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                                  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, 2002

                                       or

---
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
---   EXCHANGE ACT OF 1934

For the transition period from _______________________ to ______________________

Commission file number    000-30827
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                         CLICKSOFTWARE TECHNOLOGIES LTD.
             (Exact name of registrant as specified in its charter)

           Israel                                              Not Applicable
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

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

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

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

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

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




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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

        /X/ Yes    / / No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. / /

The aggregate market value of the ordinary shares held by nonaffiliates of the
Registrant, based upon the closing sale price of the ordinary shares on June 28,
2002 (the last business day of the Registrant's most recently completed second
fiscal quarter) as reported by the Nasdaq National Market, was approximately
$5.2 million. Ordinary shares held by each executive officer and director and by
each person who owns 5% or more of the outstanding voting stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.

As of March 13, 2003, there were approximately 26,373,249 Ordinary Shares of the
Registrant outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

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

The Registrant's Proxy Statement and Notice of Annual General Meeting of
Shareholders is incorporated by reference.


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                                TABLE OF CONTENTS


                                                                            PAGE
                                                                           -----

PART I
     Item 1.  Business....................................................    4
     Item 2.  Properties..................................................   12
     Item 3.  Legal Proceedings...........................................   13
     Item 4.  Submission of Matters to a Vote of Security Holders.........   13

PART II
     Item 5.  Market for the Registrant's Common Equity and Related
              Stockholder Matters.........................................   14
     Item 6.  Selected Consolidated Financial Data........................   15
     Item 7.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations...................................   16
     Item 7A. Quantitative and Qualitative Disclosures About Market
              Risk........................................................   33
     Item 8.  Financial Statements........................................   34
     Item 8A. Unaudited Consolidated Quarterly Financial Data ............   50
     Item 9.  Changes In and Disagreement With Accountants on Accounting
              and Financial Disclosure....................................   50

PART III
     Item 10. Directors and Executive Officers of the Registrant..........   52
     Item 11. Executive Compensation......................................   52
     Item 12. Security Ownership of Certain Beneficial Owners and
              Management..................................................   52
     Item 13. Certain Relationships and Related Transactions..............   52
     Item 14. Controls and procedures.....................................   52
     Item 15. Exhibits, Financial Statement Schedules and Reports on Form
              8-K.......................................................     53

SIGNATURES................................................................   55



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PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

ITEM 1. BUSINESS

We provide software products for optimizing service operations, which are
designed to improve customer responsiveness and the utilization of service
resources. Our products allow our clients to respond quickly to customers'
demands for service while improving utilization of service personnel and
reducing 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 the U.S., ClickSoftware, Inc.; a wholly-owned subsidiary
incorporated in the United Kingdom, ClickSoftware Europe, Limited; a
wholly-owned subsidiary in Belgium, ClickSoftware Belgium, N.V.; and a
wholly-owned subsidiary incorporated in Germany, ClickSoftware Central Europe
GmbH. On January 21, 2002 our U.S. subsidiary incorporated a wholly owned
subsidiary in Australia, ClickSoftware Australia Pty Limited. Our product
development efforts are conducted primarily in Israel. Our sales and marketing
and implementation efforts in North America, Europe, and Asia Pacific and Africa
are conducted by our subsidiaries.

PRODUCTS

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

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

     o    field workforce productivity
     o    responsiveness to customers
     o    quality of service delivered
     o    profitability of the service operation
     o    reduction in missed customer commitments


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

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

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

CLICKSCHEDULE optimizes service scheduling and routing for improving workforce
productivity by balancing customer, resource, and organizational preferences
including contractual commitments, priority, drive time, skills, and resource
availability. Configuration capabilities, very high scalability and use of
standard eXtensible Markup Language (XML) interfaces are designed to improve
integration with enterprise systems and deployment according to organizational
business policies and processes.

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

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

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

CLICKFORECAST provides field service workload forecasting to help companies
reduce excess workforce capacity. ClickForecast can combine historical service
workload with future business events to create a forecast for each territory,
job type, or business unit. ClickForecast enables service managers, marketing,
and sales to collaboratively determine required staffing levels, and create
multiple forecast scenarios, each with different business assumptions.

TECHNOLOGY

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

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

Our applications are standards-based, facilitating integration with related
Customer Relationship Management (CRM), Enterprise Resource Planning (ERP) or
supply chain functions. Service Optimization client applications run on standard
web browsers and Windows-based computers. The application server supports
leading database management systems, including Oracle (Windows and non-Windows)
and Microsoft SQL Server scalable enough to meet the demands of large service
organizations. Service Optimization delivers inherent scalability based on a
DYNAMIC LOAD BALANCING architecture that uses thin clients, a stateless server
model, multi-threaded application servers and relational databases.

Our proprietary optimization algorithms provide efficient solutions for complex
problems arising from, among others, the following:

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

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

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

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

Our optimization merges mathematical disciplines and experience with real-life
service operations. The result is an algorithm that combines the traits of
several optimization disciplines including adaptive learning, genetic
algorithms, taboo search, and geographic clustering. Our optimization overcomes
the challenge of a vast number of possible schedules by first rapidly
identifying all feasible schedules, and then selecting the best schedules. The
schedule is selected by evaluating each feasible schedule by weighted cost of
service, job revenue, and customer satisfaction to create a BUSINESS VALUE for
the schedule. The business value is then used to compare the quality of all
schedules, constantly maintaining an optimized schedule. ClickFix's diagnostic
and problem resolution engine includes algorithms for problem resolution based
on equipment design and field knowledge, a knowledge base with self-learning
capabilities, and an intelligent component that creates new trouble shooting
solutions based on modeling both equipment structure and historic data.

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

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PROFESSIONAL SERVICES AND CUSTOMER SUPPORT
Our professional services organization is staffed by employees 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:

     o    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 and business change management.
     o    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.
     o    Project Advisory Services - We offer a packaged set of reviews and
          consulting services targeted at ensuring the ability of our
          implementation partners to deliver a working solution. We have
          provided this service to date to support relatively simple
          implementations of specific niche customers such as utilities.

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
customer support team.

SALES AND MARKETING

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

We typically direct our sales efforts to the client's chief executive officer,
the chief information officer, the vice presidents of customer service and other
senior executives responsible for improving customer service at our clients'
organizations. We focus our marketing efforts on identifying potential new
clients, generating new sales opportunities, and creating awareness in our
target markets about the value of our products and their applications. Our
programs target prospective clients across a wide variety of industries,
business relationships and geographies. In order to effectively promote product
awareness, we engage in marketing activities in a wide variety of areas
including public relations and analyst relations, email campaigns, web seminars
with our customers and industry analysts, a newsletter and advertising creation
and placement, direct mailings and trade shows. As of December 31, 2002, we
employed over 30 individuals in our sales and marketing department.

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

We have also established relationships with large System Integrator (SI)
organizations such as Accenture, IBM business consulting services, Deloitte
Consulting, and Bering

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point. These partners have committed various levels of resources to integrate,
customize and implement our solutions. Depending on the strength of the
relationship, we have co-invested in training and certifying their professional
services teams, developed co-marketing programs, and incorporated our products
into their marketing/referral strategies.

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

CUSTOMERS
We sell our products to a broad base of clients representing a variety of
industries with unique needs, including telecommunications, utilities,
high-technology service providers and home equipment retailers. The following is
a representative list of our clients or end-users using our products. This list
of clients is representative of the geographically dispersed client base, the
various industries utilizing our products and the various stages of deployment
of our product lines. Each of these clients accounted for at least $500,000 of
product and/or service revenues for 2002 and, as a group, these clients
accounted for approximately 46% of our total revenues for 2002:

Accenture Australia Limited
 Gaz Metropolitain Inc.
 London Electricity plc.
 Philips Medical Systems Nederland B.V.
 Siemens ICN
 Siemens Westinghouse Power Company
 Telstra Corporation

No customer accounted for greater than 10% of revenues during the year ended
December 31, 2002.

RESEARCH AND DEVELOPMENT

We have invested significant time and resources in creating a structured process
for undertaking all product development projects. These include documenting
product requirements, specifying product features and workflow, developing the
software, performing quality assurance, and creating documentation and
packaging. Our research and development center in Israel is ISO 9000 compliant
and continuously updates its software development procedures to maintain an
ongoing improvement process and high quality products.

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

Our research and development expenses, prior to participation grants from the
Office of the Chief Scientist of the Government of Israel, totaled $3.8 million
for the year ended December 31, 2002, $4.4 million for the year ended December
31, 2001 and $5.4 million for the year ended December 31, 2000. As of December
31, 2002, we employed 28 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:

     o    independent systems integrators and in-house information technology
          departments;
     o    traditional ERP and CRM software application vendors;
     o    software vendors in the utility, telecommunications, Internet access,
          field services, home delivery and other markets;

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     o    providers of service scheduling software and components and logistics
          solutions providers; and
     o    providers of supply-chain optimization solutions for manufacturing
          organizations.

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

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

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:

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

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

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

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

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

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

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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.

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

EMPLOYEES

As of December 31, 2002, we had 115 full-time employees: 28 engaged in research
and development, 30 in sales, marketing and business development, 38 in
professional services and technical support and 19 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.

During the fourth quarter of 2002 we announced a reorganization plan under which
we implemented an across the board salary reduction and reduced our workforce by
approximately 40 employees, mainly from those engaged in research and
development activities. (See also note 4 of the notes to our consolidated
financial statements attached hereto).

61 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 $283,000 in 2002, $266,000 in 2001 and
$562,000 in 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. Israeli law also limits the maximum number of hours of overtime. Certain
of our employment compensation arrangements are fixed and do not differentiate
between compensation for regular hours

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and overtime work. Therefore, we may face potential claims from these employees
asserting that the fixed salaries do not compensate for overtime work. While
there is no certainty that such claims will prevail, even if they do, 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
February 28, 2003 are as follows:

NAME                  AGE   POSITION
----                  ---   --------
Dr. Moshe BenBassat   55    Chief Executive Officer and Chairman of the Board
Shmuel Arvatz         40    Executive Vice President and Chief Financial Officer
David Schapiro        45    Executive Vice President, Markets & Products
Hannan Carmeli        44    Executive Vice President, Worldwide Professional
                            Services
Amit Bendov           38    Senior Vice President, Product Marketing
Dr. Israel Borovich   61    Director
Roni A. Einav         58    Director
Nathan Gantcher       62    Director
Eddy Shalev           55    Director
James W. Thanos       54    Director

DR. MOSHE BENBASSAT co-founded ClickSoftware and has served as Chairman and
Chief Executive Officer since its inception. From 1987 to 1999, Dr. BenBassat
served as a Professor of Information Systems at the Faculty of Management at
Tel-Aviv University. Dr. BenBassat has also held academic positions at the
University of Southern California and the University of California in 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.

SHMUEL ARVATZ has served as Executive Vice President and Chief Financial Officer
of ClickSoftware Technologies since October 20, 2002. Prior to his position at
ClickSoftware, Mr. Arvatz served as the Chief Financial Officer at Shrem, Fudim,
Kelner Technologies Ltd., a leading investment house in Israel. He also served
as Executive Vice President and Chief Financial Officer of Tecnomatix
Technologies Ltd. (NASDAQ: TCNO), a provider of software e-manufacturing
solutions. From 1990 to 1999, Mr. Arvatz served as Vice President and Chief
Financial Officer at ADC Israel Ltd. (previously Teledata Communications Ltd., a
telecommunications equipment provider which was acquired by ADC Telecom Inc. in
1998). Mr. Arvatz holds a B.A. in Accounting and Economics from Bar-Ilan
University.

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

HANNAN CARMELI has served as our Executive Vice President of Worldwide
Professional Services since August 2002. Prior to this role, he has served as
our Senior Vice President, Products, Services and Operations since January 2001.
From August 1996 to December 2000, Mr. Carmeli held various executive roles
including General Manager of the TechMate Division as well as Manager of Product
Services and Operations. Prior to joining us, Mr. Carmeli held R&D and field
positions with software vendors ranging from software development through
product management and sales management. Mr. Carmeli holds a Bachelor of Science
degree from the Technion Institute and a Master of Science degree in Computer
Science from Boston University.

AMIT BENDOV has served as our Senior 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

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 11

<PAGE>

Research and Development Manager. Mr. Bendov holds a Bachelor of Science degree
in Computer Science and Statistics from Tel Aviv University.


--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 12

<PAGE>

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

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

NATHAN GANTCHER has served as a director of ClickSoftware since April 2000.
Since January 2002, Mr. Gantcher has served as Co-Chairman, President and CEO of
Alpha Investment Management LLC. From October 1997 to October 1999, Mr. Gantcher
served as Vice Chairman of CIBC World Markets Corp. From 1983 to November 1997,
Mr. Gantcher served as President, Chief Operating Officer and Co-Chief Executive
Officer of Oppenheimer & Co. Since 1983, Mr. Gantcher has served as Chairman of
the Board of Trustees of Tufts University. Mr. Gantcher is a member of the Board
of Overseers at the Columbia University Graduate School of Business, a director
of Mack-Cali Realty Corp and the Jewish Communal Fund, and a trustee of the
Anti-Defamation League Foundation. Mr. Gantcher holds a Bachelor of Arts degree
in Business from Tufts University and a Master of Business Administration degree
from the Columbia University Graduate School of Business. Mr. Gantcher has
notified us that he will not stand for reelection as a director at our next
annual shareholders meeting.

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. and other
publicly traded high tech companies. Mr. Shalev is the Managing General Partner
of Genesis Partners. Mr. Shalev holds a Master of Science degree in Management
Information Systems from Tel Aviv University.

JAMES W. THANOS has served as a director of ClickSoftware since May 2000. From
October 1999 to June 2002, Mr. Thanos 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

We have a seven-year lease for approximately 17,130 square feet of office space
in Campbell, California that expires in 2007. During the fourth quarter of 2002,
as part of our reorganization plan we closed our office in Campbell, California
and moved our North America headquarters to Burlington, Massachusetts. We have a
three-year lease for approximately 6,900 square feet of office space in
Burlington, Massachusetts that expires in 2004. We are currently negotiating the
final termination of the Campbell lease agreement. (See also note 4 of the notes
to our consolidated financial statements attached hereto).

