CLICKSERVICE SOFTWARE LTD
424B4, 2000-06-23
PREPACKAGED SOFTWARE
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<PAGE>   1


                                                Filed Pursuant to Rule 424(b)(4)


                                                      Registration No. 333-30274


PROSPECTUS


                                4,000,000 Shares


                              [CLICKSOFTWARE LOGO]

                                Ordinary Shares
--------------------------------------------------------------------------------

    This is our initial public offering of ordinary shares. We are offering
                           4,000,000 ordinary shares.


    Prior to the offering, no public market existed for the ordinary shares.



The ordinary shares have been approved for listing on the Nasdaq National Market
                            under the symbol "CKSW."




INVESTING IN OUR ORDINARY SHARES INVOLVES RISKS. "RISK FACTORS" BEGIN ON PAGE 8.


<TABLE>
<CAPTION>
                                                     PER SHARE                           TOTAL
                                          -------------------------------   -------------------------------
<S>                                       <C>                               <C>
Public Offering Price...................               $7.00                          $28,000,000
Underwriting Discount and Commissions...               $0.49                          $ 1,960,000
Proceeds, before expenses, to
  ClickSoftware.........................               $6.51                          $26,040,000
</TABLE>



We have granted the underwriters an option for a period of 30 days to purchase
up to 600,000 additional ordinary shares on the same terms and conditions as set
forth above solely to cover over-allotments, if any.


Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

We have received from the Securities Authority of the State of Israel an
exemption from Israel's prospectus publication requirements. Nothing in this
exemption shall be construed as authenticating the matters contained in this
prospectus or as an approval of their reliability or adequacy or as an
expression of opinion as to the quality of the securities offered by this
prospectus.


Lehman Brothers expects to deliver the shares on or about June 27, 2000.

--------------------------------------------------------------------------------
LEHMAN BROTHERS
                CIBC WORLD MARKETS
                                         SG COWEN
                                              FIDELITY CAPITAL MARKETS
                                               a division of National Financial
                                                     Services Corporation


June 22, 2000

<PAGE>   2
                          [Inside Front Cover Artwork]

Graphical representation of ClickSoftware's ClickSchedule product, with graphics
depicting use by Customer and Customer Service Representative for Phone-Based
Scheduling, Customer for Web-Based Self-Scheduling, Senior Executive for
Web-Based Business Performance Analysis, Dispatcher for Web-Based Schedule
Administration and Service Personnel for Web-Based Individual Schedule Access.
The graphic also includes the following text: ClickSoftware: Every time
commitment to a customer involves a complex back-end fulfillment decision...
ClickSchedule addresses the fulfillment challenge in a fully integrated manner
so that customer responsiveness and resource utilization are simultaneously
optimized. ClickSchedule assigns customer requests to delivery resources and
plans their schedule and route to optimize utilization according to
company-specific business rules.
<PAGE>   3

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Prospectus Summary....................    3
Risk Factors..........................    8
Special Note Regarding Forward-Looking
  Statements..........................   21
Use of Proceeds.......................   22
Dividend Policy.......................   22
Capitalization........................   23
Dilution..............................   24
Selected Consolidated Financial
  Data................................   25
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................   26
Business..............................   40
Management............................   54
Certain Transactions..................   67
</TABLE>


<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Principal Shareholders................   69
Description of Share Capital..........   71
Shares Eligible for Future Sale.......   76
United States Federal Income Tax
  Considerations......................   78
Israeli Taxation and Investment
  Programs............................   81
Conditions in Israel..................   87
Enforceability of Civil Liabilities...   89
Where You Can Find More Information...   89
Legal Matters.........................   90
Experts...............................   90
ISA Exemption.........................   90
Underwriting..........................   91
Index to Consolidated Financial
  Statements..........................  F-1
</TABLE>

                             ABOUT THIS PROSPECTUS

     You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information that is different
from that contained in this prospectus. We are offering to sell ordinary shares
and seeking offers to buy ordinary shares only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of the ordinary shares.


     Until July 17, 2000, all dealers that buy, sell or trade the ordinary
shares, whether or not participating in this offering, may be required to
deliver a prospectus. This is an addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to unsold allotments
or subscriptions.


     "ClickSoftware", "ClickSchedule", "ClickFix", "ClickAnalyze",
"ClickBroker", "ClickSchedule Fast Track", "ClickPlan", "W-6", "W-6 Service
Scheduler" and "TechMate" are our trademarks. This prospectus also contains
trademarks, trade names and service marks of other companies.

     As used in this prospectus, the terms "we," "us," "our" and "ClickSoftware"
mean ClickSoftware Technologies Ltd. and its subsidiaries, unless otherwise
indicated.

     For information regarding enforceability of civil liabilities against us
and other persons, see the section of this prospectus with the heading
"Enforceability of Civil Liabilities."

     ClickSoftware prepares its consolidated financial statements in United
States dollars in accordance with generally accepted accounting principles as
applied in the United States, or U.S. GAAP. All references in this prospectus to
"dollars" or "$" are to United States dollars and all references in this
prospectus to "NIS" are to New Israeli Shekels. The representative dollar
exchange rate for converting the NIS to dollars, as reported by the Federal
Reserve Bank of New York, was 0.248 U.S. dollars for one NIS on March 31, 2000.
<PAGE>   4

                               PROSPECTUS SUMMARY

     You should read the following summary together with the more detailed
information regarding our company and the ordinary shares being sold in this
offering and our financial statements and notes thereto appearing elsewhere in
this prospectus.

                        CLICKSOFTWARE TECHNOLOGIES LTD.

     We provide software for optimizing service operations by improving customer
responsiveness and the utilization of service resources. Our ClickSchedule
product line allows our clients to respond quickly to customers' demands for
service and to assign the right resource to the right service request at the
right time and place. Customers may place their service requests either via the
telephone to customer service representatives in call centers or via the
Internet. The ClickSchedule product line provides ease of use and convenience to
end user customers and optimizes utilization of clients' fulfillment resources,
thus maximizing the number of service calls that are delivered per day. While
ClickSchedule assigns and routes service calls in order to reduce travel times
and idle time, our ClickFix product line is aimed at supporting the
troubleshooting process and reducing the need to dispatch repair personnel.
ClickFix provides customers with the information needed to diagnose equipment
failures and conduct remedial action thus speeding up the resolution process and
increasing the number of repairs completed per day. Our ClickSchedule and
ClickFix product lines can operate both internally within organizations and on
an Internet basis. 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.

     The service sector is people-intensive. Without automation tools,
businesses engaged in service and product delivery must deploy substantial
resources in order to schedule and complete transactions that require a
same-time and/or same-place interaction between the service provider and the
customer. To build and maintain relationships with customers, businesses are
attempting to improve the quality and speed of their service and product
fulfillment in order to distinguish themselves from their competitors. Whether
scheduling telephone, cable or Internet access installation, or the repair of
home and office equipment, consumers and businesses need to be assured that
their requests for services will be quickly scheduled for narrow time slots, and
then efficiently delivered.

