act:

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

--------------------------------------------------------------------------------
                                (Title of class)

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
    ----       ----
<PAGE>
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.
                                   ------
State the aggregate market value of the voting and non-voting common equity held
by  non-affiliates  of the  registrant.  The  aggregate  market  value  shall be
computed by reference to the price at which the common  equity was sold,  or the
average bid and asked  prices of such  common  equity,  as of a  specified  date
within 60 days prior to the date of filing. (See definition of affiliate in Rule
405, 17 CFR 230.405.)

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
26,  2001,  as  reported  by  the  Nasdaq  National  Market,  was  approximately
$3,377,675.  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.

NOTE.--If a  determination  as to  whether a  particular  person or entity is an
affiliate cannot be made without involving  unreasonable effort and expense, the
aggregate  market  value  of the  common  stock  held by  non-affiliates  may be
calculated  on the basis of  assumptions  reasonable  under  the  circumstances,
provided that the assumptions are set forth in this Form.

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

As of March 26, 2001, there were approximately 26,064,539 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 (e.g., Part I, Part II, etc.) 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.  The listed  documents  should be clearly
described for identification  purposes (e.g.,  annual report to security holders
for fiscal year ended December 24, 1980).

None.
<PAGE>
<TABLE>
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                                TABLE OF CONTENTS



                                                                                                        PAGE
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PART I
         <S>      <C>                                                                                  <C>
         Item 1.    Business.........................................................................     5
         Item 2.    Properties.......................................................................    14
         Item 3.    Legal Proceedings................................................................    15
         Item 4.    Submission of Matters to a Vote of Security Holders..............................    15

PART II
         Item 5.    Market for the Registrant's Common Equity and
                    Related Stockholder Matters......................................................    15
         Item 6.    Selected Consolidated Financial Data.............................................    17
         Item 7.    Management's Discussion and Analysis of Financial Condition
                    and Results of Operations........................................................    18
         Item 7A    Quantitative and Qualitative Disclosures About Market
                    Risk.............................................................................    33
         Item 8.    Financial Statements.............................................................    37
         Item 9.    Changes In and Disagreement With Accountants on Accounting
                    and Financial Disclosure.........................................................    51

PART III
         Item 10.   Directors and Executive Officers of the Registrant...............................    51
         Item 11.   Executive Compensation...........................................................    52
         Item 12.   Security Ownership of Certain Beneficial Owners and
                    Management.......................................................................    55
         Item 13.   Certain Relationships and Related Transactions...................................    56

PART IV
         Item 14.   Exhibits, Financial Statement Schedules and Reports on Form
                    8-K..............................................................................    56
SIGNATURES          .................................................................................    57


</TABLE>

<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 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
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 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., and a wholly-owned subsidiary
incorporated in the United Kingdom,  ClickService  Software 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.

ClickSoftware began the year under its former name, IET-Intelligent Electronics.
On  January  25,  2000 we  announced  the  change  of our  name to  ClickService
Software.  Prior to our public  offering,  we changed our name to  ClickSoftware
Technologies Ltd.

On April 26, 2000 we  introduced  CLICKANALYZE,  a new  software  solution  that
enables service organizations to obtain accurate measurements of compliance with
service  commitments  and  levels of  resource  utilization.  On  October  5, we
announced the release of CLICKMOBILE,  which enables service  representatives in
the field to send and receive updated schedule  information  throughout the day.
At the same time, we announced the release of  CLICKPLAN,  a Web-based  resource
planning tool to be used by service managers for high-level  resource allocation
based on their  forecasted  workload.  In January 2001, we introduced FAST TRACK
2.0, the second version of our implementation tool enabling  CLICKSCHEDULE to be
integrated within sixty days.

PRODUCTS

We have  developed a suite of products  that automate and optimize the processes
by which service  operations manage internal resources and customer calls. These
solutions work across all management  levels and  organizational  boundaries and
cover the  business  functions  of tactical  planning,  strategic  planning  and
analysis, and operational execution. Our products enable enterprises to:

*   Efficiently schedule and fulfill service;

*   Effectively plan for the optimal workforce according to forecasted workload;

*   Intelligently diagnose and troubleshoot equipment;

*   Monitor execution via Internet and wireless devices; and

*   Accurately measure the business performance of the organization.


                                      5
<PAGE>

Our  optimization  solutions  can be used  alone or in tandem to enable  service
organizations  to improve  response  time,  quality  of  customer  service,  and
customer  satisfaction  while maintaining a high level of resource  utilization.
Our solutions integrate easily with existing CRM solutions.

SERVICE OPTIMIZATION SUITE OF PRODUCTS

Our Service  Optimization suite of products provides an end-to-end  solution for
improving the efficiency and cost-effectiveness of service operations by working
across all management levels and organizational  boundaries.  In addition to our
ClickSchedule  and CLICKFIX  offerings,  our suite of products includes a mobile
client, and solutions for business planning and business performance analysis.

Our Service Optimization suite includes the following products:

*   CLICKSCHEDULE is a web-centric  software solution that allows  organizations
    to optimally schedule appointments for delivery, installation, or service by
    assigning service personnel and sequencing  individual  schedules and travel
    routes in an economical  way.  CLICKSCHEDULE  automatically  considers  such
    factors as technician  skills set, task  complexity,  planned task duration,
    resource and parts availability,  overtime, travel time and travel distance,
    and contractual obligations of the service provider.

    CLICKSCHEDULE  performs  scheduling  functions by integrating  with existing
    customer relations  management (CRM) applications.  Using a CRM application,
    an online customer or a call center professional  provides details regarding
    the  service  request  as  an  XML  message  to  the  CLICKSCHEDULE  server.
    ClickSchedule  immediately  recommends optimized scheduling options weighing
    the parameters of the customer's  request against  configured  parameters of
    the service  provider.  The CRM  application  then  presents  the  optimized
    scheduling options to the customer for choice.

    After the CRM application sends the customer  appointment  selection back to
    CLICKSCHEDULE,  the data is used to organize and then communicate individual
    schedules to service  representatives.  In addition,  the data  provides the
    basis for  ClickSoftware's  resource  management  and analysis  applications
    further described below.

*   CLICKFIX  is  a  troubleshooting  solution  for  equipment-related   problem
    resolution  support.  CLICKFIX  captures the  description  of the  equipment
    problem manually by user interface, automatically from automated event logs,
    or remotely via a modem. The CLICKFIX application prompts the user to select
    from a list of common or potential  problems  associated with the particular
    symptom  and 'walks' the user  through  the  problem  resolution  process by
    proposing  additional  tests and finally  recommending  corrective  actions.
    CLICKFIX  works  effectively  for  both  trained  service   technicians  and
    untrained  equipment  end-users.  CLICKFIX works in a stand-alone  mode on a
    mobile computer or may be accessed via the web.  Information  gained by each
    diagnostic  situation  is  reincorporated  in to  the  resolution  database,
    effectively   creating   an   artificial   intelligence   solution   gaining
    functionality through experience.


                                       6
<PAGE>

*   CLICKMOBILE integrates with CLICKSCHEDULE to enable the automatic, real-time
    wireless   communication   of  the  scheduling  and  rescheduling  of  field
    resources.  Using a wireless PDA, field resources  communicate the status of
    assigned tasks (e.g., "en-route",  "onsite", "delayed",  "completed", etc.),
    providing  the  necessary  information  to  enable  scheduling  adjustments.
    Dispatchers  may then  proactively  monitor  and manage  scheduling  changes
    throughout  the day to maintain  resource  optimization  despite  unexpected
    events such as traffic delays, transportation breakdowns, and jobs in excess
    of planned  duration.  The  result is both  improved  schedule  optimization
    through earlier problem  detection and the ability to better manage customer
    expectations  through  communication.   In  addition,   CLICKMOBILE  enables
    intra-day,  real-time performance measurement of utilization,  productivity,
    and customer commitment compliance.

*   CLICKANALYZE  is an advanced  management  level  software  solution  used to
    quickly  and  accurately  measure  the  business  performance  of a  service
    organization.   Used  in  conjunction  with   CLICKSCHEDULE   and  CLICKFIX,
    CLICKANALYZE  users  analyze  basic  and  customized  business   performance
    indicators such as service levels,  resource utilization,  employee load and
    operations cost.  CLICKANALYZE provides both executive level summary reports
    and detailed analysis according to territory, job type, employee skill, time
    frame and other configurable factors.

*   CLICKPLAN   enables  service   organizations  to  increase  future  resource
    utilization  by identifying  and resolving  potential  workforce  shortages,
    surpluses, and imbalances. CLICKPLAN compares forecasted work with available
    resource  capacity  grouped  by  job  type,  territory,  skills,  and  other
    criteria. As future resources are allocated,  CLICKPLAN highlights potential
    shortages and imbalances in the workforce months and years in advance.

TECHNOLOGY

Our products are based upon our  internally  developed  core  technologies,  W-6
Service Scheduler and TechMate.  These two core technologies were developed over
the last decade and  include  sophisticated  algorithms  and  business  scenario
representation  tools. Our research and development  personnel have been working
on service  technology  solutions  since 1985,  including  algorithmic  software
solutions,  system integration and  implementations.  Based on these efforts, we
have gained  significant  experience with the complex  optimization and decision
support  troubleshooting needs of service organizations.  As differentiated from
the needs of supply chain of manufacturing operations,  the needs of the service
chain are far more complex. For instance, service scheduling involves scheduling
personnel  of  different  skills in  different  locations  to tasks of different
complexity  in  constantly  changing  locations,  all  coordinated  to meet  the
scheduling demands of the customer.

Our applications are fully  standards-based,  allowing complete integration with
related  CRM,  ERP  or  supply  chain   functions.   Our   applications  run  on
Windows-based  computers  or standard  web  browsers  and  servers,  and support
leading relational database  management systems,  including Oracle and Microsoft
SQL Server. The multi-tier  architecture connects browser-based  applications to
Windows NT application servers through local area networks,  wide area networks,
intranet or Internet  connections.  Our technology  performs  messaging  between
clients  and the  application  server in real time over  standard  communication
protocols, e.g. HTTP and TCP/IP. Our applications are inherently scalable due to
our multi-tier architecture that uses thin clients,  multi-threaded  application
servers and relational databases.

Specifically,  our core technologies include internally  developed  optimization
algorithms.  These algorithms  provide efficient  solutions for complex problems
arising from, among others, the following:

*   the vast number of possible solutions  associated with optimized  scheduling
    of personnel;
*   the number of service organization-specific resources and variables;
*   the need to instantly respond to concurrent users' service requests;
*   the vast number of potential routes within a specific geographic area; and
*   various time zone considerations.

Our core  technologies  also include  sophisticated  service  business  scenario
modeling.  We have  developed  models  based on a vast number of  variables  and
resource  characteristics  common to service  organizations.  By employing these
models,  we can use our  algorithms  to address  the market  needs of  different
segments of the service industry and broaden the customer base for our products.


                                      7
<PAGE>

Our technology  contains an open,  multi-tiered  architecture.  Our architecture
incorporates the following key components:

*   Application  software  and web  servers  capable  of  performing  high-speed
    optimization,  problem  resolution,  and Internet  access to the application
    host system; and
*   Extensible  Markup  Language,  or XML,  Application  Programming  Interfaces
    (APIs), which enable other applications to integrate and access the data and
    services of CLICKSCHEDULE or CLICKFIX.

