<PAGE>

                                  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, 2003

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



                         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.

          [ ] Yes        [X] No

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).

          [ ] Yes        [X] No

The aggregate market value of the Ordinary Shares held by non-affiliates of the
Registrant on June 30, 2003, the last business day of the Registrant's most
recently completed second fiscal quarter, was $21.3 million (based on the
closing market sales price of the Ordinary Shares on that date). 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 12, 2004, there were 27,134,819 Ordinary Shares of the Registrant
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement and Notice for the Registrant's
2004 Annual General Meeting of Shareholders (which will be filed with the
Securities and Exchange Commission within 120 days of the end of the fiscal year
ended December 31, 2003) are incorporated by reference.




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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 2

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                                TABLE OF CONTENTS

                                                                      PAGE
                                                                      -----

PART I
Item 1.  Business....................................................    4
Item 2.  Properties..................................................   13
Item 3.  Legal Proceedings...........................................   13
Item 4.  Submission of Matters to a Vote of Security Holders.........   14

PART II
Item 5.  Market for the Registrant's Common Equity and Related
         Stockholder Matters.........................................   14
Item 6.  Selected Consolidated Financial Data........................   16
Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations...................................   17
Item 7A. Quantitative and Qualitative Disclosures About Market
         Risk........................................................   38
Item 8.  Financial Statements........................................   39
Item 8A. Unaudited Consolidated Quarterly Financial Data ............   56
Item 9.  Changes In and Disagreement with Accountants on Accounting
         and Financial Disclosure....................................   56
Item 9A. Controls and Procedures.....................................   58

PART III
Item 10. Directors and Executive Officers of the Registrant..........   58
Item 11. Executive Compensation......................................   58
Item 12. Security Ownership of Certain Beneficial Owners and
         Management..................................................   58
Item 13. Certain Relationships and Related Transactions..............   58
Item 14. Principal Accountant Fees and Services......................   59
Item 15. Exhibits, Financial Statement Schedules and Reports on Form
         8-K.........................................................   60

SIGNATURES...........................................................   62




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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 are subject to certain risks that may have a significant impact
on our business, operating results or financial condition, including the risk
factors described in the Section of this Report entitled "Management Discussion
and Analysis of Financial Condition and Results of Operations - FACTORS THAT MAY
AFFECT FUTURE RESULTS." Investors are cautioned that our forward-looking
statements are inherently uncertain. Should one or more of the risks that we
describe in this Annual Report and our Quarterly Reports on Form 10-Q or other
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 clients' management and
operations, 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. Our U.S. subsidiary has 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, mobile 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 a number of service industry segments, including: telecommunications,
computer and office equipment, industrial equipment, medical equipment, building
automation, utilities, aerospace & defense, and home services. ClickSoftware's
solutions can deliver improvements in:


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     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

We have developed our service chain optimization solutions 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 Service Optimization suite includes:

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, a high degree of 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 our 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 personnel.
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.

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.

CLICKFORECAST provides field service workload forecasting to help companies
project 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 the demand levels of their customers, 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

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 5

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research and development personnel have been working on 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.

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 complete both simple and complex tasks.
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. The application server supports leading database
management systems, including Oracle (Windows and non-Windows) and Microsoft SQL
Server, and is scalable to meet the demands of large service organizations. Our
service optimization suite of applications delivers inherent scalability based
on a dynamic load balancing architecture that uses 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.

The Service Optimization suite 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, the Service Optimization suite addresses the market
needs of different segments of the service industry and broadens the customer
base for our products.

The Service Optimization suite 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 HTTP-based 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 applications merge 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. 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 involves direct analysis of customers' business
requirements, software module design to meet these requirements, software
development and coding, testing, and quality assurance. Our research and
development group and their processes are ISO 9001 certified.

PROFESSIONAL SERVICES AND CUSTOMER SUPPORT
Our professional services organization is staffed by qualified employees with
experience in the resource optimization field. We provide our clients, as well
as our implementation partners, with consulting and deployment services,
upgrades,

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 6

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and comprehensive training and support to help achieve business goals with a
quicker return on investment. Our consulting services include:

     o    Business Analysis. Our consultants assess current or planned service
          optimization 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 project teams, implement and assist
          in the configuration of our solutions to accelerate the project
          deployment schedule and ensure a successful implementation process.
          Such activities include the design, configuration and testing of our
          deliverables as well as training and supporting the customer
          organization during the rollout and when the applications go live. The
          implementation activities also include the development and
          configuration of interfaces to other enterprise solutions - either
          commercial or in-house legacy systems, as needed based on the project.
     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.
     o    "ClickSoftware University." We offer a series of high-level management
          workshops that convey proven methods and principles for improving the
          efficiency and effectiveness of the field service operation. These
          courses share lessons learned from years of best practice research and
          field experience implementing service optimization solutions.

Customer support is available by telephone and over the Internet. Customer
support is typically 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 located within our development facility, 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 the professional
services organization to the customer support team.

SALES AND MARKETING

We market and sell our products through our direct sales force, which is located
in North America, Europe, and the Asia Pacific 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 and marketing efforts to the client's executive
officers, including the vice president of customer service, the chief
information officer, the chief financial officer and other senior executives
responsible for improving customer service at our clients' organizations. We
target 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, newsletters and advertising creation and placement, direct mailings
and trade shows. As of December 31, 2003, we employed 29 individuals in our
sales and marketing department.

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 7

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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. A partial list of these vendors includes SAP AG and PeopleSoft,
Inc. We also participate in joint sales efforts

We also market our products and services through resellers. Our 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.
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.

We have also established relationships with large System Integrator (SI)
organizations such as Accenture Ltd., International Business Machines
Corporation (IBM) and Cap Gemini Ernst & Young. 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 jointly
developing industry-specific solutions, training and certifying their
professional services teams, developing co-marketing programs, and incorporating
our products into their marketing/referral strategies.

CUSTOMERS
We sell our products to a broad base of customers 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 customers or end-users using our products. This
list of customers is representative of our geographically dispersed customers
base and the various industries utilizing our products.


                                                  Industry
Diebold, Inc. (U.S.)                              Capital equipment
Hewlett-Packard Company (U.S.)                    Computer and office equipment
T-Systems, a subsidiary of Deutsche Telecom
 (Germany)                                        Telecommunications
Telstra Corporation (Australia)                   Telecommunications
United Utilities plc (UK)                         Utilities and energy


Two customers, including one which serves as a channel partner, accounted for
greater than 10% of revenues during the year ended December 31, 2003.

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 9001 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 and schedule optimization; continuing to enhance the scalability of
our products; and continuing the development of offerings for specific vertical
industries.

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 8

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COMPETITION

The market for our products is competitive and rapidly changing. Competition may
increase in the future as the service optimization market gains size and
increased business focus, current competitors expand their product offerings,
and new companies enter the market.

The principal competitive factors in the service optimization industry are:

     o    The technological capabilities and performance of the solution;
     o    Domain expertise and experience with large-scale implementations; and
     o    The acceptance and adaptability of the service optimization solution
          to the solution offerings of large system integrators and CRM/ERP
          vendors, and the ability to form marketing alliances with the
          foregoing.

We believe our solutions compare favorably based on these competitive factors.
Our current and potential competitors include:

     o    Direct competitors in the service optimization space, including
          Service Power Technologies plc.
     o    Software application vendors that offer field force management
          solutions with certain optimization modules, such as Viryanet Ltd. and
          MDSI Mobile Data Solutions Inc.
     o    Traditional ERP and CRM software application vendors; and
     o    Large systems integrators and internal information technology
          departments that may elect to develop a solution in-house.

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. 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, CLICKANALYZE, CLICKFIX
and CLICKPLAN, and have filed applications for registration of the marks
CLICKFORECAST and CLICKSCHEDULE. In the European Community, we own trademark
registrations for CLICKFIX, 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

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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, partners,
employees and consultants and generally control access to and distribution of
our software, documentation and other proprietary information.

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

From time to time, we may encounter disputes over rights and obligations
concerning intellectual property. We also indemnify most of our customers
against any future claim that our products infringe 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, 2003, we had 125 full-time employees: 34 engaged in research
and development, 29 in sales, marketing and business development, 42 in
professional services and technical support and 20 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.

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

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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 payment expenses amounted to $234,000 in 2003, $283,000 in 2002 and
$266,000 in 2001.

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors and certain information about them as of
March 12, 2004 are as follows:

<TABLE>
<CAPTION>
<S>                          <C>    <C>
NAME                         AGE    POSITION
----                         ---    --------
Dr. Moshe BenBassat          56     Chief Executive Officer and Chairman of the Board
Shmuel Arvatz                41     Executive Vice President and Chief Financial Officer
Hannan Carmeli               45     Executive Vice President, Worldwide Professional Services
David Schapiro               46     Executive Vice President, Markets & Products
Amit Bendov                  39     Senior Vice President, Product Marketing
Naomi Atsmon                 51     Director
Dr. Israel Borovich          62     Director
Roni A. Einav                59     Director
Dan Falk                     58     Director
James W. Thanos              55     Director
Gil Weiser                   62     Director
</TABLE>

DR. MOSHE BENBASSAT co-founded ClickSoftware and has served as Chairman and
Chief Executive Officer since 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 our Executive Vice President and Chief Financial
Officer since October 2002. Prior to joining ClickSoftware, Mr. Arvatz served as
the Chief Financial Officer at Shrem, Fudim, Kelner Technologies Ltd., a leading
investment house in Israel. From February 2001 to June 2002, Mr. Arvatz 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.

HANNAN CARMELI has served as our Executive Vice President of Worldwide
Professional Services since August 2002. Prior to this role, he 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.

DAVID SCHAPIRO has served as our Executive Vice President of Markets and
Products since April 2001. Prior to this position and since 1994, he held
various executive and management roles at ClickSoftware, including Senior Vice
President of Product Development, ClickSchedule Division General Manager, and
Vice President of Business Development. From 1984 until 1994 Mr. Schapiro served
in positions at

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

<PAGE>

Applied Materials, a semiconductor equipment manufacturer, Scitex Corporation, a
digital printing system company, and ClickSoftware. 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.

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

NAOMI ATSMON has served as a director of ClickSoftware since May 2003. Ms.
Atsmon was employed by Amdocs Ltd., a customer care and billing Software
Company, from 1986 until the end of 2002. From 1997 until 2002, Ms. Atsmon
served as a division president at Amdocs Ltd., managing large scale billing
projects for telephone companies in North America and Europe, with overall
responsibility for the profit and loss statement of the division. From 1994
until 1997, Ms. Atsmon served as a vice president at Amdocs Ltd. From 1991 until
1994, she was a director for Amdocs Ltd. in charge of software development and
customer relations with one of the largest telephone companies in the U.S. Prior
to joining Amdocs Ltd., Ms. Atsmon was a project manager at Bank Hapoalim, in
charge of a large financial project for the bank controller. From 1976 to 1981,
Ms. Atsmon was a system analyst with Agrexco Ltd, an agricultural products
exporting company. Ms. Atsmon also currently serves as a board member of Jacada
Ltd, a software provider. Ms. Atsmon holds a Bachelor of Science degree in
Management & Industrial Engineering from the Technion Institute, and studied
business administration at Tel-Aviv University.

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 Ltd. and Knafaim-Arkia Holdings Ltd., an investment management company.
Dr. Borovich currently serves as a director of Issta Lines Israel Students
Travel Company Ltd., Arkia International (1981) Ltd. and other companies of
Arkia's group in the aviation and tourism business. Dr. Borovich also serves as
a chairman of Granit Hacarmel Investments Ltd. and Sonol Israel Ltd., an
investment management company. Dr. Borovich also served as a director of
Knafaim-Arkia Holdings, Ltd., an investment management company, Maman-Cargo
Terminals & Handling Ltd. and Ayalon Highways (Israel) Ltd. Dr. Borovich served
as a professor on the Faculty of Management of Tel Aviv University. Dr. Borovich
holds Bachelor of Science, Master of Science and Ph.D. degrees in Industrial
Engineering from the Polytechnic Institute in Brooklyn.