     The emergence and acceptance of the Internet as a medium for commerce is
fundamentally changing the way companies conduct their businesses. International
Data Corporation estimates that business-to-business and business-to-consumer
transactions will grow from $50.4 billion in 1998 to over $1.3 trillion in 2003.
There are Internet software tools aimed at optimizing the manufacturing and
distribution of physical goods, an area known as supply chain optimization. We
believe that service operations can benefit in a similar way by leveraging the
Internet to improve responsiveness to customers, to optimize the utilization of
service resources and to ensure fast and successful completion of the service
call.

     The ClickSoftware solution offers a set of software optimization tools for
the individual service provider, as well as a set of tools to manage
interactions between customers and service providers in business-to-consumer and
business-to-business marketplaces.

     Our solution offers the following benefits to our clients and their
customers:

     - Greater customer service

     - Optimized utilization of fulfillment resources by better fitting of
       resources to customer requests, and minimizing idle and travel time

     - Seamless integration with complementary enterprise software solutions

     - Rapid return on investment due to increased service revenues with
       existing service resources

                                        3
<PAGE>   5

     Our objective is to be the leading provider of web-based application
software for optimizing service operations of business-to-business and
business-to-consumer enterprises. The key elements of our strategy include:

     - Expand market acceptance of our products

     - Extend our brand recognition

     - Enhance our sales and implementation channels

     - Extend the breadth and depth of our product offerings

     - Target online service businesses

     - Provide customized solutions for additional industries

     Our products are based on our core technologies which have been developed
based upon our 15 years of experience using sophisticated algorithms to provide
solutions to the service industry. Over the years we have gained experience with
the complex scheduling and troubleshooting needs of service organizations.
Although we believe that our sophisticated algorithms for software applications
and extensive knowledge of the service market provide us with a unique position
against the competition, the market for our products is competitive and rapidly
changing. We expect competition to increase significantly in the future as
current competitors expand their product offerings and new companies enter the
market. We also face risks in the achievement of our strategy due to our history
of losses, our recent change in strategic focus and the need for the market to
accept our products. For additional discussion of the risks we face, please see
"Risk Factors" beginning on page 8.

     We market and sell our products primarily through our direct sales force
located in North America and Europe, as well as through reseller and joint
selling relationships with leading customer relationship management, or CRM,
vendors and enterprise resource planning, or ERP, vendors. Our products are used
by a broad base of clients internally within their organizations representing a
variety of industries with unique needs, including telecommunications, telephone
and Internet access providers, high-technology service providers and retailers,
including Agilent Technologies, Bell Atlantic, Canadian Red Cross, Caterpillar,
Compaq Computer Corporation, Covad Communications, Crawfords and Company, EMC,
Enbridge Services, Level 3 Communications, Maritime Telephone and Telegraph,
Montgomery Ward, New Brunswick Telephone and Schindler Elevator. This list of
clients is representative of our geographically dispersed client base, the
various industries utilizing our products and the various stages of deployment
of our product lines. Each of these clients accounted for at least $100,000 of
our revenues in 1999 and as a group, these clients accounted for approximately
42% of our total revenues in 1999.

                                        4
<PAGE>   6

                             CORPORATE INFORMATION

     We were incorporated in Israel in September 1979. We changed our name to
ClickService Software Ltd. on January 30, 2000. We changed our name to
ClickSoftware Technologies Ltd. on May 25, 2000.

     Our principal executive offices are located at 34 Habarzel Street, Tel
Aviv, Israel and our telephone at that address is (972-3) 765-9400. We also
maintain corporate offices in the United States at 3425 S. Bascom Avenue, Suite
230, Campbell, California, and our telephone number at that address is (408)
377-6088. Our address on the World Wide Web is www.clicksoftware.com.
Information contained on our web site does not constitute part of this
prospectus.

                                  THE OFFERING


Ordinary shares offered by us.........     4,000,000 shares



Ordinary shares to be outstanding
after the offering....................     24,979,543 shares


Use of proceeds.......................     For working capital and general
                                           corporate purposes, including sales
                                           and marketing, professional services,
                                           research and development and
                                           expansion of our operational and
                                           administrative infrastructure.


Nasdaq National Market symbol.........     "CKSW"


     Unless otherwise noted, share and per share amounts, and all other
information, in this prospectus:


     - give effect to the equivalent of a 3-for-5 reverse share split, which was
       effected on March 20, 2000 through the combination of a reverse share
       split and a share dividend;


     - give effect to the conversion of all outstanding preferred shares into
       13,499,898 ordinary shares immediately prior to the closing of the
       offering;

     - give effect to the conversion of all outstanding Ordinary A and Ordinary
       B shares into           ordinary shares immediately prior to the closing
       of the offering; and

     - assume no exercise of the underwriters' over-allotment option.

     The ordinary shares to be outstanding after the offering is based on shares
outstanding as of March 31, 2000. This number excludes:

     - 1,544,941 shares underlying options outstanding as of March 31, 2000 at a
       weighted exercise price of $2.99 per share;

     - 393,552 shares subject to warrants outstanding as of March 31, 2000 at a
       weighted exercise price of $1.96 per share;

     - 2,675,400 ordinary shares available for future grants under our 2000
       Share Option Plans subject to an automatic increase of the lesser of 5%
       of the then outstanding shares or 1,250,000 shares annually; and

     - 800,000 ordinary shares available for issuance under our 2000 Employee
       Share Purchase Plan subject to an automatic increase of the lesser of 2%
       of the then outstanding shares or 500,000 shares annually.

     Since March 31, 2000, we have issued additional options to three directors
to purchase 80,000 ordinary shares in the aggregate at an exercise price of
$10.00 per share. As of March 31, 2000, we also had additional outstanding
employee options to purchase 939,039 ordinary shares at a weighted average
exercise price of $0.58 per share. All the underlying shares to be issued upon
exercise of these options are issued and held by a trustee and were included in
the ordinary shares outstanding.

                                        5
<PAGE>   7

                      SUMMARY CONSOLIDATED FINANCIAL DATA

     The following table presents summary consolidated financial and operating
data derived from our consolidated financial statements. We have calculated pro
forma basic and diluted net loss per share assuming conversion of all of our
preferred shares into ordinary shares. You should read this summary information
along with the sections of the prospectus entitled "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and related
notes.