The CLICKSCHEDULE scheduling engine contains technologies which include not only
business  rules and  objectives  defining  the  constraints  and policies of the
service  organization,  but also  optimization  algorithms  which  schedule  the
service  resources  based  on  these  rules  and  objectives.  These  rules  and
objectives and optimization algorithms are designed in a generic fashion so that
they can be adaptable to a wide range of service scheduling problems.

The  CLICKFIX  problem  resolution  engine  contains  technologies  that include
algorithms  for fast  problem  resolution  based on  equipment  design and field
knowledge,  a knowledge  base with  learning  capabilities,  and an  intelligent
component  that creates new trouble  shooting  solutions  based on modeling both
equipment structure and historic data.

Our user customization  includes an Industry Segment Layer, which includes data,
algorithms,  and Application  Program  Interfaces  (APIs) that are  specifically
developed to address the needs of  particular  industry  segments.  In addition,
external   customization  points  enable  ClickSoftware   professional  services
personnel  and third party  system  integrators  to  efficiently  configure  our
software to provide customization for particular customers.

Our development  methodology is based on techniques which facilitate development
of components  that can be  incorporated in future  products.  This  methodology
enables us to reduce the time required to introduce  functionality  enhancements
and new products.  Our  development  methodology  involves  analysis of business
requirements,  software  module  design  to meet  these  requirements,  software
development and coding,  testing and quality assurance.  Our product development
group in Israel is ISO 9000 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.


                                       8
<PAGE>
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.

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 $100,000 of
product  and/or  service  revenues  for  2000  and,  as a group,  these  clients
accounted for approximately 37% of our total revenues for 2000:

Crown Castle
Covad Communications
ICL
InstallInc.com
Level 3 Communications
Novellus
Schindler Elevator
Starband Communications
UPC
Swisscom
Vodafone
Watkins

Each of three clients  represented  between 3% and 7% of our total  revenues for
2000.

One customer  accounted  for greater than 10% of revenues  during the year ended
December 31, 2000 and none  accounted  for the same in 1999.  For the year ended
December 31, 1998, sales to each of three customers constituted greater than 10%
of our revenues.

SALES AND MARKETING

We market and sell our products  primarily through our direct sales force, which
is located in North  America  and  Europe.  Our  multi-disciplined  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,  advertising  creation and
placement, direct mailings and trade shows. As of December 31, 2000, we employed
over 71 individuals in our sales and marketing department.


                                       9
<PAGE>
Our marketing  organization  also 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 enterprise resource
planning (ERP) companies,  and customer  relationship  management (CRM) vendors.
With these relationships,  we both participate in joint sales efforts as well as
sell our  software  for  resale.  These  vendors  include  Nortel,  Clarify,  i2
Technologies, JD Edwards, Metrix, PeopleSoft/Vantive,  Orbital, SAP, Siebel, and
Viryanet.  These partners have committed  resources depending on the strength of
the  relationship,  including  building an interface  for our product,  training
their  employees,   developing  co-marketing  programs,  and  incorporating  our
products  into their  marketing  strategies.  We  provide  sales  materials  and
training to resellers on the  implementation  of our  software  solutions.  With
several of these  partners,  we also have reseller  agreements by which they are
authorized to resell our products to their customers. These agreements generally
provide the parties  with the right to use each other's  names in marketing  and
advertising  materials,  and to occasionally  conduct joint marketing  programs.
These  agreements  are  generally  for a one-year  period and are  automatically
renewable.  We believe  these  relationships  will extend our presence and brand
name in new and existing markets.

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,  resource  planning,
capacity planning and monitoring,  in enhancing the scalability of our products,
and in continuing the  development of packaged  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 $5.4 million
for the year ended  December 31, 2000,  $3.9 million for the year ended December
31, 1999,  and $3.1 million for the year ended December 31, 1998. As of December
31, 2000, we employed 47 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.


                                       10
<PAGE>
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.


<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  borad 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  have  filed  trademark  applications  in the  United  States  for the use of
CLICKSOFTWARE,     CLICKBROKER,    CLICKANALYZE,    CLICKPLAN,    CLICKFORECAST,
CLICKPERFORMANCE MONITOR, CLICKSCHEDULE, CLICKFIX, CLICKANSWER, CLICKCATALOG and
W-6. However, we may not receive registrations for these trademarks. In 2000, we
settled two legal  disputes  regarding our current and former names.  See "Legal
Proceedings."

Our registered trademarks also include Diagnostic Executive and Aitest. 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.


                                       11
<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,  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, 2000, we had 198 full-time employees,  47 engaged in research
and  development,  71  in  sales,  marketing  and  business  development,  44 in
professional  services and technical  support and 36 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.

84 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  $272,000  in 1998,  $202,000 in 1999 and
$562,000 in the year 2000.

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.

EXECUTIVE OFFICERS AND DIRECTORS

Our executive  officers and directors and certain  information  about them as of
March 15, 2001 are as follows:

                                       12
<PAGE>
<TABLE>
<CAPTION>
Name                          Age    Position
----                          ---    --------

<S>                           <C>    <C>
Dr. Moshe BenBassat           53     Chief Executive Officer and Chairman of the Board
Shimon M. Rojany              53     Senior Vice President and Chief Financial Office
Corey Leibow                  46     Chief Operating Officer
David Schapiro                42     Senior Vice President, Product Development
Ami Shpiro                    47     President and General Manager, European Operations
Hannan Carmeli                42     Senior Vice President, Product Services and Operations
Amit Bendov                   36     Vice President, Product Marketing
Roni Einav                    45     Director
Dr. Israel Borovich           58     Director
Nathan Gantcher               60     Director
Eddy Shalev                   53     Director
James W. Thanos               52     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 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 for
Ajuba  Solutions.  Beginning in 1995, Mr. Leibow was the Vice President of Sales
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 Senior VP of Product Development since August 2000.
Prior to this role he  served as our Vice  President  & General  Manager  of the
Product  Development  Group since  1999.  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 Mr.  Schapiro  has  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.

AMI SHPIRO has served as President of European  Operations  since December 2000.
He had served as Vice President and General  Manager of European  Operations and
Managing Director of ClickSoftware  Europe Limited since October 1996. From 1994
to October 1996,  Mr. Shpiro served as Vice  President,  W-6 division.  Prior to
1994, Mr. Shpiro had various roles in developing the W-6 scheduling  system. Mr.
Shpiro  holds a Bachelor of Science  degree in Computer  Science and a Master of
Science degree from the Hebrew University of Jerusalem.

HANNAN CARMELI has served as Senior Vice President and General Manager, Products
Services and  Operations  of the since  October  1997.  From  September  1997 to
October  1997,  Mr.  Carmeli  served as Manager of the TechMate  Division.  From
December  1994 to  September  1996,  Mr.  Carmeli  served as Sales  Director for
Surecomp,  a software vending  company.  Mr. Carmeli holds a Bachelor of Science
degree from the Technion  Institute  and a Master of Science  degree in Computer
Science from Boston University.


                                       13
<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 EINAV has served as a director of ClickSoftware since April 2000. From 1983
to April 1999,  Mr.  Einav  served as Chairman of the Board of  Directors of New
Dimension  Software,  Ltd., a software  company which he founded.  Mr. Einav has
also played a role in founding over ten additional  Israeli high-tech  companies
including:   Liraz   Computers,   which  owns  Level  8,  Jacada,   UDS-Ultimate
Distribution Systems, CreditView,  CePost, CeDimension, ComDa and Einav Systems.
Mr.  Einav is 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 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., Ogen  Investments,  Ltd.,  Granit Hacarmel
Investments,  Ltd. and Vulcan  Batteries  Ltd. Dr.  Borovich  holds  Bachelor of
Science,  Master of Science  and a Doctor of  Philosophy  degrees in  Industrial
Engineering from the Polytechnic Institute in Brooklyn.

NATHAN GANTCHER has served as a director of ClickSoftware since April 2000. 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,  Mr.  Shalev has also served as a director  of  Fundtech  Corp.  Mr.
Shalev has served as Chief  Executive  Officer of E. Shalev Ltd.  since  January
1997 and as the Managing General Partner of E. Shalev Management since 1983. 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.

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

ClickSoftware  has 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 3,000 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.


                                       14
<PAGE>

Anticipated minimum net rents for these facilities are approximately  $1,064,000
for the twelve months ending December 31, 2001,  $91,128,000 for 2002,  $981,000
for 2003 and $1,000,000 for 2004.

ITEM 3. LEGAL PROCEEDINGS

The Company is not currently involved in any material legal proceedings.  During
2000, we were involved in two legal matters which have been settled.

CLICKSERVICES.COM  V. CLICKSERVICE  SOFTWARE.  On February 28, 2000, a trademark
infringement complaint was filed against us in the United States District Court,
Northern District of California, by Clickservices.com, an unrelated third party.
At the time, we were known as  "ClickService  Software".  The complaint  alleged
that  our  use  of  the  CLICKSERVICE   trademark  and   "clickservice.com"  and
"clickservice.net"  Internet domain names resulted in trademark infringement and
unfair  competition  in violation of federal  law.  The  complaint  also alleged
unfair  competition,  false  advertising,  and  false  designation  of origin in
violation  of  California's   Business  and  Professions   Code,  and  trademark
infringement   in   violation   of   California   common   law.    Additionally,
Clickservices.com demanded damages of an unspecified amount.

On May 2, 2000,  the District  Court  granted  Clickservices.com's  motion for a
preliminary injunction and enjoined us from using the CLICKSERVICE trademark and
the domain names  "clickservice.com"  and  "clickservice.net".  We have complied
with the District  Court's order and changed our corporate name to ClickSoftware
Technologies Ltd. and our domain name to clicksoftware.com. On October 19, 2000,
final Stipulated  Consent Judgment and Permanent  Injunction Order was signed by
the court which permanently restrained us from using the trademarks.  Concurrent
with the final order, both parties agreed to withdraw all other claims.

CLICKSOFTWARE  TECHNOLOGIES LTD. V. CLICK COMMERCE, INC. After we were contacted
by Click Commerce, Inc., an unrelated third party, alleging that our new company
name, ClickSoftware  Technologies Ltd., may infringe upon their company name and
trademark,  we responded on June 22, 2000 by filing a complaint for  declaratory
relief in the United States  District  Court,  Northern  District of California,
seeking a determination  that the use of our name and trademarks do not infringe
on Click Commerce, Inc.'s claimed trademarks.  Click Commerce, Inc. responded to
our complaint by denying our allegations.  In addition,  Click Commerce,  Inc.'s
response included a  cross-complaint  alleging that our use of the CLICKSOFTWARE
trademark and our use of other product names resulted in trademark infringement,
unfair competition, and false designation of origin in violation of federal law.
The  cross-complaint  also alleged unfair  competition and false  advertising in
violation  of  California's   Business  and  Professions   Code,  and  trademark
infringement  in  violation  of  California  common law.  Click  Commerce,  Inc.
demanded damages from us in an unspecified amount.

On December 20, 2000,  the parties  agreed to a settlement  whereby both parties
withdrew  their  complaints  and agreed to allow the  continued the use of their
respective  trademarks.  In addition,  the parties  agreed to stipulate  certain
facts and  retain  specific  rights for future  actions  should  there be future
factual instances of trade name confusion.