RONI A. EINAV has served as a director of Clicksoftware since April 2000. Mr.
Einav is the general manager of Einav High-Tech assets Ltd., an investment
company focused on technology ventures, founded by him in 1995. From 1983 to
April 1999, Mr. Einav served as Chairman of the Board of Directors of New
Dimension Software, Ltd., a systems software company he had founded, which was
subsequently acquired by BMC Software for over $650 million. Mr. Einav has also
played a key role in founding approximately a dozen other software companies,
including Liraz Computers, Jacada Ltd., UDS, XciTel, CePost, CeDimension, ComDa,
Computer Systems and Einav Systems. Mr. Einav was a Major in the Israeli Defense
Forces and served as a systems analyst, in a research and development division.

DAN FALK has served as a director of ClickSoftware since June 2003. Between June
2000 and May 2003 Mr. Falk served as the chairman of the board of directors of
Atara Technology Ventures Ltd., an Israeli company investing in advanced
technology enterprises. Mr. Falk is also a member of the boards of directors of
Orbotech Ltd., Nice System Ltd., Orad Ltd, Netafim, Dor Chemicals Ltd, Attunity
Ltd., Visionix Ltd., Ramdor Ltd., Medcon Ltd., and Poalim Ventures I, all of
which are Israeli high technology companies. From July 1999 to November 2000,
Mr. Falk served as President and Chief Operating Officer of Sapiens
International Corporation N.V., a Netherlands Antilles company engaged in the
development of software solutions for large-scale, cross-platform systems. Mr.
Falk was Executive Vice President of Orbotech, a high technology company, from
August 1995 to July 1999, and between June 1994 and August 1995 served as its
Executive Vice President and Chief Financial Officer. From October 1992 until
June 1994, Mr. Falk was Vice President and Chief Financial Officer of Orbotech.
Mr. Falk was Director of Finance and Chief Financial Officer of Orbot Systems,
predecessor of Orbotech

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

<PAGE>

Ltd., from 1985 until 1992. Mr. Falk received a Master of Business
Administration degree in 1973 from the Hebrew University School of Business and
had 15 years experience in finance and banking, including senior positions at
Israel Discount Bank Ltd., prior to joining Orbot.

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., an e-commerce software company.
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, a
sales force automation company. Mr. Thanos holds a Bachelor of Arts degree in
International Relations and a Bachelor of Arts degree in Behavioral Sciences
from Johns Hopkins University.

GIL WEISER has served as a director of ClickSoftware since June 2003. Mr. Weiser
is currently chairman or a member of the board of directors of the following
companies: Fundtech, a software company, BBP, a subsidiary of Fundtech company,
Tescom, a service company, and Carmel a company connected with Haifa University.
Mr. Weiser is currently also a member of the board of directors of the Tel Aviv
Stock Exchange. From January to December 2002, he was the Acting Vice Chairman
of ORAMA, an international investment banking group. From 1995 to 2000, Mr.
Weiser served as Chief Executive Officer of Hewlett-Packard Israel, a technology
company. From 1993 to 1995, Mr. Weiser served as Chief Executive Officer of
Fibronics Corporation, a communications company. From 1976 to 1993, he served as
Chief Executive Officer of Digital Israel, a computing company. Mr. Weiser is
Chairman of the executive committee of Haifa University. Mr. Weiser was the Vice
Chairman of the Israel Management Center and is a member of the Israel High-Tech
Association Executive Committee. Mr. Weiser holds a Bachelor of Science degree
in Electrical Engineering from the Technion Institute and a Master of Science
degree in Electronics and Computers from the University of Minnesota in
Minneapolis.

Executive officers serve at the discretion of the Board and are appointed
annually. The employment of each of our executive officers is at will and may be
terminated at any time, with or without cause, subject to contractual notice
provisions. There are no family relationships between any of our directors or
executive officers.

ITEM 2. PROPERTIES

We have a lease for approximately 6,900 square feet of office space in
Burlington, Massachusetts that expires in May 2004. We are currently negotiating
a new lease of office space in the Burlington area. We also have a lease for
approximately 14,100 square feet of office space in Tel Aviv, Israel that
expires in June 2005.

Our U.K. subsidiary currently operates from a leased facility of approximately
2,700 square feet in Slough, near London. We also lease additional smaller
offices in various sites throughout North America, Europe and Asia. We consider
that our current office space is sufficient to meet our anticipated needs for
the foreseeable future and is suitable for the conduct of our business.

ITEM 3. LEGAL PROCEEDINGS

On August 25, 2003, a complaint was filed against us, one of our officers and
one of our former officers in the United States District Court for the District
of Massachusetts. None of the defendants have been served, and the case is in
the preliminary stages. The complaint is substantially similar to a complaint
previously filed in the same court against these parties and dismissed by the
court for failure to perfect service on the defendants in a timely manner. The
complaint is purportedly brought on behalf of investors who purchased our
securities between June 22, 2000 and October 21, 2002 and seeks unspecified
damages. The complaint contains various allegations, including violations of the
Securities Exchange Act of 1934 and common law claims with respect to our
financial results for 2000, 2001 and the first six months of 2002. It is not
possible for us to quantify the extent of our potential liability, if any. An
unfavorable outcome in this or any other case could have a material adverse
effect on our business, financial condition, results of operations, cash flow
and the trading price of our ordinary shares. In addition, defending any
litigation may be costly and divert management's attention from the day-to-day
operations of our business.

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

<PAGE>

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

None.


PART II

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

Market for Ordinary Shares

Our ordinary shares have been quoted on the NASDAQ SmallCap Market under the
symbol "CKSW" since August 29, 2002 (except between November 6, 2002 and March
6, 2003, when they were quoted under the symbol "CKSWE"). Between June 22, 2000
and August 28, 2002, our ordinary shares were quoted on the NASDAQ National
Market under the symbol "CKSW." 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 sales prices of our ordinary shares as quoted by the
NASDAQ National Market or the Nasdaq SmallCap Market, as applicable to the
relevant period. These prices are over-the-counter market quotations which
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not necessarily represent actual transactions.


FISCAL YEAR ENDED DECEMBER 31, 2003                HIGH               LOW
-----------------------------------                ----               ---
First Quarter                                     $0.23            $ 0.12
Second Quarter                                    $2.33            $ 0.19
Third Quarter                                     $2.85            $ 1.52
Fourth Quarter                                    $4.95            $ 1.95

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


HOLDERS OF RECORD

As of March 12, 2004, there were approximately 55 stockholders of record of our
Ordinary Shares.

DIVIDENDS

We currently intend to retain earnings, if any, for use in our business. We have
never declared or paid cash dividends and have no intention to pay any cash
dividends on our capital stock in the foreseeable future.

EQUITY COMPENSATION PLAN INFORMATION

Information required by this Item 5 regarding our equity compensation plans is
incorporated by reference to the information set forth in the section entitled
"Equity Compensation Plan Information" in our Proxy Statement.




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

<PAGE>

USE OF PROCEEDS FROM REGISTERED SECURITIES

On June 22, 2000, we commenced an initial public offering of our ordinary
shares. 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.

From the time of our initial public offering through the year ended December 31,
2002, our operations used cash. Beginning with the first quarter of 2003, our
operations became profitable and began generating positive net cash flow. For
the year ended December 31, 2003, our operations provided $4.2 million in
operating cash.

As of December 31, 2003, we had used all the aggregate net proceeds of $28.2
million from our initial public offering of ordinary shares for the following
purposes:

     o    approximately $11.2 million to expand our international operations
          including infrastructure and sales and marketing expenses;
     o    approximately $8.8 million to expand our domestic operations by hiring
          additional employees, leasing additional office space and expanding
          our infrastructure; and
     o    approximately $8.2 million for domestic sales and marketing.

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.




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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 15

<PAGE>
<TABLE>
<CAPTION>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated statement of operations data for the years ended December 31, 2003, 2002, 2001, 2000 and 1999, and the
selected consolidated balance sheet data as of December 31, 2003, 2002, 2001, 2000 and 1999 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, 2000 and December 31, 1999 and selected consolidated balance sheet data as of
December 31, 2001, December 31, 2000 and 1999 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 Report.


CONSOLIDATED STATEMENT OF OPERATIONS DATA:

                                                                           YEAR ENDED DECEMBER 31,
                                              ----------------------------------------------------------------------------------
                                                   2003              2002             2001            2000            1999
                                                   ----              ----             ----            ----            ----

                                                               (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S>                                                <C>               <C>              <C>            <C>              <C>
Revenues:
  Software license                                 $   10,622        $    7,113       $   11,734     $     7,412      $   5,062
  Services                                             11,788             8,640            6,441           5,178          4,912
                                              ----------------------------------------------------------------------------------
    Total Revenues                                     22,410            15,753           18,175          12,590          9,974
                                              ----------------------------------------------------------------------------------
Cost of Revenues:
  Software License                                        955               949              798             454            219
  Services                                              6,631             5,804            5,498           5,301          4,469
                                              ----------------------------------------------------------------------------------
    Total cost of revenues                              7,586             6,753            6,296           5,755          4,688
                                              ----------------------------------------------------------------------------------
Gross Profit                                           14,824             9,000           11,879           6,835          5,286
                                              ----------------------------------------------------------------------------------
Operating Expenses:
  Research and Development expenses, net                1,911             2,806            3,246           4,300          2,910
  Selling and Marketing expenses                        7,836            10,473           12,499          13,654          7,945
  General and Administrative Expenses                   3,494             3,106            4,048           3,717          1,759
  Restructuring and assets impairment                       -             2,665              294               -              -
  Amortization of deferred Stock-based
      Compensation                                        101               300              437           1,237            738
                                              ----------------------------------------------------------------------------------
Total Operating Expenses                               13,342            19,350           20,524          22,908         13,352
                                              ----------------------------------------------------------------------------------
Operating Profit (loss)                                 1,482          (10,350)          (8,645)        (16,073)        (8,066)
Interest and other income(expense), net
                                                          259               252              649             679          (254)
                                              ----------------------------------------------------------------------------------
Net Income (Loss)                                  $    1,741        $ (10,098)       $  (7,996)     $  (15,394)      $ (8,320)

Dividend related to convertible preferred
      shares                                                -                 -                -               -        (4,989)
                                              ----------------------------------------------------------------------------------
Net loss attributable to ordinary
shareholders                                       $    1,741        $ (10,098)       $  (7,996)     $  (15,394)      $(13,309)
                                              ==================================================================================

Basic net Income (loss) per ordinary share         $     0.07        $   (0.40)       $   (0.32)     $    (0.68)      $  (2.24)
Diluted net Income (loss) per ordinary share       $     0.06        $   (0.40)       $   (0.32)     $    (0.68)      $  (2.24)
Shares used in computing basic net Income
(loss) per share                                   25,847,758        25,553,891       25,322,771      22,501,563      5,948,816
                                              ==================================================================================
Shares used in computing diluted net Income
(loss) per share                                   26,874,351        25,553,891       25,322,771      22,501,563      5,948,816
                                              ==================================================================================


--------------------------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                                    PAGE 16
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEET DATA:

                                                               DECEMBER 31,
                                   ---------------------------------------------------------------------------
                                      2003         2002           2001             2000             1999
                                      ----         ----           ----             ----             ----

                                                              (IN THOUSANDS)

<S>                                   <C>          <C>            <C>              <C>              <C>
Cash and cash equivalents             $7,695       $3,400         $8,125           $4,438           $7,838
Short-term Investments                 3,394        2,949          1,846           16,878                -
Working capital                        8,821        5,849         14,191           21,398            7,666
Total assets                          17,455       13,957         20,700           28,645           13,843
Long-term liabilities, net of
      current portion                  1,490        1,476          1,400            1,446            1,112
Shareholders' equity                   9,613        6,684         16,428           23,773            8,480


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

OVERVIEW

We are specialists in the area of service optimization solutions and derive revenues from the licensing of our
software products and the provision of consulting and support services.