<TABLE>
<CAPTION>
                                                                                                  THREE MONTHS
                                                 YEAR ENDED DECEMBER 31,                        ENDED MARCH 31,
                                ----------------------------------------------------------   ----------------------
                                  1995        1996        1997        1998         1999        1999         2000
                                ---------   ---------   ---------   ---------   ----------   ---------   ----------
                                     (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)              (UNAUDITED)
<S>                             <C>         <C>         <C>         <C>         <C>          <C>         <C>
CONSOLIDATED STATEMENT OF
  OPERATIONS DATA:
Revenues:
  Software license............  $   2,111   $   1,491   $   1,235   $   3,932   $    5,414   $     758   $    2,126
  Service and maintenance.....      1,660       1,893       1,080       2,139        4,912       1,271        1,385
                                ---------   ---------   ---------   ---------   ----------   ---------   ----------
    Total revenues............      3,771       3,384       2,315       6,071       10,326       2,029        3,511
Cost of revenues:
  Software license............         21          14          13          25           71           7          110
  Service and maintenance.....      1,387       1,458       1,035       2,301        4,299         925        1,213
                                ---------   ---------   ---------   ---------   ----------   ---------   ----------
    Total cost of revenues....      1,408       1,472       1,048       2,326        4,370         932        1,323
Gross profit..................      2,363       1,912       1,267       3,745        5,956       1,097        2,188
Loss from operations..........     (1,015)     (2,159)     (4,364)     (5,891)      (7,725)     (1,799)      (3,357)
Net loss......................     (1,225)     (2,437)     (4,512)     (5,858)      (7,979)     (1,821)      (3,352)
Dividend related to
  convertible preferred
  shares......................         --          --          --          --       (4,989)         --           --
Net loss attributable to
  ordinary shareholders.......     (1,225)     (2,437)     (4,512)     (5,858)     (12,968)     (1,821)      (3,352)
Basic and diluted net loss per
  share.......................  $   (0.24)  $   (0.47)  $   (0.80)  $   (0.99)  $    (2.18)  $   (0.31)  $    (0.56)
Shares used in computing
  basic and diluted net loss
  per share...................  5,081,265   5,216,705   5,657,728   5,914,735    5,948,816   5,948,816    6,001,896
Pro forma basic and diluted
  net loss per share
  (unaudited).................                                                  $    (0.73)              $    (0.17)
Shares used in computing pro
  forma basic and diluted net
  loss per share
  (unaudited).................                                                  17,692,964               19,501,794
</TABLE>


                                        6
<PAGE>   8


     The following table provides a consolidated summary of our balance sheet as
of March 31, 2000 and as adjusted to give effect to the sale of 4,000,000
ordinary shares by us at the initial public offering price of $7.00 per share
and our anticipated application of the net proceeds of the offering.



<TABLE>
<CAPTION>
                                                               AS OF MARCH 31, 2000
                                                              ----------------------
                                                              ACTUAL     AS ADJUSTED
                                                              -------    -----------
                                                                         (UNAUDITED)
                                                                  (IN THOUSANDS)
<S>                                                           <C>        <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................................  $ 4,739      $29,529
Working capital.............................................    5,149       29,939
Total assets................................................   10,801       35,591
Long-term liabilities, net of current portion...............    1,171        1,171
Shareholders' equity........................................    6,158       30,948
</TABLE>


                                        7
<PAGE>   9

                                  RISK FACTORS

     You should carefully consider the following factors and other information
in this prospectus before you decide to invest in our ordinary shares. If any of
the negative events referred to below occurs, 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 FINANCIAL PERFORMANCE MAY SUFFER BECAUSE WE HAVE RECENTLY CHANGED OUR
STRATEGIC FOCUS AND PRICING PROGRAM.

     Historically, all of our operating revenue has come from sales of our
ClickSchedule product, formerly known as W-6 Service Scheduler, and our ClickFix
product, formerly known as TechMate, to clients seeking application software
that enables efficient provisioning of services in enterprise, rather than
Internet, environments. As a result, while we sold the W-6 technology that is
included in ClickSchedule and the TechMate technology that is included in
ClickFix prior to 1999, we have only recently sold the new versions for Internet
scheduling and troubleshooting. Our current strategy is to expand upon our
installed base of clients using our software to become the leading provider of
web-scheduling and delivery software solutions for the service operations of
Internet companies. To the extent that our strategy is not successful, our
business, operating results and financial condition will suffer.

     In December 1999, we introduced a new pricing program for our products.
Traditionally, we have generated revenue through one-time sales of licenses to
our clients at a price based upon the number of resources optimized. Our new
pricing model enables our clients to pay monthly user fees for licenses of our
software or to pay on a per-transaction basis. It is too early to determine
which pricing structure will become more prevalent, however many of our new
customers have chosen the new pricing model. If we have not determined
appropriate monthly or per transaction fees for our software licenses, our
revenues from software licenses may decrease or may not increase. Our new
pricing model will also result in delayed recognition of revenues, which may
cause our quarterly operating results to be lower than expected in any
particular quarter.

WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR FUTURE LOSSES.

     We have not achieved profitability and expect to continue to incur net
losses for the foreseeable future. We incurred net losses of approximately $4.5
million for the year ended December 31, 1997, $5.9 million for the year ended
December 31, 1998, $8.0 million for the year ended December 31, 1999 and $3.4
million for the three months ended March 31, 2000. As of March 31, 2000, we had
an accumulated deficit of approximately $32.0 million.

     For the year ended December 31, 1999, we incurred sales and marketing and
research and development expenses totalling $11.2 million. For the three months
ended March 31, 2000, these expenses totaled $4.2 million. We expect to continue
to incur significant sales and marketing and research and development expenses
and expect such expenses to increase significantly. Some of our expenses, such
as expenses for 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. For example, for the three months ended March 31, 2000,
approximately 73% of our expenses consisted of payroll related expenses and rent
and utilities expenses. As a result, we will need to generate significant
revenues to achieve and maintain profitability, which we may not be able to do.

OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS AND IF WE FAIL TO
MEET THE EXPECTATIONS OF SECURITIES ANALYSTS OR INVESTORS, OUR SHARE PRICE MAY
DECREASE.

     Our quarterly operating results are difficult to predict and are not a good
measure for comparison. Our future quarterly operating results may fluctuate
significantly and may not meet the expectations of

                                        8
<PAGE>   10

securities analysts or investors. If this occurs, the price of our ordinary
shares may decrease. The factors that may cause fluctuations in our quarterly
operating results include the following:

     - the volume and timing of customer orders;

     - the length and unpredictability of our sales cycle;

     - the mix of revenues generated by product licenses and professional
       services;

     - internal budget constraints of our current and prospective clients,
       particularly newly formed Internet companies;

     - announcement or introduction of new products or product enhancements by
       us or our competitors;

     - changes in prices of and the adoption of different pricing strategies for
       our products and those of our competitors;

     - changes in our business strategy;

     - timing and amount of sales and marketing expenses;

     - changes in our business relationships;

     - technical difficulties or "bugs" affecting the operation of our software;

     - foreign currency exchange rate fluctuations; and

     - general economic conditions.

     In addition, due to client purchasing patterns, we typically realize a
significant portion of our software license revenues in the last few weeks of a
quarter. For example, during the year ended December 31, 1999, we realized an
average of 41% of our revenues from the sales of software licenses during the
last two weeks of each quarter. For the three months ended March 31, 2000, we
recognized 57% of our revenues from the sales of software licenses during the
last two weeks of the quarter. As a result, we may experience significant
variations in our license revenues and results of operations if we incur any
delays in client orders.

FAILURE OF THE MARKET TO ACCEPT OUR TECHNOLOGY WOULD ADVERSELY AFFECT DEMAND FOR
OUR PRODUCTS AND THE PRICE OF OUR ORDINARY SHARES COULD DECLINE.

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

IF THE MARKET FOR SCHEDULING FULFILLMENT OF SERVICES AND PRODUCTS OVER THE
INTERNET DOES NOT DEVELOP AS EXPECTED OR AT ALL, OR IF OUR PRODUCTS ARE NOT
ACCEPTED BY BUSINESSES SCHEDULING SERVICES, DEMAND FOR OUR SOLUTIONS MAY NOT
DEVELOP AND THE PRICE OF OUR ORDINARY SHARES COULD DECLINE ACCORDINGLY.