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:

                                       15
<PAGE>


Fiscal year ended December 31, 2000                  HIGH              LOW
-----------------------------------                  ----              ---

Second Quarter (from June 22, 2000)                $ 7.375            $ 5.81
Third Quarter                                      $ 8.750            $ 3.00
Fourth Quarter                                     $ 3.656            $ 1.75

As of March 26,  2001,  there were 111  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,  the  Company  commenced  an initial  public  offering of its
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  shares of 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. In addition, the following table sets forth the
expenses  incurred in  connection  with the  offering,  other than  underwriting
discounts and commissions:

        SEC Registration fee                                       $ 24,772
        NASD filing fee                                               6,825
        Nasdaq National Market listing fee                           98,149
        Printing and engraving expenses                             315,660
        Legal fees and expense                                      727,134
        Accounting fees and expenses                                207,373
        Transfer agent and registrar fees                           326,454
        Miscellaneous expenses                                       69,660
                                                            ----------------
          Total                                                 $ 1,776,027
                                                            ================

After  deducting the  underwriting  discounts and  commissions  and the expenses
related to the offering as described  above,  we received net proceeds  from the
offering of approximately $28,169,973.

As of December 31, 2000,  we have used the aggregate net proceeds of $28 million
from our initial public offering of ordinary shares for the following purposes:

*   approximately $7 million to expand our  international  operations  including
    infrastructure and sales and marketing expenses;
*   approximately  $7.5  million to expand  our  domestic  operations  by hiring
    additional  employees,  leasing  additional  office space and  expanding our
    infrastructure; and
*   approximately $3 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
director,  officer, general partner of the Company or their associates,  persons
owning  10%  or  more  of any  class  of our  equity  securities,  or any of our
affiliates.

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


                                       16
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.

The  selected  consolidated  statement  of  operations  data for the years ended
December 31, 1996,  1997,  1998,  1999 and 2000,  and the selected  consolidated
balance sheet data as of December 31, 1996,  1997, 1998, 1999 and 2000 have been
derived from our audited financial  statements.  The consolidated  statements of
operations  data for the years ended December 31, 1996 and 1997 and the selected
consolidated  balance  sheet data as of  December  31,  1996,  1997 and 1998 are
derived from audited  consolidated  financial  statements  that are not included
herein.  For the year ended December 31, 1996, the audited financial  statements
were  adjusted to eliminate  the results of  operations  of two  divisions,  our
Nester and Systems divisions spun off from our operations in 1997. Therefore the
numbers presented here for 1996 represent  unaudited  adjusted numbers for these
periods.  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.

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
                                                                   YEAR ENDED DECEMBER 31,
                                              ------------------------------------------------------------------
                                                   1996         1997         1998          1999          2000
                                              ------------ ------------ ------------ ------------- -------------
                                                       (in thousands except share and per share data)

Revenues:
<S>                                               <C>           <C>          <C>           <C>         <C>
  Software license                                $ 1,491       $1,235       $3,932        $5,414      $ 10,500
  Service and maintenance                           1,893        1,080        2,139         4,912         5,242
                                              ------------ ------------ ------------ ------------- -------------
      Total Revenues                                3,384        2,315        6,071        10,326        15,742
Cost of Revenues:
  Software License                                     14           13           25            71           272
  Service and Maintenance                           1,458        1,035        2,301         4,299         5,156
                                              ------------ ------------ ------------ ------------- -------------
    Total cost of revenues                          1,472        1,048        2,326         4,370         5,428
                                              ------------ ------------ ------------ ------------- -------------
Gross Profit                                        1,912        1,267        3,745         5,956        10,314
Operating Expenses:
  Research and Development
       expenses, net                                  862        1,339        2,284         2,910         4,300
  Sales and Marketing expenses                      2,184        3,172        6,019         8,274        14,106
  General and Administrative                        1,025        1,120        1,133         1,759         4,397
       expenses
  Share based Compensation                              -            -            -           738         1,237
                                              ============ ============ ============ ============= =============
Total Operating Expenses                            4,071        5,631        9,636        13,681        24,040
Loss from Operations                              (2,159)      (4,364)      (5,891)       (7,725)      (13,726)
Interest and other (expenses)
  income, net                                       (278)        (148)           33         (254)           680
                                              ------------ ------------ ------------ ------------- -------------
Net Loss                                         $(2,437)     $(4,512)     $(5,858)      $(7,979)     $(13,046)
                                              ============ ============ ============ ============= =============

Dividend related to convertible
  preferred shares                                                                        (4,989)
                                              ------------ ------------ ------------ ------------- -------------
Net loss attributable to ordinary
  shareholders                                   $(2,437)     $(4,512)     $(5,858)     $(12,968)     $(13,046)
                                              ============ ============ ============ ============= =============
Net loss per ordinary share                       $(0.47)      $(0.80)      $(0.99)       $(2.18)       $(0.58)
Shares used in computing basic and diluted
net loss per share                              5,216,705    5,657,728    5,914,735     5,948,816    22,312,554



                                       17
<PAGE>
CONSOLIDATED BALANCE SHEET DATA:
                                                                          DECEMBER 31,
                                              ------------------------------------------------------------------
                                                   1996         1997         1998          1999          2000
                                              ------------ ------------ ------------ ------------- -------------
                                                                        (in thousands)

Cash and cash equivalents                           $ 104        $ 301      $ 3,770     $ 7,838       $ 4,438
Short term Investments                                  -            -            -           -        16,878
Working capital                                   (2,770)        (604)        4,178       8,007        23,610
Total assets                                        1,866        2,604        7,983      14,195        31,455
Long-term liabilities, net of current
  portion                                           1,954        1,530        1,254       1,112         1,446
Shareholders' equity (net capital
  deficiency)                                     (3,954)      (3,177)        4,657       8,821        26,462

</TABLE>

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.

                                       18
<PAGE>

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.

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  (expenses)  income  includes  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, 1998, 1999 and 2000 were immaterial.

Our tax  rate  will  reflect  a mix of the U.S.  statutory  tax rate on our U.S.
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  which 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.

RESULTS OF OPERATIONS

FISCAL YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

REVENUES.  Revenues increased $5.4 million or 52% to $15.7 million in 2000, from
$10.3 million in 1999. In 1999,  revenues increased $4.2 million or 70% to $10.3
million from $6.1 million in 1998. In 2000,  62% our revenues were  generated in
North  America,  32% in  Europe,  3% in Israel  and 3% in all  other  geographic
locations ("Rest of the World").  In 1999, 67% of our revenues were generated in
North America, 21% in Europe, 9% in Israel and 3% in Rest of the World. In 1998,
71% of our revenues were generated in North America, 20% in Europe, 8% in Israel
and 1% in Rest of the World.  The increase in percentage of revenues from Europe
are largely  attributable to an increase in sales by our European  subsidiary to
customers in Europe.

                                       19
<PAGE>

SOFTWARE  LICENSE.  Software  license  revenues  were  $10.5  million  or 67% of
revenues in 2000,  $5.4 million or 52% of revenues in 1999,  and $3.9 million or
65% of revenues in 1998.  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 $5.2 million or
33% of revenues  in 2000,  $4.9  million or 48% of  revenues  in 1999,  and $2.1
million or 35% of revenues in 1998. 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.  The increase in service
and  maintenance  revenues from 1998 to 1999 was primarily due to an increase in
the number of clients  during these  periods,  and  increased  sales of services
related to CLICKSCHEDULE implementations that these new clients required.

COST OF REVENUES. Cost of revenues were $5.4 million or 35% of revenues in 2000,
$4.4 million or 42% of revenues in 1999,  and $2.3 million or 38% of revenues in
1998.  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 66% in 2000 as compared to 58% in 1999
and 62% in 1998. Because our service and maintenance revenues have significantly
lower gross  margins than our  software  license  revenues,  the change in gross
profit percentages are primarily due to the changing mix of lower margin service
and maintenance revenues compared to higher margin software license revenues.

COST OF SOFTWARE  LICENSES.  Cost of software  license revenues were $272,000 in
2000 $71,000 in 1999,  and $25,000 in 1998.  Cost of software  license  revenues
were less than 2% of  revenues  in 2000 and less than 1% of revenues in 1999 and
1998.

COST OF SERVICE AND MAINTENANCE.  Cost of service and maintenance  revenues were
$5.2  million or 33% of  revenues  in 2000,  $4.3  million or 42% of revenues in
1999,  and $2.3 million or 38% of revenues in 1998.  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  increase in the
cost of service and maintenance  revenues from 1998 to 1999 was due primarily to
an  increase  in the sale of  licenses,  which  resulted  in an increase of $1.4
million in personnel  related costs,  an increase of $0.3 million in third party
related  costs and an  increase  of $0.3  million in other  expenses.  The total
number of professional  services employees employed by us was 44 on December 31,
2000, 35 on December 31, 1999, and 23 on December 31, 1998.

OPERATING  EXPENSES.  Total  operating  expenses  were $24.0  million or 153% of
revenues in 2000,  $13.7 million or 132% of revenues in 1999,and $9.6 million or
159% of revenues in 1998.

RESEARCH AND DEVELOPMENT EXPENSES,  NET. Research and development expenses,  net
of related grants, were $4.3 million or 27% of revenues in 2000, $2.9 million or
28% of  revenues  in 1999,  and $2.3  million  or 38% of  revenues  in 1998.  We
received  or  accrued  grants  from the Chief  Scientist  in the  amount of $1.1
million in 2000, $1.0 million in 1999, and $0.9 million in 1998. The increase in
research  and  development  expenses on an absolute  basis from 1998 to 1999 and
1999 to 2000 was  primarily  due to an  increase  of $1.3  million in  personnel
related costs related to improvements of our  CLICKSCHEDULE and CLICKFIX product
lines and development of CLICKPLAN and  CLICKANALYZE as part of our introduction
of a  complete  suite  of  service  optimization  management  products.  We  are
continuing to invest  substantially in research and  development,  and we expect
that research and development expenses will increase on an absolute basis in the
future.


                                       20
<PAGE>

SALES AND MARKETING EXPENSES. Sales and marketing expenses were $14.1 million or
90% of revenues  in 2000,  $8.3  million or 80% of  revenues  in 1999,  and $6.0
million or 99% of revenues in 1998.  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.  Personnel related
costs increased $1.4 million from 1998 to 1999 and other expenses increased $0.9
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 71 on December 31, 2000, 44 on December 31, 1999,  and 25 on December 31,
1998.

GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses were
$4.4  million or 28% of  revenues  in 2000,  $1.8  million or 17% of revenues in
1999,  and $1.3 million or 22% of revenues in 1998.  General and  administrative
expenses included $1.1 million in bad debt charges in 2000, $0.1 million in 1999
and none in 1998.  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  and  incur  incremental  costs of being a public
company.

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

INTEREST  AND OTHER  (EXPENSES)  INCOME,  NET.  Interest  income net of interest
expenses,  were $0.7 million or 4% of revenues in 2000,  ($0.3) million or 2% of
revenues in 1999, and $33,000 or less than 1% of revenues in 1998.