We also lease approximately 19,720 square feet of office space in Tel Aviv,
Israel. The office space is leased pursuant to a lease that expires in June
2003. In March 2003 we signed an agreement under which we extended the current
lease agreement for an additional two years, reduced the office space to
approximately 14,100 square feet and reduced the rent per square foot. Our U.K.
subsidiary currently operates from a leased facility of approximately 2,700
square feet in Slough, near London. We also lease

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 13

<PAGE>

additional smaller offices in various sites throughout North America and the
European continent. We consider that our current office space is sufficient to
meet our anticipated needs for the foreseeable future.

Anticipated minimum net rents for these facilities are approximately $600,000
for the twelve months ending December 31, 2003 and will decrease to $420,000 for
2004 and $75,000 for 2005, with the expiration of some of the leases.

ITEM 3. LEGAL PROCEEDINGS

In December 2002, a lawsuit was filed against us and our current and former
officers in the United States District Court for the District of Massachusetts
asserting securities law claims on behalf of persons who purchased our ordinary
shares between June 22, 2000 and October 21, 2002. To date, the complaint has
not been served on any of the defendants, nor has the plaintiff taken any other
action in connection with the matter.

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

None.


--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 14

<PAGE>

PART II

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

Our ordinary shares were quoted on the NASDAQ National Market under the symbol
"CKSW" between June 22, 2000 and August 28,2002 and on the NASDAQ SmallCap
Market under the symbol "CKSW" (or "CKSWE") from August 29, 2002. 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 or the Nasdaq SmallCap
Market, as applicable to the relevant period:

FISCAL YEAR ENDED DECEMBER 31, 2002                     HIGH               LOW
-----------------------------------                     ----               ---
First Quarter                                         $ 2.25            $ 1.10
Second Quarter                                        $ 1.20            $ 0.32
Third Quarter                                         $ 0.58            $ 0.36
Fourth Quarter                                        $ 0.44            $ 0.08

FISCAL YEAR ENDED DECEMBER 31, 2001                     HIGH               LOW
-----------------------------------                     ----               ---
First Quarter                                         $ 2.72            $ 0.75
Second Quarter                                        $ 1.43            $ 0.56
Third Quarter                                         $ 1.82            $ 0.70
Fourth Quarter                                        $ 1.47            $ 0.82

As of March 13, 2002, there were 82 stockholders of record of our Ordinary
Shares.

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

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

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

As of December 31, 2002, we have used a portion of the aggregate net proceeds of
$28.2 million from our initial public offering of ordinary shares for the
following purposes:

     o    approximately $9.5 million to expand our international operations
          including infrastructure and sales and marketing expenses;
     o    approximately $7.5 million to expand our domestic operations by hiring
          additional employees, leasing additional office space and expanding
          our infrastructure; and
     o    approximately $7.0 million for domestic sales and marketing.

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

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

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


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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 15

<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated statement of operations data for the years ended
December 31, 2002, 2001, 2000, 1999 and 1998, and the selected consolidated
balance sheet data as of December 31, 2002, 2001, 2000, 1999 and 1998, have been
derived from our audited financial statements (as restated with respect to the
years ended December 31, 1999, 2000 and 2001). The consolidated statements of
operations data for the years ended December 31, 1999, 1998 and selected
consolidated balance sheet data as of December 31, 2000, 1999 and 1998 are
derived from audited consolidated financial statements that are not included
herein (as restated with respect to the years ended December 31, 1999, 2000 and
2001). 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.

See note 3 of the notes to our consolidated financial statements that are
included on the Form 10-K/A for the year December 31, 2001 that we filed with
the SEC on January 24, 2003 for a description of the restatement of our
financial statements as applicable to the years ended December 31, 1999, 2000
and 2001.

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

                                                                             YEAR ENDED DECEMBER 31,
                                                    --------------------------------------------------------------------------
                                                        2002            2001           2000           1999          1998
                                                        ----            ----           ----           ----          ----

                                                                 (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S>                                                     <C>             <C>            <C>           <C>             <C>
Revenues:
  Software license                                      $   7,113       $  11,734      $   7,412     $   5,062       $  3,932
  Services                                                  8,640           6,441          5,178         4,912          2,139
                                                    --------------------------------------------------------------------------
    Total Revenues                                         15,753          18,175         12,590         9,974          6,071
                                                    --------------------------------------------------------------------------
Cost of Revenues:
  Software License                                            949             798            454           219            165
  Services                                                  5,804           5,498          5,301         4,469          2,377
                                                    --------------------------------------------------------------------------
    Total cost of revenues                                  6,753           6,296          5,755         4,688          2,542
                                                    --------------------------------------------------------------------------
Gross Profit                                                9,000          11,879          6,835         5,286          3,529
                                                    --------------------------------------------------------------------------
Operating Expenses:
  Research and Development expenses, net                    2,806           3,246          4,300         2,910          2,284
  Selling and Marketing expenses                           10,473          12,499         13,654         7,945          5,803
  General and Administrative Expenses                       3,106           4,048          3,717         1,759          1,333
  Restructuring and assets impairment                       2,665             294              -             -              -
  Amortization of deferred Stock-based
      Compensation                                            300             437          1,237           738              -
                                                    --------------------------------------------------------------------------
Total Operating Expenses                                   19,350          20,524         22,908        13,352          9,420
                                                    --------------------------------------------------------------------------
Loss from Operations                                     (10,350)         (8,645)       (16,073)       (8,066)        (5,891)
Interest and other income, net                                252             649            679         (254)             33
                                                    --------------------------------------------------------------------------
Net Loss                                                $(10,098)       $ (7,996)      $(15,394)     $ (8,320)       $(5,858)

Dividend related to convertible preferred shares                -               -              -       (4,989)              -
                                                    --------------------------------------------------------------------------
Net loss attributable to ordinary shareholders          $(10,098)       $ (7,996)      $(15,394)     $(13,309)       $(5,858)
                                                    ==========================================================================

Basic and diluted net loss per ordinary share           $  (0.40)       $  (0.32)      $  (0.68)     $  (2.24)       $ (0.99)
Shares used in computing basic and diluted net
loss per share                                         25,553,891      25,322,771     22,501,563     5,948,816      5,914,735
                                                    ==========================================================================
</TABLE>

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 16

<PAGE>
<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEET DATA:

                                                                      DECEMBER 31,
                                           -------------------------------------------------------------------
                                               2002          2001         2000         1999          1998
                                               ----          ----         ----         ----          ----

                                                                     (IN THOUSANDS)
<S>                                          <C>          <C>          <C>          <C>           <C>
Cash and cash equivalents                    $   3,400    $   8,125    $   4,438    $   7,838     $   3,770
Short-term Investments                           2,949        1,846       16,878            -             -
Working capital                                  5,849       14,191       21,398        7,666         4,178
Total assets                                    13,957       20,700       28,645       13,843         7,983
Long-term liabilities, net of current
      portion                                    1,476        1,400        1,446        1,112         1,254
Shareholders' equity
                                                 6,684       16,428       23,773        8,480         4,657
</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

Since late 1996, we have focused on providing service optimization software
products based on our W-6 Service Scheduler and TechMate technologies. We have
also invested significant resources in developing products based on these
technologies. As a result, until 2001, we increased the number of our employees
involved in research and development, sales and marketing, and professional
services. During 2001 and 2002, we reduced the number of our employees as part
of cost cutting measures.

In the fourth quarter of 2002, in light of the continued worldwide economic
recession and the ongoing reductions in investments in corporate capital
expenditures, we initiated a reorganization plan aimed at reducing our operating
expenses. As part of the plan we reduced our workforce by approximately 40
employees, implemented an across the board salary reduction, closed our office
in Campbell, California and moved our North America headquarters to Burlington,
Massachusetts. As a result of this plan, we recorded in the fourth quarter of
2002 restructuring costs and asset impairment in the amount of approximately
$2.7 million. (See also note 4 of the notes to our consolidated financial
statements in "Item 8. Financial Statements".)

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. Currently our product
offering for service optimization applications include: ClickSchedule, ClickFix,
ClickAnalyze, ClickPlan, ClickMobile and ClickForecast.

We derive revenues from software licensing and services. 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 software license fees primarily derived from contracts with our direct
sales clients and our indirect distribution channels. We recognize revenues in
accordance with the AICPA Statement of Position 97-2, "SOFTWARE REVENUE
RECOGNITION," or SOP 97-2, as amended. (See note 2 of the notes to our
consolidated financial statements attached hereto.)

Service revenues are comprised of revenues from consulting, training, and
post-contract customer support. Consulting services are billed at an agreed-upon
rate plus incurred expenses. Clients licensing our products generally purchase
consulting agreements from us. Post-contract customer support arrangements
provide technical support and the right to unspecified updates on an if-and
when-available basis. Post-contract customer

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 17

<PAGE>

support revenues are charged as a percentage of license fees depending upon the
level of support coverage requested by the customer. Our products are marketed
worldwide through a combination of a direct sales force, consultants and various
business relationships we have with implementation and technology companies and
resellers.

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

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 cost of revenues. Software
research and development costs incurred prior to the establishment of technology
feasibility are included in research and development expenses as incurred.

Selling and marketing expenses consist primarily of personnel and related costs
for marketing and sales functions, including related travel, direct advertising
costs, expenditures on trade shows, market research and promotional printing.

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

Restructuring and assets impairment costs consist of write-down of equipment and
leasehold improvements related to office space reduction, termination of lease
contract and employees severance and benefits costs in connection with the
termination of employment of employees. (See also note 4 of the notes to our
consolidated financial statements attached hereto.)

Amortization of stock-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. Deferred Stock-based
compensation is amortized over the vesting period of the underlying options,
generally four years.

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

The functional currency of our operations is the U.S. dollar, which is the
primary currency in the economic environment in which we conduct our business. A
significant portion of our research and development expenses and other expenses
are incurred in New Israeli Shekels, or 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 changes in foreign currency exchange rates on our results of
operations for the years ended December 31, 2002 and 2001 were immaterial.

Our tax rate will mainly reflect a mix of the U.S. statutory tax rate on our
U.S. income, the U.K statutory tax rate on our U.K income, the Belgium statutory
tax rate on our Belgium income, the German statutory tax rate on our German
income, the Australian tax rate on our Australian 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

--------------------------------------------------------------------------------
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<PAGE>

dividend out of retained earnings that were exempt from tax due to its Approved
Enterprise status, we would be required to pay 25% corporate income tax on
income from which the dividend was distributed. All of these tax benefits are
subject to various conditions and restrictions. There can be no assurance that
we will obtain approval for additional Approved Enterprise Programs, or that the
provisions of the law will not change.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. These estimates are evaluated by us on an on-going basis. We base
our estimates on our historical experience and on various other assumptions that
we believe to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying amount values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

Our recognition of revenue requires judgments and estimates that may
significantly impact our consolidated financial statements.

Revenue results are difficult to predict, and any shortfall in revenues or delay
in recognizing revenues could cause our operating results to vary significantly
from quarter to quarter and could result in future operating losses. In
addition, the timing of our revenue recognition influences the timing of certain
expenses, such as commissions and royalties. We follow very specific and
detailed guidelines in measuring revenues, however, certain judgments affect the
application of our revenue policy.

Our revenues are principally derived from the licensing of our software and the
provision of related services. We recognize revenues in accordance with SOP
97-2. Revenues from software license fees are recognized when persuasive
evidence of an arrangement exists, either by written agreement or a purchase
order signed by the customer, the software product has been delivered, the
license fees are fixed and determinable, and collection of the license fees is
considered probable. License fees from software arrangements which involve
multiple elements, such as post-contract customer support, consulting and
training, are allocated to each element of the arrangement based on the relative
fair values of the elements. We determine the fair value of each element in
multiple-element arrangements based on vendor specific objective evidence, or
VSOE. We determine the VSOE for each element according to the price charged when
the element is sold separately. In judging the probability of collection of
software license fees we continuously monitor collection and payments from our
customers and maintain a provision for estimated credit losses based upon our
historical experience and any specific customer collection issues that we have
identified. In connection with customers with whom we have no previous
experience, we may utilize independent resources to evaluate the
creditworthiness of those customers. For some customers, typically those with
whom we have long-term relationships, we may grant extended payment terms. We
perform on-going credit evaluations of our customers. If the financial situation
of any of our customers were to deteriorate, resulting in an impairment of their
ability to pay the indebtedness they incur with us, additional allowances may be
required.

Our software products generally do not require significant customization or
modification. However, when such customization or modification is necessary, the
revenue generated by those activities is deferred and recognized using the
percentage of completion method.

Service revenues include post-contract customer support, consulting and
training. Post-contract customer support arrangements provide for technical
support and the right to unspecified updates on an if-and-when-available basis.
Revenues from those arrangements are recognized ratably over the term of the
arrangement, usually one year. Consulting services are recognized on a time and
material basis, or in a fixed price contract, on a percentage of completion
basis. Revenues from training are recognized as the services are provided.

In recognizing revenues based on the rate of completion method, we estimate time
to completion with revisions to estimates reflected in the period in which
changes become known. If we do not accurately estimate the resources required or
the scope of work to

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 19

<PAGE>

be performed, or do not manage our projects properly within the planned periods
of time or satisfy our obligations under the contracts, then future services
margins may be significantly and negatively affected or losses on existing
contracts may need to be recognized.

FISCAL YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

You should read the following discussion in conjunction with the audited
consolidated financial statements for the years ended December 31, 2002, 2001,
and 2000.

RESULTS OF OPERATIONS

Our operating results for each of the five years ended December 31, 2002, 2001,
2000, 1999 and 1998 expressed as a percentage of revenues are as follows:

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                     -----------------------------------------------------
                                                         2002      2001       2000       1999        1998

<S>                                                     <C>       <C>        <C>        <C>         <C>
  Software license                                        45%       65%        59%        51%         65%
  Services                                                 55        35         41         49          35
                                                     -----------------------------------------------------
    Total Revenues                                        100       100        100        100         100
                                                     -----------------------------------------------------
Cost of Revenues:
  Software License                                          6         4          4          2           3
  Services                                                 37        31         42         45          39
                                                     -----------------------------------------------------
    Total cost of revenues                                 43        35         46         47          42
                                                     -----------------------------------------------------
Gross Profit                                               57        65         54         53          58
                                                     -----------------------------------------------------
Operating Expenses:
  Research and Development
        expenses, net                                      18        18         34         29          38
  Selling and Marketing expenses                           66        69        108         80          95
  General and Administrative                               20        22         30         18          22
        Expenses
  Restructuring and assets impairment                      17         2          -          -           -
  Amortization of deferred Stock-based
        Compensation                                        2         2         10          7           -
                                                     -----------------------------------------------------
Total Operating Expenses                                  123       113        182        134         155
                                                     -----------------------------------------------------
Loss from Operations                                     (66)      (48)      (128)       (81)        (97)
Interest and other income, net                              2         4          5        (2)           1
                                                     -----------------------------------------------------
Net Loss                                                 (64)      (44)      (123)       (83)        (96)
Dividend related to convertible
  Preferred shares                                          -         -          -       (50)           -
                                                     -----------------------------------------------------
Net loss attributable to ordinary shareholders          (64)%     (44)%     (123)%     (133)%       (96)%
                                                     =====================================================
</TABLE>

FISCAL YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000

During the third quarter of 2002, the audit committee of our board of directors,
with the assistance of outside advisors, conducted a review of our financial
statements for 2000 and 2001 and for the first six months of 2002. On October
21, 2002, we announced that we would restate our financial statements for 2000
and 2001 and for the first six months of 2002. Following the reaudit of our
financial statements, we restated our financial statements for the announced
periods and for the year ended December 31, 1999 and filed an amendment to the
10-K for the three years ended 2001 on January 24, 2003. The financial results
provided in this annual report reflect this restatement.