     Our business strategy is premised, in part, on our belief that traditional
bricks-and-mortar companies, such as utilities, as well as e-commerce companies,
will offer their customers the opportunity to schedule and obtain services
online rather than on the telephone. While some of our clients use the web-based

                                        9
<PAGE>   11

features of our products in an intranet environment, as of the date of this
prospectus, none of our clients is currently offering Internet self-scheduling
options to its customers. In addition, in order for our business strategy to be
successful, consumers and businesses must move away from telephone-based
customer service to Internet-based customer service. While adoption of the
Internet as a new medium for commerce is occurring for purchases of products,
the adoption of the Internet to schedule and obtain services is at a much
earlier stage. If online service scheduling solutions are not widely adopted by
consumers and businesses engaging in e-commerce transactions, our business will
suffer. We began emphasizing our products' Internet capabilities in September
1999 and we have devoted and expect to continue to devote substantial resources
to market these products. Our new business strategy requires us to market our
products to companies that utilize the Internet to deliver service. Many of
these companies may have limited capital resources and may not be willing to
invest in our solutions.

IF USE OF THE INTERNET FOR COMMERCIAL TRANSACTIONS DOES NOT GROW AS ANTICIPATED,
OUR BUSINESS STRATEGY MAY NOT BE SUCCESSFUL.

     Our success will depend in large part on the acceptance of the Internet in
the commercial marketplace and on the ability of third parties to provide a
reliable Internet infrastructure network with the speed, data capacity, security
and hardware necessary for reliable Internet access and services. To the extent
that the Internet continues to experience increased numbers of users, increased
frequency of use or increased bandwidth requirements of users, the Internet
infrastructure may not be able to support the demands placed on it and the
performance and reliability of the Internet could suffer, which could cause the
market for our products to fail to grow or to grow more slowly than anticipated,
causing our business to suffer.

IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS MAY NOT SUCCEED.

     Our ability to successfully offer products and services and to implement
our business plan in the evolving market for service scheduling and resource
optimization software requires an effective planning and management process. We
continue to increase the scope of our operations in the United States and
internationally and expect to continue to increase our headcount substantially
in the future. For example, the number of individuals we employed grew from 107
as of December 31, 1998 to 165 as of March 31, 2000. As part of this growth, we
have had to implement new operational and financial systems, procedures and
controls; expand, train and manage our employee base; and maintain close
coordination among our technical, accounting, finance, marketing and sales
staffs. These factors have placed, and our anticipated expansion will continue
to place, a significant strain on our existing management systems and resources.
We expect that we will need to continue to expand our existing management and to
improve our financial and managerial controls and reporting systems and
procedures, and expand, train and manage our work force worldwide. Furthermore,
we expect that we will be required to manage multiple relationships as we expand
our customer base and our business relationships.

TWO PRODUCTS ACCOUNT FOR THE MAJORITY OF OUR REVENUE. IF THE DEMAND FOR THESE
PRODUCTS FALLS, OUR SALES COULD BE SIGNIFICANTLY REDUCED AND OUR FINANCIAL
PERFORMANCE COULD BE SERIOUSLY DAMAGED.

     Historically, all of our operating revenue has come from sales of, and
services related to, our ClickSchedule product, formerly known as W-6 Service
Scheduler, and our ClickFix product, formerly known as TechMate, to clients
seeking application software that enables efficient provisioning of services in
enterprise environments. As we pursue our new business strategy and develop our
products, we anticipate that revenues from sales of our ClickSchedule and
ClickFix product lines, together with related professional services fees, will
continue to account for all of our operating revenue for the foreseeable future.
Accordingly, the widespread market acceptance of these products is critical to
our future success. Competition, technological change or other factors could
decrease demand for, or market acceptance of, these products or make these
products obsolete. Any decrease in demand or market acceptance would have a
material adverse effect on our business and operating results.

                                       10
<PAGE>   12

OUR LONG AND UNPREDICTABLE SALES AND IMPLEMENTATION CYCLES DEPEND ON FACTORS
OUTSIDE OUR CONTROL, WHICH MAY CAUSE QUARTERLY LICENSE AND SERVICE FEES REVENUES
TO VARY SIGNIFICANTLY FROM PERIOD TO PERIOD.

     To date, our customers have taken a long time, typically ranging from three
months to one year, to evaluate our products before making their purchase
decisions. In addition, depending on the nature and specific needs of a client,
the implementation of our products can take up to three to twelve months. Sales
of licenses and implementation schedules are subject to a number of risks over
which we have little or no control, including clients' budgetary constraints,
clients' internal acceptance reviews, the success and continued internal support
of clients' own development efforts, the efforts of businesses we have
relationships with, the nature, size and specific needs of a client and the
possibility of cancellation of projects by clients. The uncertain outcome of our
sales efforts and the length of our sales cycles could result in substantial
fluctuations in license revenues. If sales forecasted from a specific client for
a particular quarter are not realized in that quarter, we are unlikely to be
able to generate revenues from alternate sources in time to compensate for the
shortfall. As a result, and due to the relatively large size of some orders, a
lost or delayed sale could have a material adverse effect on our quarterly
revenue and operating results. Moreover, to the extent that significant sales
occur earlier than expected, revenue and operating results for subsequent
quarters could be adversely affected.

FAILURE TO EXPAND OUR SALES AND MARKETING ORGANIZATIONS COULD LIMIT OUR ABILITY
TO SELL ADDITIONAL PRODUCTS AND SERVICES, WHICH WOULD IMPAIR OUR ABILITY TO GROW
OUR BUSINESS AND INCREASE REVENUES.

     We must expand our direct and indirect sales operations to increase market
awareness of our products and generate increased revenues. We cannot be certain
that we will be successful in these efforts. We have recently expanded our
direct sales force in North America and plan to hire additional sales personnel.
As of March 31, 2000, we employed 54 individuals in our sales and marketing
organizations. Because 33 of these sales and marketing personnel joined us
within the last fifteen months, we will be required to devote significant
resources to the training of these new sales personnel. We believe we will need
to expand our sales and marketing organization significantly over the next
twelve months. We might not be able to hire or retain the kind and number of
sales and marketing personnel we are targeting because competition for qualified
sales and marketing personnel in our market is intense.

WE DEPEND ON KEY PERSONNEL, AND THE LOSS OF ANY KEY PERSONNEL COULD AFFECT OUR
ABILITY TO COMPETE AND OUR ABILITY TO ATTRACT ADDITIONAL KEY PERSONNEL AFTER THE
OFFERING MAY BE MORE DIFFICULT.

     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 Ben-Bassat, our Chief Executive
Officer, has individually participated in and has been responsible for
overseeing much of the research and development of our core technologies. While
we currently have 46 employees in Israel working on our products, Dr. Ben-Bassat
is still involved in our research and development efforts. The services of Dr.
Ben-Bassat 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 Dr.
Ben-Bassat and our Chief Financial Officer, Shimon M. Rojany. None of our other
officers or key employees is bound by an employment agreement. Our relationships
with these officers and key employees are at will and the loss of any of our key
personnel could harm our ability to execute our business strategy and compete.
In addition, we believe that the prospective employees that we target after the
offering may perceive that the share option component of our compensation
packages is not as valuable as the component was prior to this offering.
Consequently, we may have difficulty hiring our desired numbers of key personnel
after this offering. Moreover, even if we are able to attract key personnel, the
resources required to attract and retain such personnel may adversely affect our
operating results.