INCOME  TAXES.  As of December 31, 2000, we had  approximately  $11.6 million of
Israeli net operating loss  carryforwards,  approximately  $17.5 million of U.S.
federal net  operating  loss  carryforwards  and  approximately  $3.4 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 to 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, 2000 we had cash and cash  equivalents  of $4.4  million and
short term investments of $16.9 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.

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, 2000,  cash used in operations was $13.5 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.  For the year ended  December 31, 1998,  cash
used in operations was $6.7 million,  comprised of the net loss of $5.9 million,
an increase in trade  receivable of $1.1 million,  partially  offset by non-cash
charges of $0.4 million.

                                       21
<PAGE>

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 and 1998  was  $0.7  million  and $1.0  million
respectively,  which  was  primarily  invested  in  leasehold  improvements  and
purchases of equipment and systems,  including  computer  equipment and fixtures
and furniture.

Net cash  provided by  financing  activities  was $29.1  million in 2000,  $11.3
million in 1999 and $11.1 million in 1998. In June 2000,  the Company  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 the Company from the offering were approximately  $28.3 million (net
of  underwriters  discount  and  issuance  expenses).  Net cash  from  financing
activities during 1999 and 1998 included proceeds from the issuance of preferred
shares of $11.4 million and $11.7 million respectively.

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  $4.2  million  related  to  research  and
development and $0.7 million related to marketing activities. As of December 31,
2000, we have paid or accrued  royalties related to these funds in the amount of
$1.3 million. See Note 11 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, 2000.

The  Company  also has an  aggregate  of  $249,000  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 are in British
Pounds bearing an average interest rate of 5.5%

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 $575,000 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.

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.

                                       22
<PAGE>

RISKS RELATED TO OUR BUSINESS

THE ECONOMIC OUTLOOK FOR THE BEGINNING OF THE YEAR 2001 MAY ADVERSELY AFFECT THE
DEMAND FOR OUR PRODUCTS AND THE COMPANY'S RESULTS OF OPERATIONS. Predictions for
the  general  economy  for the first part of 2001  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  which 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 AND WE EXPECT TO CONTINUE TO INCUR NET LOSSES
FOR THE IMMEDIATE  FUTURE.  We expect to continue to incur significant sales and
marketing and research and development expenses,  and such expenses may increase
in the future.  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.  For example, in the year ended December 31, 2000, an average of 62% of
realized revenue was recognized in the last two weeks of each 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 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.

                                       23
<PAGE>

FAILURE OF THE MARKET TO ACCEPT OUR TECHNOLOGY WOULD ADVERSELY AFFECT DEMAND FOR
OUR PRODUCTS AND THE PRICE OF OUR ORDINARY  SHARES COULD  DECLINE.  Our products
are based on complex technologies, including sophisticated algorithms and models
which we have developed to address complex scheduling and troubleshooting issues
in the service  industry.  Although our products are currently being used in the
service  industry,  and we believe our  technologies  address these issues,  the
methods  we have  chosen  have  not yet  been  widely  accepted  by the  service
industry.  We cannot predict whether our products will be widely accepted by the
service industry. Failure of the market to accept our technology would adversely
affect demand for our products.  In addition, we participate in an industry with
an  inherently  high failure rate and we cannot assure you that our clients will
achieve success when using our products and services. Any publicized performance
problems  relating to our products or those of our  competitors  could also slow
client adoption of our products.  Moreover, to the extent that we are associated
with  unsuccessful  client projects,  even if due to factors beyond our control,
our reputation and competitive  position in our industry could be materially and
adversely affected.

OUR PRODUCT  SUITE  ACCOUNTS FOR ALL OF OUR LICENSE  REVENUE.  IF THE DEMAND FOR
THIS PRODUCT FALLS, OUR SALES COULD BE  SIGNIFICANTLY  REDUCED AND OUR FINANCIAL
PERFORMANCE  COULD BE  SERIOUSLY  DAMAGED.  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.  As we
pursue our business  strategy and  continue to integrate  new products  with the
product suite, we anticipate that revenues from sales of our  CLICKSCHEDULE  and
CLICKFIX product lines,  together with related professional  services fees, will
account for a substantial  portion of our operating  revenue for the foreseeable
future.  Accordingly,  the  widespread  market  acceptance of these  products is
critical  to our  future  success.  Competition,  technological  change or other
factors could  decrease  demand for, or market  acceptance of, these products or
make these products obsolete.  Any decrease in demand or market acceptance would
have a material adverse effect on our business and operating results.

During the year ended December 31, 2000, we introduced  three new products that,
together with our existing products,  constitute a suite of products that offers
a more  comprehensive  solution  to our  customers.  The  growth of our  company
depends on the development of market  acceptance of these new products.  We have
no guarantee  that the sales of these new 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 LONG AND  UNPREDICTABLE  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 a
long time,  typically  ranging  from three  months to one year,  to evaluate our
products before making their purchase decisions.  In addition,  depending on the
nature and specific needs of a client,  the  implementation  of our products can
take up to  three  to  twelve  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.  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.

                                       24
<PAGE>

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 North  America.  As of December  31,  2000,  we
employed 71 individuals in our sales and marketing organizations.  Because 27 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.  Mr.
Shimon Rojany, our CFO, recently announced his upcoming  retirement.  Mr. Rojany
is  committed  to  continuing  his  services for as long as required to ensure a
smooth transition. 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. In addition, given the
decline in our share price and the  volatility of the stock  market,  we believe
that the prospective employees that we target may perceive that the share option
component of our  compensation  packages is not valuable.  Consequently,  we may
have difficulty hiring our desired numbers of key personnel.  Moreover,  even if
we are able to attract  key  personnel,  the  resources  required to attract and
retain such personnel may adversely affect our operating results.

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
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
are 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.

                                       25
<PAGE>

OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED  DEVELOPERS IS CRUCIAL TO OUR FUTURE
GROWTH AND RESULTS OF  OPERATIONS.  As a company  focused on the  development of
software  products,  our research and  development  personnel is one of our most
valued assets.  Our future success depends in large part on our ability to hire,
train and retain software  developers,  systems  architects,  project  managers,
business process experts, systems analysts, trainers,  consultants and sales and
marketing  professionals of various experience levels.  Personnel possessing the
skills needed to contribute to our research and development efforts are in short
supply,  and this shortage is likely to continue.  As a result,  competition for
these  people  is  intense,  and the  industry  turnover  rate for them is high.
Although the location of our  development  team in Israel  protects us from this
risk to some extent, any inability to hire, train and retain a sufficient number
of qualified  development  employees  could hinder the research and  development
activities and growth of our business.

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. See Part 1,
Competition.

FAILURE TO FULLY DEVELOP OR MAINTAIN KEY BUSINESS  RELATIONSHIPS COULD LIMIT OUR
ABILITY TO SELL  ADDITIONAL  LICENSES  WHICH 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
only beginning to derive  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.

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  which  could  impair our revenue and
operating results.

                                       26
<PAGE>

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  which  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
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 are one
of the  pioneers in our field and 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:

                                       27

<PAGE>

*   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  which would  result in the  issuance  of  additional
shares.

OUR BUSINESS MAY BECOME  INCREASINGLY  SUSCEPTIBLE TO NUMEROUS RISKS  ASSOCIATED
WITH  INTERNATIONAL  OPERATIONS.  A significant  portion 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
*   political and economic instability.

                                       28
<PAGE>

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.

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 1999, 34%, and in 2000, 27% 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.  In 1998, the
rate of devaluation of the NIS against the dollar exceeded the rate of inflation
in Israel,  which benefited us. However, we cannot assure you that this reversal
will continue or that we will not be materially adversely affected in the future
if the rate of inflation in Israel  exceeds the  devaluation  of the NIS against
the  dollar or if the  timing  of this  devaluation  lags  behind  increases  in
inflation in Israel.

The effects of foreign currency  exchange rates on our results of operations for
the years ended December 31, 1998, 1999 and 2000 were immaterial.

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  a  substantial  portion 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 the 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  Senior  Vice  President  of  Product
Development,  and Hannan Carmeli,  our Senior Vice President of 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,
your rights as a  shareholder  will be governed by the  Companies  Law of Israel
which became  effective on February 1, 2000.  Certain  obligations and fiduciary
duties of directors,  officers and shareholders  under the new Companies Law are
new and 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.

                                       29
<PAGE>

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. For the year 2000, our expenses  incurred in
the UK were 26% of our  total  expenses.  For the year of 1999,  these  expenses
represented 15% of our total expenses. Our revenue from the UK has grown. We are
expanding  operations  in  other  areas  of  Europe,  and  income  and  expenses
recognized in the European  Community Euro will increase.  We incur a portion of
our expenses,  principally salaries and related personnel expenses in Israel, in
NIS. In 1999 34%, and in 2000 27% 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.  For 2000, our DSO (days
sales  outstanding) was 101 days reflecting the necessity to extend longer terms
for  larger  deals.  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.  In 1998,  1999,  and 2000,  we received or accrued  grants from the
Chief  Scientist  totaling   approximately   $0.9  million,   $1.0  million  and
approximately $1.1 million respectively.  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  which 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.   The  amount  of  the  grants  received  since  inception  is
approximately $4.2 million in respect of which we have already paid $1.3 million
out of a  total  of $4.3  million  due to the  Chief  Scientist  in the  form of
royalties.  We expect to pay or accrue additional royalties for the year 2000 at
a rate  equal  to  3.5%  of our  total  revenues.  We  expect  to pay or  accrue
additional  royalties  for the year  2001 at a rate  equal to 3.5% of our  total
revenues.  From  time to time,  the  Government  of Israel  changes  the rate of
royalties  without our possibility  accurately  predict the change. 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 licensing of our software in the ordinary course
of business is not  considered  a transfer  of  technology  by the Office of the
Chief  Scientist  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  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.

                                       30
<PAGE>

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.

PROPOSED  TAX REFORM IN ISRAEL MAY REDUCE OUR TAX  BENEFITS.  On May 4, 2000,  a
committee  chaired by the  Director  General of the Israeli  Ministry of Finance
issued  a report  recommending  a  sweeping  reform  in the  Israeli  system  of
taxation.  The  proposed  reform  would  significantly  alter  the  taxation  of
individuals  and would  also  affect  corporate  taxation.  In  particular,  the
proposed  reform would reduce but not  eliminate  the tax benefits  available to
approved  enterprises  such as  ours.  The  Israeli  cabinet  has  approved  the
recommendation  in  principle,   but   implementation  of  the  reform  requires
legislation  by Israel's  Knesset.  We cannot be certain  whether  the  proposed
reform  will be  adopted,  when it will be adopted or what form any reform  will
ultimately take or what effect it will have on our company.

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  based upon the civil  liability  provisions of
the U.S. federal  securities laws in an Israeli court against us or any of those
persons or to effect service of process upon these persons in the United States.
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, 2000, our executive  officers,  directors and entities  affiliated with them
beneficially owned approximately 33.5% 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 they are
opposed by our other investors.

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.

                                       31
<PAGE>

OTHER ORDINARY  SHARES MAY BE SOLD IN THE FUTURE.  THIS COULD DEPRESS THE MARKET
PRICE FOR OUR  ORDINARY  SHARES.  As of December  31,  2000,  we had  26,064,539
ordinary  shares  outstanding,  including  shares held by a trustee for issuance
under  outstanding  options.  In  addition,  as of  December  31,  2000,  we had
1,848,821  ordinary  shares issuable upon exercise of outstanding  options,  and
3,385,383 additional ordinary shares reserved for issuance pursuant to our stock
option  plans  and  employee   share  purchase  plan.  If  we  or  our  existing
shareholders  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  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.