The restatement resulted primarily from the recognition of revenue from sales to
reseller customers and other customers, where revenue had been recognized
prematurely or should not have been recognized at all. We also reclassified
royalty expenses related to grants received from the Chief Scientist from
selling and marketing expenses to cost of revenues expenses.

This restatement is further discussed in note 3 of the notes to our consolidated
financial statements that are included on the Form 10-K/A for the year December
31, 2001 that we filed the U.S. Securities and Exchange Commission on January
24, 2003.

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 20

<PAGE>

REVENUES. Revenues decreased $2.4 million or 13% to $15.8 million in 2002, from
$18.2 million in 2001. In 2001, revenues increased $5.6 million or 44% to $18.2
million from $12.6 million in 2000. The decrease in revenues from 2001 to 2002
was the result of the general economic downturn. Specifically, increased
scrutiny of capital budgets has resulted in unexpected delays in larger sales
and smaller initial orders in sales that did successfully close. The increase in
revenues from 2000 to 2001 was the result of increased demand for our products
and the expanding of our sales and marketing efforts into new markets. In 2002,
48% of our revenues were generated in North America, 30% in Europe, 2% in Israel
and 20% in Asia Pacific and Africa. In 2001, 47% of our revenues were generated
in North America, 35% in Europe, 2% in Israel and 16% in Asia Pacific and
Africa. In 2000, 61% of our revenues were generated in North America, 34% in
Europe, 3% in Israel and 2% in Asia Pacific and Africa. The increase in
percentage of revenues from the Asia Pacific and Africa region is largely
attributable to an expansion of our sales effort in the Asian Pacific region.

SOFTWARE LICENSES. Software license revenues were $7.1 million or 45% of
revenues in 2002, $11.7 million or 65% of revenues in 2001, and $7.4 million or
59% of revenues in 2000. The decrease in software license revenues from 2001 to
2002 by $4.6 million or 39% was primarily the result of the general economic
downturn. The increase in software license revenues from 2000 to 2001 by $4.3
million or 58% was due to the penetration into new markets as well as increased
average sales per client, growth of our client base, and recurring sales to our
installed base of clients.

SERVICES. Service revenues were $8.6 million or 55% of revenues in 2002, $6.4
million or 35% of revenues in 2001, and $5.2 million or 41% of revenues in 2000.
The increase in services revenues from 2001 to 2002 by $2.2 million or 34% was
primarily due to the increase in post-contract support agreements and smaller
increase in revenues from consulting services. The relatively small increase in
service revenues from 2000 to 2001 by $1.3 million or 24% (as compared to the
increase in Software License revenues during that period) was primarily due to
an increase in license distribution through third parties also providing
implementation services, and increased efficiency in our implementation process.

COST OF REVENUES. Cost of revenues was $6.8 million or 43% of revenues in 2002,
$6.3 million or 35% of revenues in 2001, and $5.8 million or 46% of revenues in
2000. The increase in the cost of revenues from 2001 to 2002 by $0.5 million or
7% was primarily due to the increase in new third party licenses and adaptors to
other Enterprise Resource Planning (ERP) and Customer Relationship Management
(CRM) systems sold during 2002. The increase in the cost of revenues from 2000
to 2001 by $0.5 million or 9% was due to an increase in the number of customers,
which resulted in an increased demand for our professional services and
increased royalties payments to the Chief Scientist.

COST OF SOFTWARE LICENSES. Cost of software license revenues were $949,000 or 6%
of revenues in 2002, $798,000 or 4% of revenues in 2001 and $454,000 or 4% of
revenues in 2000. The increase in the cost of software revenues from 2001 to
2002 by $151,000 or 19% was primarily due to the increase in new third party
licenses and adaptors to other Enterprise Resource Planning (ERP) and Customer
Relationship Management (CRM) systems sold during 2002 partially offset by
decrease in royalties payments to Chief Scientist. The increase in the cost of
software revenues from 2000 to 2001 by $344,000 or 76% was primarily due to
increased royalties payments to Chief Scientist.

COST OF SERVICES. Cost of service revenues were $5.8 million or 37% of revenues
in 2002, $5.5 million or 31% of revenues in 2001, and $5.3 million or 42% of
revenues in 2000. The increase in the cost of services from 2001 to 2002 by
$306,000 or 6% was primarily due to increased royalties payments to the Chief
Scientist, as well as increased demand for our professional services. The
increase in the cost of services from 2000 to 2001, by $197,000 or 4%, was
primarily due to increased demand for our professional services. The relatively
small increases in cost of services from 2000 to 2001 and from 2001 to 2002
compared to the increase in service revenues in the same years is primarily
attributable to the increased service and maintenance productivity.

GROSS PROFIT. Gross profit as a percentage of revenues was 57% in 2002 as
compared to 65% in 2001 and 54% in 2000. The decrease in the gross profit from
2001 to 2002 by $2.9 million or 24% was primarily due to lower license revenues
in 2002. The increase in the gross profit from 2000 to 2001 by $5.0 million or
74% was primarily due to the increase in license revenues in 2001. The decrease
in gross margins from 2001 to 2002 was primarily due to a change in the revenue
mix in favor of higher services revenues resulting in lower margins. The
increase in gross margins from 2000 to 2001 was primarily due to a change in the
revenue mix in favor of software license revenues resulting in higher margins.

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 21

<PAGE>

OPERATING EXPENSES. Total operating expenses were $19.4 million or 123% of
revenues in 2002, $20.5 million or 113% of revenues in 2001, and $22.9 million
or 182% of revenues in 2000. The decrease in operating expenses from 2001 to
2002 by $1.2 million or 6% (excluding restructuring and impairment costs of $2.7
million, the decrease was $3.5 millions or 17%) was primarily due to cost
cutting measures implemented during the past twelve months partially offset by
restructuring and impairment expenses. The decrease in the operating expenses
from 2000 to 2001 by $2.4 million or 10% was primarily due to cost cutting
measures implemented during 2001. For example, our total number of employees
decreased from 198 at the end of 2000 to 157 at the end of 2001 and to 115 at
the end of 2002.

RESEARCH AND DEVELOPMENT EXPENSES, NET. Research and development expenses, net
of related grants, were $2.8 million or 18% of revenues in 2002, $3.2 million or
18% of revenues in 2001, and $4.3 million or 34% of revenues in 2000. Research
and development expenses, prior to participation grants from the Office of the
Chief Scientist of the Government of Israel, totaled $3.8 million for the year
ended December 31, 2002, $4.4 million for the year ended December 31, 2001 and
$5.4 million for the year ended December 31, 2000. We received or accrued grants
from the Chief Scientist in the amount of $1.0 million in 2002, $1.2 million in
2001 and $1.1 million in 2000. The decrease in research and development expenses
from 2001 to 2002 by $440,000 or 14% is primarily due to impact of cost cutting
measures implemented during 2002. The decrease in research and development
expenses from 2000 to 2001 by $1.1 million or 25% is primarily due to impact of
cost cutting measures implemented during 2001. In 2000, we introduced new
management products, which required an increase in personnel related costs.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses were $10.5
million or 66% of revenues in 2002, $12.5 million or 69% of revenues in 2001,
and $13.7 million or 108% of revenues in 2000. The decrease in the selling and
marketing expenses from 2001 to 2002 by $2.0 million or 16% was primarily due to
cost cutting measures implemented during 2002. The decrease in the selling and
marketing expenses from 2000 to 2001 by $1.2 million or 8% was primarily due to
cost cutting measures implemented during 2001.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses were
$3.1 million or 20% of revenues in 2002, $4.0 million or 22% of revenues in
2001, and $3.7 million or 30% of revenues in 2000. General and administrative
expenses included $130,000 in bad debt charges in 2002, $1.2 million in bad debt
charges in 2001 and $0.4 million in 2000. General and administrative expenses
without bad debts were $3.0 million in 2002, $2.8 million 2001 and $3.3 million
in 2000. The increase in general and administrative expenses without bad debt
charges from 2001 to 2002 by $0.2 million was primarily due to special costs,
primarily legal and accounting fees, incurred in connection with the review of
our financial statements conducted by our audit committee of the board of
directors which led to the restatement of our financial statements for 2000,
2001 and the first six months of 2002. (See note 3 of the notes to our
consolidated financial statements attached hereto.) The decrease in general and
administrative expenses without bad debt charges from 2000 to 2001 by $0.5
million was due to cost cutting measures implemented during 2001.

AMORTIZATION OF STOCK-BASED COMPENSATION. Stock-based compensation expenses for
the year ended December 31, 2002 amounted to $300,000 of previously recorded
deferred stock-compensation. Stock-based compensation expenses for the year
ended December 31, 2001 amounted to $400,000 of previously recorded deferred
stock-compensation. Stock-based compensation expenses for the year ended
December 31, 2000 amounted to $1.2 million of previously recorded deferred
stock-compensation. The decrease in share-based compensation expenses over the
years is attributed to the fact that the amortization of the share-based
compensation progressively decreases over the four-year amortization period.
Deferred compensation as of December 31, 2002 amounted to $100,000, which will
be amortized over 2003.

RESTRUCTURING AND ASSETS IMPAIRMENT. Restructuring costs were $2.7 million or
17% of revenues in 2002 and $300,000 or 2% of revenues in 2001. There were no
restructuring costs in 2000. The restructuring expenses in 2002 consisted mainly
of write-down of equipment and leasehold improvements related to office space
reduction and termination of lease contracts in connection mainly to the closing
of our California office and employees severance and benefits costs incurred by
us in connection with the termination of employment of employees. The
restructuring expenses in 2001 were costs associated with employees severance
and benefits.

INTEREST AND OTHER INCOME , NET. Interest income net of interest expenses, were
$300,000 or 2% of revenues in 2002, $600,000 or 4% of revenues in 2001, $700,000
or 5%

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 22
<PAGE>

of revenues in 2000. The decrease of interest income, net over the years is
attributed to the fact that the company cash and short-term investments
decreased over the years as well as lower return on investments achieved.

INCOME TAXES. As of December 31, 2002, the company has approximately $13.0
million of Israeli net operating loss carryforwards, approximately $31.4 million
of U.S. federal net operating loss carryforwards and approximately $8.4 million
of the European subsidiaries net operating loss carryforwards available to
offset future taxable income. The Israeli and the European net operating loss
carryforwards have no expiration date. The U.S. net operating loss carryforwards
will expire in various amounts in the years 2008 through 2014.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2002 we had cash and cash equivalents of approximately $3.4
million, short-term investments of approximately $2.9 million and long-term
investments of approximately $0.3 million. As of December 31, 2002,
approximately $2.9 million of the $3.2 million in short-term and long-term
investments had been deposited with banks to secure letters of credit totaling
approximately $2.6 million issued on our behalf which are described below.

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 $28.2 million, net
of underwriter discount and other issuance costs.

For the year ended December 31, 2002, net cash used in operations was $1.1
million, comprised of our net loss of $10.1 million, a decrease in short term
investment of $1.8 million, a decrease in trade receivables of $1.6 million, a
decrease in other receivables of $200,000, an increase in accounts payable of
$2.7 million, and an increase in deferred revenue of $300,000, which was
partially offset by non-cash charges of $2.3 million (including a one-time
impairment charge of $1.2 million).

For the year ended December 31, 2001, net cash provided by operations was $4.0
million, comprised of our net loss of $8.0 million, a decrease in short term
investment of $14.6 million, an increase in trade receivables of $3.6 million, a
decrease in accounts payable of $0.5 million, and a decrease in deferred revenue
of $100,000, which was partially offset by non-cash charges of $1.4 million.

For the year ended December 31, 2000, net cash used in operations was $30.1
million, comprised of our net loss of $15.4 million, an increase in short term
investment of $16.6 million, a decrease in trade receivables of $1.6 million, an
increase in other receivables of $1.0 million, an increase in accounts payable
of $0.4 million, and a decrease in deferred revenue of $1.0 million, partially
offset by non-cash charges of $2.0 million.

Net cash used in investing activities was $3.5 million in 2002, of which $3.2
million was primarily invested in bank deposits and $300,000 invested in
leasehold improvements and purchases of equipment and systems, including
computer equipment and fixtures and furniture. Net cash used in investing
activities was $400,000 in 2001, which was primarily invested in leasehold
improvements and purchases of equipment and systems, including computer
equipment and fixtures and furniture. Net cash used in investing activities was
$2.4 million in 2000, which was primarily invested in leasehold improvements and
purchases of equipment and systems, including computer equipment and fixtures
and furniture.

There were no material financing activities in 2002 and 2001. Net cash provided
by financing activities was $29.2 million in 2000, as a result of the initial
public offering of our shares which yielded proceeds of approximately $28.2
million (net of underwriters discount and issuance expenses).

As of December 31, 2002 we had outstanding trade receivables of approximately
$4.0 million, which represented approximately 26% of 2002 total revenues. As of
December 31, 2001 we had outstanding trade receivables of approximately $5.6
million, which represented approximately 31% of 2001 total revenues. As of
December 31, 2000 we had outstanding trade receivables of approximately $2.0
million, which represented approximately 16% of 2000 total revenues. Our trade
receivables typically have 30 to 60 day terms; although we also negotiate longer
payment plans with some of our clients.