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 software updates. Post-contract customer support revenues are charged as a percentage
of license fees depending upon the level of support coverage requested by the customer. Our support contracts
typically renew automatically for successive twelve-month periods unless the customer informs us of its desire
not to renew annual support.

During the course of 2003, we achieved four profitable quarters by increasing our annual revenues 42% from 2002
while reducing our annual expenses by 20% from the previous year. The key elements of this performance were our
ability to increase our presence in the marketplace, particularly in the utilities and telecommunications
industries, through direct sales and channel partners and the restructuring plan that we implemented in the
fourth quarter of 2002. Another key factor contributing to our success in 2003 was our ability to attract and
implement large-scale optimization solutions.

As in 2003, we believe that our performance in 2004 will primarily depend on our ability to continue attracting
and implementing service optimization solutions. We believe that we can manage the level of our expenses so as
to maintain annual profitability if we achieve our revenue targets. This projection is subject to many risk
factors, including those described in the section of this Report entitled "FACTORS THAT MAY AFFECT FUTURE
RESULTS."

We restated our financial statements for 1999, 2000, 2001 and for the first six months of 2002 and filed an
amendment to our Annual Reports on Form 10-K for the three years ended 1999, 2000 and 2001 on January 24, 2003.
The financial results provided in this annual report reflect this restatement. 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 the U.S. Securities and Exchange Commission on January 24, 2003.

The functional currency of our operations is the U.S. dollar, which is the primary currency in the geographic
regions in which we conduct our business. A significant portion of our research and development expenses and
other expenses are incurred

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                  PAGE 17
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

in New Israeli Shekels, or NIS, and a portion of our revenues and expenses are incurred in British pounds,
European Community euros and Australian dollars. The results of our operations are subject to fluctuations
in these exchange rates, which are influenced by various global economic factors.


RESULTS OF OPERATIONS

Our operating results for each of the five years ended December 31, 2003, 2002,
2001, 2000 and 1999 expressed as a percentage of revenues are as follows:

                                                                     YEAR ENDED DECEMBER 31,
                                                     -----------------------------------------------------
                                                         2003      2002       2001       2000        1999

<S>                                                     <C>       <C>        <C>        <C>         <C>
Revenues:
  Software license                                        47%       45%        65%        59%         51%
  Services                                                 53        55         35         41          49
                                                     -----------------------------------------------------
    Total Revenues                                        100       100        100        100         100
                                                     -----------------------------------------------------
Cost of Revenues:
  Software License                                          4         6          4          4           2
  Services                                                 30        37         31         42          45
                                                     -----------------------------------------------------
    Total cost of revenues                                 34        43         35         46          47
                                                     -----------------------------------------------------
Gross Profit                                               66        57         65         54          53
                                                     -----------------------------------------------------
Operating Expenses:
  Research and Development
        expenses, net                                       8        18         18         34          29
  Selling and Marketing expenses                           35        66         69        108          80
  General and Administrative
        Expenses                                           16        20         22         30          18
  Restructuring and assets impairment                       -        17          2          -           -
  Amortization of deferred Stock-based
        Compensation                                        0         2          2         10           7
                                                     -----------------------------------------------------
Total Operating Expenses                                   59       123        113        182         134
                                                     -----------------------------------------------------
Operating Profit (loss)                                     7      (66)       (48)      (128)        (81)
Interest and other income, net                              1         2          4          5         (2)
                                                     -----------------------------------------------------
Net Income (loss)                                           8      (64)       (44)      (123)        (83)
Dividend related to convertible
  Preferred shares                                          -         -          -          -        (50)
                                                     -----------------------------------------------------
Net Income (loss) attributable to ordinary
  shareholders                                             8%     (64)%      (44)%     (123)%      (133)%
                                                     =====================================================


REVENUES


                                                        REVENUE BREAKDOWN
                                                        -----------------

                          ---------------- -------------- --------------- -------------- ---------------
                               2003          % CHANGE          2002         % CHANGE          2001
                               ----          ---------         ----         --------          ----

                                                         (IN THOUSANDS)

Revenues:
  Software license
                                  $10,622          49%            $7,113        (39)%           $11,734
  Percentage of total
    revenues                          47%                            45%                            65%
  Services                         11,788          36%             8,640         34%              6,441
  Percentage of total
    revenues                          53%                            55%                            35%
                          ----------------                ---------------                ---------------
    Total Revenues
                                 $ 22,410          42%          $ 15,753        (13)%           $18,175
                          ----------------                ---------------                ---------------


----------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                              PAGE 18
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

Revenues increased $6.6 million or 42% to $22.4 million in 2003, from $15.8 million in 2002. In
2002 revenues decreased $2.4 million or 13% to $15.8 million from $18.2 million in 2001. The
increase in revenues from 2002 to 2003 was the result of our ability to attract and implement
large-scale projects in 2003 through direct sales and our channel partners. In particular, we
expanded our presence in the utilities and telecommunications industries. The decrease in revenues
from 2001 to 2002 was the result of the general economic downturn and increased scrutiny of capital
budgets.

In 2004, we project continued growth in our business based on our recurring revenue stream, current
sales prospects, pilot projects that may develop into full-scale contracts and expectations of
expanding channel relationships. This projection is subject to many risk factors, including those
described in the section of this Report entitled "FACTORS THAT MAY AFFECT FUTURE RESULTS.


                                               REVENUES BY TERRITORY
                                               ---------------------

                  --------------------------------------------------------------------------------
                      2003           %            2002           %           2001         %
                      ----           --           ----           --          ----         -
                                  REVENUES                    REVENUES                 REVENUES
                                                  (IN THOUSANDS)
<S>                     <C>              <C>         <C>             <C>      <C>             <C>
Revenues:
North America           $10,239          46%         $7,600          48%      $8,493          47%
Europe                    9,155          41%          4,734          30%       6,318          35%
Israel                       71           0%            297           2%         455           2%
Asia Pacific
and Africa                2,945          13%          3,122          20%       2,909          16%
                  --------------              --------------              -----------
    Total
Revenues                $22,410         100%        $15,753         100%     $18,175         100%
                  --------------              --------------              -----------


In 2003, 46% of our revenues were generated in North America (with 36% in the U.S.), 41% in Europe
(with 19% in the U.K., 11% in Germany and 8% in the Netherlands), 0% in Israel and 13% in Asia
Pacific and Africa. In 2002, 48% of our revenues were generated in North America (with 37% in the
U.S.), 30% in Europe (with 12% in the U.K., 8% in the Netherlands and 7% in Germany), 2% in Israel
and 20% in Asia Pacific and Africa. In 2001, 47% of our revenues were generated in North America
(with 43% in the U.S.), 35% in Europe (with 18% in the U.K., 5% in the Netherlands and 5% in
Austria), 2% in Israel and 16% in Asia Pacific and Africa. The increase in the percentage of
revenues from the Europe region in 2003 is the result of a few large projects that we sold directly
and through our channel partners. We do not anticipate material variances from our historical
geographic breakdown in 2004 and will continue our sales efforts in each territory.

SOFTWARE LICENSES As reflected in the table entitled "Revenue Breakdown", above, software license
revenues were $10.6 million or 47% of revenues in 2003, $7.1 million or 45% of revenues in 2002,
and $11.7 million or 65% of revenues in 2001. The increase in software license revenues from 2002
to 2003 by $3.5 million or 49% was primarily the result our ability to attract and implement
large-scale projects in 2003 through direct sales and our channel partners. 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.

SERVICES Service revenues were 11.8 million or 53% of revenues in 2003, $8.6 million or 55% of
revenues in 2002, and $6.4 million or 35% of revenues in 2001. The increase in services revenues
from 2002 to 2003 by $3.2 million or 36% was primarily due to an increased base of customers with
implementations that went "live," which contributed to a substantial increase in post-contract
support agreements, together with a smaller increase in revenues from consulting services. 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, together with a smaller increase in revenues from
consulting services.


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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                      PAGE 19
</TABLE>

<PAGE>

COST OF REVENUES

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.

Cost of revenues was $7.6 million or 34% of revenues in 2003, $6.8 million or
43% of revenues in 2002, and $6.3 million or 35% of revenues in 2001. The
increase in the cost of revenues from 2002 to 2003 by $0.8 million or 12% on an
absolute basis was primarily due to higher costs associated with professional
services performed by the Company and an increase in royalties paid to the Chief
Scientist. 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. We expect our cost of revenues on an
absolute basis to continue to increase in 2004 as a natural consequence of the
projected growth of our revenues.

COST OF SOFTWARE LICENSES

Cost of software license revenues were $955,000 or 4% of revenues in 2003,
$949,000 or 6% of revenues in 2002, and $798,000 or 4% of revenues in 2001. The
increase in royalty payments to the Chief Scientist by $0.2 million from 2002 to
2003 was fully offset by a decrease in third party licenses and adaptors to
other Enterprise Resource Planning (ERP) and Customer Relationship Management
(CRM) systems sold during 2003. 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 ERP and CRM systems sold during 2002,
partially offset by decrease in royalties payments to the Chief Scientist.

COST OF SERVICES

Cost of service revenues were $6.6 million or 30% of revenues in 2003, $5.8
million or 37% of revenues in 2002, and $5.5 million or 31% of revenues in 2001.
The increase in the cost of services from 2002 to 2003 by $0.8 million or 14% on
an absolute basis was primarily due to the increased demand for our professional
services and an increase in royalties paid to the Chief Scientist. 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 relatively small increase in cost of services
from 2001 to 2002 compared to the increase in service revenues in the same years
is primarily attributable to optimization of our service and maintenance
organization.

GROSS PROFIT

Gross profit was $14.8 million, or 66% of revenues, in 2003, $9 million, or 57%
of revenues, in 2002 and $11.9 million, or 65% of revenues, in 2001.

The increase in gross profit from 2002 to 2003 by $5.8 million, or 65%, was due
to higher revenues and margins. The increase in gross margins from 2002 to 2003
was due to a change in the revenue mix in favor of higher-margin license
revenues and due to more profitable generation of service revenues. The decrease
in gross profit from 2001 to 2002 by $2.9 million, or 24%, was due to lower
license revenues and margins. The decrease in gross margins from 2001 to 2002
was due to a change in the revenue mix in favor of lower-margin services
revenues.

If we meet our software license revenue target in 2004, we believe that we will
be able to maintain our current higher-margin revenue mix resulting from a
relatively large proportion of license revenues.

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 20

<PAGE>
<TABLE>
<CAPTION>

OPERATING EXPENSES

Operating expenses are categorized into research and development expenses, selling and marketing expenses,
general and administrative expenses, and share based compensation.