If  additional  funds are raised  through the issuance of equity or  convertible
debt securities,  the percentage  ownership of our shareholders will be reduced,
and these newly issued  securities  may have rights,  preferences  or privileges
senior to those of existing  shareholders.  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, our passive  income,  or our assets which produce  passive income,
exceeds  specified  levels,  we  may  be  characterized  as  a  passive  foreign
investment  company for United States  federal  income tax  purposes.  We do not
currently  anticipate that this will happen,  but, if it does, our  shareholders
will be subject to adverse United States tax consequences. Prospective investors
should consult with their own tax advisors with respect to the tax  consequences
applicable to them of investing in our ordinary shares.

                                       32
<PAGE>

BUSINESS  INTERRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS.  Our operations are
vulnerable to interruption by fire, earthquake,  power loss,  telecommunications
failure and other events beyone 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 compenesate 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.

INTEREST RATE RISK. As of December 31, 2000, we had cash and cash equivalents of
$21.3 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,  2000,  we had total  short term debt of $0.1  million  and
long-term debt net of current  maturities of $0.1 million which bear interest at
rates that are linked to LIBOR or the Israeli consumer price index. We also have
a revolving,  accounts  receivable-based,  secured credit facility of up to $2.5
million for working capital purposes.  Amounts  outstanding bear interest at the
U.S.  prime  rate  plus 1%. As of  December  31,  2000,  there  were no  amounts
outstanding under this facility.

                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
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.

                                       33
<PAGE>

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.



    Independent Auditors' Report................................   35
    Consolidated Balance Sheets.................................   36
    Consolidated Statements of Operations and Comprehensive
      Loss......................................................   37
    Consolidated Statements of 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) as of December 31, 1999
and 2000,  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, 2000. These financial  statements are the  responsibility  of
the Company's management.  Our responsibility is to express an opinion on these1
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.  as of  December  31,  1999 and 2000,  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,  2000,  in
conformity with accounting principles generally accepted in the United States.



                             /s/ LUBOSHITZ KASIERER
                             ------------------------------
                             Member Firm of Arthur Andersen




Tel-Aviv, Israel
January 29, 2001





                                       35

<PAGE>

<TABLE>
<CAPTION>

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

                                                                                           DECEMBER 31,
                                                                                      1999             2000
                                                                              ----------------- ----------------
ASSETS
Current Assets:
<S>                                                                                    <C>              <C>
  Cash and cash equivalents (note 3)                                                   $ 7,838          $ 4,438
  Short-term investments (note 4)                                                            -           16,878
  Trade receivables, net of allowance of $130 and $742 as
     of December 31, 1999 and 2000, respectively                                         3,966            4,375
  Other receivables and prepaid expenses (note 5)                                          465            1,466
                                                                              ----------------- ----------------
     Total current assets                                                               12,269           27,157
Property and equipment, net (note 6)                                                     1,498            3,772
Severance pay deposits (note 10)                                                           428              526
                                                                              ----------------- ----------------
     Total assets                                                                     $ 14,195         $ 31,455
                                                                              ================= ================


LIABILITIERS AND SHAREHODERS' EQUITY
CURRENT LIABILITIES:
  Short-term debt (note 7)                                                              $  320           $  146
  Accounts payable and accrued expenses (note 8)                                         2,799            3,274
  Deferred revenues                                                                      1,143              127
                                                                              ----------------- ----------------
     Total current liabilities                                                           4,262            3,547
                                                                              ----------------- ----------------

LONG-TERM LIABILITIES
  Long-term debt (note 9)                                                                  213              103
  Accrued severance pay (note 10)                                                          899            1,343
                                                                              ----------------- ----------------
     Total long-term liabilities                                                         1,112            1,446
                                                                              ----------------- ----------------
     Total liabilities                                                                   5,374            4,993
                                                                              ----------------- ----------------
Commitments and contingencies (note 11)

SHAREHOLDERS' EQUITY: (NOTE 12)
Convertible Preferred shares of NIS 0.02par value:
     Authorized  --  17,330,238  as of  December  31, 1999 and  5,000,000  as of
December 31, 2000; Issued and outstanding -- 13,499,898 as of December 31,
1999 and none as of December 31,  2000                                                      60                -
Ordinary shares of NIS 0.02 par
value:
     Authorized  --  8,314,801  as of December  31, 1999 and  100,000,000  as of
December 31, 2000; Issued and outstanding -- 7,208,816 shares as of
December 31, 1999 and 26,064,539 as of December 31, 2000                                    13              100
Additional paid-in capital                                                              40,052           69,169
Deferred compensation                                                                  (2,663)          (1,120)
Accumulated deficit                                                                   (28,641)         (41,687)
                                                                              ----------------- ----------------
     Total shareholders' equity                                                          8,821           26,462
                                                                              ----------------- ----------------
     Total liabilities and shareholders' equity                                       $ 14,195         $ 31,455
                                                                              ================= ================


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,
                                                                       1998             1999           2000
                                                                ----------------- --------------- --------------
Revenues: (note 13)
<S>                                                                      <C>             <C>           <C>
  Software license                                                       $ 3,932         $ 5,414       $ 10,500
  Service and maintenance                                                  2,139           4,912          5,242
                                                                ----------------- --------------- --------------
     Total revenues                                                        6,071          10,326         15,742

Cost of revenues:
  Software license                                                            25              71            272
  Service and maintenance                                                  2,301           4,299          5,156
     Total cost of revenues                                                2,326           4,370          5,428
                                                                ----------------- --------------- --------------
     Gross profit                                                          3,745           5,956         10,314
                                                                ----------------- --------------- --------------

Operating expenses:
  Research and development expenses                                        3,150           3,935          5,408
  Less - participation by the Chief Scientist
     of the Government of Israel (note 11)                                   866           1,025          1,108
                                                                ----------------- --------------- --------------
  Research and development expenses, net                                   2,284           2,910          4,300
  Sales and marketing expenses (note 11)                                   6,019           8,274         14,106
  General and administrative expenses                                      1,333           1,759          4,397
  Share-based compensation                                                     -             738          1,237
                                                                ----------------- --------------- --------------
     Total operating expenses                                              9,636          13,681         24,040
                                                                ----------------- --------------- --------------
     Operating loss                                                      (5,891)         (7,725)       (13,726)
Interest and other (expenses) income, net                                     33           (254)            680
                                                                ----------------- --------------- --------------
     Net loss                                                          $ (5,858)       $ (7,979)     $ (13,046)
                                                                ----------------- --------------- --------------
Dividend related to convertible preferred shares
                                                                           $   -       $ (4,989)           $  -
                                                                ----------------- --------------- --------------
Net loss attributable to ordinary shareholders                         $ (5,858)       $(12,968)     $ (13,046)
                                                                ================= =============== ==============
Basic and diluted net loss per share (note 2)                           $ (0.99)        $ (2.18)       $ (0.58)
                                                                ================= =============== ==============
Shares used in computing basic and diluted net loss per share
                                                                       5,914,735       5,948,816     22,312,554
                                                                ================= =============== ==============

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
                                              NUMBER OF   CONVERTIBLE            ADDITIONAL
                                              ORDINARY     PREFERRED    SHARE    PAID-IN       DEFERRED    ACCUMULATED
                                                SHARES       SHARES     AMOUNT    CAPITAL    COMPENSATION    DEFICIT      TOTAL
                                              ----------- ------------- -------- ----------- ------------- ------------ -----------

<S>                                            <C>           <C>            <C>     <C>              <C>      <C>        <C>
Balance as of December 31, 1997                7,208,816     5,109,862      $36     $ 6,602          $  -     $(9,815)   $ (3,177)

Shares issued net of
issuance costs of $155                                 -     6,557,950       29      13,663             -            -      13,692
                                              ----------- ------------- -------- ----------- ------------- ------------ -----------

Balance as of December 31, 1998                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                12,499,898  (12,499,898)        -           -             -            -           -

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

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,
                                                                       1998             1999           2000
                                                                ----------------- --------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                <C>               <C>             <C>
Net loss                                                           $ (5,858)         $ (7,979)       $ (13,046)

Adjustments  to  reconcile  net loss to net cash  used
in  operating  activities
Expenses not affecting operating cash flows:
  Depreciation                                                           323               484              654
  Amortization of deferred compensation                                    -               738            1,237
  Unrealized gain from investments                                         -                 -            (258)
  Severance pay                                                           15                40              346
  Other                                                                   37               (8)                -
Changes in operating assets and liabilities:
  Trade receivables                                                  (1,074)           (1,925)             (409
  Other receivables                                                    (189)              (26)          (1,001)
  Accounts payable and accrued expenses                                  398             1,112              475
  Deferred revenues                                                    (315)             1,057          (1,016)
                                                             ---------------- ----------------- ----------------
Net cash used in operating activities                                (6,663)           (6,507)         (13,018)
                                                             ---------------- ----------------- ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments                                         -                 -         (16,620)
Purchases of equipment                                               (1,039)             (732)          (2,928)
                                                             ---------------- ----------------- ----------------
Net cash used in investing activities                                (1,039)             (732)         (19,548)
                                                             ---------------- ----------------- ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt                                                        (133)                14            (174)
Proceeds from long-term debt                                               -                35                -
Repayments of long-term debt                                           (368)             (147)            (110)
Net proceeds from issuance of Convertible Preferred shares
                                                                      11,672            11,374                -
Net proceeds form issuance of Ordinary
  shares                                                                   -                 -           28,170
Net proceeds from warrants exercised                                       -                 -              579
Employee and ESPP options exercised                                        -                31              701
                                                             ---------------- ----------------- ----------------
Net cash provided by financing activities                             11,171            11,307           29,166
                                                             ---------------- ----------------- ----------------

Increase (decrease) in cash and cash
  Equivalents                                                          3,469             4,068          (3,400)
Cash and cash equivalents at beginning of
  Period                                                                 301             3,770            7,838
                                                             ---------------- ----------------- ----------------
Cash and cash equivalents at end of period                           $ 3,770           $ 7,838          $ 4,438
                                                             ================ ================= ================


Supplemental cash flow information
Cash paid for interest                                                 $ 152             $ 137             $ 86
                                                             ================ ================= ================
Non-cash transactions
Loans converted into shares                                          $ 2,020               $ -              $ -
                                                             ================ ================= ================


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
                 FOR THE YEAR ENDED DECEMBER 31, 1999 AND 2000)
                            (IN THOUSANDS OF DOLLARS)

NOTE 1 -- GENERAL

     ClickSoftware  Technologies Ltd. (formerly I.E.T.  Intelligent  Electronics
Ltd.   and   formerly    ClickService   Software   Ltd.)   (the   "Company"   or
"ClickSoftware"),  was incorporated in Israel and provides  application software
that enables  companies to efficiently  provide service and product  delivery in
enterprise  environments and over the Internet.  The CLICKSCHEDULE  product line
enables  clients to optimize the  delivery of scheduled  services and product to
their  customers.  The CLICKFIX  product  facilitates  automated  diagnosis  and
troubleshooting  of  equipment.  CLICKSCHEDULE  and CLICKFIX  enable  clients to
optimize  resource  allocation,   offering  their  customers  ease  of  use  and
convenience while procuring services and products.  ClickSoftware customers come
from a wide variety of industries,  including aerospace, defense, semi-conductor
and communications, software, and automotive industry.