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 23

<PAGE>

We have various commitments primarily related to guarantees, letters of credit,
capital lease obligations and short-term debt. The following table provides
details regarding our contractual cash obligations and other commercial
commitments subsequent to December 31, 2002:


--------------------------- ------------------ ----------------------------
                                                  AMOUNT OF COMMITMENT
COMMERCIAL                  TOTAL AMOUNTS              EXPIRATION
COMMITMENTS                 COMMITTED (IN            PER PERIOD (IN
                            THOUSANDS)                 THOUSANDS)
--------------------------- ------------------ ----------------------------
                                                  2003        2004,2005
--------------------------- ------------------ ------------ ---------------
Short Term Bank Debt               $17             $17            -
--------------------------- ------------------ ------------ ---------------
Guarantees/Letters of            $2,627          $2,347         $280
Credit
--------------------------- ------------------ ------------ ---------------


--------------------------- -----------------------------------------------
                                 PAYMENTS DUE BY PERIOD (IN THOUSANDS)
CONTRACTUAL
OBLIGATIONS                -----------------------------------------------
                                  TOTAL            2003        2004, 2005
--------------------------- ------------------ ------------- --------------
Lease Obligations                $1,097            $614           $483

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

We have entered into standby letters of credit agreements with banks primarily
relating to the guarantee of future performance on certain contracts and office
lease payments. As of December 31, 2002, contingent liabilities on outstanding
letters of credit agreements aggregated approximately $2.6 million of which all
but $280,000 are scheduled to expire during 2003. The letters of credit are
secured by $2.9 million in deposits with the banks, to cover any potential
payments under the guarantees.

Since inception, we have received aggregate payments from the Government of the
State of Israel through the Office of the Chief Scientist of the Ministry of
Industry and Trade in the amount of $6.3 million related to research and
development. In return for the Government of Israel participation, we are
committed to pay royalties at a rate of 3% to 5% of sales of the developed
product, up to 100%-150% of the amount of grants received with annual interest
of LIBOR as of the date of approval for programs approved from 1999 and
thereafter. As of December 31, 2002, we had paid or accrued royalties related to
the results of research and development in the amount of $2.3 million. The
estimated current net commitment is approximately $4.0 million. The refund of
the grant is contingent on future sales, and we have no obligation to refund
these grants, if sufficient sales are not generated.

Our capital requirements depend on numerous factors, including market demand and
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 selling and marketing and research and
development operations in the future. Our ability to reach profitability using
our currently available balance of cash and cash equivalents will depend on our
ability to increase our revenues while continuing to control our expenses.
However, we cannot assure you that we will be able to achieve or maintain
profitability, particularly given the current economic conditions and potential
reduction in information technology spending by our current and prospective
customers. If we are not successful in doing so, we will be required to seek
new, external sources of financing. 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 out shareholders.

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 24

<PAGE>

In the fourth quarter of 2002, in light of the worldwide economic recession and
the slowdown in investments in corporate capital expenditure, we initiated a
reorganization plan aimed at reducing our operating expenses and preserving our
cash and cash equivalent balances. As part of the plan we reduced our workforce
by approximately 40 employees, implemented across the board salaries reduction,
closed our office in Campbell, California and moved our North America
headquarter to Burlington, Massachusetts. As a result of this plan, we recorded
in the fourth quarter of 2002 restructuring costs and asset impairment in the
amount of approximately $2.7 million. (See also note 4 of the notes to our
consolidated financial statements attached hereto.)

We estimate that our expenses in the first quarter of 2003 will be between $4.7
and $4.9 million excluding restructuring expenses, although actual expenses may
differ. Also we will need to use cash during 2003 for certain expenses recorded
in 2002 in connection with our restructuring in the amount of approximately $1.3
million. If we are able to maintain our quarterly revenues at a level similar to
that of the third and fourth quarters of 2002, we believe that we will have
sufficient cash to fund our operations for at least the near term although there
is no assurance we will be able to do so.

RECENT ACCOUNTING PRONOUNCEMENTS

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements SFAS
Nos. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections." SFAS No. 145 will impact how companies account for sale-leaseback
transactions and how gains or losses on debt extinguishments are presented in
financial statements. SFAS No. 145 is effective for fiscal years beginning after
May 15, 2002, but early application is encouraged.

In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146 "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No.
146 requires that a liability for costs associated with an exit or disposal
activity be recognized only when the liability is incurred, rather than at the
date of an entity's commitment to an exit plan. SFAS 146 requires that the
liability be initially measured at fair value. SFAS No. 146 is effective for
exit or disposal activities that are initiated after December 31, 2002. We do
not expect that adoption of SFAS No. 146 will have material impact on our
financial statements.

In November 2002, FASB Interpretation No. 45, or FIN 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" was issued. This interpretation requires elaborating on
the disclosures that must be made by a guarantor in its interim and annual
financial statements about its obligations under certain guarantees that it has
issued. It also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The disclosure requirements of this
Interpretation are effective for statements issued after December 15, 2002 and
its recognition requirements are applicable for guarantees issued or modified
after December 31, 2002. We do not expect that adoption of FIN 45 will have
material impact on our financial statements.

In December 2002, the FASB issued Statement of Financial Accounting Standards
Board No. 148, "Accounting for Stock-Based Compensation -- Transition and
Disclosure -- an amendment of FASB Statement No. 123" ("SFAS 148"). SFAS 148
amends SFAS No. 123 to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS
123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. We have followed the
prescribed format and have provided the additional disclosures required by SFAS
148 in these financial statements for the periods presented (see Note 2), and
will also provide the disclosures in our quarterly financial statements.

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 25

<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS

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

RISKS RELATED TO OUR BUSINESS

OUR NEED FOR ADDITIONAL FINANCING IS UNCERTAIN, AS IS OUR ABILITY TO RAISE
FURTHER FINANCING IF REQUIRED. Our ability to reach profitability using our
currently available balance of cash and cash equivalents will depend on our
ability to increase our revenues while continuing to reduce our expenses. We
cannot assure you that we will be successful in doing so. If we are not
successful in doing so, particularly given current economic conditions and
potential reductions in information technology spending by our current and
prospective customers, we will need to raise additional capital to finance our
operations. Under current market conditions, we may not be able to do so
byselling additional equity or debt securities. If we are able to issue 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. 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.

Alternatively, we may seek other forms of financing, such as credit from banks
or institutional lenders. We cannot be certain that additional financing will be
available to us 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, which
may include the need to:

     o    fund additional marketing expenditures;
     o    develop new or enhance existing products and services;
     o    enhance our operating infrastructure;
     o    respond to competitive pressures; or
     o    acquire complementary businesses or necessary technologies.

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

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

WE FACE RISKS RELATING TO OUR FINANCIAL STATEMENT RESTATEMENT. During the third
quarter of 2002, our audit committee, with the assistance of outside advisors,
conducted a review of our financial statements for 2000 and 2001 and the first
six months of 2002. On October 21, 2002, we announced that we would restate our
financial statements for 1999, 2000 and 2001 and the first six months of 2002.
In addition, we announced that our audit committee had decided to recommend to
our shareholders that we

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 26

<PAGE>

terminate our relationship with Luboshitz Kasierer, formerly a member firm of
Arthur Andersen, as our auditors and appoint new auditors. At a shareholders'
meeting held on December 31, 2002, our shareholders authorized the engagement of
Brightman Almagor Brightman Almagor & Co., a member firm of Deloitte Touche
Tohmatsu. Following the reaudit of our financial statements, we restated our
financial statements for the announced periods and for the year ended December
31, 1999 and filed an amendment to the 10-K for the three years ended 2001 on
January 24, 2003.

The restatement of our prior financial statements may lead to litigation claims
against us. The defense of claims may cause the diversion of management's
attention and resources, and we may be required to pay damages if any such
claims are not resolved in our favor. Any litigation, even if resolved in our
favor, could cause us to incur significant legal and other expenses. In this
regard, in December 2002, a lawsuit was filed against us and our current and
former officers in the United States District Court for the District of
Massachusetts asserting securities law claims on behalf of persons who purchased
our ordinary shares between June 22, 2000 and October 21, 2002. To date, the
complaint has not been served on any of the defendants, nor has the plaintiff
taken any other action in connection with the matter. In addition, we have
provided information regarding our financial statement restatement to the staff
of the Securities and Exchange Commission on a voluntary basis, and the SEC has
requested additional information. Any additional inquiry by the SEC may result
in a diversion of our management's attention and resources and require
additional expenses for professional services. In addition, any claims against
us or any inquiry by the SEC may cause the price of our Ordinary Shares to
decline.

IF WE ARE CHARACTERIZED AS A PASSIVE FOREIGN INVESTMENT COMPANY, OUR UNITED
STATES SHAREHOLDERS WILL BE SUBJECT TO ADVERSE TAX CONSEQUENCES. If, for any
taxable year, either, (1) 75% or more of our gross income is passive income or
(2) 50% or more of the fair market value of our assets, including cash (even if
held as working capital), produce or are held to produce passive income, we may
be characterized as a "passive foreign investment company" ("PFIC") for United
States federal income tax purposes. Passive income includes dividends, interest,
royalties, rents annuities and the excess of gains over losses from the
disposition of assets, which produce passive income. For purposes of the asset
test, cash is considered to be an asset which produces passive income. As a
result of our cash position and the decline in the value of our assets, there is
a sustantial risk that we are a PFIC for U.S. federal income tax purposes.

If we are characterized as a PFIC, our shareholders who are residents of the
United States will be subject to adverse United States tax consequences. Our
treatment as a PFIC could result in a reduction in the after-tax return to
shareholders resident in the United States and may cause a reduction in the
value of such shares.

If we were to be treated as a PFIC, our shareholders will be required, in
certain circumstances, to pay an interest charge together with tax calculated at
maximum rates on certain "excess distributions" including any gain on the sale
of ordinary shares. In order to avoid this tax consequence, they (1) may be
permitted to make a "qualified electing fund" election (however the company does
not currently intend to take the action necessary for our shareholders to make a
"qualified electing fund" election, in which case, in lieu of such treatment
they would be required to include in their taxable income certain undistributed
amounts of our income) or (2) may elect to mark-to-market the ordinary shares
and recognize ordinary income (or possible ordinary loss) each year with respect
to such investment and on the sale or other disposition of the ordinary shares.
Prospective investors should consult with their own tax advisors with respect to
the tax consequences applicable to them of investing in our ordinary shares.

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

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

FAILURE OF THE MARKET TO ACCEPT OUR PRODUCTS WOULD ADVERSELY AFFECT OUR
PROFITABILITY. Historically, all of our operating revenue has come from sales
of, and services related to, our ClickSchedule product and our ClickFix product,
to clients seeking application software that enables efficient provisioning of
services in enterprise environments. During the year ended December 31, 2000, we
introduced three products that, together with our existing products, constitute
a suite of products that offers a more comprehensive solution to our customers.
On November 28, 2001 we released version 7.0

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of our Service Optimization Suite that utilizes dynamic load balancing
architecture, which dynamically redirects requests among a group of
ClickSoftware servers running our product applications. On October 2002 we added
ClickForecast to our Service Optimization suite. This increases the scalability
of our products by enabling our customers to optimize additional resources by
adding hardware to this group of ClickSoftware servers. Our growth depends in
part on the development of market acceptance of these products. We have no
guarantee that the sales of these products will develop as quickly as we
anticipate, or at all. Lack of long-term demand for our new products would have
a material adverse effect on our business and operating results.

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

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. 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 our executive officers, including Dr. Moshe BenBassat. Although these
agreements generally require sixty days notification prior to departure,
relationships with these officers and key employees are at will. The loss of any
of our key personnel could harm our ability to execute our business strategy and
compete.

IF WE FAIL TO EXPAND OUR PROFESSIONAL SERVICES ORGANIZATION, WE MAY NOT BE ABLE
TO SERVICE ADDITIONAL CLIENTS AND INSTALL ADDITIONAL LICENSES. We cannot be
certain that we can attract or retain a sufficient number of highly qualified
professional services personnel to meet our business needs. Clients that license
our software typically engage our professional services organization to assist
with the installation and operation of our software applications. Our
professional services organization also provides assistance to our clients
related to the maintenance, management and expansion of their software systems.
Future 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. If we were not able to
maintain our professional services organization, our ability to support our
service business would be limited.

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,

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long-term relationships with implementation and professional services providers,
or if these providers do not meet the needs or expectations of our clients, we
may be unable to grow our revenues and our business could suffer. As a result of
the limited resources and capacities of many third-party implementation
providers, we may be unable to attain sufficient focus and resources from the
third-party providers to meet all of our clients' needs, even if we establish
relationships with these third parties. If sufficient resources are unavailable,
we will be required to provide these services internally, which could limit our
ability to meet other demands. Even if we are successful in developing
relationships with third-party implementation and professional services
providers, we will be subject to significant risk, as we cannot control the
level and quality of service provided by third-party implementation and
professional services partners.

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

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

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

IF OUR SHARES ARE DELISTED, IT MAY BECOME MORE DIFFICULT TO SELL OUR SHARES AND
THE PRICE OF OUR ORDINARY SHARES WILL LIKELY FALL. After and in response to our
completion on February 27, 2003 of filings of Forms 10-K/A and 10-Q/A required
in connection with the restatement of our financial statements for the years
ending December 31, 1999, 2000, 2001 and for the six months ended June 30, 2002,
the Nasdaq Listing Qualifications Department (the "Panel") ceased the process of
delisting our shares from the Nasdaq SmallCap Market. The Panel also approved
the resumption of trading of our ordinary shares under the ticker symbol "CKSW".
Our shares had been traded under the temporary ticker symbol "CKSWE" used during
the delisting evaluation process. However, we cannot assure you that our
ordinary shares will continue to be listed on the Nasdaq SmallCap Market or that
we will be able to meet the Nasdaq SmallCap Market continued listing criteria in
the future. If our shares are delisted, our ordinary shares may become more
difficult to buy and sell. In addition, the trading market for our ordinary
shares will likely be adversely affected by our shares' delisting, and the
decreased trading volume may cause the price of our ordinary shares to fall.

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 2000 versions of our
products due to the market acceptance of Windows 2000 over the last several
years.

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While we interface smoothly with UNIX systems, we currently do not provide UNIX
versions of our software. The actual or anticipated introduction of new products
has resulted and will continue to result in some reformulation of our product
offerings. Technology and industry standards can make existing products obsolete
or unmarketable or result in delays in the purchase of such products. As a
result, the life cycles of our products are difficult to estimate. We must
respond to developments rapidly and continue to make substantial product
development investments. As is customary in the software industry, we have
previously experienced delays in introducing new products and features, and we
may experience such delays in the future that could impair our revenue and
operating results.