                                                                   OPERATING EXPENSES
                                                                   ------------------

                                            ------------------------------------------------------------------
                                               2003        % CHANGE        2002        % CHANGE       2001
                                               ----        ---------       ----        --------       ----

                                                                     (IN THOUSANDS)
<S>                                           <C>            <C>          <C>           <C>         <C>
Operating Expenses:
  Research and Development                      $ 1,911          (32)%      $ 2,806         (14)%     $ 3,246
        Expenses, net
  Selling and Marketing Expenses                  7,836          (25)%       10,473         (16)%      12,499
  General and Administrative                      3,494            12%        3,106         (23)%       4,048
        Expenses
  Restructuring and assets impairment                 -            N.A        2,665          806%         294
  Amortization of deferred
        Stock-based Compensation                    101          (66)%          300         (31)%         437
                                            ------------                ------------               -----------
Total Operating Expenses                        $13,342          (31)%      $19,350          (6)%     $20,524
                                            ------------                ------------               -----------
Average No. of Employees                            118                         150                       157
                                            ------------                ------------               -----------


Total operating expenses were $13.3 million or 59% of revenues in 2003, $19.4 million or 123% of revenues in
2002, and $20.5 million or 113% of revenues in 2001. The decrease in operating expenses from 2002 to 2003 by
$6.0 million or 31% (excluding restructuring and impairment costs of $2.7 million, the decrease was $3.3
million or 20%) was primarily due to cost-cutting measures implemented during 2002. 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 2002
partially offset by restructuring and impairment expenses. For example, our total number of employees decreased
from 157 at the end of 2001 to 115 at the end of 2002.

We anticipate an increase in our operating expenses in 2004, particularly our selling and marketing expenses,
as we expand our sales efforts.

RESEARCH AND DEVELOPMENT EXPENSES, NET

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. 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.

Research and development expenses, net of related grants, were $1.9 million or 8% of revenues in 2003, $2.8
million or 18% of revenues in 2002, and $3.2 million or 18% of revenues in 2001. Research and development
expenses, prior to participation grants from the Office of the Chief Scientist of the Government of Israel,
totaled $2.4 million for the year ended December 31, 2003, $3.8 million for the year ended December 31, 2002,
and $4.4 million for the year ended December 31. We received or accrued grants from the Chief Scientist in the
amount of $0.5 million in 2003, $1.0 million in 2002 and $1.2 million in 2001. The decrease in research and
development expenses from 2002 to 2003 by $0.9 million, or 32%, was primarily due to the impact of cost cutting
measures implemented during 2002 which reduced expenses by $1.4 million. This expense reduction was partially
offset by a decrease of $0.5 million in grants received from the Office of the Chief

----------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                    PAGE 21
</TABLE>

<PAGE>

Scientist. The decrease in research and development expenses from 2001 to 2002
by $440,000 or 14% was primarily due to the impact of cost cutting measures
implemented during 2002.

We anticipate an increase in our research and development expenses in 2004 as we
expand our overall activities.

SELLING AND MARKETING EXPENSES

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.

Selling and marketing expenses were $7.8 million or 35% of revenues in 2003,
$10.5 million or 66% of revenues in 2002, and $12.5 million or 69% of revenues
in 2001. The decrease in the selling and marketing expenses from 2002 to 2003 by
$2.6 million or 25% was primarily due to cost cutting measures implemented
during 2002. 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.

We expect selling and marketing expenses to increase in 2004 as we expand our
sales efforts, particularly in the market for large-scale service optimization
solutions.

GENERAL AND ADMINISTRATIVE EXPENSES

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

General and administrative expenses were $3.5 million or 16% of revenues in
2003, $3.1 million or 20% of revenues in 2002, and $4.0 million or 22% of
revenues in 2001. General and administrative expenses included $220,000 in bad
debt charges in 2003, $130,000 in bad debt charges in 2002 and $1.2 million in
2001. General and administrative expenses without bad debts were $3.3 million in
2003, $3.0 million in 2002 and $2.8 million in 2001. The increase of $0.3
million in general and administrative expenses from 2002 to 2003, excluding bad
debt charges, was primarily due to an increase in payroll expenses of $0.7
million offset by a decrease of $0.4 million in legal and consultancy costs. The
increase in general and administrative expenses from 2001 to 2002 by $0.2
million, excluding bad debt charges, was primarily due to legal and accounting
fees incurred in connection with our audit committee's review of our financial
statements and the resulting restatement of our financial statements for 1999,
2000, 2001 and the first six months of 2002. (See note 3 of the notes to our
consolidated financial statements attached hereto.)

AMORTIZATION OF STOCK-BASED COMPENSATION

Amortization of stock-based compensation represents the aggregate difference, at
the date of grant, between the respective exercise prices 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.

Stock-based compensation expenses for the year ended December 31, 2003 amounted
to $101,000 of previously recorded deferred stock-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. 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. As of December 31, 2003, there remained no deferred compensation.

RESTRUCTURING AND ASSETS IMPAIRMENT

Restructuring and assets impairment costs consist of write-down of equipment and
leasehold improvements related to office space reduction, termination of lease

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

<PAGE>

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.)

There were no restructuring costs in 2003. Restructuring costs were $2.7 million
or 17% of revenues in 2002 and $300,000 or 2% of revenues in 2001. 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
employee severance and benefits costs incurred by us in connection with the
restructuring. The restructuring expenses in 2001 were costs associated with
employee severance and benefits.

INTEREST AND OTHER INCOME, NET

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

Interest income net of interest expenses, was $259,000 or 1% of revenues in
2003; $252,000 or 2% of revenues in 2002; and $649,000 or 4% of revenues in
2001. The decrease in interest income from 2001 to 2002 is attributable to the
fact that the Company's cash and short-term investments decreased over the
years. The decrease was partially mitigated in 2002 by the positive effect of
currency fluctuations.

INCOME TAXES

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

As of December 31, 2003, the Company has approximately $18.5 million of Israeli
net operating loss carryforwards, approximately $27.5 million of U.S. federal
net operating loss carryforwards and approximately $8.3 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 gradually
over the years 2008 through 2022.

NET INCOME (LOSS)

Net income was $1.7 million or 8% of revenues in 2003, net loss was ($10.1)
million or (64%) of revenues in 2002, and net loss was ($8.0) million or (44%)
of revenues in 2001.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and investments increased by $5.0 million or 76% to $11.7 million as of
December 31, 2003 from $6.6 million as of December 31, 2002. Our cash and
investments decreased by $3.3 million or 66% to $6.6 million as of December 31,
2002 from $10.0 million as of December 31, 2001. Our primary sources of cash and
investments during 2003 were cash flows generated from operations of $4.2
million and $1.1 million from exercises of employee stock options and employee
share

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 23

<PAGE>
<TABLE>
<CAPTION>

purchase plans ("ESPP") purchases. Our primary sources of cash and investments during 2002 and the
previous two years were IPO proceeds from 2000.

As of December 31, 2003 we had cash and cash equivalents of approximately $7.7 million, short-term
investments of approximately $3.3 million and long-term investments of approximately $0.6 million. As of
December 31, 2003, approximately $1.4 million in short-term and long-term investments had been deposited
with banks to secure letters of credit totaling approximately $1.2 million, which are described below. Our
cash, short-term investments and long-term investments are invested or deposited in low-risk and
predominantly U.S-denominated investments and bank deposits.


                                                          CASH AND INVESTMENTS
                                                          --------------------

                                 -------------- -------------- ------------- ------------- --------------
                                     2003         % CHANGE         2002        % CHANGE        2001
                                     ----         ---------        ----        --------        ----

                                                             (IN THOUSANDS)
<S>                                    <C>                          <C>                          <C>
      Cash and cash
        equivalents                    $ 7,695                      $ 3,400                      $ 8,125
      Short-term investments             3,394                        2,949                        1,845
      Long-term investments                580                          280                            -
                                 --------------                -------------               --------------
      Total Cash and
        investments                    $11,669          76%         $ 6,629         (66%)        $ 9,970
                                 --------------                -------------               --------------


For the year ended December 31, 2003, net cash provided by operations was $4.2 million, comprised of our
net income of $1.7 million, a decrease in trade receivables of $0.7 million, a decrease in other
receivables of $0.5 million, a decrease in accounts payable of $1.3 million, and an increase in deferred
revenue of $1.9 million, which was partially offset by non-cash charges of $0.7 million.

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.

Net cash used in investment activities was $0.9 million in 2003, of which $0.7 million was primarily
invested in bank deposits and $0.2 million invested in leasehold improvements and purchases of equipment
and systems, including computer equipment and fixtures and furniture. 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, 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, fixtures and furniture.

fNet cash provided by financing activities was $1.1 million in 2003, as a result
of the employee options exercises and employee share purchase plans ("ESPP")
purchases. There were no material financing activities in 2002 and 2001.

As of December 31, 2003, we had outstanding trade receivables of approximately $3.4 million, which
represented approximately 15% of 2003 total revenues. 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. Our trade

------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                PAGE 24
</TABLE>

<PAGE>

receivables typically have 30 to 60 day terms; although we also negotiate longer
payment plans with some of our clients. Days sales outstanding ("DSO"),
calculated based on revenues for the most recent quarter and accounts receivable
at the balance sheet date, decreased to 48 days as of December 31, 2003 from 79
days as of December 31, 2002. DSO decreased to 79 days as of December 31, 2002
from 85 days as of December 31, 2001. The decrease in DSO is due in part to
improvements in our processes of collection and improved negotiated payment
terms with customers.

We have various commitments primarily related to guarantees, letters of credit
and capital lease obligations. The following table provides details regarding
our contractual cash obligations and other commercial commitments subsequent to
December 31, 2003:

----------------------------- ----------------- -----------------------------
                                                     AMOUNT OF COMMITMENT
COMMERCIAL                    TOTAL AMOUNTS              EXPIRATION
COMMITMENTS                   COMMITTED           PER PERIOD (IN THOUSANDS)
                              (IN               -----------------------------
                              THOUSANDS)                    2004
----------------------------- ----------------- -----------------------------
Guarantees/Letters of Credit       $1,236                  $1,236
----------------------------- ----------------- -----------------------------

Expected future rental payments including expected new contracts for 2004 are
approximately $550,000.

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

CONTRACTUAL                  PAYMENTS DUE BY PERIOD (IN THOUSANDS)
-----------                  -------------------------------------
OBLIGATIONS         --------------------------------------------------------
-----------             Total          2004           2005         2006
                        -----          ----           ----         ----
------------------- -------------- -------------- ------------- ------------
Lease Obligations       $590           $424           $120          $46
-----------------       ----           ----           ----          ---
------------------- -------------- -------------- ------------- ------------

We have entered into standby letter of credit agreements with banks primarily
relating to the guarantee of future performance on certain contracts. As of
December 31, 2003, contingent liabilities on outstanding letter of credit
agreements aggregated approximately $1.2 million. All of these obligations are
scheduled to expire during 2004. We expected to renew some of these letters of
credit in 2004. The letters of credit are secured by $1.4 million in deposits to
cover potential payments under the guarantees.

As permitted under Israeli law, we have agreements whereby we indemnify our
officers and directors for certain events or occurrences while the officer or
director is, or was serving, at our request in such capacity. The
indemnification period covers all pertinent events and occurrences during the
officer's or director's lifetime. We have director and officer insurance
coverage that may limit our exposure and may enable us to recover a portion of
any future amounts paid. We believe the estimated fair value of these
indemnification agreements in excess of applicable insurance coverage is
minimal.

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 $6.8 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, 2003, we had paid or accrued royalties related to
the results

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 25

<PAGE>

of research and development in the amount of $3.1 million. The estimated current
net commitment is approximately $3.7 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 investments in computers and office
equipment. We intend to continue investing significant resources in our selling
and marketing, research and development operations in the future and investments
in computers and office equipment. We attained profitability in the three months
ending March 31, 2003 and maintained profitability in the next three quarters.
Our ability to maintain profitability 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 maintain profitability, particularly given the current
economic conditions and a 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, which may not be
available to us on favorable terms or at all. 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.

We believe that we will have sufficient cash to fund our operations for at least
the next twelve months although there is no assurance that we will be able to do
so.

CRITICAL ACCOUNTING POLICIES

In preparing our consolidated financial statements, we are required to make
estimates, judgments and assumptions that affect the reported amounts of
revenues and expenses, assets and liabilities and contingent assets and
liabilities at the date of the financial statements.