     The Company has incurred net operating  losses since  inception  and, as of
December 31, 2000, had an accumulated  deficit of $41.7 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  shares of  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 ("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.

     The Company,  originally named I.E.T. Intelligent Electronics Ltd., changed
its name from ClickService  Software Ltd. in January 2000 after a U.S. trademark
infringement  claim had been filed against the Company.  The Company changed its
name to  ClickSoftware  Technologies  Ltd. and  discontinued use of prior domain
names.

     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) and in the U.K.  (ClickSoftware Europe Limited).  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.

     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:
                                       40
<PAGE>

-    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,  2000 --  U.S.$1.00  = NIS 4.04
(December 31, 1999 - 4.15).

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 a 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 .

CONCENTRATION OF CREDIT RISK

     The  Company  provides  credit to its  customers  in the  normal  course of
business,  performs  ongoing  credit  evaluations of its customers and maintains
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.

                                       41
<PAGE>

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 12).

<TABLE>
<CAPTION>

                                                                        FOR THE YEAR ENDED DECEMBER 31,
                                                                        1998            1999            2000
                                                                 ---------------- -------------- ---------------
                                                                (in thousands except share data and share numbers)

<S>                                                                  <C>            <C>             <C>
Net loss attributable to ordinary shareholders                       $   (5,858)    $  (12,968)     $  (13,046)
Basic and diluted:
  Weighted averages shares used in computing
   basic and diluted net loss per ordinary share                       5,914,735      5,948,816      22,312,554

                                                                 ================ ============== ===============
  Basic and diluted net loss per Ordinary share                      $    (0.99)    $    (2.18)     $    (0.58)
                                                                 ================ ============== ===============
</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  13,340,290,  16,577,409 and 2,487,677 as of
December 31, 1998, 1999 and 2000 respectively.

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 12 the pro forma disclosures required under SFAS No. 123.


                                       42
<PAGE>

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 June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting  for Derivative  Instruments and Hedging  Activities."  SFAS No. 133
establishes  accounting and reporting  standards requiring that every derivative
instrument  be  recorded in the  balance  sheet at its fair value.  SFAS No. 133
requires that changes in the derivative's fair value be recognized  currently in
earnings unless specific hedge accounting  criteria are met. Special  accounting
for qualifying  hedges allows a derivative's  gains and losses to offset related
results on the hedged item in the income  statement.  The Company must adopt the
principles of SFAS No. 133, as amended by SFAS No.137 and 138, effective January
1, 2001. The Company  believes that the adoption of SFAS No. 133 will not have a
material effect on its financial statements.

NOTE 3 -- CASH AND CASH EQUIVALENTS

                                                           DECEMBER 31,
                                                        1999          2000
                                                  --------------- -----------
                                                        (in thousands)
               In NIS                                    $     -     $   532
               In British Pounds                               -         436
               In U.S. dollars                             7,838       3,470
                                                  --------------- -----------
                                                         $ 7,838     $ 4,438
                                                  =============== ===========



NOTE 4 - SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>

                                                                                            DECEMBER 31,
                                                                                      1999              2000
                                                                                   ----------      -------------
                                                                                        (in thousands)
<S>                                                                                      <C>             <C>
Taxable Securities (average annual interest rate of 6.8%)                            $     -           $  4,026
Corporate Bonds (average annual interest rate of 6.6%)                                     -              2,291
Euro Dollar Bonds (average annual interest rate of 6.7%)                                   -              5,121
Asset-backed Securities (average annual interest rate of 6.7%)                             -              5,440

                                                                                   ----------      -------------
                                                                                     $     0           $ 16,878
                                                                                   ==========      =============

</TABLE>
NOTE 5 -- OTHER RECEIVABLES AND PREPAID EXPENSES
<TABLE>
<CAPTION>

                                                                                            DECEMBER 31,
                                                                                      1999              2000
                                                                                   ----------      -------------
                                                                                        (in thousands)
<S>                                                                                      <C>             <C>
Government participations and other government receivables                           $   142           $    421
Employees                                                                                 60                 78
Other receivables and prepaid expenses                                                   263                967
                                                                              ----------------     ------------
                                                                                     $   465           $  1,466
                                                                              ================     ============

</TABLE>

                                       43
<PAGE>

NOTE 6 -- PROPERTY AND EQUIPMENT

                                                            DECEMBER 31,
                                                       1999          2000
                                                    ----------    ----------
                                                           (in thousands)
       COST
       Computers and office equipment               $ 2,747          $ 4,264
       Leasehold improvements                           357            1,551
       Motor vehicles                                   363              580
                                                    ----------    ----------
                                                    $ 3,467          $ 6,395
       Accumulated Depreciation                       1,969            2,623
                                                    ----------    ----------
       NET BOOK VALUE                               $ 1,498           $3,772
                                                    ==========    ==========



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

     The net book  value of the  Company's  property  and  equipment  located in
Israel was in the amount of  $1,052,000  and  $1,216,000 as of December 31, 1999
and 2000, respectively.

NOTE 7 -- SHORT-TERM DEBT

                                                          DECEMBER 31,
                                                        1999      2000
                                                       ------    ------
                                                        (in thousands)
    Short-term debt                                   $   15      $   -
    Current maturities on long-term debt (note 9)        173        146
    Shareholder loan on demand                           132          -
                                                       ------    ------
                                                      $  320      $ 146
                                                       ======    ======

     In 1999 the Company established a revolving, trade receivable based, credit
facility of up to $2.5 million for working capital purposes.  The line of credit
is limited to 80% of eligible trade receivables and the amount outstanding under
this facility as of December 31, 1999 and December 31, 2000 was nil.

NOTE 8 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                                                          DECEMBER 31,
                                                        1999        2000
                                                      -------     -------
    Suppliers                                         $  805      $ 1,335
    Employee and related expenses                      1,173        1,075
    Accrued royalties                                    330          389
    Other                                                491          475
                                                      -------     -------
                                                      $2,799      $ 3,274
                                                      =======     =======




NOTE 9 -- LONG-TERM DEBT

                                                          DECEMBER 31,
                                                       1999        2000
                                                     -------     -------
    Bank Loans
      In U.S. dollars                                $ 150        $ 113
      Linked to the Israeli CPI                        111           47
      In British Pounds                                 68           89
      Other                                             57            -
                                                     -------     -------
                                                     $ 386        $ 249
    Less - current maturities (note 7)                 173          146
                                                     -------     -------
                                                     $ 213        $ 103
                                                     =======     =======

     A U.S.  dollar loan in the amount of $90,000 bears annual interest of LIBOR
plus 1% (7% as of December 31, 2000). 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 5.5%.

                                       44
<PAGE>

Long-term debt as of December 31, 2000 net of current  maturities,  is repayable
as follows:

                                                 DECEMBER 31,
                                            1999               2000
                                          -------           --------
                                                (in thousands)
    2000                                   $ 148               $72
    2003                                      54                26
    2004                                      10                 5
    2005                                       1                 -
                                          -------           --------
                                           $ 213             $ 103
                                          =======           ========

NOTE 10 -- 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 $272,000,  $202,000 and $562,000 for the
years ended December 31, 1998, 1999 and 2000 respectively.

NOTE 11 -- 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
$4,178,000. 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.  The Company has
paid or accrued royalties through December 31, 2000 of $1,251,000.

     In connection  with its export  marketing  activities,  until  December 31,
1996, the Company received  participation payments from the Government of Israel
through the Fund for the Encouragement of Marketing  Activities in the amount of
$707,000.  The  Company is  committed  to pay  royalties  at a rate of 3% of the
increase  in  export  sales  over  a  base  amount,  up to  the  amount  of  the
participations  received.  The  Company  has paid or accrued  royalties  through
December 31, 2000 in the amount of $425,000.

     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  and on
amounts receivable from certain major customers.

     The Company  operates from leased  facilities in Israel,  the United States
and the U.K.,  for periods  expiring in the years 2001 through 2004 (some with a
renewal option ending in May 2008) at annual rent in the amount of approximately
$1,279,000. Minimum rental payments, as of December 31 are as follows:

                                                       (in thousands)
                                                       ----------------------
                                2001                                 $ 1,126
                                2002                                     903
                                2003                                     981
                                2004                                   1,000
                                                       ----------------------
                                                                     $ 4,010
                                                       ======================

--------------------
Rent expense amounted to $563,000,  $722,000, and $1,039,000 for the years ended
December 31, 1998, 1999, and 2000 respectively.

                                       45
<PAGE>

NOTE 12 -- SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
A. SHARE CAPITAL -- COMPRISES OF SHARES OF NIS 0.02 PAR VALUE.

                                                                         NUMBER OF SHARES
                                                   -------------------------------------------------------------
                                                             AUTHORIZED               ISSUED AND OUTSTANDING
                                                            DECEMBER 31,                   DECEMBER 31,
                                                        1999            2000            1999          2000
                                                   --------------- ---------------- ------------- --------------
<S>                                                     <C>            <C>             <C>           <C>
Ordinary shares                                         6,474,801      100,000,000     5,468,816     26,064,539
Ordinary A shares - non-voting                            840,000                -    840,000(*)              -
Ordinary B Convertible shares - non-voting
                                                        1,000,000                -    900,000(*)              -
                                                   --------------- ---------------- ------------- --------------
                                                        8,314,801      100,000,000     7,208,816     26,064,539
                                                   =============== ================ ============= ==============

Preferred A-1 Convertible shares                        4,750,000                -     2,810,424              -
Preferred A Convertible shares                          3,750,000                -     2,299,438              -
Preferred B Convertible shares                          4,000,000                -     3,826,809              -
Preferred C Convertible shares                          3,000,000                -     2,731,141              -
Preferred D Convertible shares (see note 12B)
                                                        1,830,238                -     1,832,086              -
Special preferred shares                                        -        5,000,000             -              -
                                                   --------------- ---------------- ------------- --------------
                                                       17,330,238        5,000,000    13,499,898              -
                                                   =============== ================ ============= ==============
</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 1,206,920 as of December 31, 1999, and 911,230 as of December
31,2000.

     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.

     Concurrent  with the IPO,  all of the  shares  of the  Company's  Series A,
Series  B,  Series  C,  Series  D and  Series  A1  convertible  preferred  stock
("Preferred  Stock") were converted into shares of the Company's ordinary shares
on a share for share basis.

B. ISSUANCES

     In December 1999,  the Company  signed an agreement to issue,  in a private
placement,  1,832,086  Preferred  D  Convertible  shares  in  consideration  for
$11,500,000.  As of December 31, 1999, the shares are  reflected,  as issued and
outstanding,  however  the shares  were  issued  subsequent  to year end.  As of
December 31, 1999, the issue exceeded  authorized share capital by 1,848 shares.
On March 20,  2000,  the  shareholders  of the  Company  approved an increase in
authorized  share  capital of Preferred D  Convertible  shares by  reclassifying
Ordinary shares to Preferred D Convertible  shares.  Subsequent to this approval
the unissued shares were issued.