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

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

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

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

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

We expect that software products may be increasingly subject to third-party
infringement or ownership claims as the number of competitors in our industry
segment

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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:

     o    be time-consuming to defend;
     o    result in costly litigation;
     o    divert management's attention and resources; or
     o    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.

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

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

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

WE ARE INCORPORATED IN ISRAEL AND HAVE IMPORTANT FACILITIES AND RESOURCES
LOCATED IN ISRAEL, WHICH COULD BE NEGATIVELY AFFECTED DUE TO MILITARY OR
POLITICAL TENSIONS. We are incorporated under the laws of the State of Israel
and our research and development facilities as well as significant executive
offices are located in Israel. Although substantial portions of our sales
currently are to customers outside of Israel, political, economic and military
conditions in Israel could nevertheless directly affect our operations. Since
the establishment of the State of Israel in 1948, a number of armed conflicts
have taken place between Israel and its Arab neighbors and a state of hostility,
varying in degree and intensity, has led to security and economic problems for
Israel. Since September 2000, a continuous armed conflict with the Palestinian
authority has been taking place.

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

CERTAIN OF OUR OFFICERS AND EMPLOYEES ARE REQUIRED TO SERVE IN THE ISRAEL
DEFENSE FORCES AND THIS COULD FORCE THEM TO BE ABSENT FROM OUR BUSINESS FOR
EXTENDED PERIODS. David Schapiro, our Executive Vice President, Markets and
Products, Hannan Carmeli, our Executive Vice President, Product Services and
Operations, and Shmuel Arvatz, our Executive Vice President and Chief Financial
Officer, as well as other male employees located in Israel are currently
obligated to perform up to 39-45 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 AN INTERNATIONAL COMPANY AND OUR INTERNATIONAL OPERATIONS ARE EXPANDING.
OUR RISK EXPOSURE TO FOREIGN CURRENCY FLUCTUATIONS IS INCREASING, AND WE MAY NOT
BE ABLE TO FULLY MITIGATE THE RISK. Our revenue from the UK has grown both in
absolute dollar basis as well as a percentage of total revenues. We are
expanding operations in other areas of Europe, and income and expenses
recognized in the European Community Euro will increase. In 2002, 20% of our
costs were incurred in GBP and 3% in Euro. We incur a portion of our expenses,
principally salaries and related personnel expenses in Israel, in NIS. In 2002,
25% of our costs were incurred in NIS. In 2002 2% of our costs incurred in
Australian Dollar. In addition to above ,we have balance sheet exposure related
to foreign net assets. So far our risk to foreign currency fluctuations was
minimal, but We cannot assure that we will be able to adequately protect
ourselves against such risks.

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

WE ANTICIPATE RECEIVING TAX BENEFITS FROM THE GOVERNMENT OF THE STATE OF ISRAEL,
HOWEVER THESE BENEFITS MAY BE DELAYED, REDUCED OR TERMINATED IN THE FUTURE.
Pursuant

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

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

OUR OFFICERS, DIRECTORS AND AFFILIATED ENTITIES OWN A LARGE PERCENTAGE OF OUR
COMPANY AND COULD SIGNIFICANTLY INFLUENCE THE OUTCOME OF ACTIONS. As of December
31, 2002, our executive officers, directors and entities affiliated with them
beneficially owned approximately 36.7% of our outstanding ordinary shares. These
shareholders, if acting together, would be able to significantly influence all
matters requiring approval by our shareholders, including the election of
directors. This concentration of ownership may also have the effect of delaying
or preventing a change of control of our company, which could have a material
adverse effect on our stock price. These actions may be taken even if our other
investors oppose them.

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

OTHER ORDINARY SHARES MAY BE SOLD IN THE FUTURE. THIS COULD DEPRESS THE MARKET
PRICE FOR OUR ORDINARY SHARES. As of December 31, 2002, we had 26,373,249
ordinary shares outstanding (net of 39,000 shares held in treasury), including
shares held by a trustee for issuance under outstanding options. In addition, as
of December 31, 2002, we had 2,919,364 ordinary shares issueable upon exercise
of outstanding options, and 2,147,618 additional ordinary shares reserved for
issuance pursuant to our stock option plans and employee share purchase plan. If
our existing shareholders or we sell a large number of our ordinary shares, the
price of our ordinary shares could fall dramatically. Restrictions under the
securities laws limit the number of ordinary shares available for sale by our
shareholders in the public market. We have filed a Registration


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Statement on Form S-8 to register for resale the ordinary shares reserved for
issuance under our stock option plans.

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:

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

In the ordinary course of our operations, we are exposed to certain market
risks, primarily changes in foreign currency exchange rates and interest rates.

FOREIGN CURRENCY EXCHANGE RATE RISK. We develop products in Israel and sell them
primarily in North America, Europe, and the Asia Pacific and Africa regions. 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.
In 2002 66% of our revenues and 50% of our expenses are denominated in US$.
Since our financial results are reported in functional currency of U.S. dollars,
fluctuations in the rates of exchange between the dollar and non-dollar
currencies may have a material effect on our results of operations. The exposure
to currency exchange rate changes is diversified due to the number of different
countries and currencies in which we conduct business. The main currencies are
US$, NIS, GBP and Euro.

In addition to above, we have balance sheet exposure related to foreign net
assets.

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 34

<PAGE>


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, 2002, we had cash and cash equivalents of
$6.3 million, which consist of cash and highly liquid short-term investments. Of
this a total of $0.6 million is denominated in non-dollar currencies. A
hypothetical 10 percent change in exchange rates against U.S dollar and a
substantial decrease in market interest rates will be by an immaterial amount
and therefore, our exposure to exchange rates fluctuations on investments and
interest rate changes is immaterial The following table provides information
about our investment portfolio, cash, and long-term debts as of December 31,
2002 and presents principal cash flows and related weighted averages interest
rates by expected maturity dates.

     YEAR OF MATURITY                                                     2003
     (in thousands of dollars)
     A) CASH AND CASH EQUIVALENTS AND INVESTMENT PORTFOLIO:
     ------------------------------------------------------
     Cash and Cash equivalents                                          $3,400
       Average interest rate                                              0.9%

     Bank deposits                                                      $3,229
       Average interest rate                                              2.0%

     B) LONG-TERM DEBTS:
     -------------------
     None.


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 8. FINANCIAL STATEMENTS

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


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


--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 35

<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. ("the Company") and its subsidiaries at December
31, 2002 and 2001 and the related statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries at December 31, 2002 and 2001, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2002, in conformity with accounting principles generally accepted in the
United States of America.


/s/ Brightman Almagor & Co.
BRIGHTMAN ALMAGOR & CO.
CERTIFIED PUBLIC ACCOUNTANTS
A MEMBER OF DELOITTE TOUCHE TOHMATSU

Tel Aviv, Israel
FEBRUARY 11, 2003


--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 36

<PAGE>
<TABLE>
<CAPTION>

                                         CLICKSOFTWARE TECHNOLOGIES LTD.
                                           CONSOLIDATED BALANCE SHEETS
                                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                                                                                DECEMBER 31,
                                                                                             2002         2001
                                                                                             ----         ----
<S>                                                                                        <C>          <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents (note 5)                                                       $    3,400   $    8,125
  Short-term investments (note 6 & Note 14b)                                                    2,949        1,846
    Trade receivables, net of allowance for doubtful accounts of $752 and $912 as of            4,043        5,607
    December 31, 2002 and 2001,respectively (note 7)
  Other receivables and prepaid expenses (note 8)                                               1,254        1,485
                                                                                          -------------------------
     Total current assets                                                                      11,646       17,063
  Long-term investments (note 9 & note 14b)                                                       280            -
  Property and equipment, net (note 10)                                                         1,250        2,985
  Severance pay deposits (note 13)                                                                781          652
                                                                                          -------------------------
     Total assets                                                                          $   13,957   $   20,700
                                                                                          =========================

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short-term debt (note 11)                                                                $       17   $      140
  Accounts payable and accrued expenses (note 12)                                               5,369        2,664
  Deferred revenues                                                                               411           68
                                                                                          -------------------------
     Total current liabilities                                                                  5,797        2,872
                                                                                          -------------------------

LONG-TERM LIABILITIES
  Long-term debt                                                                                    -           21
  Accrued severance pay (note 13)                                                               1,476        1,379
                                                                                          -------------------------
     Total long-term liabilities                                                                1,476        1,400
                                                                                          -------------------------
     Total liabilities                                                                          7,273        4,272
                                                                                          -------------------------

COMMITMENTS AND CONTINGENCIES (NOTE 14)

SHAREHOLDERS' EQUITY: (NOTE 15)
 Special preferred shares NIS 0.02 par value
    Authorized - 5,000,000 as of December 31, 2002 and 2001; no issued and
    outstanding shares as of December 31, 2002 and 2001
Ordinary shares of NIS 0.02 par value:
    Authorized -- 100,000,000 as of December 31, 2002 and 2001;
    Issued -- 26,412,249 shares as of December 31, 2002 and
    26,285,464 as of December 31,2001;
    Outstanding -- 26,373,249 shares as of December 31,2002 and
    26,246,464 shares as of December 31, 2001.                                                    102          101
Additional paid-in capital                                                                     69,196       69,143
Deferred stock compensation                                                                     (101)        (401)
Accumulated deficit                                                                          (62,470)     (52,372)
Treasury stock, at cost: 39,000 shares                                                           (43)         (43)
                                                                                          -------------------------
     Total shareholders' equity                                                                 6,684       16,428
                                                                                          -------------------------
     Total liabilities and shareholders' equity                                            $   13,957   $   20,700
                                                                                          =========================

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

------------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                       PAGE 37
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                               CLICKSOFTWARE TECHNOLOGIES LTD.
                                            CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

                                                                                           YEAR ENDED DECEMBER 31,
                                                                                   2002             2001            2000
                                                                                   ----             ----            ----
<S>                                                                           <C>              <C>             <C>
Revenues (note 16):
  Software license                                                            $        7,113   $      11,734   $        7,412
  Services                                                                             8,640           6,441            5,178
                                                                             -------------------------------------------------
     Total revenues                                                                   15,753          18,175           12,590
                                                                             -------------------------------------------------

Cost of revenues:
  Software license                                                                       949             798              454
  Services                                                                             5,804           5,498            5,301
                                                                             -------------------------------------------------
     Total cost of revenues                                                            6,753           6,296            5,755
                                                                             -------------------------------------------------

                                                                             -------------------------------------------------
     Gross profit                                                                      9,000          11,879            6,835
                                                                             -------------------------------------------------

Operating expenses:
  Research and development expenses                                                    3,759           4,422            5,408
          Less - participation by the Chief Scientist of the Government of
        Israel  (note 14a)                                                               953           1,176            1,108
                                                                             -------------------------------------------------
  Research and development expenses, net                                               2,806           3,246            4,300
  Selling and marketing expenses                                                      10,473          12,499           13,654
  General and administrative expenses                                                  3,106           4,048            3,717
  Restructuring and assets impairment  (note 4)                                        2,665             294                -
  Amortization of deferred stock-based compensation (1)                                  300             437            1,237
                                                                             -------------------------------------------------
     Total operating expenses                                                         19,350          20,524           22,908
                                                                             -------------------------------------------------
     Operating loss                                                                 (10,350)         (8,645)         (16,073)
Interest and other income, net                                                           252             649              679
                                                                             -------------------------------------------------
Net loss                                                                      $     (10,098)   $     (7,996)   $     (15,394)
                                                                             =================================================
Basic and diluted net loss per ordinary share                                 $       (0.40)   $      (0.32)   $       (0.68)
                                                                             -------------------------------------------------
Shares used in computing basic and diluted net loss per share                     25,553,891      25,322,771       22,501,563
                                                                             -------------------------------------------------


(1)  Amortization of deferred stock-based compensation would be further classified as follows:


                                                                                           YEAR ENDED DECEMBER 31,
                                                                                   2002             2001            2000
                                                                                   ----             ----            ----

Cost of revenues                                                              $          20    $          18   $          112
Research and development expenses                                                        44               56              174
Selling and marketing expenses                                                           12               56              174
General and administrative expenses                                                     224              307              777
                                                                             -------------------------------------------------
Total                                                                                   300              437            1,237
                                                                             -------------------------------------------------


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

------------------------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                                   PAGE 38
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                   CLICKSOFTWARE TECHNOLOGIES LTD.
                                     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                  (IN THOUSANDS, EXCEPT SHARE DATA)

                                            NUMBER OF                                                         LESS
                              NUMBER OF    CONVERTIBLE             ADDITIONAL                                COST OF
                              ORDINARY      PREFERRED    SHARE      PAID-IN       DEFERRED     ACCUMULATED   TREASURY
                               SHARES        SHARES      CAPITAL    CAPITAL     COMPENSATION     DEFICIT      SHARES      TOTAL
                             ------------------------------------------------------------------------------------------------------
<C>                          <C>           <C>             <C>       <C>            <C>          <C>        <C>          <C>
Balance as of January 1,
2000                           7,208,816     13,499,898    $  73    $  40,052      $  (2,663)    $ (28,982)     $    -   $   8,480
Shares issued net of
issuance cost of $4,030        4,600,000              -       23       28,147               -             -          -      28,170
Conversion of preferred
shares                        13,499,898   (13,499,898)        -            -               -             -          -           -
Warrants exercised               459,439              -        2          577               -             -          -         579
Employee options exercised       273,098              -        2          638               -             -          -         640
Expired options                        -              -        -        (306)             306             -          -           -
Employee Stock purchase
plan                              23,288              -        -           61               -             -          -          61
Amortization of deferred
compensation                           -              -        -            -           1,237             -          -       1,237
Net loss                               -              -        -            -               -      (15,394)          -    (15,394)
                             ------------------------------------------------------------------------------------------------------
Balance as of December 31,
2000                          26,064,539              -    $ 100    $  69,169      $  (1,120)    $ (44,376)     $    -   $  23,773
Employee options exercised        62,020              -        -          119               -             -          -         119
Expired options                        -              -        -        (282)             282             -          -           -
Employee Stock purchase
plan                             158,905              -        1          137               -             -          -         138
Amortization of deferred
compensation                           -              -        -            -             437             -          -         437
Net loss                               -              -        -            -               -       (7,996)          -     (7,996)
Treasury Shares                 (39,000)              -        -            -               -             -       (43)        (43)
                             ------------------------------------------------------------------------------------------------------
Balance as of December 31,
2001                          26,246,464              -    $ 101    $  69,143      $    (401)    $ (52,372)     $ (43)   $  16,428
Employee options exercised         1,500              -        -            5               -             -          -           5
Employee Stock purchase
plan                             125,285              -        1           48               -             -          -          49
Amortization of deferred
compensation                           -              -        -            -             300             -          -         300
Net loss                               -              -        -            -               -      (10,098)          -    (10,098)