On an ongoing basis, we evaluate our estimates, judgments and assumptions,
including those related to revenue recognition, and bad debt provisions. We base
our estimates, judgments and assumptions on historical experience and forecasts,
and on various other factors that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions. We believe that the following critical accounting
policies affect our more significant estimates, judgments and assumptions used
in the preparation of our consolidated financial statements.

REVENUE RECOGNITION

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

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 26

<PAGE>

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 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.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

We maintain an allowance for doubtful accounts using estimates that we make
based on factors we believe appropriate such as the composition of the accounts
receivable aging, historical bad debts, changes in payment patterns, customer
creditworthiness and current economic trends. If we used different assumptions,
or if the financial condition of customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional provisions for doubtful
accounts would be required and would increase our bad debt expense.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an interpretation of ARB 51." The
primary objectives of this interpretation are to provide guidance on the
identification of entities for which control is achieved through means other
than through voting rights ("variable interest entities") and how to determine
when and which business enterprise (the "primary beneficiary") should
consolidate the variable interest entity. This new model for consolidation
applies to an entity in which either (i) the equity investors (if any) do not
have a controlling financial interest; or (ii) the equity investment at risk is
insufficient to finance that entity's activities without receiving additional
subordinated financial support from other parties. In addition, FIN 46 requires
that the primary beneficiary, as well as all other enterprises with a
significant variable interest in a variable interest entity, make additional
disclosures. Certain disclosure requirements of FIN 46 were effective for
financial statements issued after January 31, 2003. In December 2003, the FASB
issued FIN 46 (revised December 2003), "Consolidation of Variable Interest
Entities" ("FIN 46-R") to address certain FIN 46 implementation issues. The
effective dates and impact of FIN 46 and FIN 46-R are as follows: (i)
Special-purpose entities ("SPEs") created prior to February 1, 2003. The Company
must apply either the provisions of FIN 46 or early adopt the provisions of FIN
46-R at the end of the first interim or annual reporting period ending after
December 15, 2003. (ii) Non-SPEs created prior to February 1, 2003. The Company
is required to adopt FIN 46-R at the end of the first interim or annual
reporting period ending after March 15, 2004. (iii) All entities, regardless of
whether an SPE, that were created subsequent to January 31, 2003. The provisions
of FIN 46 were applicable for variable interests in entities obtained after
January 31, 2003. The adoption

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<PAGE>

FIN 46-R did not have a material impact on the Company's consolidated financial
position, consolidated results of operations, or liquidity.

In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. In particular, this Statement clarifies under what circumstances a
contract with an initial net investment meets the characteristic of a
derivative. It also clarifies when a derivative contains a financing component
that warrants special reporting in the statement of cash flows. SFAS No. 149 is
generally effective for contracts entered into or modified after June 30, 2003.
The adoption of SFAS No. 149 did not have a material impact on the Company's
financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for how a company classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify certain financial instruments as a liability
(or as an asset in some circumstances). SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The adoption of SFAS No. 150 did not have an impact on the Company's
financial statements.

FACTORS THAT MAY AFFECT FUTURE RESULTS

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

                          RISKS RELATED TO OUR BUSINESS

OUR NEED FOR ADDITIONAL FINANCING IS UNCERTAIN, AS IS OUR ABILITY TO OBTAIN
FURTHER FINANCING IF REQUIRED.
Our ability to maintain or increase profitability using our currently available
balance of cash, cash equivalents and short term loans will depend on our
ability to maintain or increase our revenues while continuing to control our
expenses. We cannot assure you that we will be successful in doing so. If we are
not successful in doing so, particularly given the uncertainties regarding
future information technology spending by our current and prospective customers,
we will need to raise additional capital to finance our operations. There can be
no assurances that we will be able to sell 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 our ordinary
shares, and the terms of these securities could impose restrictions on our
operations. The sale of additional equity or convertible debt securities would
result in additional dilution to the stock holdings of 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 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.

WE MAY NOT BE ABLE TO MAINTAIN 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

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generate significant revenues to maintain profitability, which we may not be
able to do.

WE FACE RISKS RELATING TO OUR FINANCIAL STATEMENTS RESTATEMENT.
Following a reaudit of our financial statements conducted in the third and
fourth quarters of 2002 and the first quarter of 2003, we restated our financial
statements for 1999, 2000, 2001 and the first six months of 2002. On January 24,
2003, we filed an amendment to our annual report on Form 10-K for the fiscal
year ended December 31, 2001.

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, on August 25, 2003, a complaint was filed in the United States
District Court for the District of Massachusetts against us, one of our officers
and one of our former officers. None of the defendants have been served, and the
case is in the preliminary stages. The complaint is substantially similar to a
complaint previously filed in the same court against these parties and dismissed
by the court for failure to perfect service on the defendants in a timely
manner. The complaint is purportedly brought on behalf of investors who
purchased our securities between June 22, 2000 and October 21, 2002 and seeks
unspecified damages. The complaint contains various allegations, including
violations of the Securities Exchange Act of 1934 and common law claims with
respect to our financial results for 2000, 2001 and the first six months of
2002. It is not possible for us to quantify the extent of our potential
liability, if any. An unfavorable outcome in this or any other case could have a
material adverse effect on our business, financial condition, results of
operations, cash flow and the trading price of our ordinary shares.

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.

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 comes from orders placed towards the end of
a quarter. From time to time, we are reliant upon a sale of significant size to
a single customer. A delay in the completion of any such sale past the end of a
particular quarter could negatively impact results for that quarter, and such
negative impact could be significant, 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;

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     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.

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 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 regarding our business;

     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.

THE ECONOMIC OUTLOOK MAY ADVERSELY AFFECT THE DEMAND FOR OUR CURRENT PRODUCTS
AND OUR RESULTS OF OPERATIONS.
Predictions regarding general economic conditions remain uncertain. Unless the
economic outlook improves significantly, the rate of growth of information
technology spending may stagnate. Consequently, the demand for our products may
not grow or may decrease, which would adversely affect our results of
operations. In addition, it is difficult to predict economic conditions, 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 and
this 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.

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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 Service Optimization Suite, which enables efficient provisioning
of services in enterprise environments. Our Service Optimization Suite includes
ClickSchedule, ClickFix, ClickAnalyze, ClickPlan, ClickMobile and ClickForecast.
We continually improve and enhance our Service Optimization Site to meet market
requirements. Our growth depends on the development of market acceptance of
these products We have no guarantee that the sales of our products will continue
to develop as we anticipate, or at all. Lack of long-term demand for our
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. BenBassat. Although these agreements
generally require sixty to ninety 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.
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.

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

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

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. 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

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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, testing by current and
potential clients and 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, 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, the
United Kingdom and Australia, 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.

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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 hostile elements in the Palestinian
Authority has been taking place.

Despite our history of avoiding adverse effects, in the future we could be
adversely affected by any major hostilities involving Israel, the interruption
or curtailment of trade between Israel and its trading partners, a significant
increase in inflation, or a significant downturn in the economic or financial
condition of Israel. The current state of peace talks between Israel and its
Arab neighbors 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 are
increasing. In 2003, 16% of our costs were incurred in GBP and 8% in the Euro.
We incur a portion of our expenses, principally salaries and related personnel
expenses in Israel, in NIS. In 2003, 31% of our costs were incurred in NIS. In
2003 we incurred 5% of our costs in the Australian Dollar. In addition to above,
we have balance sheet exposure related to foreign net assets. We cannot assure
you that we will be able to adequately protect ourselves against such risks.

WE ARE INCURRING ADDITIONAL COSTS AND DEVOTING MORE MANAGEMENT RESOURCES TO
COMPLY WITH INCREASING REGULATION OF CORPORATE GOVERNANCE AND DISCLOSURE.
We are spending an increased amount of management time and external resources to
understand and comply with changing laws, regulations and standards relating to
corporate governance and public disclosure, including the Sarbanes-Oxley Act of
2002, new SEC regulations and Nasdaq Stock Market rules. Devoting the necessary
resources to comply with evolving corporate governance and public disclosure
standards may result in increased general and administrative expenses and a
diversion of management time and attention to compliance activities.

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

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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 us 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 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 effect service of process on us or any of those
persons or to enforce a U.S. court judgment, based upon the civil liability
provisions of the U.S. federal securities laws, against us or any of those
persons, 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.

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

<PAGE>

A SIGNIFICANT PORTION OF OUR WORKFORCE IS SUBJECT TO ISRAELI LABOR LAWS, WHICH
MAY LEAD TO CLAIMS FOR ADDITIONAL OVERTIME PAY.
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 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.

OUR OFFICERS, DIRECTORS AND AFFILIATED ENTITIES OWN A LARGE PERCENTAGE OF OUR
ORDINARY SHARES AND COULD SIGNIFICANTLY INFLUENCE THE OUTCOME OF ACTIONS.
As of December 31, 2003, our executive officers, directors and entities
affiliated with them beneficially owned approximately 21% 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 any merger
or 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 us. 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, 2003, we had 27,080,955 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, 2003, we had
3,071,216 ordinary shares issuable upon exercise of outstanding options, and
1,372,020 additional ordinary shares reserved for issuance pursuant to our stock
option plans and employee share purchase plan. If we or our existing
shareholders sell a large number of our ordinary shares, the price of our
ordinary shares could fall dramatically. Restrictions under the securities laws
limit the number of ordinary shares available for sale by our shareholders in
the public market. We have filed a Registration Statement on Form S-8 to
register for resale the ordinary shares reserved for issuance under our stock
option plans.

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 that produces
passive income. As a result of our cash position and the decline in the value of
our assets, there is a substantial 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

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 37

<PAGE>

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 we do 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.

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 2003 64% of our revenues and 40% 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.

We enter from time to time into forward contracts related to foreign currency
rates in order to protect against foreign currency accounts receivables and
certain forecasted transactions. We do not participate in any speculative
investments.

Interest Rate Risk As of December 31, 2003, we had cash, cash equivalents and
short-term investments of $11.1 million, which consist of cash and highly liquid
short-term investments. Of this, a total of $0.5 million is denominated in
non-dollar currencies. A substantial decrease in market interest rates would
have immaterial impact on our financial condition.

The following table provides information about our investment portfolio, cash,
and investments as of December 31, 2003 and presents principal cash flows and
related weighted averages interest rates by expected maturity dates.