     The Company has recorded a preferred share dividend of  approximately  $5.0
million  representing  the value of the  beneficial  conversion  feature  on the
issuance of Series D 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.


     In addition, in December 1999, certain employees exercised their options to
acquire 53,080 Ordinary shares. These shares had been previously issued and held
by the  trustee  and were  included  in the  number  of issued  and  outstanding
Ordinary shares.

     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 D Convertible  shares in December  1999.  This warrant
was exercised in March 2000.


                                       46
<PAGE>

     In February 2000,  15,329  Ordinary A 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 A 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  shares of  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.

     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 addition,  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 $2.6 per share according to the 2000 Employee Share Purchase Plan.

C. WARRANTS

     Warrants to purchase 393,552 Preferred B Convertible  shares were issued on
March 31, 1998 in  conjunction  with the  conversion  to Preferred B 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

     The Company  adopted an  Employees'  Share  Option Plan (1996  Option Plan)
according to which  options for the purchase of up to 360,000  Ordinary A shares
may be granted to  employees.  The options  have an exercise  price of $0.58 per
share and shall vest over a four year period  beginning  with 25% vesting  after
one year and  continuing at the rate of 33% per year for the  remaining  vesting
period,  commencing in the second year from the date of the grant.  In 1997, the
Company adopted an Employees'  Share Option Plan (1997 Option Plan) according to
which options for the purchase of up to 900,000 Ordinary B shares may be granted
to employees. The options are exercisable at a price of $0.58 per share and vest
over a four year  period,  with  monthly  vesting  after two years.  The options
issued to U.S. employees vest after 1 year.  Employees'  compensation in respect
of options granted under these plans is immaterial.

     In 1999 the Company adopted new option plans according to which options for
the  purchase  of 660,810  Ordinary B shares  may be granted to  employees.  The
options  have an  exercise  price of $0.83 per share and vests  over a four year
period.

     On  November  30,  1999 a warrant to purchase  75,000  Ordinary  shares was
issued to a consultant that vests immediately with an exercise price of $3.67.

     The Board of Directors  has approved the grant of a  stand-alone  option to
purchase 720,000 ordinary shares to the Company's CEO and stand-alone options to
purchase 95,000 ordinary shares to directors.

     The  Company  has  adopted  new option  plans in 2000 under which they have
granted  1,015,213  options at a weighted  average  exercise  price of $5.75 per
share.

                                       47
<PAGE>

     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 reduction  of  shareholders'  equity and  amortized  over the
vesting period of the applicable options.  The Company recorded  amortization of
deferred compensation of approximately  $1,237,000 and $738,000 during the years
ended December 31, 2000 and 1999, respectively.

     During 2000,  a total of 91,571  options  expired  which  reduced  deferred
compensation by approximately  $306,000.  As of December 31, 2000, the remaining
deferred compensation of approximately  $1,120,000 will be amortized as follows:
$664,000  $344,000,and  $112,000  during the years  ended  2001,  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",  using the "Black-Scholes option pricing" method with
the  following  weighted  average  assumptions  used for grants in all  reported
periods: (1) average expected life of the options is 1.31; (2) dividend yield of
0%; (3) expected  volatility of 0% for 1998 and 1999 and expected  volatility of
152% for December 31, 2000; and (4) risk-free interest rate of 5%, the effect on
the Company's net loss and net loss per share would have been immaterial for all
reported periods.

     Transactions related to the above discussed options and warrants granted to
employees and  consultants  during the years ended 1998,  1999 and 2000, 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-     WEIGHTED-
                                                                                         AVERAGE       AVERAGE
                                                     OPTIONS                            EXERCISE        FAIR
                                                    AVAILABLE         OUTSTANDING       PRICE PER     VALUE OF
                                                    FOR GRANT          OPTIONS(*)         SHARE        OPTION
                                                --------------- ------------------ -------------- --------------

<S>                                                <C>                <C>               <C>             <C>
Outstanding January 1, 1998                            898,470            661,530           0.58
Granted                                              (627,810)            627,810           0.58         $ 1.14
Forfeited                                               65,035           (65,035)           0.58
                                                --------------- ------------------ --------------
Outstanding December 31, 1998                          335,695          1,224,305           0.58
Authorized                                           1,493,809
Granted                                            (1,493,809)          1,493,809           1.64         $ 2.62
Exercised                                                    -           (53,080)           0.58
                                                --------------- ------------------ --------------
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 Purch plan                   (23,288)                  -
                                                --------------- ------------------ --------------
Outstanding December 31, 2000                        3,385,383          2,761,049           2.65
                                                =============== ================== ==============
</TABLE>
-----------------
(*) As of December 31, 1998,  1999, and 2000,  1,260,000,  1,206,920 and 912,228
Ordinary  shares are held by a trustee  and have been  reserved  for  allocation
against certain employee options granted but not yet exercised.

                                       48
<PAGE>

     The following table summarizes  information  about options  outstanding and
exercisable as of December 31, 2000:

<TABLE>
<CAPTION>
                                           OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                                       ---------------------------                    ------------------
                                NUMBER       WEIGHTED-                               NUMBER
                            OUTSTANDING        AVERAGE            WEIGHTED-        OUTSTANDING       WEIGHTED-
                                 AT           REMAINING            AVERAGE            AT              AVERAGE
                             DECEMBER 31,    CONTRACTUAL          EXERCISE         DECEMBER 31,      EXERCISE
EXERCISE PRICE                   2000             LIFE              PRICE             2000             PRICE
--------------------------- ---------------- ----------------- ---------------- ---------------- ---------------
<S>                                 <C>                  <C>              <C>            <C>             <C>
$ 0.58                              778,788              4.09             0.58           547683          $ 0.58
$ 0.83                              435,858              6.91             0.83           67,598            0.83
$ 1.83                              514,390              5.96             1.83           92,928            1.83
$ 3.67                               90,000              4.85             3.67           32,500            3.67
$ 8.50                              280,200              8.08             8.50                -               -
$10.00                               65,000              9.25            10.00                -               -
$ 8.00                               15,000              9.41             8.00            2,917            8.00
$ 4.375                             306,813              8.85            4.375                -               -
$ 3.065                             275,000              9.86            3.065                -               -
                            ----------------                                    ----------------
                                  2,761,049                                             743,626
                            ================                                    ================

</TABLE>

     On February 9, 2001, the Company  granted options to acquire 809,500 shares
to  employees at an exercise  price of $1.69 per share.  The shares vests over a
two year period.

     On February 9, 2001, the Company granted options to acquire 120,000 shares
to four directors at an exercise price of $1.69 per share.  The shares vest over
a two-year period. Such grants are subject to shareholder approval.

NOTE 13 -- 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.

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

                                                                      YEAR ENDED DECEMBER 31,
                                                                  1998         1999         2000
                                                             ------------ ------------ ------------
           Sales                                                        (in thousands)
          <S>                                                <C>          <C>          <C>
           North America                                         $ 4,293      $ 6,978      $ 9,766
           Europe                                                  1,193        2,163        5,027
           Israel                                                    493          905          440
           Rest of the World                                          92          280          509
                                                             ------------ ------------ ------------
                                                                 $ 6,071     $ 10,326     $ 15,742
                                                             ============ ============ =============

           Sales to a single customer exceeding 10%
                                                                  %            %            %
                                                             ------------ ------------ ------------
           Customer A                                                 13          (*)          (*)
           Customer B                                                 12          (*)          (*)
           Customer C                                                 11          (*)          (*)
           Customer D                                                  -          (*)          (*)
</TABLE>
----------------
(*) Under 10%

NOTE 14 -- 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%.

                                       49
<PAGE>

     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
$11.6 million as of December 31, 2000. In addition losses of approximately $17.5
million are  attributable to the U.S.  subsidiary which will expire between 2008
and 2013. The UK subsidiary has carryforward  tax losses of  approximately  $3.4
million as of December 31, 2000. The  carryforward tax losses for Israel and the
UK have no expiration date.

     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  income taxes have
been included in these financial statements.  Deferred taxes in respect of other
temporary differences are immaterial.

NOTE 15 -- 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.


<TABLE>
<CAPTION>

                                                                              DECEMBER 31,
                                                                          1999             2000
                                                                          ----             ----
                                                                             (in thousands)
     Balances:
<S>                                                                     <C>               <C>
          Other Receivables (Accounts Payable)                          $ (139)           $ 121
          Loan from shareholder on demand                               $  132               -



                                                                    YEAR ENDED DECEMBER 31,
                                                                1998         1999         2000
                                                                ----         ----         ----
                                                                        (in thousands)
           Transactions:
             Management fee income from Nester                  $ 89         $ 48         $ 48

</TABLE>

                                       50

<PAGE>

NOTE 16 - UNAUDITED CONSOLIDATED FINANCIAL DATA

     The following table presents the quarterly  information for fiscal 2000 and
1999:
<TABLE>
<CAPTION>


                                                            First        Second        Third         Fourth
                                                           Quarter       Quarter      Quarter        Quarter
                                                        -------------- ------------ ------------- --------------
                                                        --------------------------------------------------------
                                                                (in thousands except per share amounts)
                                                                              (Unaudited)
2000
<S>                                                           <C>          <C>           <C>            <C>
Net sales                                                     $ 3,511      $ 4,308       $ 4,789        $ 3,134
Gross margin                                                  $ 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

1999
Net sales                                                     $ 2,029      $ 2,341       $ 2,759        $ 3,197
Gross margin                                                  $ 1,097      $ 1,372       $ 1,600        $ 1,887
Net Loss                                                     $(1,821)     $(1,578)      $(2,177)       $(2,403)
Dividend Related to preferred shares                                -            -             -       $(4,989)
Net loss attributed to ordinary
  shareholders                                               $(1,821)     $(1,578)      $(2,177)       $(7,392)
----------------------------------------------------------------------------------------------------------------

Basic and diluted net loss per share                         $ (0.10)     $ (0.09)      $ (0.12)       $ (0.13)
Basic and diluted net loss per share attributed to           $ (0.10)     $ (0.09)      $ (0.12)       $ (0.41)
ordinary shareholders
Shares used in computing basic and
  Diluted net loss per share                                   17,617       17,617        17,617         17,922
Price per ordinary share - high                                   N/A          N/A           N/A            N/A
Price per ordinary share - low                                    N/A          N/A           N/A            N/A
</TABLE>

     The company's  ordinary shares are traded on the NASDAQ. As of December 31,
2000, there were approximately 107 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  Ownership  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
reporting persons, the Company believes that during the year ending December 31,
2000,  all  Section  16  filing   requirements  were  met,  with  the  following
exceptions:

                                       51
<PAGE>

     *    For Shimon  Rojany,  CFO,  late filing of Form 4 for the month of June
          2000  indicating  a single  indirect  acquisition  of 3,000  shares of
          Company stock.
     *    For James  Thanos,  Director,  late  filing of Form 4 for the month of
          June 2000  indicating a single direct  acquisition  of 5,000 shares of
          Company stock.
     *    For Corey Leibow, COO, late filing of Form 3 due November 25, 2000.
     *    For Timothy Spence, VP of Business Affairs and Controller, late filing
          of Form 3 due September 25, 2000.
     *    For Corey Leibow, COO, late filing of Form 5 due February 14, 2001.