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IF WE FAIL TO EXPAND OUR PROFESSIONAL SERVICES ORGANIZATION, WE MAY NOT BE ABLE
TO SERVICE ADDITIONAL CLIENTS AND SELL ADDITIONAL LICENSES.

     We cannot be certain that we can attract or retain a sufficient number of
highly qualified 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 other assistance to our clients
and works with our clients' in-house staff to train them regarding the
maintenance, management and expansion of their software systems. Growth in
licenses of our software will depend in part on our ability to provide our
clients with these services. In addition, we will be required to expand our
professional services organization to enable us to continue to support our
existing installed base of customers as we focus on our new business strategy.
As a result, we plan to increase the number of our service personnel in order to
meet these needs. Competition for qualified services personnel with the relevant
knowledge and experience is intense, and we may not be able to attract and
retain necessary personnel. If we are not able to grow our professional services
organization, our ability to expand our business would be limited. To meet our
clients' needs for professional services, we may need to increase our use of
third-party consultants to supplement our own professional services group which
may be more costly and less successful than our own organization. In addition,
we could experience delays in recognizing revenue if our professional services
group fails to complete implementations in a timely manner.

OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED DEVELOPERS IS CRUCIAL TO OUR FUTURE
GROWTH AND RESULTS OF OPERATIONS.

     As a company focused on the development of software products, our research
and development personnel are one of our most valued assets. Our future success
depends in large part on our ability to hire, train and retain software
developers, systems architects, project managers, telecommunications business
process experts, systems analysts, trainers, writers, consultants and sales and
marketing professionals of various experience levels. Personnel possessing the
skills needed to contribute to our research and development efforts are in short
supply, and this shortage is likely to continue. As a result, competition for
these people is intense, and the industry turnover rate for them is high. Any
inability to hire, train and retain a sufficient number of qualified development
employees could hinder the research and development activities and growth of our
business.

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 be
seriously harmed. 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 expand our base of
clients. 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.

                                       12
<PAGE>   14

OUR MARKET IS HIGHLY COMPETITIVE AND ANY REDUCTION IN DEMAND FOR, OR PRICES OF,
OUR PRODUCTS COULD NEGATIVELY IMPACT OUR REVENUES, REDUCE OUR GROSS MARGINS AND
CAUSE OUR SHARE PRICE TO DECLINE.

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

     Our current and potential competitors include:

     - independent systems integrators, such as Electronic Data Systems
       Corporation, consulting firms and in-house information technology
       departments of enterprise and Internet businesses which may develop their
       own solutions that compete with our products;

     - traditional enterprise resource planning and customer relationship
       management software application vendors, including Oracle Corporation;

     - software vendors in the utility, telecom, field services, home delivery
       and other vertical markets, including Mobile Data Solutions Inc.;

     - other providers of scheduling software and components as well as various
       logistics solutions providers such as ServicePower, Inc.; and

     - providers of software that allows manufacturing organizations to optimize
       their resources.

     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. For
additional discussion of our competition, please see "Business -- Competition."

FAILURE TO DEVELOP OR MAINTAIN KEY BUSINESS RELATIONSHIPS COULD LIMIT OUR
ABILITY TO SELL ADDITIONAL LICENSES WHICH COULD DECREASE OUR REVENUES AND
INCREASE OUR SALES AND MARKETING COSTS.

     We believe that our success in penetrating our target markets depends in
part on our ability to develop and maintain business relationships with software
vendors, resellers, systems integrators, distribution partners and customers. If
we fail to develop these relationships, our growth could be limited. We have
recently entered into agreements with third parties relating to the integration
of our products with their product offerings, distribution, reselling and
consulting. We have not derived significant revenues from these agreements and
we may not be able to derive significant revenues in the future from these
agreements. In addition, our growth may be limited if prospective clients do not
accept the solutions offered by our strategic partners.

OUR MARKET MAY EXPERIENCE RAPID TECHNOLOGICAL CHANGES THAT COULD CAUSE OUR
PRODUCTS TO FAIL OR REQUIRE US TO REDESIGN OUR PRODUCTS, WHICH WOULD RESULT IN
INCREASED RESEARCH AND DEVELOPMENT EXPENSES.

     Our market is characterized by rapid technological change, dynamic client
needs and frequent introductions of new products and product enhancements. If we
fail to anticipate or respond adequately to technology developments and client
requirements, or if our product development or introduction is delayed, we may
have lower revenues. Client product requirements can change rapidly as a result
of computer hardware and software innovations or changes in and the emergence,
evolution and adoption of new industry standards. For example, we offer Windows
NT versions of our products due to the market acceptance of Windows NT over the
last several years. We currently do not provide Unix versions of our software
and we may not be able to modify our products and services to address new
requirements and

                                       13
<PAGE>   15

standards. The actual or anticipated introduction of new products has resulted
and will continue to result in some reformulation of our product offerings.
Technology and industry standards can make existing products obsolete or
unmarketable or result in delays in the purchase of such products. As a result,
the life cycles of our products are difficult to estimate. We must respond to
developments rapidly and make substantial product development investments. As is
customary in the software industry, we have previously experienced delays in
introducing new products and features, and we may experience such delays in the
future which could impair our revenue and operating results.

OUR PRODUCTS COULD BE SUSCEPTIBLE TO ERRORS OR DEFECTS THAT COULD RESULT IN LOST
REVENUES, LIABILITY OR DELAYED OR LIMITED MARKET ACCEPTANCE.

     Complex software products such as ours often contain errors or defects,
particularly when first introduced or when new versions or enhancements are
released. In the past, some of our products have contained errors and defects
which have delayed implementation or required us to expend additional resources
to correct the problems. Despite internal testing and testing by current and
potential clients, our current and future products may contain serious defects
or errors. Any such defects or errors would likely 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 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. For a more detailed description of the protection of our intellectual
property, please see "Business -- Intellectual Property."

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. For example, on
February 28, 2000, a trademark infringement complaint was filed against us with
respect to the use of our former corporate name and former Internet domain
names. On May 2, 2000, a preliminary injunction was entered, enjoining us from
using these names. As a result, we have changed our corporate name to
ClickSoftware Technologies Ltd. and ceased our use of our former domain names.
This litigation remains ongoing and even if we are successful in defending the
lawsuit, we may incur significant legal expenses and our management may expend
significant time in the defense. In addition, we have been contacted by an
unrelated third party which is alleging that our new company name ClickSoftware
Technologies Ltd. may infringe their company name and trademarks. See
"Business -- Legal Proceedings."


                                       14
<PAGE>   16

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

     - be time-consuming to defend;

     - result in costly litigation;

     - divert management's attention and resources;

     - cause product shipment delays; or

     - require us to enter into costly royalty or licensing agreements, if they
       are even available, on commercially reasonable terms, or at all.

     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. For additional information, please see
"Business -- Intellectual Property."

ANY FUTURE ACQUISITIONS OF COMPANIES OR TECHNOLOGIES MAY RESULT IN DISTRACTION
OF OUR MANAGEMENT AND DISRUPTIONS TO OUR BUSINESS.