    YEAR OF MATURITY                                                   2004
    (in thousands of dollars)
    A) CASH, CASH EQUIVALENTS AND INVESTMENTS PORTFOLIO:
    ----------------------------------------------------
    Cash and Cash equivalents                                        $7,695
      Average interest rate                                            0.8%

    Bank deposits                                                    $3,974
      Average interest rate                                            1.4%

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

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 38

<PAGE>

ITEM 8. FINANCIAL STATEMENTS

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


    Report of Independent Public Accountants..................................40

    Consolidated Balance Sheets...............................................41

    Consolidated Statements of Operations.....................................42

    Consolidated Statements of Changes in Shareholders' Equity................43

    Consolidated Statements of Cash Flows.....................................44

    Notes to Consolidated Financial Statements................................45




--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 39

<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, 2003 and 2002 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, 2003. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
and its subsidiaries at December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003, 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 FIRM OF DELOITTE TOUCHE TOHMATSU

Tel Aviv, Israel
FEBRUARY 9, 2004




--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 40

<PAGE>
<TABLE>
<CAPTION>

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


                                                                                                 DECEMBER 31,
                                                                                             2003           2002
                                                                                             ----           ----
<S>                                                                                           <C>            <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents (note 5)                                                          $ 7,695        $ 3,400
  Short-term investments (note 6 & Note 14b)                                                    3,394          2,949
    Trade receivables, net of allowance for doubtful accounts of $735 and $752 as of
    December 31, 2003 and 2002,respectively (note 7)                                            3,362          4,043
  Other receivables and prepaid expenses (note 8)                                                 722          1,254
                                                                                         ----------------------------
     Total current assets                                                                      15,173         11,646
  Long-term investments (note 9 & note 14b)                                                       580            280
  Severance pay deposits (note 13)                                                                779            781
  Property and equipment, net (note 10)                                                           923          1,250
                                                                                         ----------------------------
     Total assets                                                                             $17,455        $13,957
                                                                                         ============================


LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short-term debt (note 11)                                                                        $-            $17
  Accounts payable and accrued expenses (note 12)                                               4,077          5,369
  Deferred revenues                                                                             2,275            411
                                                                                         ----------------------------
     Total current liabilities                                                                  6,352          5,797
                                                                                         ----------------------------

LONG-TERM LIABILITIES
     Accrued severance pay (note 13)                                                            1,490          1,476
                                                                                         ----------------------------
     Total liabilities                                                                          7,842          7,273
                                                                                         ----------------------------

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, 2003 and 2002; no issued and
    outstanding shares as of December 31, 2003 and 2002;
Ordinary shares of NIS 0.02 par value:
    Authorized -- 100,000,000 as of December 31, 2003 and 2002;
    Issued - 27,119,955 shares as of December 31, 2003 and
    26,412,249 as of December 31,2002;
    Outstanding - 27,080,955 shares as of December 31,2003 and
    26,373,249 shares as of December 31, 2002.                                                    109            102
Additional paid-in capital                                                                     70,276         69,196
Deferred stock compensation                                                                         -          (101)
Accumulated deficit                                                                          (60,729)       (62,470)
                                                                                         ----------------------------
                                                                                                9,656          6,727
Treasury stock, at cost: 39,000 shares                                                           (43)           (43)
                                                                                         ----------------------------
     Total shareholders' equity                                                                 9,613          6,684
                                                                                         ----------------------------
     Total liabilities and shareholders' equity                                               $17,455        $13,957
                                                                                         ============================


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




---------------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                         PAGE 41
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                            CLICKSOFTWARE TECHNOLOGIES LTD.
                                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (in thousands, except share and per share amounts)


                                                                                    YEAR ENDED DECEMBER 31,
                                                                          2003               2002               2001
                                                                          ----               ----               ----
<S>                                                                <C>                <C>               <C>
Revenues (note 16):
  Software license                                                 $    10,622        $     7,113       $     11,734
  Services                                                              11,788              8,640              6,441
                                                                -----------------------------------------------------
     Total revenues                                                     22,410             15,753             18,175
                                                                -----------------------------------------------------

Cost of revenues:
  Software license                                                         955                949                798
  Services                                                               6,631              5,804              5,498
                                                                -----------------------------------------------------
     Total cost of revenues                                              7,586              6,753              6,296
                                                                -----------------------------------------------------

                                                                -----------------------------------------------------
     Gross profit                                                       14,824              9,000             11,879
                                                                -----------------------------------------------------

Operating expenses:
  Research and development expenses                                      2,434              3,759              4,422
        Less - participation by the Chief
        Scientist of the Government of Israel
        (note 14a)                                                         523                953              1,176
                                                                -----------------------------------------------------
  Research and development expenses, net                                 1,911              2,806              3,246
  Selling and marketing expenses                                         7,836             10,473             12,499
  General and administrative expenses                                    3,494              3,106              4,048
  Restructuring and assets impairment
        (note 4)                                                             -              2,665                294
  Amortization of deferred stock-based compensation (1)                    101                300                437
                                                                -----------------------------------------------------
     Total operating expenses                                           13,342             19,350             20,524
                                                                -----------------------------------------------------
     Operating Income (loss)                                             1,482           (10,350)            (8,645)
Interest and other income, net                                             259                252                649
                                                                -----------------------------------------------------
Net Income (loss)                                                  $     1,741        $  (10,098)       $    (7,996)
                                                                -----------------------------------------------------

                                                                -----------------------------------------------------
Basic net Income (loss) per share                                  $      0.07        $    (0.40)       $     (0.32)
                                                                -----------------------------------------------------
Diluted net Income (loss) per share                                $      0.06        $    (0.40)       $     (0.32)
                                                                -----------------------------------------------------
Shares used in computing basic Net Income (Loss) per share          25,847,758         25,553,891         25,322,771
                                                                -----------------------------------------------------
Shares used in computing diluted Net Income (Loss) per share        26,874,351         25,553,891         25,322,771
                                                                -----------------------------------------------------


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


                                                                                    YEAR ENDED DECEMBER 31,
                                                                          2003               2002               2001
                                                                          ----               ----               ----

Cost of revenues                                                            $7                $20                $18
Research and development expenses                                           15                 44                 56
Selling and marketing expenses                                               4                 12                 56
General and administrative expenses                                         75                224                307
                                                                -----------------------------------------------------
Total                                                              $       101        $       300       $        437
                                                                -----------------------------------------------------


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


---------------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                         PAGE 42
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                   CLICKSOFTWARE TECHNOLOGIES LTD.
                                     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                  (in thousands, except share data)


                                                                                                              LESS COST
                               NUMBER OF                   ADDITIONAL                                           OF
                                ORDINARY       SHARE        PAID-IN         DEFERRED          ACCUMULATED     TREASURY
                                 SHARES       CAPITAL       CAPITAL       COMPENSATION          DEFICIT         SHARES       TOTAL
                             -------------------------------------------------------------------------------------------------------
<S>                              <C>             <C>           <C>             <C>             <C>                 <C>      <C>
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
                             -------------------------------------------------------------------------------------------------------
Employee options exercised          306,684          4           1,001                -                 -            -        1,005
Employee Stock purchase
  plan                              401,022          3              79                -                 -            -           82
Amortization of deferred
  compensation                            -          -               -              101                 -            -          101
Net Income                                -          -               -                -             1,741            -        1,741
                             -------------------------------------------------------------------------------------------------------
Balance as of
December 31, 2003                27,080,955      $ 109         $70,276         $      -        $ (60,729)        $(43)      $ 9,613
                             -------------------------------------------------------------------------------------------------------


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


------------------------------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                                        PAGE 43
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                           CLICKSOFTWARE TECHNOLOGIES LTD.
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                   (IN THOUSANDS)


                                                                               YEAR ENDED DECEMBER 31,
                                                                        2003            2002            2001
                                                                        ----            ----            ----
<S>                                                                       <C>           <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net income (loss) to
net cash used in operating activities:

Net Income(loss)                                                     $      1,741     $  (10,098)      $   (7,996)
  Depreciation                                                                551             890              700
  Amortization of deferred compensation                                       101             300              437
  Unrealized (gain) loss from Investments                                    (21)              28              395
  Severance pay, net                                                           16            (32)             (90)
  Assets impairment                                                             -           1,195                -
  Other                                                                         -            (35)                -
  Trade receivables                                                           681           1,564          (3,565)
  Other receivables                                                           532             231             (19)
  Accounts payable and accrued expenses                                   (1,292)           2,705            (489)
  Deferred revenues                                                         1,864             343             (59)
  Decrease in marketable securities, net                                        -           1,818           14,637
                                                                   ------------------------------------------------

Net cash provided by (used in) operating activities                         4,173         (1,091)            3,951
                                                                   ------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of investments                                                     (724)         (3,229)                -
Purchases of equipment                                                      (224)           (315)            (390)
                                                                   ------------------------------------------------
Net cash used in investing activities                                       (948)         (3,544)            (390)
                                                                   ------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net)                                                        (17)           (123)              (6)
Repayments of long-term debt                                                    -            (21)             (82)
Net proceeds from issuance of Ordinary shares                                   -               -                -
Purchase of treasury shares                                                     -               -             (43)
Net proceeds from warrants exercised                                            -               -                -
Employee and ESPP options exercised                                         1,087              54              257
                                                                   ------------------------------------------------
Net cash (used in) provided by financing activities                         1,070            (90)              126
                                                                   ------------------------------------------------
Increase (decrease) in cash and cash equivalents                            4,295         (4,725)            3,687

Cash and cash equivalents at beginning of year                              3,400           8,125            4,438
                                                                   ------------------------------------------------
Cash and cash equivalents at end of year                             $       7,69     $     3,400      $     8,125
                                                                   ------------------------------------------------

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


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


-------------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                       PAGE 44
</TABLE>

<PAGE>

                         CLICKSOFTWARE TECHNOLOGIES LTD.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      (AS OF DECEMBER 31, 2003 AND 2002 AND
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 and 2001)
                            (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.

On June 2000, the Company completed an initial public offering of its ordinary
shares (the "IPO").

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.

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.

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

<PAGE>

CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to credit risk,
consist principally of cash instruments and accounts receivable. The Company
maintains cash and cash equivalents and investments with major financial
institutions and limits the amount of credit exposure with any institution. 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 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.

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 46

<PAGE>
<TABLE>
<CAPTION>

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 INCOME (LOSS) PER SHARE
Basic and diluted net Income (loss) per share are presented in conformity with SFAS No. 128 "Earnings per
Share" for all years presented. Basic and diluted net Income (loss) per share have been computed using the
weighted-average number of ordinary shares outstanding during the year. (See note 15).


                                                                        FOR THE YEAR ENDED DECEMBER 31,
                                                                    2003             2002           2001
                                                                    ----             ----           ----
                                                                                                 AS RESTATED
                                                                                                 -----------
                                                                               (IN THOUSANDS
                                                                   EXCEPT SHARE DATA AND SHARE NUMBERS)
<S>                                                                    <C>           <C>             <C>
Net Income (loss) attributable to ordinary shareholders                $ 1,741       $(10,098)       $(7,996)
Basic and diluted:
Shares used in computing basic Net Income (Loss) per share          25,847,758      25,553,891     25,322,771
Shares used in computing diluted Net Income (Loss) per share
                                                                    26,874,351      25,553,891     25,322,771
                                                              ================================================

Basic net Income (Loss) per share                                      $  0.07       $  (0.40)       $ (0.32)
Diluted net Income (Loss) per share                                    $  0.06       $  (0.40)       $  0.32)
                                                              ================================================


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 income (loss) per share to the extent such securities are anti-dilutive. The total number of shares
excluded from the calculations of diluted net Income (loss) per share were 2,044,623, 3,676,203 and 3,775,971
for the years ended December 31, 2003, 2002 and 2001, 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.

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 Income
(loss) and basic and diluted net Income (loss) per share would have been increased or decreased to the
following pro-forma amounts:

----------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                    PAGE 47
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                         2003                  2002                   2001
                                                         ----                  ----                   ----
                                                                (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                        <C>                  <C>                    <C>
Net Income (loss)
     As reported                                           $1,741               $(10,098)              $(7,996)
Add - stock based compensation determined
under APB 25                                                  101                     300                   437
Deduct - stock based compensation determined
under SFAS 123                                              (419)                   (534)                 (627)
Pro-forma                                                  $1,423               $(10,332)              $(8,186)
Basic net Income (loss) per
   Share
     As reported                                            $0.07                 $(0.40)               $(0.32)
     Pro-forma                                              $0.05                 $(0.40)               $(0.32)
Diluted net Income (loss) per
   Share
     As reported                                            $0.06                 $(0.40)               $(0.32)
     Pro-forma                                              $0.05                 $(0.40)               $ 0.32)

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 (2002 - 5, 2001 - 1.2); (2) dividend yield of 0% (3) expected volatility of 151% (2002 - 122%, 2001 -
152%) and (4) risk-free interest rate of 3.1% (2002 - 4%, 2001 - 1.75%).