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
and, prior to his resignation from the board of  directors, Mr. Fredrick Harman.
Both 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 the Company only recently  established  the Committee in
connection with its initial public offering, 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, the Company  completed the initial public offering of its 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 it continues to grow and mature.  The Committee  recognizes that in order for
the  Company 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,  the
Company must offer  compensation  that (a) is competitive  in the industry;  (b)
motivates  executive  officers  to  achieve  the  Company's  strategic  business
objectives;  and (c)  aligns  the  interests  of  executive  officers  with  the
long-term interests of stockholders.

The Company currently uses 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 the Company's overall performance.

                                       52
<PAGE>

COMPENSATION

The following table sets forth all compensation  received for services  rendered
to the Company and the Company's  subsidiaries in all capacities during the last
three years by (i) the Company's Chief Executive  Officer and (ii) the Company's
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           ($)
                  ----          ------          -----         ------------       -------           ---
Moshe BenBassat,
     CEO
<S>                      <C>        <C>              <C>          <C>                 <C>             <C>
                         1998       67,418                 -               -                -              -
                         1999      178,989           189,112               -          720,000              -
                         2000      225,000           239,709      83,594 (1)                -              -
Shimon Rojany
     CFO
                         1998       41,667                 -               -           30,000              -
                         1999       88,333            32,083               -           73,227              -
                         2000      185,833            68,083       4,362 (2)           30,000              -
Robert Spina (3)
     VP Sales
                         1998       91,875            79,705               -           27,000              -
                         1999       83,916            66,484               -           21,000              -
                         2000      120,000           128,996         706 (2)            7,200              -
Ami Shpiro
     President, European Operations
                         1998      116,396            18,703       3,009 (4)            6,000              -
                         1999      130,500            92,389       7,221 (4)            6,781              -
                         2000      130,500            83,692       6,528 (4)           18,000              -
David Schapiro
     Sr. VP, Product Development
                         1998       96,201             7,650      21,400 (5)           90,000              -
                         1999      103,080            12,397      23,142 (5)           31,036              -
                         2000      131,858            14,714      29,006 (5)           30,000              -
-----------------------------
(1) Other compensation to Dr. BenBassat includes $75,000 housing allowance.
(2) Executive disability insurance.
(3) Mr. Spina resigned effective December 31, 2000.
(4) Pension contributions.
(5) Contributions to employee benefit programs.

</TABLE>
OPTION GRANTS IN YEAR 2000

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

                                       53
<PAGE>
<TABLE>
<CAPTION>

                        Number of       % of Total
                          Shares     Options Granted
                        Underlying   to Employees in Exercise Price   Expiration    Grant Date Present
                     Options Granted       2000           ($/sh)         Date            Value (1)
                     ---------------       ----           ------         ----            ---------

<S>                            <C>         <C>        <C>               <C>             <C>
Moshe BenBassat                     -     0.00%                -            -                  -
Robert Spina (2)                7,200     0.71%       $     8.50        3/20/10          $  3,432
Shimon Rojany                  30,000     2.96%       $     8.50        3/20/10          $ 14,299
Ami Shpiro                     18,000     1.77%       $     8.50        3/20/10          $ 10,469
David Schapiro                 30,000     2.96%       $     8.50        3/20/10          $ 17,448

----------------------------
(1) Computed  using the  Black-Scholes  option  pricing  model.  Full vesting of
options is four years from grant date.  Assumes the average expected life of the
option is 1.31 years,  a volatility of 116%, an annual  dividend  yield of 0.0%,
and interest risk free interest rate of 5%.
(2) Mr. Spina resigned effective December 31, 2000.
</TABLE>

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 2000, and exercisable and unexercisable
stock  options held by each of the Named  Executive  Officers as of December 31,
2000.
<TABLE>
<CAPTION>

                                                      Number of Securities          Value of Unexercised
                                                  Underlying Unexercised Options   In-the-Money Options at
                                       Value         as of December 31, 2000       December 31, 2000 (1)
                   Shares Acquired                -----------------------------  -------------------------
                     on Exercise      Realized     Exercisable   Unexercisable   Exercisable  Unexercisable
                    ------------    ------------  ------------   -------------   ------------ -------------
<S>                   <C>           <C>               <C>             <C>                 <C>           <C>
Moshe BenBassat       205,608       $574,640.57       75,372          439,020             $  -          $  -
Robert Spina (2)       23,249       $ 69,097.77        1,563              -            $ 1,714          $  -
Shimon Rojany          36,920       $130,724.31       15,942           77,365         $ 31,199       $45,726
Ami Shpiro                -         $       -         23,527           30,735         $ 20,165       $20,447
David Schapiro            -         $       -        136,963          121,036         $159,794       $98,453

----------------------------
(1) Based upon the Closing Price of the ordinary  shares on December 29, 2000 of
$1.75 less the exercise price per share.
(2) Mr. Spina resigned effective December 31, 2000.

</TABLE>

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, 2000.  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:

                                       54
<PAGE>
                     6/23/00      6/30/00       9/29/00    12/29/00
                     -------      -------       ------     --------

    CKSW                0%          -5%          -46%        -76%
    NASDX               0%           2%          - 3%        -36%
    NASD:COMPUTER       0%           3%          - 6%        -43%


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, 2000 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, 2000.  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
26,064,539 shares outstanding as of December 31, 2000.

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

                                                                                       ORDINARY SHARES
                                                                                      BENEFICIALLY OWNED
NAME AND ADDRESS                                                                    NUMBER       PERCENTAGE
----------------                                                                    ------       ----------
NAMED EXECUTIVE OFFICERS AND DIRECTORS
<S>                                                                                 <C>            <C>
Moshe BenBassat(1)                                                                  4,812,874     18.39%
Shimon Rojany (2)                                                                     341,063      1.31%
David Schapiro(3)                                                                     157,296      0.60%
Ami Shpiro(4)                                                                         194,924      0.75%
Robert Spina (5)                                                                       24,812      0.10%
Israel Borovich(6)                                                                      8,750      0.03%
Nathan Gantcher                                                                        50,000      0.19%
Roni Einav                                                                                  -        -
James W. Thanos                                                                         5,000      0.02%
Eddy Shalev                                                                         2,871,270     11.02%

SHAREHOLDERS
Worldview Technology International I, L.P. ("WVTI I")                                 745,612       2.9%
Worldview Technology Partners I, L.P. ("WVTP I")                                    1,913,029       7.3%
Worldview Strategic Partners I, L.P. ("WVSP I")                                       164,780       0.6%
                                                                                 ------------- ---------------
  Total, Entities associates with Worldview                                         2,823,421      10.8%
     435 Tasso Street, Suite 120
     Palo Alto, CA 94301
Entities affiliated with Genesis Partners                                           2,871,270      11.0%
     50 Dizengoff Street
     Tel-Aviv 64332, Israel
Entities affiliated with Oak Investments Partners                                   4,724,027      18.1%
     525 University Avenue, Suite 1300
     Palo Alto, CA  94301
Meritech Capital Associates LLC                                                     1,828,629       7.0%
     90 Middlefield Road, Suite 201
     Menlo Park, CA  94025
Liberty Wanger Asset Management                                                     1,660,000       6.4%
     227 West Monroe Street, Suite 3000
     Chicago, IL 60606-5016

All executive officers and directors as a group (14 persons)                        8,727,274      33.39%
---------------------
(1)      Includes 2,246,887 shares held by Dr. BenBassat's spouse, Idit BenBassat.  Also includes options to purchase 110,490
         ordinary shares.
(2)      Includes options to purchase 12,448 Ordinary Shares exercisable within 60 days of March 31, 2000 held by Mr. Rojany.
(3)      Includes options to purchase 145,296 Ordinary Shares exercisable within 60 days of March 31, 2000 held by Mr. Schapiro.
(4)      Includes options to purchase 24,516 Ordinary Shares exercisable within 60 days of March 31, 2000 held by Mr. Shpiro.
(5)      Includes options to purchase 1,563 Ordinary Shares exercisable within 60 days of March 31, 2000 held by Mr. Spina.  Mr.
         Spina resigned effective December 31, 2000.
(6)      Includes options to purchase 6,250 Ordinary Shares exercisable within 60 days of March 31, 2000 held by Borovich.
</TABLE>


                                       55
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During  the  fiscal  year  ended  December  31,  2000,  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".


                                       56
<PAGE>

                                     PART IV

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

(a) EXHIBITS

<TABLE>
<CAPTION>
   EXHIBIT
   NUMBER                                          DESCRIPTION OF DOCUMENT

<S>           <C>
3.1*           Articles of Association of ClickSoftware Technologies Ltd.
4.1*           Specimen of Ordinary Share Certificate
4.2*           Fourth Amended and Restated Registration Rights Agreement, dated December 15, 1999
10.1*          Form of 2000 Share Option Plan
10.2*          Form of 2000 Employee Share Purchase Plan
10.3*          Employment Agreement between ClickSoftware Technologies Ltd.
               and Moshe Ben-Bassat
10.4*          Employment Agreement between ClickSoftware Technologies Ltd. and Shimon Rojany
10.5*          Form of Indemnification Agreement
10.6*          Form of 1996 Option Plan
10.7*          Form of 1997 Option Plan
10.8*          Form of 1998 Option Plan
10.9*          Form of 1999 Option Plan
10.10*         Form of 1999 Option Plan
10.11*         Form of 2000 U.S. Option Plan
10.12*         Form of 2000 Israeli Plan
10.13*         Form of 2000 Unapproved U.K. Share Scheme
10.14*         Form of 2000 Approved U.K. Share Scheme
10.15          Employment Agreement between ClickSoftware Technologies Ltd. and Corey Leibow
21.1*          Subsidiaries of the Registrant
23.1           Consent of Luboshitz Kasierer, a member firm of Arthur Andersen
24.1           Powers of Attorney
-------------------------
*  Incorporated by reference from the Registrant's Registration Statement on Form S-1 (file no. 333-30274), as amended.

</TABLE>
(b) REPORTS ON FORM 8-K:

None.
                                       57
<PAGE>

                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of
1934,  the  Registrant  caused  this  Report to be  signed on its  behalf by the
undersigned,  thereunto duly authorized,  in Campbell,  California, on March 30,
2001.

                                          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.


       SIGNATURE                               TITLE                    DATE
       ---------                               -----                  -------

  /s/ Moshe BenBassat       Chief Executive Officer and           March 30, 2001
--------------------------- Chairman of the Board of Directors
     Moshe BenBassat        (Principal Executive Officer)


  /s/ Shimon M. Rojany      Chief Financial Officer               March 30, 2001
--------------------------- (Principal Financial and Accounting
      Shimon M. Rojany       Officer)

  /s/ Roni Einav             Director                             March 30, 2001
---------------------------
      Roni Einav

  /s/ Dr. Israel Borovich    Director                             March 30, 2001
---------------------------
      Dr. Israel Borovich

  /s/ Nathan Gantcher        Director                             March 30, 2001
---------------------------
      Nathan Gantcher

  /s/ Eddy Shalev            Director                             March 30, 2001
---------------------------
      Eddy Shalev

  /s/ James W. Thanos        Director                             March 30, 2001
---------------------------
      James W. Thanos

                                       58