                             ------------------------------------------------------------------------------------------------------
Balance as of December 31,
2002                          26,373,249              -    $ 102    $  69,196      $    (101)    $ (62,470)     $ (43)   $   6,684
                             ------------------------------------------------------------------------------------------------------

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

------------------------------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                                         PAGE 39
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                         CLICKSOFTWARE TECHNOLOGIES LTD.
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                  (IN THOUSANDS)
                                                                               YEAR ENDED DECEMBER 31,
                                                                        2002            2001            2000
                                                                        ----            ----            ----
<S>                                                                 <C>             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash used in
operating activities:

Net loss                                                            $    (10,098)   $     (7,996)    $    (15,394)
  Depreciation                                                                890             700              640
  Amortization of deferred compensation                                       300             437            1,237
  Unrealized (gain) loss from
    Investments                                                                28             395            (258)
  Severance pay, net                                                         (32)            (90)              346
  Assets impairment                                                         1,195               -                -
  Other                                                                      (35)               -                -
  Trade receivables                                                         1,564         (3,565)            1,572
  Other receivables                                                           231            (19)          (1,001)
  Accounts payable and accrued expenses                                     2,705           (489)              365
  Deferred revenues                                                           343            (59)          (1,016)

Decrease (Increase) in marketable securities, net                           1,818          14,637         (16,620)
                                                                   ------------------------------------------------
Net cash provided by (used in) operating activities                        (1,091)          3,951         (30,129)
                                                                   ------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of investments                                                   (3,229)               -                -
Purchases of equipment                                                      (315)           (390)          (2,437)
                                                                   ------------------------------------------------
Net cash used in investing activities                                     (3,544)           (390)          (2,437)
                                                                   ------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net)                                                       (123)             (6)            (174)
Repayments of long-term debt                                                 (21)            (82)            (110)

Net proceeds from issuance of Ordinary shares                                   -               -           28,170
Purchase of treasury shares                                                     -            (43)                -
Net proceeds from warrants exercised                                                            -              579
Employee and ESPP options exercised                                            54             257              701
                                                                   ------------------------------------------------
Net cash (used in) provided by financing activities                          (90)             126           29,166
                                                                   ------------------------------------------------
Increase (decrease) in cash and cash equivalents                          (4,725)           3,687          (3,400)

Cash and cash equivalents at beginning of year                              8,125           4,438            7,838
                                                                   ------------------------------------------------
Cash and cash equivalents at end of year                            $       3,400   $       8,125    $       4,438
                                                                   ------------------------------------------------


Supplemental cash flow information:
Cash paid for interest                                              $          10   $          22    $          86


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

-------------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                        PAGE 40
</TABLE>

<PAGE>

                         CLICKSOFTWARE TECHNOLOGIES LTD.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (AS OF DECEMBER 31, 2002 AND 2001 AND
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000)
                            (IN THOUSANDS OF DOLLARS)

NOTE 1 -- GENERAL

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

The Company has incurred net operating losses since inception and, as of
December 31, 2002, had an accumulated deficit of $62.5 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, the company completed an initial public offering of its
ordinary shares (the "IPO"). The offering commenced on June 22, 2000 whereby
4,000,000 ordinary shares registered under a 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, the Company paid an aggregate of $2,254,000 in
underwriting discounts and commissions to the underwriters and incurred other
expenses of approximately $1.8 million.

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

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION
The financial statements have been prepared in conformity with accounting
principles generally accepted in the U.S.

PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its wholly
owned subsidiaries. All significant material intercompany balances and
transactions have been eliminated.

FINANCIAL STATEMENTS IN U.S. DOLLARS
The reporting currency of the Company is the U.S. dollar ("dollar"). The dollar
is the functional currency of the Company and its subsidiaries. Transactions and
balances originally denominated in dollars are presented at their original
amounts. Non-dollar transactions and balances are remeasured into dollars in
accordance with the principles set forth in Statement of Financial Accounting
Standards ("SFAS") No. 52. All exchange gains and losses from translation of
monetary balance sheet items resulting from transactions in non-dollar
currencies are recorded in the statement of operations as they arise.

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 41

<PAGE>

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
Cash equivalents consist of short-term, highly liquid investments that are
readily convertible into cash with original maturities of three months or less.
Bank deposits with maturities of more than three months but less than one year
are included in short-term investments.

CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the company to credit risk,
consist principally of cash instruments and accounts receivable. The Company
maintains cash and cash equivalents and investments with major financial
institutions and limits the amount of credit exposure with any institution. The
accounts receivable are derived from sales to a large number of customers,
mainly large industrial corporations and their suppliers located mainly in
Europe and the United States. The Company generally does not require collateral.
The Company performs ongoing credit evaluations of its customers and maintains
an allowance for doubtful accounts which management believes adequately covers
all anticipated losses in respect of trade receivables.

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.

The Company complies with provisions of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement requires that
long-lived assets and certain identifiable intangible assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to undiscounted future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less cost to sell.

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
The Company recognizes revenues in accordance with the American Institute of
Certified Public Accountants ("AICPA") Statement of Position 97-2, Software
Revenue Recognition, as amended. In accordance with SOP 97-2, revenues from
software license fees are recognized when persuasive evidence of an arrangement
exists, the software product covered by written agreement or a purchase order
signed by the customer has been delivered, the license fees are fixed and
determinable and collection of the license fees is considered probable. Revenues
from software product license agreements, which require significant
customization and modification of the software product are deferred and
recognized using the percentage-of-completion method of contract accounting in
accordance with AICPA Statement of Position 81-1. When software arrangements
involve multiple elements the Company allocates revenue to each element based on
the relative fair values of the elements. The Company's determination of fair
value of each element in multiple element arrangements is based on
vendor-specific objective evidence (VSOE). The Company limits its assessment of
VSOE for each element to the price charged when the same element is

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 42

<PAGE>

sold separately. If vendor specific objective evidence of fair value does not
exist for all elements to support the allocation of the total fee among all
delivered and undelivered elements of the arrangement, revenue is deferred until
such evidence exist for the undelivered elements, or until all elements are
delivered, whichever is earlier.

If the fee due from the customer is not fixed or determinable, revenue is
recognized as payments become due from the customer, assuming all other revenue
recognition criteria have been met. Generally, the Company considers all
arrangements with extended payment terms greater than nine months not to be
fixed or determinable.
The Company also enters into license arrangements with resellers whereby
revenues are recognized upon sale through to the end user by the reseller.
Service revenues include consulting services, post-contract customer support and
training. Consulting revenues are generally recognized on a time and material
basis. However, revenues from certain fixed-price contracts are recognized on
the percentage of completion basis. Post-contract customer support agreements
provide technical support and the right to unspecified updates on an
if-and-when-available basis. Post-contract customer support revenues are
recognized ratably over the term of the support period (generally one year) and
training and other service revenues are recognized as the related services are
provided.

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. (See note 15).

<TABLE>
<CAPTION>
                                                                      FOR THE YEAR ENDED DECEMBER 31,
                                                                    2002             2001           2000
                                                                    ----             ----           ----
                                                                                 AS RESTATED     AS RESTATED
                                                                                 -----------     -----------
                                                              (IN THOUSAND SEXCEPT SHARE DATA AND SHARE NUMBERS)

<S>                                                               <C>             <C>            <C>
Net loss attributable to ordinary shareholders                    $   (10,098)    $    (7,996)   $   (15,394)
Basic and diluted:
  Weighted average shares used in computing basic and
diluted net loss per ordinary share                                 25,553,891      25,322,771     22,501,563
                                                               ===============================================

  Basic and diluted net loss per Ordinary share                   $     (0.40)    $     (0.32)   $     (0.68)
                                                               ===============================================
</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 anti-dilutive for all years presented.
The total number of shares excluded from the calculations of basic and diluted
net loss per share were 3,676,203, 3,775,971 and 2,831,718 for the years ended
December 31, 2002, 2001 and 2000, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS
The financial instruments of the Company consist mainly of cash and cash
equivalents, short-term investments, current and non-current accounts
receivable, accounts payable and long-term liabilities. In view of their nature,
the fair value of the financial instruments included in working capital of the
Company is usually identical or close to their carrying amounts.

STOCK-BASED COMPENSATION
The Company accounts for employee stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and in accordance with FASB Interpretation No. 44. Pursuant to these
accounting pronouncements, the Company records compensation for stock options
granted to employees over the vesting period of the options based on the
difference, if any, between the exercise price of the options and the market
price of the underlying shares at that date. Deferred compensation is amortized
to compensation expense over the vesting period of the options. See below for
pro forma disclosures required in accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation", as amended by SFAS 148.

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 43

<PAGE>

If stock-based compensation had been measured under the alternative fair value
accounting method provided for under SFAS No. 123, "ACCOUNTING FOR STOCK-BASED
COMPENSATION", as amended by SFAS 148, the Company's net loss and basic and
diluted net loss per share would have been increased or decreased to the
following pro-forma amounts:

                                               2002       2001         2000
                                               ----       ----         ----
                                                      (IN THOUSANDS,
                                                EXCEPT PER SHARE AMOUNTS)
Net loss
     As reported                            $(10,098)     $(7,996)   $(15,394)
Deduct- stock based compensation determined       300          437       1,237
under APB 25
 Add- stock based compensation determined       (534)        (627)     (1,363)
under SFAS 123
Pro-forma                                    (10,332)      (8,186)    (15,520)
Basic and diluted net loss per
   Share
     As reported                            $  (0.40)     $ (0.32)   $  (0.68)
     Pro-forma                                 (0.40)       (0.32)      (0.69)

Under SFAS 123, the fair market value of each option grant is estimated on the
date of grant using the "BLACK-SCHOLES OPTION PRICING" method with the following
weighted-average assumptions:(1) expected life of 5 years (2001 - 1.2, 2000 -
1.2); (2) dividend yield of 0% (3) expected volatility of 149% (2001 - 122%,
2000 - 152%) and (4) risk-free interest rate of 4% (2001 - 1.75%, 2000 - 5%).

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 2002, the FASB issued Statement of Financial Accounting Standards No.
146 "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No.
146 requires that a liability for costs associated with an exit or disposal
activity be recognized only when the liability is incurred, rather than at the
date of an entity's commitment to an exit plan. SFAS 146 requires that the
liability be initially measured at fair value. SFAS No. 146 is effective for
exit or disposal activities that are initiated after December 31, 2002.
Management does not expect that adoption of SFAS No. 146 will have a material
impact on its financial statements.

In November 2002, FASB Interpretation No. ("FIN") 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" was issued. This interpretation requires elaborating on
the disclosures that must be made by a guarantor in its interim and annual
financial statements about its obligations under certain guarantees that it has
issued. It also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The disclosure requirements of this
Interpretation are effective for statements issued after December 15, 2002 and
its recognition requirements are applicable for guarantees issued or modified
after December 31, 2002. Management does not expect that adoption of FIN 45 will
have a material impact on its financial statements.

In December 2002, the FASB issued Statement of Financial Accounting Standards
Board No. 148, "Accounting for Stock-Based Compensation -- Transition and
Disclosure -- an amendment of FASB Statement No. 123" ("SFAS 148"). SFAS 148
amends SFAS No. 123 to provide alternative methods of transition for a voluntary
change to the fair-value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS
123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. The Company has followed
the prescribed format and has provided the additional disclosures required by
SFAS 148 in these financial statements for the periods presented (see Note 2),
and will also provide the disclosures in its quarterly financial statements.

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 44

<PAGE>

NOTE 3 -- RESTATEMENT

During the third quarter of 2002, the Company's audit committee, with the
assistance of outside advisors, conducted a review of its financial statements
for 2000 and 2001 and for the first six months of 2002. On October 21, 2002, the
Company announced that it would restate its financial statements for 2000 and
2001 and for the first six months of 2002. The restatement results primarily
from the recognition of revenue from sales to reseller customers and other
customers, where revenue has been recognized prematurely or should not have been
recognized at all.

Following the reaudit of the Company's financial statements, the Company
restated its financial statements for the announced periods and for the year
ended December 31, 1999 and filed an amendment to the 10-K for the year ended
December 31,2001 on January 24, 2003.

NOTE 4 -- RESTRUCTURING AND ASSETS IMPAIRMENT

In the fourth quarter of 2002, in light of the worldwide economic recession and
the slowdown in investments in corporate capital expenditure, the management of
the company initiated a reorganization plan aimed at reducing its operating
expenses. As a result of this plan, the Company recorded in the fourth quarter
of 2002 restructuring costs and assets impairment in the amount of $2,665.

The reorganization plan included the termination of employees mainly in the U.S
and Israel. Terminating employees were identified by name and position in
advance as part of the plan, and given termination notice during the fourth
quarter of 2002. Restructuring costs relating to such employees represent
severance and benefits expenses incurred by the Company in connection with the
layoff of the employees.

The reduction in headcount resulted in the utilization of less office space and
office equipment mainly in the U.S. Consequently the Company recorded costs in
connection with payments required to terminate lease contract and write-down of
equipment and leasehold improvements for which no alternative use has been
found.

The restructuring costs are summarized in the following table:

                                                            DECEMBER 31,
                                                         2002          2001
                                                         ----          ----
                                                            (IN THOUSANDS)

Write-down of equipment and leasehold improvements     $    1,195           -
Termination of lease contract                                 850           -
Severance and benefit expenses                                620         294
                                                      ------------------------
                                                       $    2,665    $    294
                                                      ------------------------

An amount of $190 was paid through December 31, 2002. The balance of $1,280
(excluding the non-cash asset impairment) is anticipated to be paid during 2003.