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 January 2003, the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities,
and interpretation of ARB 51." The primary objectives of this interpretation are to provide guidance on the
identification of entities for which control is achieved through means other than through voting rights
("variable interest entities") and how to determine when and which business enterprise (the "primary
beneficiary") should consolidate the variable interest entity. This new model for consolidation applies to an
entity in which either (i) the equity investors (if any) do not have a controlling financial interest; or (ii)
the equity investment at risk is insufficient to finance that entity's activities without receiving additional
subordinated financial support from other parties. In addition, FIN 46 requires that the primary beneficiary, as
well as all other enterprises with a significant variable interest in a variable interest entity, make
additional disclosures. Certain disclosure requirements of FIN 46 were effective for financial statements issued
after January 31, 2003. In December 2003, the FASB issued FIN 46 (revised December 2003), "Consolidation of
Variable Interest Entities" ("FIN 46-R") to address certain FIN 46 implementation issues. The effective dates
and impact of FIN 46 and FIN 46-R are as follows: (i) Special-purpose entities ("SPEs") created prior to
February 1, 2003. The Company must apply either the provisions of FIN 46 or early adopt the provisions of FIN
46-R at the end of the first interim or annual reporting period ending after December 15, 2003. (ii) Non-SPEs
created prior to February 1, 2003. The Company is required to adopt FIN 46-R at the end of the first interim or
annual reporting period ending after March 15, 2004. (iii) All entities, regardless of whether an SPE, that were
created subsequent to January 31, 2003. The provisions of FIN 46 were applicable for variable interests in
entities obtained after January 31, 2003. The adoption FIN 46-R did not have a material impact on the company's
consolidated financial position, consolidated results of operations, or liquidity.

In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133 on Derivative Instruments and Hedging
Activities." SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. In
particular, this Statement clarifies under what circumstances a contract with an initial net investment meets
the characteristic of a derivative. It also

----------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                    PAGE 48
</TABLE>

<PAGE>

clarifies when a derivative contains a financing component that warrants special
reporting in the statement of cash flows. SFAS No. 149 is generally effective
for contracts entered into or modified after June 30, 2003. The adoption of SFAS
No. 150 did not have a material impact on the Company's financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for how a company classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify certain financial instruments as a liability
(or as an asset in some circumstances). SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The adoption of SFAS No. 150 did not have an impact on the Company's
financial statements.

NOTE 3 -- RESTATEMENT

The Company restated its financial statements for 1999, 2000, 2001 and for the
first six months of 2002 and filed an amendment to our Form 10-K for the three
years ended 1999, 2000 and 2001 on January 24, 2003. The financial results
provided in this annual report reflect this restatement. See note 3 of the notes
to the consolidated financial statements that are included on the Form 10-K/A
for the year ended December 31, 2001 that the Company filed with the U.S.
Securities and Exchange Commission on January 24, 2003.

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.

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. The Company recorded costs in connection
with payments required to terminate lease contract and a write-down of equipment
and leasehold improvements for which no alternative use has been found.

These costs are summarized in the following table:

                                                          DECEMBER 31,
                                                        2003         2002
                                                        ----         ----
                                                         (in thousands)

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

NOTE 5 -- CASH AND CASH EQUIVALENTS

                                                          DECEMBER 31,
                                                        2003         2002
                                                        ----         ----
                                                         (in thousands)

In U.S. dollars                                           $7,173      $2,845
In British Pounds                                             64         206
In NIS                                                        15         151
In Euro                                                      443         198
                                                     ------------------------
                                                          $7,695      $3,400
                                                     ========================


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

<PAGE>

The cash balances bear interest at an average annual rate of 0.8%.

NOTE 6 -- SHORT-TERM INVESTMENTS

                                                          DECEMBER 31,
                                                        2003         2002
                                                        ----         ----
                                                         (in thousands)
Bank Deposits (see also note 14b)                        $ 3,394     $ 2,949
                                                     ------------------------
                                                         $ 3,394     $ 2,949
                                                     ========================

The bank deposits bear interest at an average annual rate of 1.40%.

NOTE 7 - -ALLOWANCE FOR DOUBTFUL ACCOUNTS

                                                          DECEMBER 31,
                                                        2003         2002
                                                        ----         ----
                                                         (in thousands)
Balance at Beginning of Year                               $752         $912
Increase to allowance                                       223          130
Write-offs                                                (240)        (290)
                                                     ------------------------
Balance at Year end                                        $735         $752
                                                     ========================


NOTE 8 -- OTHER RECEIVABLES AND PREPAID EXPENSES

                                                          DECEMBER 31,
                                                        2003         2002
                                                        ----         ----
                                                         (in thousands)
Government participation and other government
  receivables                                               $55         $225
Employees                                                   132           36
Prepaid expenses                                            494          674
Other receivables                                            41          319
                                                     ------------------------
                                                           $722       $1,254
                                                     ========================

NOTE 9 -- LONG-TERM INVESTMENTS

                                                          DECEMBER 31,
                                                        2003         2002
                                                        ----         ----
                                                         (in thousands)
Bank Deposits (see also note 14b)                          $580         $280
                                                     ------------------------
                                                           $580         $280
                                                     ========================

The bank deposits bear interest at an average annual rate of 0.8%.

NOTE 10 -- PROPERTY AND EQUIPMENT, NET

                                                          DECEMBER 31,
                                                        2003        2002
                                                        ----        ----
                                                         (in thousands)
COST
Computers and office equipment                           $3,093       $2,906
Leasehold improvements                                      617          804
Motor vehicles                                              408          409
                                                     ------------------------
                                                         $4,118       $4,119
ACCUMULATED DEPRECIATION                                  3,195        2,869
                                                     ------------------------
                                                           $923       $1,250
                                                     =========== ============


     See also Note 4 - Restructuring and assets impairment.


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

<PAGE>

NOTE 11 -- SHORT-TERM DEBT

                                                          DECEMBER 31,
                                                        2003        2002
                                                        ----        ----
                                                         (in thousands)

Current maturities on long-term debt                         $-          $17
                                                     ------------------------
                                                             $-          $17
                                                     ========================


NOTE 12 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                                                          DECEMBER 31,
                                                        2003        2002
                                                        ----        ----
                                                         (in thousands)

Suppliers                                                $  956       $1,083
Employee and related expenses                             1,408        1,234
Accrued royalties                                           732          581
Accrued restructuring (note 4)                               91        1,280
Other                                                       890        1,191
                                                     ------------------------
                                                         $4,077       $5,369
                                                     ========================

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 $234, $283 and 266 for the years ended
December 31, 2003, 2002 and 2001, 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 $6,830. 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 plus
     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, 2003 of $3,165. The total additional contingent
     liability to pay royalties is $3,665. The payment of such additional
     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
     banks relating to the guarantee of future performance on certain contracts.
     As of December 31, 2003, contingent liabilities on outstanding letter of
     credit agreements which expire after December 31, 2003 aggregated
     approximately $1.2 million. The letters of credit are secured by $1.4
     million in deposits 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 2004 through
     2006. Minimum future rental payments, as of December 31, 2003 are as
     follows:

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

                        2004                       $424
                        2005                        120
                        2006                         46
                                    --------------------
                                                   $590
                                    ====================


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

<PAGE>

     Rent expense amounted to $620, $1,139 and $1,138 for the years ended
     December 31, 2003, 2002 and 2001, respectively.

     D: On August 25, 2003, a complaint was filed in the United States District
     Court for the District of Massachusetts against the Company, one of its
     officers and one of its former officers. None of the defendants have been
     served, and the case is in the preliminary stages. The complaint is
     substantially similar to a complaint previously filed in the same court
     against these parties and dismissed by the court for failure to perfect
     service on the defendants in a timely manner. The complaint is purportedly
     brought on behalf of investors who purchased the Company's securities
     between June 22, 2000 and October 21, 2002 and seeks unspecified damages.
     The complaint contains various allegations, including violations of the
     Securities Exchange Act of 1934 and common law claims with respect to the
     Company's financial results for 2000, 2001 and the first six months of
     2002.

NOTE 15 -- SHAREHOLDERS' EQUITY

A. PUBLIC OFFERING

On June 2000, the Company completed an initial public offering of its ordinary
shares (the "IPO") with total net proceeds of $28.2 million.

B. SHARE CAPITAL

Share capital is comprises of ordinary shares of NIS 0.02 par value. The amount
of shares issued includes shares reserved for issuance to employees held in
trust. The total number of ordinary shares held by the trustee is 71,819 as of
December 31, 2003, and 756,839 as of December 31, 2002.

C. EMPLOYEE STOCK PURCHASE PLAN

During 2000, the Board of Directors approved an Employee Stock Purchase Plan
(the "ESPP"), effective August 2000. Under the ESPP, the maximum number of
shares to be made available is 800,000 with an annual increase to be added on
the first day of each year commencing 2001 equal to the lesser of 2% shares or
500,000 of the outstanding shares on such date or a lesser amount determined by
the Board of Directors. During 2003, the Board of directors decided to increase
the ESPP pool by 250,000 shares effective January 1, 2004.

Employees are eligible to participate in the ESPP if they are employed by the
Company or Its U.S subsidiary for at least 20 hours per week and more than 5
months in any calendar year. Employee stock purchases are made through payroll
deductions. Under the terms of the ESPP, employees may not deduct an amount
exceeding $25,000 in total value of stock in any one year and may not purchase
more than 5,000 shares during any six-month offering period. The purchase price
of the stock will be 85% of the lower of the fair market value of an ordinary
share on the first day of the offering period and the fair market value on the
last day of the offering period. The offering period was determined to be six
months. The ESPP shall terminate in 2010, unless terminated earlier by the Board
of Directors.

As of January 1, 2004, 708,510 ordinary shares were issued under the ESPP, and
an additional 341,490 ordinary shares are reserved for issuance.


D. EMPLOYEE, DIRECTORS, AND CONSULTANT OPTION PLANS

The Company adopted new option plans in 2000. Under these plans, the Company
granted 1,160,840 (including 39,840 shares pursuant to an exchange offer),
513,500, 1,375,652 and 1,015,213 options at an average exercise price of $2.41,
$1.28, $1.50 and $5.75 for the years ended December 31,2003, 2002, 2001 and
2000, respectively.

During the year ended December 31, 2003 the Board of Directors and Shareholders
at the annual meeting approved the grants of stand-alone options to purchase
385,000 ordinary shares to directors.

--------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 52

<PAGE>
<TABLE>
<CAPTION>

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.

In April 2003 the Company commenced a voluntary stock option exchange program for its employees. Under the program
participating employees were given the opportunity to have unexercised stock options previously granted to them
cancelled, and to receive replacement options at a future date. Replacement options were granted at a ratio of
between 50% and 5% for each option cancelled, at an exercise price equal to the fair market value of the Company's
Ordinary Shares on the date of the re-grant. Pursuant to the terms of the offer, 279,118 options were cancelled at
May 2003. The Company granted 39,840 replacement options at December 2003 at an exercise price of $4.39.

During the year ended December 31, 2003 the Board of Directors decided to increase the reserve for grants under
its umbrella option plan, the Amended and Restated 2000 Share Option Plan (the "ESOP"), by 400,000 options
effective January 1, 2004.