     We may acquire or make investments in complementary businesses,
technologies, services or products if appropriate opportunities arise. From time
to time we may engage in discussions and negotiations with companies regarding
our acquiring or investing in such companies' businesses, products, services or
technologies. We cannot make assurances that we will be able to identify future
suitable acquisition or investment candidates, or if we do identify suitable
candidates, that we will be able to make such acquisitions or investments on
commercially acceptable terms or at all. Our management has limited experience
in acquiring companies or technologies. If we acquire or invest in another
company, we could have difficulty assimilating that company's personnel,
operations, technology or products and service offerings. In addition, the key
personnel of the acquired company may decide not to work for us. These
difficulties could disrupt our ongoing business, distract our management and
employees, increase our expenses and adversely affect our results of operations.
Furthermore, we may incur indebtedness to pay for any future acquisitions. As of
the date of this prospectus, we have no agreement to enter into any material
investment or acquisition transaction.

FUTURE ACQUISITIONS MAY RESULT IN DILUTION TO OUR CURRENT SHAREHOLDERS.

     In the future we may acquire complementary business through the issuance of
additional ordinary shares. Additional issuances of ordinary shares could
decrease the value of our ordinary shares and reduce the net tangible book value
per share. Consequently, an acquisition in which we issue additional shares
could actually decrease the value of your investment in ClickSoftware. As of the
date of this prospectus, we have no agreement to enter into any material
acquisition which would result in the issuance of additional shares.

OUR BUSINESS MAY BECOME INCREASINGLY SUSCEPTIBLE TO NUMEROUS RISKS ASSOCIATED
WITH INTERNATIONAL OPERATIONS.

     A significant portion of our operations occur outside the United States.
Our facilities are located in North America, Israel and the United Kingdom and
our executive officers and other key employees are dispersed throughout the
world. This geographic dispersion requires significant management resources that

                                       15
<PAGE>   17

may place us at a disadvantage compared to our locally-based competitors. In
addition, our international operations are generally subject to a number of
risks, including:

     - foreign currency exchange rate fluctuations;

     - longer sales cycles;

     - multiple, conflicting and changing governmental laws and regulations;

     - expenses associated with customizing products for foreign countries;

     - protectionist laws and business practices that favor local competition;

     - difficulties in collecting accounts receivable; and

     - political and economic instability.

     We received approximately 32% of our total revenues in the year ended
December 31, 1999 and 21% of our total revenues in the three months ended March
31, 2000 from licenses and services sold to clients located outside of North
America. We expect international revenues to continue to account for a
significant percentage of total revenues in the future 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.

RISKS RELATED TO OUR LOCATION IN ISRAEL

WE ARE INCORPORATED IN ISRAEL AND HAVE IMPORTANT FACILITIES AND RESOURCES
LOCATED IN ISRAEL WHICH COULD BE NEGATIVELY AFFECTED DUE TO MILITARY OR
POLITICAL TENSIONS.

     We are incorporated under the laws of the State of Israel and our research
and development facilities as well as significant executive offices are located
in Israel. Although a substantial portion of our sales currently are being made
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. We could be adversely affected by any major hostilities involving
Israel, the interruption or curtailment of trade between Israel and its trading
partners, a significant increase in inflation, or a significant downturn in the
economic or financial condition of Israel. Despite the progress towards peace
between Israel and its Arab neighbors, the future of these peace efforts is
uncertain. Several Arab countries still restrict business with Israeli companies
which may limit our ability to make sales in those countries. We could be
adversely affected by restrictive laws or policies directed towards Israel or
Israeli businesses.

CERTAIN OF OUR OFFICERS AND EMPLOYEES ARE REQUIRED TO SERVE IN THE ISRAEL
DEFENSE FORCES AND THIS COULD FORCE THEM TO BE ABSENT FROM OUR BUSINESS FOR
EXTENDED PERIODS.

     David Schapiro, our Vice President and General Manager, product development
group, and Hannan Carmeli, our Vice President and General Manager, ClickFix, as
well as other male employees located in Israel are currently obligated to
perform up to 39 days of annual reserve duty in the Israel Defense Forces and
are subject to being called for active military duty at any time. The loss or
extended absence of any of our officers and key personnel due to these
requirements could harm our business.

WE ARE SUBJECT TO A RECENTLY ADOPTED NEW COMPANIES LAW WHICH HAS NOT YET BEEN
INTERPRETED.

     Because we are incorporated under the laws of the State of Israel, your
rights as a shareholder will be governed by the Companies Law of Israel which
became effective on February 1, 2000. Certain obligations

                                       16
<PAGE>   18

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

THE RATE OF INFLATION IN ISRAEL MAY NEGATIVELY IMPACT OUR COSTS IF IT EXCEEDS
THE RATE OF DEVALUATION OF THE NIS AGAINST THE DOLLAR.

     Substantially all of our revenues are denominated in dollars or are
dollar-linked, but we incur a portion of our expenses, principally salaries and
related personnel expenses in Israel, in NIS. In 1999, 34%, and in the three
months ended March 31, 2000, 31%, of our costs were incurred in NIS. As a
result, we are exposed to the risk that the rate of inflation in Israel will
exceed the rate of devaluation of the NIS in relation to the dollar or that the
timing of this devaluation will lag behind inflation in Israel. In that event,
the dollar cost of our operations in Israel will increase and our
dollar-measured results of operations will be adversely affected. In 1998, the
rate of devaluation of the NIS against the dollar exceeded the rate of inflation
in Israel which benefited us. However, we cannot assure you that this reversal
will continue or that we will not be materially adversely affected in the future
if the rate of inflation in Israel exceeds the devaluation of the NIS against
the dollar or if the timing of this devaluation lags behind increases in
inflation in Israel. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Impact of Inflation and Currency
Fluctuations."

THE GOVERNMENT PROGRAMS IN WHICH WE CURRENTLY PARTICIPATE AND TAX BENEFITS WHICH
WE CURRENTLY RECEIVE REQUIRE US TO SATISFY PRESCRIBED CONDITIONS AND MAY BE
TERMINATED OR REDUCED IN THE FUTURE. THIS WOULD INCREASE OUR COSTS AND TAXES.