NOTE 5 -- CASH AND CASH EQUIVALENTS

                                                            DECEMBER 31,
                                                         2002         2001
                                                         ----         ----
                                                            (IN THOUSANDS)

In U.S. dollars                                        $    2,845    $  7,784
In British Pounds                                             206         336
In NIS                                                        151           5
In Euro                                                       198           -
                                                      ------------------------
                                                       $    3,400    $  8,125
                                                      ------------------------

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 45

<PAGE>
<TABLE>
<CAPTION>

NOTE 6 -- SHORT-TERM INVESTMENTS

                                                                               DECEMBER 31,
                                                                            2002         2001
                                                                            ----         ----
                                                                              (IN THOUSANDS)
<S>                                                                      <C>          <C>
Bank Deposits (see also note 14b)                                        $    2,949   $       0
Asset-backed Securities (average annual interest rate of 2.9%)                    -       1,545
Commercial Papers                                                        $        0   $     301
                                                                        ------------------------
                                                                         $    2,949   $   1,846
                                                                        ========================

The bank deposits bear an average annual interest rate of 2.0%.

NOTE 7 - -ALLOWANCE FOR DOUBTFUL ACCOUNTS

                                                                               DECEMBER 31,
                                                                            2002        2001
                                                                            ----        ----
                                                                              (IN THOUSANDS)

Balance at Beginning of Year                                             $     912    $     742
Charged to expenses                                                            130        1,229
Deductions                                                                   (290)      (1,059)
                                                                        ------------------------
Balance at Year end                                                      $     752    $    912
                                                                        ========================

NOTE 8 -- OTHER RECEIVABLES AND PREPAID EXPENSES

                                                                               DECEMBER 31,
                                                                            2002        2001
                                                                            ----        ----
                                                                              (IN THOUSANDS)
Government participations and other government receivables               $     225    $     329
Employees                                                                       36           58
Prepaid expenses                                                               674          660
Other receivables                                                              319          438
                                                                        ------------------------
                                                                         $   1,254    $   1,485
                                                                        ========================

NOTE 9 -- LONG-TERM INVESTMENTS

                                                                               DECEMBER 31,
                                                                            2002        2001
                                                                            ----        ----
                                                                              (IN THOUSANDS)
Bank Deposits (see also note 14b)                                        $     280    $       0
                                                                        ------------------------
                                                                         $     280    $       0
                                                                        ========================

The bank deposits bear an average annual interest rate of 2.0%.

NOTE 10 -- PROPERTY AND EQUIPMENT,NET

                                                                               DECEMBER 31,
                                                                            2002        2001
                                                                            ----        ----
                                                                              (IN THOUSANDS)
COST
Computers and office equipment                                           $   2,906    $   4,221
Leasehold improvements                                                         804        1,664
Motor vehicles                                                                 409          409
                                                                        ------------------------
                                                                         $   4,119    $   6,294
ACCUMULATED DEPRECIATION                                                     2,869        3,309
                                                                        ------------------------
                                                                         $   1,250    $   2,985
                                                                        ========================


     See also Note 4 Restructuring and assets impairment.


------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                     PAGE 46
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

NOTE 11 -- SHORT-TERM DEBT

                                                                               DECEMBER 31,
                                                                            2002        2001
                                                                            ----        ----
                                                                              (IN THOUSANDS)

<S>                                                                      <C>          <C>
Short-term debt                                                          $       0    $      72
Current maturities on long-term debt                                            17           68
                                                                        ------------------------
                                                                         $      17    $     140
                                                                        ========================

NOTE 12 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                                                                               DECEMBER 31,
                                                                            2002        2001
                                                                            ----        ----
                                                                              (IN THOUSANDS)

Suppliers                                                                $   1,083    $    732
Employee and related expenses                                                1,234          941
Accrued royalties                                                              581          446
Accrued restructuring (note 4)                                               1,280            -
Other                                                                        1,191          545
                                                                        ------------------------
                                                                            $5,369       $2,664
                                                                        ------------------------
</TABLE>

NOTE 13 - ACCRUED SEVERANCE PAY
Under Israeli law and labor agreements, the Company is required to make
severance payments to its dismissed employees and employees leaving its
employment in certain other circumstances. The Company's severance pay
obligation to its employees, which is calculated on the basis of the salary of
each employee for the last month of the reported period multiplied by the years
of such employee's employment, is reflected by the accrual presented in the
balance sheet and is partially funded by deposits with insurance companies and
provident funds.

Severance pay expenses amounted to $283, 266, and $562 for the years ended
December 31, 2002, 2001 and 2000, respectively.

NOTE 14 -- COMMITMENTS AND CONTINGENCIES
A:   In connection with its research and development, the Company received
     grants from the State of Israel in the total amount of $6,320. The Company
     is committed to pay royalties at a rate of 3% to 5% of sales of the
     developed product, up to 100% -- 150% of the amount of grants received with
     annual interest of LIBOR as of the date of approval for programs approved
     from 1999 and thereafter. The Company so far has paid or accrued royalties
     through December 31, 2002 of $2,335. The total additional contingent
     liability to pay royalties is $3,908.The payment of royalties is contingent
     on future sales and the Company has no obligation to refund these grants,
     if sufficient sales are not generated.

B:   The Company has entered into standby letters of credit agreements with a
     bank primarily relating to the guarantee of future performance on certain
     contracts and office lease payments. As of December 31, 2002 contingent
     liabilities on outstanding letters of credit agreements aggregated
     approximately $2.6 million of which $0.28 million expires after December
     31, 2003. The letters of credit are secured by $2.9 million in deposits,
     with the bank, to cover any potential payments under the guarantees.

C:   The Company operates from leased facilities in Israel, the United States,
     U.K., Belgium and Germany, for periods expiring in the years 2003 through
     2005. Minimum future rental payments, as of December 31, 2002 are as
     follows:

                    (IN THOUSANDS)
                 --------------------

     2003         $              614
     2004                        408
     2005                         75
                 --------------------
                  $            1,097
                 ====================

     Rent expense amounted to $1,139, $1,138 and $1,039 for the years ended
     December 31, 2002, 2001 and 2000, respectively.

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 47

<PAGE>

D:   In December 2002, a lawsuit was filed against the Company and its current
     and former officers in the United States District Court for the District of
     Massachusetts asserting securities law claims on behalf of persons who
     purchased the Company's ordinary shares between June 22, 2000 and October
     21, 2002. To date, the complaint has not been served on any of the
     defendants, nor has the plaintiff taken any other action in connection with
     the matter.

NOTE 15 -- SHAREHOLDERS' EQUITY

A. SHARE CAPITAL -- COMPRISES OF SHARES OF NIS 0.02 PAR VALUE.

The amount of shares issued includes shares reserved for issuance to employees
held in reserve by a trustee. The total number of ordinary shares held by the
trustee is 756,839 as of December 31, 2002, and 761,189 as of December 31, 2001.

B. ISSUANCES

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

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

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

In March 1998, warrants to purchase 393,552 shares were issued. In June 2000,
prior to the IPO, the March 1998 warrants were exercised as follows: 289,131
shares at an 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. A total of 4,000,000 ordinary shares were sold to the public at
a price of $7.00 per share. Cash proceeds to the Company net of $1.96 million in
underwriting discounts before expenses, were approximately $26.04 million.

C. EMPLOYEE, DIRECTORS, AND CONSULTANT OPTION PLANS

The Company adopted new option plans in 2000. Under these plans, the Company
granted 513,500, 1,375,652 and 1,015,213 options at an average exercise price of
$1.28, $1.50 and $5.75 for the years ended December 31, 2002, 2001 and 2000,
respectively.

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

Transactions related to the above discussed options and warrants granted to
employees and consultants during the years ended 2002, 2001 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:


--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 48

<PAGE>
<TABLE>
<CAPTION>

                                                                                      WEIGHTED-
                                                                                       AVERAGE       WEIGHTED-
                                                        OPTIONS                        EXERCISE      AVERAGE
                                                      AVAILABLE FOR   OUTSTANDING     PRICE PER     FAIR VALUE
                                                         GRANT        OPTIONS (*)       SHARE        OF OPTION
                                                     ------------------------------------------------------------
<S>                                                  <C>             <C>             <C>           <C>
Outstanding December 31, 2000                              3,385,383      2,761,049          2.65
Granted                                                  (1,519,688)      1,519,688          1.51         $ 0.72
Forfeited                                                    458,067      (458,067)          2.20
Exercised                                                          -      (150,287)          0.79
Exercised Employee Stock Purchase plan                     (158,905)              -             -
                                                     ---------------------------------------------
Outstanding December 31, 2001                              2,164,857      3,672,383          2.31


Granted                                                    (513,500)        513,500          1.28         $ 1.21
Forfeited                                                    621,556      (621,556)          1.35
Exercised                                                          -        (5,850)          0.64
Exercised Employee Stock Purchase plan                     (125,295)              -             -
                                                     ---------------------------------------------
Outstanding December 31, 2002                              2,147,618      3,558,477          2.15
                                                     ---------------------------------------------
</TABLE>
----------------
 (*) As of December 31, 2002, 2001 and 2000, 639,113, 791,031 and 912,228
outstanding options are held by a trustee and have been reserved for allocation
against certain employee options granted but not yet exercised.

The following table summarizes information about options outstanding and
exercisable as of December 31, 2002:

<TABLE>
<CAPTION>
                                          OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                           --------------------------------------------------- ---------------------------------
                                                  WEIGHTED-
                                 NUMBER            AVERAGE        WEIGHTED-            NUMBER       WEIGHTED-
        RANGE OF              OUTSTANDING AT      REMAINING       AVERAGE          OUTSTANDING AT   AVERAGE
     EXERCISE PRICE           DECEMBER 31,       CONTRACTUAL      EXERCISE           DECEMBER 31,   EXERCISE
            $                     2002              LIFE           PRICE                 2002        PRICE
----------------------------------------------------------------------------------------------------------------
<S>                           <C>                 <C>             <C>              <C>              <C>
           0.58                      639,113             2.09      $ 0.58                639,113     $ 0.58
           0.83                      252,341             4.91      $ 0.83                208,236     $ 0.83
           1.83                      496,390             3.96      $ 1.83                496,390     $ 1.83
           3.67                       90,000             2.85      $ 3.67                 90,000     $ 3.67
           8.50                      205,917             6.08      $ 8.50                126,848     $ 8.50
          10.00                       65,000             7.25      $10.00                 43,333     $10.00
           8.00                       15,000             7.41      $ 8.00                 12,917     $ 8.00
           4.37                      157,063             6.85      $ 4.37                 92,285     $ 4.37
           3.06                      143,229             7.86      $ 3.06                143,229     $ 3.06
           1.69                      682,250             8.08      $ 1.69                628,375     $ 1.69
           1.21                      187,600             8.58      $ 1.21                187,600     $ 1.21
        0.75 - 1.81                  157,699             8.58      $ 1.21                 55,395     $ 1.21
        0.85 - 1.56                  168,125             9.25      $ 1.18                 42,156     $ 1.16
           1.40                      298,750             9.25      $ 1.40                118,125     $ 1.40
                           ------------------                                  ------------------
                                   3,558,477                                           2,884,002
                           ==================                                  ==================

NOTE 16 -- SEGMENT REPORTING

The Company operates in one segment, the design, development, and marketing of
software solutions. The Company's revenues by geographic area are as follows:

                                                                           YEAR ENDED DECEMBER 31,
                                                                      2002            2001           2000
                                                                      ----            ----           ----
                                                                                (IN THOUSANDS)
REVENUE
North America                                                       $      7,600    $     8,493    $    7,635
Europe                                                                     4,734          6,318         4,321
Israel                                                                       262            455           440
Asia Pacific and Africa                                                    3,157          2,909           194
                                                                 ---------------------------------------------
                                                                    $     15,753    $    18,175    $   12,590
                                                                 ---------------------------------------------

Sales to a single customer exceeding 10% of total sales:                %               %             %
                                                                 ---------------- -------------- -------------
Customer A                                                                     -             12             -
</TABLE>

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 49

<PAGE>

Long lived Assets by geographical areas is as follows:

                                                    YEAR ENDED DECEMBER 31,
                                                     2002            2001
                                                     ----            ----
  NET PROPERTY AND EQUIPMENT                           (IN THOUSANDS)
  North America                                   $         254    $     1,790
  Europe                                                    188            198
  Israel                                                    808            997
                                               --------------------------------
                                                  $       1,250    $     2,985
                                               ================================

NOTE 17-- 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 first plan
benefit period has already expired. The benefit periods of the second and third
plans have not yet commenced. The regular tax rate applicable to the Company is
36%.

In the event of distribution by the Company of a cash dividend out of retained
earnings that 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.

The Company has not provided deferred taxes on future distributions of
tax-exempt earnings, as management and the Board of Directors have determined
not to make any distribution that may result in a tax liability for the Company.
Accordingly, such earnings have been considered to be permanently reinvested.
The tax-exempt earnings may be distributed to shareholders without subjecting
the Company to taxes only upon a complete liquidation of the Company.

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

DEFERRED TAXES
The Company has net operating loss carryforwards in Israel of approximately
$13.0 million as of December 31, 2001. In addition, losses of approximately
$31.4 million are attributable to the U.S. subsidiary, which will expire between
2008 and 2014, and the European subsidiaries have tax loss carryforwards of
approximately $8.4 million as of December 31, 2002. The tax loss carryforwards
for Israel and the European companies 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 tax assets have been included
in these financial statements.

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

                                       YEAR ENDED DECEMBER 31,
                                2002            2001             2000
                                ----            ----             ----
                                           (IN THOUSANDS)
Israel                      $        (181)    $     1,355   $    (6,565)
International                      (9,917)        (9,351)        (8,829)
                          -----------------------------------------------
                            $     (10,098)    $   (7,996)   $    15,394)
                          -----------------------------------------------

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 50

<PAGE>

NOTE 18 -- BALANCES AND TRANSACTIONS WITH RELATED PARTIES

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

                                                         DECEMBER 31,
                                                      2002        2001
                                                      ----        ----
                                                       (IN THOUSANDS)
     Balances:
     Other Receivables                                 $ 3        $294

                                                        YEAR ENDED DECEMBER 31,
                                                      2002        2001      2000
                                                      ----        ----      ----
                                                            (IN THOUSANDS)
     Transactions:
       Management fee income from Nester               $48        $ 48      $ 48
       Other General and administrative expenses       $67        $165      $208


ITEM 8A. UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL DATA

The following table presents the quarterly information for fiscal 2002 and 2001:

<TABLE>
<CAPTION>

                                                         FIRST          SECOND         THIRD         FOURTH
                                                        QUARTER         QUARTER       QUARTER        QUARTER
                                                     -----------------------------------------------------------
                                                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                                            (UNAUDITED)
<S>                                                     <C>            <C>           <C>             <C>
2002
Net sales                                               $     3,106    $     3,461   $     4,609     $    4,577
Gross profit                                            $     1,683    $     1,776   $     2,733     $    2,808
Net Loss                                                $   (2,350)    $   (1,828)   $   (1,833)     $  (4,087)
----------------------------------------------------------------------------------------------------------------

Basic and diluted net loss per share:                   $    (0.09)    $    (0.07)   $    (0.07)     $   (0.16)
Shares used in computing basic and
  diluted net loss per share (in thousands)                  25,488         25,551        25,581         25,604
Price per ordinary share - high                         $      2.25    $      1.20   $      0.58     $     0.44
Price per ordinary share - low                          $      1.10    $      0.32   $      0.36     $     0.08


2001
Net sales                                               $     4,330    $     4,104   $     3,776     $    5,965
Gross profit                                            $     2,639    $     2,284   $     2,328     $    4,628
Net Profit (Loss)                                       $   (2,615)    $   (2,690)   $   (2,705)           $ 14

Basic and diluted net loss per share:                   $    (0.10)    $    (0.11)   $    (0.11)     $     0.00
----------------------------------------------------------------------------------------------------------------
Shares used in computing basic and
  diluted net loss per share (in thousands)                  25,228         25,349        25,407         25,463
Price per ordinary share - high                         $     2.719    $      1.43   $      1.82     $     1.47
Price per ordinary share - low                          $      0.75    $     0.563   $       0.7     $     0.82
</TABLE>


The Company's ordinary shares are traded on the Nasdaq SmallCap Market. As of
March 13, 2003, there were approximately 82 registered holders of ordinary
shares.