A summary of the status of the Company's stock option plans as of December 31, 2003 and 2002 and changes during
the years then ended are as follows:


                                                                                        WEIGHTED-      WEIGHTED-
                                                                                        AVERAGE        AVERAGE
                                                     OPTIONS AND                        EXERCISE         FAIR
                                                       SHARES         OUTSTANDING        PRICE         VALUE OF
                                                    AVAILABLE FOR     OPTIONS (*)         PER           OPTION
                                                        GRANT                            SHARE
                                                  ---------------------------------------------------------------
<S>                                                     <C>                 <C>              <C>          <C>
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
Granted                                               (1,506,000)         1,506,000          2.08         $ 1.94
Granted Exchange Offer                                   (39,840)            39,840          4.39         $ 1.91
Forfeited                                                 642,146         (642,146)          2.92
Forfeited Exchange Offer                                  279,118         (279,118)           0.7
Exercised                                                       -         (991,702)          1.10
Exercised Employee Stock Purchase plan                  (401,022)                 -             -
                                                  ------------------------------------------------
Outstanding December 31, 2003                           1,122,020         3,191,351           2.1
                                                  ------------------------------------------------

(*) As of December 31, 2003, 2002 and 2001, 71,819, 756,839 and 791,031 outstanding options, respectively, were
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, 2003:

                                          OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                           -------------------------------------------------------------------------------------
                                 NUMBER          WEIGHTED-                          NUMBER
                              OUTSTANDING        AVERAGE          WEIGHTED-       OUTSTANDING       WEIGHTED-
        RANGE OF                  AT             REMAINING        AVERAGE             AT            AVERAGE
     EXERCISE PRICE           DECEMBER 31,      CONTRACTUAL       EXERCISE        DECEMBER 31,      EXERCISE
            $                    2003              LIFE            PRICE             2003             PRICE
----------------------------------------------------------------------------------------------------------------
       0.21 - 0.95                   599,162              5.1      $ 0.48                386,350     $ 0.60
       1.01 - 1.83                 1,747,586              6.9      $ 1.51              1,193,427     $ 1.62
       2.04 - 3.67                   190,400              5.7      $ 2.81                 93,562     $ 3.61
       0.21 - 0.95                   555,203                9      $ 4.27                 70,322     $ 4.39
       0.21 - 0.95                    99,000              4.2      $ 8.65                 88,821     $ 8.66
                           ------------------                                  ------------------
                                   3,191,351                                           1,832,482
                           ==================                                  ==================


----------------------------------------------------------------------------------------------------------------
10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                    PAGE 53
</TABLE>

<PAGE>

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,
                                   2003             2002            2001
                                   ----             ----            ----
                                              (in thousands)
Revenue
U.S                                    $ 8,177        $ 5,770          $ 7,723
Canada                                   2,004          1,802              722
U.K                                      4,342          1,847            3,316
Germany                                  2,283          1,068              354
Other European countries                 2,530          1,819            2,648
Israel                                      71            297              455
Australia                                2,935          3,067            2,405
Rest of the world                           68             83              552
                             --------------------------------------------------
                                       $22,410        $15,753          $18,175
                             ==================================================

Sales to a single customer exceeding 10% of total sales:

                                   2003             2002            2001
                                   ----             ----            ----
                                    %                %               %
Customer A                                   -              -               12
Customer B                                  13              -                -
Customer C                                  10              -                -


Long-lived assets by geographical areas are as follows:

                                                    YEAR ENDED DECEMBER 31,
                                                     2003            2002
                                                     ----            ----

  NET PROPERTY AND EQUIPMENT                             (IN THOUSANDS)
  North America                                           $ 170          $ 254
  Europe                                                    113            188
  Australia                                                   8              -
  Israel                                                    632            808
                                               --------------------------------
                                                          $ 923         $1,250
                                               ================================


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

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

<PAGE>

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
$18.5 million as of December 31, 2003. In addition, losses of approximately
$27.5 million are attributable to the U.S. subsidiary, which will expire between
2008 and 2022, and the European subsidiaries have tax loss carryforwards of
approximately $8.3 million as of December 31, 2003. 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,
                                    2003            2002             2001
                                    ----            ----             ----
                                               (in thousands)
Israel
                                        $1,381      $   (181)       $ 1,355
International                              360        (9,917)       (9,351)
                              -----------------------------------------------
                                        $1,741      $(10,098)      $(7,996)
                              ===============================================


NOTE 18 -- TRANSACTIONS WITH RELATED PARTIES


                                                     YEAR ENDED DECEMBER 31,
                                                   2003        2002      2001
                                                   ----        ----      ----
                                                          (in thousands)
Transactions:
  Management fee                                      $39         $48      $ 48
  Other General and administrative expenses           $44         $67      $165




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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 55

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<CAPTION>

ITEM 8A. UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL DATA

The following table presents the quarterly information for fiscal 2003 and 2002:

                                                         FIRST          SECOND         THIRD         FOURTH
                                                        QUARTER         QUARTER       QUARTER        QUARTER

                                                     -----------------------------------------------------------
                                                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                                            (UNAUDITED)
<S>                                                        <C>            <C>           <C>            <C>
2003
Net sales                                                  $  5,141       $  5,060      $  5,902       $  6,307
Gross profit                                               $  3,333       $  3,333      $  3,885       $  4,273
Net Income                                                 $    158       $    173      $    687       $    723
----------------------------------------------------------------------------------------------------------------

Basic net Income (loss) per share:                         $   0.01       $   0.01      $   0.03       $   0.03
Diluted net Income (loss) per share:                       $   0.01       $   0.01      $   0.03       $   0.03
Shares used in computing basic net
Income (loss) per share (in thousands)                       25,616         25,648        25,729         26,379
Shares used in computing diluted net
Income (loss) per share (in thousands)                       25,616         25,942        27,047         28,456
Price per ordinary share - high                            $   0.23       $   2.33      $   2.85       $   4.95
Price per ordinary share - low                             $   0.12       $   0.19      $   1.52       $   1.95


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 net Income (loss) per share:                         $ (0.09)       $ (0.07)      $ (0.07)       $ (0.16)
Diluted net Income (loss) per share:                       $ (0.09)       $ (0.07)      $ (0.07)       $ (0.16)
Shares used in computing basic net
Income (loss) per share (in thousands)
                                                             25,488         25,551        25,581         25,604
Shares used in computing diluted net
Income (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


The Company's ordinary shares are traded on the Nasdaq SmallCap Market. As of March 12, 2004, there were
approximately 55 registered holders of ordinary shares.

ITEM 9. CHANGES IN AND DISAGREEMENTS 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 for the fiscal years ended December 31, 2003 and December 31, 2002, at shareholder
meetings held on April 30, 2003 and December 31, 2002 respectively.

Prior to the appointment of Brightman Almagor & Co., 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.

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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                      PAGE 56
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<PAGE>

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 57

<PAGE>

ITEM  9A. CONTROLS AND PROCEDURES

Based on their evaluation as of December 31, 2003, our Chief Executive Officer
and Chief Financial Officer have concluded that our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) were sufficiently effective to ensure that the
information required to be disclosed by us in the Annual Report on Form 10-K was
recorded, processed, summarized and reported within the time periods specified
within the SEC's rules and instructions for Form 10-K.

There were no changes in our internal controls over financial reporting during
the quarter ended December 31, 2003 that have materially affected or are
reasonably likely to materially affect our internal controls over financial
reporting.

Our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all error and all fraud. A control system, no
mater how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system have been met.
Furthermore, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

Directors - The information required by this 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
stockholders (the "Proxy Statement"), which information is incorporated herein
by reference.

The information required by Item 405 of Regulation S-K is set forth under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's Proxy Statement, which information is incorporated herein by
reference.

The Company has adopted a Code of Ethics for Principal Executive and Senior
Financial Officers that applies to the Company's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. The Code of Ethics for Principal Executive
and Senior Financial Officers is filed as an exhibit to this report.

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 captions "Security
Ownership of Certain Beneficial Owners and Management" and "Equity Compensation
Plan Information" 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.


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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 58

<PAGE>

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 is set forth under the caption
"[Principal Accountant Fees and Services]" in the Company's Proxy Statement,
which information is incorporated herein by reference.





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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                    PAGE 59

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<CAPTION>

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

The following documents are filed as part of this report:

(a)(1) FINANCIAL STATEMENTS - See Item 8 hereto
       Consolidated Balance Sheets
       Consolidated Statements of Operations and Comprehensive Loss
       Consolidated Statements of Shareholders' Equity
       Consolidated Statements of Cash Flows

(a)(2) FINANCIAL STATEMENTS SCHEDULES - See Item 8 hereto
       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.

(a)  EXHIBITS

                                  EXHIBIT INDEX
EXHIBIT
 NUMBER                                       DESCRIPTION OF DOCUMENT

<S>              <C>
3.3  (1)         Articles of Association of ClickSoftware Technologies Ltd., amended and restated as of May 28, 2003
4.1  (2)         Specimen of Ordinary Share Certificate
4.2  (2)         Fourth Amended and Restated Registration Rights Agreement, dated December 15, 1999
10.1 (3)         Form of 2000 Share Option Plan, as amended
10.2 (2)         Form of 2000 Employee Share Purchase Plan
10.6 (2)         Form of 1996 Option Plan
10.7 (2)         Form of 1997 Option Plan
10.8 (2)         Form of 1998 Option Plan
10.9 (2)         Form of 1999 Option Plan
10.12(2)         Form of 2000 Israeli Plan
10.13(2)         Form of 2000 Unapproved U.K. Share Scheme
10.14(2)         Form of 2000 Approved U.K. Share Scheme
10.17(4)         Employment Agreement between ClickSoftware Technologies Ltd. and Shmuel Arvatz
10.18(5)         Amended Form of Indemnification Agreement
10.19(5)         Amended Employment Agreement between ClickSoftware Technologies Ltd. and Moshe BenBassat
10.20(5)         2003 Israeli Share Option Plan
10.21            Form of 2000 Unapproved U.K. Share Scheme, as amended
10.22            Form of 2000 U.K. Share Scheme, as amended
14               Code of Ethics for Principal Executive Officer and Senior Financial Officers
21.1             Subsidiaries of the Registrant
23.1             Consent of Brightman Almagor & Co., member of Deloitte Touche Tohmatsu
31.1             Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities
                 Exchange Act of 1934, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2             Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities
                 Exchange act of 1934, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1             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.
32.2             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 report on Form 10-Q filed on August 13, 2003.
(2) Incorporated by reference to the Registrant's Registration Statement on Form S-1/A (file no. 333-30274), as amended.
(3) Incorporated by reference to the Registrant's definitive proxy statement filed on August 6, 2001.


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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                              PAGE 60
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<S>                                                                             <C>
(4) Incorporated by reference to the Registrant's annual report on Form 10-K filed on March 24, 2003.
(5) Incorporated by reference to the Registrants definitive proxy statement filed on April 30, 2003.

(b) REPORTS ON FORM 8-K:

On October 27, 2003, the Company furnished to the Commission a current report on Form 8-K pursuant to the Securities and
Exchange Act of 1934, as amended, reporting the Company's financial results for the quarter ended September 30, 2003.







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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                                              PAGE 61
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                                                  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 22, 2004


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.


               SIGNATURE                                     TITLE                                DATE
-------------------------------------   ------------------------------------------------   ------------------
<S>                                     <C>                                                <C>
/S/ DR. MOSHE BENBASSAT                  Chief Executive Officer and
-------------------------------------    Chairman of the  Board of Directors
Dr. Moshe BenBassat                      (Principal Executive Officer)                       March 22, 2004


/S/ SHMUEL ARVATZ                        Chief Financial Officer (Principal Financial        March 22, 2004
-------------------------------------    and Accounting Officer)
Shmuel Arvatz


/S/ NAOMI ATSMON                         Director                                            March 22, 2004
-------------------------------------
Naomi Atsmon


/S/ DR. ISRAEL BOROVICH                  Director                                            March 22, 2004
-------------------------------------
Dr. Israel Borovich


/S/ RONI A.EINAV                         Director                                            March 22, 2004
-------------------------------------
Roni A.Einav


/S/ DAN FALK                             Director                                            March 22, 2004
-------------------------------------
Dan Falk


/S/ JAMES W. THANOS                      Director                                            March 22, 2004
-------------------------------------
James W. Thanos


/S/ GIL WEISER                           Director                                            March 22, 2004
-------------------------------------
Gil Weiser


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10-K CLICKSOFTWARE TECHNOLOGIES LTD.                                                               PAGE 62
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