     We receive grants from the Government of the State of Israel through the
Office of the Chief Scientist of the Ministry of Industry and Trade, or the
Chief Scientist, for the financing of a significant portion of our research and
development expenditures in Israel and we may apply for additional grants in the
future. In 1998 and in 1999, we received or accrued grants from the Chief
Scientist totaling approximately $0.9 million and $1.0 million respectively,
representing 27% and 26% of our total research and development expenditures in
these years. In the three months ended March 31, 2000, we received or accrued
grants from the Chief Scientist totaling approximately $0.1 million,
representing 7% of our total research and development expenditures in this
quarter. We cannot assure you that we will continue to receive grants at the
same rate or at all. The Chief Scientist budget has been subject to reductions
which may affect the availability of funds for Chief Scientist grants in the
future. The percentage of our research and development expenditures financed
using grants from the Chief Scientist may decline in the future, and the terms
of such grants may become less favorable. In connection with research and
development grants received from the Chief Scientist, we must make royalty
payments to the Chief Scientist on the revenues derived from the sale of
products, technologies and services developed with the grants from the Chief
Scientist. The amount of the grants received since inception are approximately
$3.2 million in respect of which we have already paid $0.9 million, out of a
total of $3.5 million, due to the Chief Scientist in the form of royalties. We
expect to pay or accrue additional royalties for the year 2000 at a rate equal
to 3% of our total revenues. In addition, our ability to manufacture products or
transfer technology outside Israel without the approval of the Chief Scientist
is restricted under law. Any manufacture of products or transfer of technology
outside Israel will also require the company to pay increased royalties to the
Chief Scientist up to 300%. We currently conduct all of our manufacturing
activities in Israel and intend to continue doing so in the foreseeable future
and therefore do not believe there will be any increase in the amount of
royalties we pay to the Chief Scientist. Additionally, the licensing of our
software in the ordinary course of business is not considered a transfer of
technology by the Office of the Chief Scientist and we do not intend to transfer
any technology outside of Israel. Consequently, we do not anticipate having to
pay increased royalties to the Chief Scientist for the foreseeable future. In
connection with our grant applications, we have made representations and
covenants
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<PAGE>   19

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 any 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 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. A warning
letter regarding our latest program was issued to us alleging that we have
partially performed the program and therefore we may not be entitled to receive
the benefits under that program. We currently believe that we will be entitled
to receive these benefits, although there can be no assurances that we will be
able to do so at this time. 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. See
"Taxation and Foreign Exchange Regulation -- Israel Tax Considerations and
Foreign Exchange Regulation -- Tax Benefits Under the Law of Encouragement of
Capital Investments, 1959."

PROPOSED TAX REFORM IN ISRAEL MAY REDUCE OUR TAX BENEFITS.

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

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 PROSPECTUS 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 prospectus reside outside of the United States and a
significant portion of our assets and the assets of these persons are located
outside the United States. Therefore, it may be difficult for an investor, or
any other person or entity, to enforce a U.S. court judgment based upon the
civil liability provisions of the U.S. federal securities laws in an Israeli
court against us or any of those persons or to effect service of process upon
these persons in the United States. Additionally, it may be difficult for an
investor, or any other person or entity, to enforce civil liabilities under U.S.
federal securities laws in original actions instituted in Israel. We have
appointed ClickSoftware Inc., our U.S. subsidiary, as our agent to receive
service of process in any action against us arising out of this 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 judgement is enforced
by an Israeli court, it will be payable in NIS. See "Enforceability of Civil
Liabilities."

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<PAGE>   20

RISKS RELATED TO THIS OFFERING

OUR OFFICERS, DIRECTORS AND AFFILIATED ENTITIES OWN A LARGE PERCENTAGE OF OUR
COMPANY AND COULD SIGNIFICANTLY INFLUENCE THE OUTCOME OF ACTIONS.


     As of March 31, 2000, our executive officers, directors and entities
affiliated with them beneficially owned approximately 61.2% of our outstanding
ordinary shares and we anticipate that this group will own approximately 51.5%
of our outstanding ordinary shares following the completion of this offering.
These shareholders, if acting together, would be able to significantly influence
all matters requiring approval by our shareholders, including the election of
directors. This concentration of ownership may also have the effect of delaying
or preventing a change of control of our company, which could have a material
adverse effect on our stock price. These actions may be taken even if they are
opposed by our other investors, including those who purchase shares in this
offering. Please see "Management -- Election of Directors"; "-- Anti-Takeover
Provisions; Mergers and Acquisitions Under Israel Law."


MANAGEMENT WILL HAVE DISCRETION OVER THE USE OF PROCEEDS FROM THIS OFFERING, HAS
NO SPECIFIC PLANS FOR THOSE PROCEEDS AND COULD SPEND OR INVEST THOSE PROCEEDS IN
WAYS WITH WHICH INVESTORS MIGHT NOT AGREE.

     We do not have a definitive quantified plan with respect to the use of the
net proceeds of this offering. Accordingly, our management will have broad
discretion with respect to the use of the net proceeds from this offering, and
investors will be relying on the judgment of our management regarding the
application of these proceeds. Some of the uses we currently anticipate include
working capital and general corporate purposes, including increased spending on
sales and marketing, professional services, research and development and
expansion of our operational and administrative infrastructure. In addition, we
may use a portion of the net proceeds to acquire or invest in complementary
businesses, technologies, product lines or products. These investments may not
yield a favorable return.

THE LIQUIDITY OF OUR ORDINARY SHARES IS UNCERTAIN SINCE THEY HAVE NOT BEEN
PUBLICLY TRADED.

     There has not been a public market for our ordinary shares. We cannot
predict the extent to which investor interest in our company will lead to the
development of an active, liquid trading market. Active trading markets
generally result in lower price volatility and more efficient execution of buy
and sell orders for investors. The initial public offering price for the
ordinary shares will be determined by negotiations between us and the
underwriters and may not be indicative of prices that will prevail in the
trading market.

WE EXPECT TO EXPERIENCE VOLATILITY IN OUR SHARE PRICE WHICH COULD NEGATIVELY
AFFECT YOUR INVESTMENT.

     You may not be able to resell your shares at or above the initial public
offering price due to a number of factors, including:

     - announcements of technological innovations;

     - announcements relating to strategic relationships;

     - conditions affecting the software and Internet industries; and

     - trends related to the fluctuations of stock prices of Israeli companies.

     The trading price of our ordinary shares may be volatile. The market for
technology and Internet-related companies has experienced extreme volatility
that often has been unrelated to the operating performance of particular
companies. These fluctuations may adversely affect the trading price of our
ordinary shares, regardless of our actual operating performance.

                                       19
<PAGE>   21

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
a merger or other acquisition of us, even if doing so would be beneficial to our
shareholders. In addition, any merger or acquisition of us will require the
prior consent of the Chief Scientist. See "Description of Share
Capital -- Anti-Takeover Provisions; Mergers and Acquisitions under Israeli
Law." See "Description of Share Capital -- Provisions Affecting Potential Change
of Control."

     Israeli law regulates mergers, votes required to approve a merger,
acquisition of shares through tender offers and transactions involving
significant shareholders. In addition, our articles of association provide for a
staggered board of directors and for restrictions on business combinations with
interested shareholders. Any of these provisions may make it more difficult to
acquire our company. See "Management -- Election of Directors" and "Description
of Share Capital." 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.


     After this offering, we will have 24,979,543 ordinary shares outstanding,
including shares held by a trustee for issuance under some outstanding options,
assuming no exercise of the underwriters' overallotment option. In addition, as
of March 31, 2000, we had 1,938,493 ordinary shares issuable upon exercise of
outstanding options and warrants, and 3,475,400 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 following this offering, the price of our ordinary shares could
fall dramatically. Restrictions under the securities laws and certain lock-up
agreements limit the number of ordinary shares available for sale by our
shareholders in the public market. We and the beneficial holders, or trustees
issuing shares to optionholders, of 20,973,303 ordinary shares and options and
warrants exercisable into an aggregate of 1,598,893 ordinary shares have agreed
not to sell ordinary shares or any securities convertible into or exercisable
for ordinary shares for 180 days after this offering without the prior consent
of Lehman Brothers. After the expiration of this 180 day period, these shares
will be available for sale in the public market of varying times subject to
compliance with applicable laws. Lehman Brothers may, in its sole discretion,
release all or any portion of the securities subject to such lock-up agreements
prior to the end of the 180 day period. The holders of options exercisable into
an aggregate of 324,600 additional ordinary shares hold options which will not
be exercisable within 180 days of the date of this prospectus. We intend to file
a Registration Statement on Form S-8 to register for resale the ordinary shares
reserved for issuance under our stock option plans after the consummation of
this offering and some of our shareholders have registration rights. See "Shares
Eligible for Future Sale."