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

Upon the recommendation of the audit committee of our Board of Directors, our
shareholders approved the appointment of Brightman Almagor & Co., a member firm
of Deloitte Touche Tohmatsu, independent accountants, as our independent
accountants at a shareholders meeting held on December 31, 2002.

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 51

<PAGE>

Luboshitz Kasierer & Co., an affiliate member of Ernst & Young International and
formerly a member firm of Arthur Andersen, had previously audited our financial
statements since the year ended December 31, 1995.

As we announced on October 21, 2002, during the third quarter of 2002, the audit
committee, with the assistance of outside advisors, conducted a review of our
financial statements for 2000 and 2001 and for the first six months of 2002.
Upon the conclusion of this review, we determined to restate our historical
financial statements for these periods and the audit committee decided to
recommend to our shareholders that they dismiss Luboshitz Kasierer as our
auditors and engage Brightman Almagor as our new auditors. Under Israeli law,
the shareholders at a general meeting are the corporate entity that is
authorized to appoint and dismiss a company's outside auditors.

Luboshitz Kasierer's reports on our consolidated financial statements for the
past two fiscal years did not contain an adverse opinion or disclaimer of
opinion, nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles. Additionally, except to the extent discussed below,
during 2000, 2001 and 2002, there were no disagreements between Luboshitz
Kasierer and us on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
Luboshitz Kasierer's satisfaction, would have caused Luboshitz Kasierer to make
reference to the subject matter of the disagreement in connection with its
reports. Furthermore, there were no reportable events, as defined in Item
304(a)(1)(v) of Regulation S-K.

During 2001, we entered into an agreement to sell certain receivables to a bank.
As a result of the sale, our management believed that it was appropriate to
reduce accounts receivable in our financial statements and to increase cash to
reflect proceeds of the sale. Because the language in the agreement with the
bank provided the bank with recourse to us in the event the receivables could
not be collected, Luboshitz Kasierer recommended that the receivables sold
continue to be recorded as receivables and not cash. Following discussions
between our management and audit committee and Luboshitz Kasierer in connection
with the audit of our financial statements for the year ended December 31, 2001,
we accepted the recommendation of Luboshitz Kasierer.

During 2000, 2001 and 2002, except as provided below, the Company did not
consult Brightman Almagor with respect to the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's consolidated financial
statements, or any other matters or reportable events as set forth in Items
304(a)(2)(i) and (ii) of Regulation S-K.

Brightman Almagor and another independent advisor were retained by the audit
committee as outside advisors. Brightman Almagor was specifically retained for
the following services: (i) to perform a special internal corporate
investigation regarding software revenue recognition by us and our United
Kingdom subsidiary in the years 2000 and 2001, (ii) to review the work of the
other advisor retained by the audit committee regarding our United States
subsidiary, on the same issues, and (iii) to submit to the audit committee
Brightman Almagor's recommendations following such work. The results of the work
done by the outside advisors pointed out what was perceived to be erroneous
accounting treatment of revenue recognition in certain situations. Following
receipt of the results of the investigations made by the audit committee, with
the assistance of the outside advisors, we made the determination to restate our
historical financial statements for the years 2000, 2001 and the first six
months of 2002.

Luboshitz Kasierer was consulted regarding the revenue recognition issues raised
in the investigation mentioned above. Luboshitz Kasierer presented its views to
the audit committee that the recognition of revenue in the financial statements
for 2000 and 2001 and for the first six months of 2002 was proper in light of
our historical sales experience.

We provided Brightman Almagor with a copy of the foregoing disclosure and with
an opportunity to furnish us with a letter addressed to the Commission
containing any new information, clarification of our expression of Brightman
Almagor views, or the respects in which Brightman Almagor does not agree with
the statements made herein. Brightman Almagor indicated that it concurs with the
foregoing disclosure and that such a letter is not required.

We also provided Luboshitz Kasierer a copy of the foregoing disclosure. Their
response is set forth in the proxy statement on form DEF14A filed with the US
Securities and Exchange Commission on December 5, 2002.

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 52

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Item 10 is set forth under the caption "Election of
Directors" and "Matters Relating to the Board of Directors" in the Company's
proxy statement for its upcoming annual general meeting of shareholders (the
"Proxy Statement") which information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is set forth under the caption "Executive
Compensation" in the Company's Proxy Statement, which information is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 is set forth under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the Company's Proxy
Statement, which information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 is set forth under the caption "Certain
Relationships and Related Transactions" in the Company's Proxy Statement, which
information is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

In the last quarter of 2002, we identified a weakness in the process of
recognizing and recording revenues in our books which led to the restatement of
our financial statements for the years 2001, 2000 and 1999 and for the six
months ended June 30, 2002. (See also note 3 of the notes to our consolidated
financial statements on Form 10-K/A for the year ended December 31, 2001, filed
with the Securities and Exchange Commission on January 24, 2003.)

Based on the instructions of the audit committee of our Board of Directors and
with the assistance of its independent auditor, we adopted a new policy for
revenue recognition. The policy includes procedures and practices to assure the
proper recognition of revenue in the future. In addition, to improve the overall
effectiveness of our disclosure controls and procedures, we have expanded the
scope of periodic discussions between our finance department and our other
operational departments, and expanded our formal reporting procedures. We have
also established a Disclosure Committee with a mandate to assist our CEO and CFO
in overseeing the accuracy and timeliness of our public disclosure and in
evaluating regularly our disclosure and control procedures.

Within 90 days prior to the date of the filing of this annual report, our chief
executive officer and our chief financial officer evaluated the effectiveness of
our disclosure controls and procedures. They did not find any weaknesses not
identified previously, and believe that the changes we began implementing at the
end of 2002 and described above address the weaknesses identified. With the
assistance of our advisors, we continue to evaluate further improvements,
including formalizing our processes, procedures and policies, to our internal
control and disclosure controls and procedure.

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 53

<PAGE>
<TABLE>
<CAPTION>

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

(A) EXHIBITS
                                  EXHIBIT INDEX
 EXHIBIT
 NUMBER                           DESCRIPTION OF DOCUMENT

<S>            <C>
3.1  (1)       Articles of Association of ClickSoftware Technologies Ltd.
4.1  (1)       Specimen of Ordinary Share Certificate
4.2  (1)       Fourth Amended and Restated Registration Rights Agreement, dated December 15, 1999
10.1 (2)       Form of 2000 Share Option Plan, as amended
10.2 (1)       Form of 2000 Employee Share Purchase Plan
10.3 (1)       Employment Agreement between ClickSoftware Technologies Ltd.
               and Moshe BenBassat
10.4 (1)       Employment Agreement between ClickSoftware Technologies Ltd. and Shimon Rojany
10.5 (1)       Form of Indemnification Agreement
10.6 (1)       Form of 1996 Option Plan
10.7 (1)       Form of 1997 Option Plan
10.8 (1)       Form of 1998 Option Plan
10.9 (1)       Form of 1999 Option Plan
10.10(1)       Form of 1999 Option Plan
10.12(1)       Form of 2000 Israeli Plan
10.13(1)       Form of 2000 Unapproved U.K. Share Scheme
10.14(1)       Form of 2000 Approved U.K. Share Scheme
10.15(3)       Employment Agreement between ClickSoftware Technologies Ltd. and Corey Leibow
10.16(4)       Lease made on January 21, 2000 by and between WTA Campbell Technologies Park, LLC and
               ClickSoftware, Inc.
10.17          Employment Agreement between ClickSoftware Technologies Ltd. and Shmuel Arvatz
21.1           Subsidiaries of the Registrant
23.1           Consent of Brightman Almagor & Co., member of Deloitte Touche Tohmatsu
99.1           Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2           Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

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


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

(B)(2) FINANCIAL STATEMENTS SCHEDULES
       Schedule II - Valuation and Qualifying Accounts and Reserves

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

(B) REPORTS ON FORM 8-K:

During the quarter ended December 31, 2002, the Company filed the following
reports on Form 8-K:

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 54

<PAGE>

Current Report on Form 8-K dated October 7, 2002 (and filed October 28, 2002),
and amended on Form 8-K/A dated November 7, 2002 (and filed November 13, 2002),
reporting Item 4 "Changes in Registrant's Certifying Accountant," Item 5 "Other
Events" and Item 7 "Financial Statements and Exhibits."

Current Report on Form 8-K dated November 25, 2002 (and filed November 26, 2002)
reporting Item 5 "Other Events" and Item 7 "Financial Statements and Exhibits".


--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 55

<PAGE>

                                   SIGNATURES

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

                                          CLICKSOFTWARE TECHNOLOGIES LTD.

                                          By:     /s/ SHMUEL ARVATZ
                                            ------------------------------------
                                                     Shmuel Arvatz
                                                 Chief Financial Officer

                                          Date: March 20, 2003


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

<TABLE>
<CAPTION>
             SIGNATURE                               TITLE                          DATE
             ---------                               -----                          ----

<S>                                     <C>                                     <C>
        /s/ MOSHE BENBASSAT             Chief Executive Officer and             March 20, 2003
------------------------------------    Chairman of the Board of Directors
            Moshe BenBassat             (Principal Executive Officer)


        /s/ SHMUEL ARVATZ               Chief Financial Officer                 March 20, 2003
------------------------------------    Principal Financial and
            Shmuel Arvatz               Accounting Officer)

        /s/ DR. ISRAEL BOROVICH         Director                                March 20, 2003
------------------------------------
            Dr. Israel Borovich

        /s/ RONI EINAV                  Director                                March 20,2003
------------------------------------
            Roni Eina

        /s/ NATHAN GANTCHER             Director                                March 20, 2003
------------------------------------
            Nathan Gantcher

        /s/ EDDY SHALEV                 Director                                March 20, 2003
------------------------------------
            Eddy Shalev

        /s/ JAMES W. THANOS             Director                                March 20, 2003
------------------------------------
            James W. Thanos
</TABLE>


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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 56

<PAGE>

                                 CERTIFICATIONS

       I, Moshe BenBassat, certify that:

1.     I have reviewed this annual report on Form 10-K of ClickSoftware
       Technologies Ltd.;

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

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

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

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

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

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

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

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

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

6.     The registrant's other certifying officers and I have indicated in this
       annual report whether there were significant changes in internal controls
       or in other factors that could significantly affect internal controls
       subsequent to the date of our most recent evaluation, including any
       corrective actions with regard to significant deficiencies and material
       weaknesses.

March 20, 2003                              By: /s/ MOSHE BENBASSAT
                                                -------------------
                                            MOSHE BENBASSAT
                                            Chairman and Chief Executive Officer


--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 57

<PAGE>

       I, Shmuel Arvatz, certify that:

1.     I have reviewed this annual report on Form 10-K of ClickSoftware
       Technologies Ltd.;

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

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

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

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

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

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

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

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

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

6.     The registrant's other certifying officers and I have indicated in this
       annual report whether there were significant changes in internal controls
       or in other factors that could significantly affect internal controls
       subsequent to the date of our most recent evaluation, including any
       corrective actions with regard to significant deficiencies and material
       weaknesses.

March 20, 2003                                By: /s/ SHMUEL ARVATZ
                                                  -----------------
                                              Shmuel Arvatz
                                              Executive Vice President and
                                              Chief Financial Officer

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 58

<PAGE>
<TABLE>
<CAPTION>

                                  EXHIBIT INDEX
   EXHIBIT
   NUMBER                         DESCRIPTION OF DOCUMENT

<S>            <C>
3.1  (1)       Articles of Association of ClickSoftware Technologies Ltd.
4.1  (1)       Specimen of Ordinary Share Certificate
4.2  (1)       Fourth Amended and Restated Registration Rights Agreement, dated December 15, 1999
10.1 (2)       Form of 2000 Share Option Plan, as amended
10.2 (1)       Form of 2000 Employee Share Purchase Plan
10.3 (1)       Employment Agreement between ClickSoftware Technologies Ltd.
               and Moshe BenBassat
10.4 (1)       Employment Agreement between ClickSoftware Technologies Ltd. and Shimon Rojany
10.5 (1)       Form of Indemnification Agreement
10.6 (1)       Form of 1996 Option Plan
10.7 (1)       Form of 1997 Option Plan
10.8 (1)       Form of 1998 Option Plan
10.9 (1)       Form of 1999 Option Plan
10.10(1)       Form of 1999 Option Plan
10.12(1)       Form of 2000 Israeli Plan
10.13(1)       Form of 2000 Unapproved U.K. Share Scheme
10.14(1)       Form of 2000 Approved U.K. Share Scheme
10.15(3)       Employment Agreement between ClickSoftware Technologies Ltd. and Corey Leibow
10.16(4)       Lease made on January 21, 2000 by and between WTA Campbell Technologies Park, LLC and
               ClickSoftware, Inc.
10.17          Employment Agreement between ClickSoftware Technologies Ltd. and Shmuel Arvatz
21.1           Subsidiaries of the Registrant
23.1           Consent of Brightman Almagor & Co., member of Deloitte Touche Tohmatsu
99.1           Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2           Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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


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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                     PAGE 59