OUR NEED FOR ADDITIONAL FINANCING IS UNCERTAIN, AS IS OUR ABILITY TO RAISE
FURTHER FINANCING IF REQUIRED.

     We currently anticipate that our available cash resources, combined with
the net proceeds from this offering, will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least twelve months
after the date of this prospectus. We may need to raise additional funds,
however, to respond to business contingencies which may include the need to:

     - fund more rapid expansion;

     - fund additional marketing expenditures;

     - develop new or enhance existing products and services;

     - enhance our operating infrastructure;

     - hire additional personnel;

     - respond to competitive pressures; or

     - acquire complementary businesses or necessary technologies.

                                       20
<PAGE>   22

     If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of our shareholders will
be reduced, and these newly-issued securities may have rights, preferences or
privileges senior to those of existing shareholders, including those acquiring
shares in this offering. We cannot assure you that additional financing will be
available on terms favorable to us, or at all. If adequate funds are not
available or are not available on acceptable terms, our ability to fund our
operations, take advantage of unanticipated opportunities, develop or enhance
our products and services or otherwise respond to competitive pressures would be
significantly limited. Additionally, prior to the issuance of additional equity
or convertible debt securities to entities outside of Israel, we will need to
obtain approval from the Chief Scientist of the State of Israel and there can be
no assurance that we will be able to obtain this consent in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Grants from the Government of the State of Israel."

YOU WILL EXPERIENCE IMMEDIATE AND SIGNIFICANT DILUTION OF BOOK VALUE PER SHARE.


     The initial public offering price of our ordinary shares will be
substantially higher than the net tangible book value per share of the
outstanding ordinary shares immediately after this offering. Based upon the
initial public offering price of $7.00 per share, if you purchase our ordinary
shares in this offering, you will incur immediate dilution of $5.76 per share in
the pro forma net tangible book value per share from the price you pay for
ordinary shares in this offering.


IF WE ARE CHARACTERIZED AS A PASSIVE FOREIGN INVESTMENT COMPANY, OUR UNITED
STATES SHAREHOLDERS WILL BE SUBJECT TO ADVERSE TAX CONSEQUENCES.

     If, for any taxable year, our passive income, or our assets which produce
passive income, exceed specified levels, we may be characterized as a passive
foreign investment company for United States federal income tax purposes. We do
not currently anticipate that this will happen, but, if it does, our
shareholders will be subject to adverse United States tax consequences.
Prospective investors should consult with their own tax advisors with respect to
the tax consequences applicable to them of investing in our ordinary shares. See
"United States Federal Income Tax Considerations."

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     We make many statements in this prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere that are
forward-looking and are not based on historical facts. These statements relate
to our future plans, objectives, expectations and intentions. We may identify
these statements by the use of words such as "believe," "expect," "will,"
"anticipate," "intend" and "plan" and similar expressions. These forward-looking
statements involve a number of risks and uncertainties. Our actual results could
differ materially from those anticipated in these forward-looking statements as
a result of various factors, including those we discuss in "Risk Factors" and
elsewhere in this prospectus. These forward-looking statements speak only as of
the date of this prospectus, and we caution you not to rely on these statements
without also considering the risks and uncertainties associated with these
statements and our business that are addressed in this prospectus.

                                       21
<PAGE>   23

                                USE OF PROCEEDS


     Our net proceeds from the sale of 4,000,000 ordinary shares in this
offering at the initial public offering price of $7.00 per share, after
deducting the underwriting discounts and commissions and estimated offering
expenses, will be approximately $24,790,000. If the underwriters' over-allotment
option is exercised in full, our net proceeds will be approximately $28,696,000.


     We do not have specific uses committed for most of the net proceeds of this
offering. The size of the offering has been determined primarily based upon our
desire to raise a sufficient amount of capital to afford us significant business
flexibility in the future.

     The principal purposes of this offering are:

     - to obtain additional working capital;

     - to create a public market for our ordinary shares;

     - to facilitate future access to public equity markets; and

     - to enhance our ability to use our shares to make future acquisitions due
       to the fact that our shares will be publicly traded.

     We expect to use the net proceeds of the offering for working capital and
general corporate purposes, including increased spending on sales and marketing,
professional services, research and development and expansion of our operational
and administrative infrastructure. In addition, we may use a portion of the net
proceeds to acquire or invest in complementary businesses, technologies, product
lines or products. However, we have no current plans, agreements or commitments
with respect to any such acquisition, and we are not currently engaged in any
negotiations with respect to any such transaction. The amount we actually spend
for these purposes may vary significantly and will depend on a number of
factors, including our future revenue and cash generated by operations and the
other factors described in "Risk Factors." Therefore, we will have broad
discretion in the way we use the net proceeds.

     Pending other uses, we intend to invest the net proceeds of this offering
in interest-bearing short-term investments or bank deposits. Any investments or
bank deposits in Israel will have interest and principal linked to a non-Israeli
currency or the consumer price index in Israel.

                                DIVIDEND POLICY

     We have never paid cash dividends to our shareholders and we currently do
not intend to pay dividends for the foreseeable future. We intend to reinvest
earnings in the development and expansion of our business. We currently intend
to reinvest the amount of tax exempt income derived from our "Approved
Enterprise" and not to distribute such income as dividends. We may only pay cash
dividends in any fiscal year out of "profits," as determined under Israeli law.
One of our lines of credit prohibits us from paying dividends or making other
distributions. See "Management's Discussion and Analysis -- Liquidity and
Capital Resources."

     Because of our investment program's Approved Enterprise status, the payment
of dividends by us may be subject to Israeli taxes to which it would not
otherwise be subject. The tax exempt income attributable to the Approved
Enterprise can be distributed to shareholders without subjecting us to taxes
only upon a complete liquidation. If we decide to distribute cash dividends out
of income that has been exempt from tax, the income out of which the dividend is
distributed will be subject to Israeli corporate tax.

     In the event we declare dividends in the future, we will pay those
dividends in U.S. dollars. Under current Israeli regulations, any dividends or
other distributions paid in respect of ordinary shares, may be freely paid in
non-Israeli currencies at the rate of exchange prevailing at the time of
conversion (provided that Israeli income tax has been paid on or withheld from
such dividends). Because exchange rates between NIS and the dollar fluctuate
continuously, a U.S. shareholder will be subject to currency fluctuation between
the date when the dividends are declared and the date the dividends are paid.

                                       22
<PAGE>   24

                                 CAPITALIZATION

     The following table sets forth our capitalization as of March 31, 2000:

     - on an actual basis;


     - on a pro forma basis, after giving effect to the conversion of all
       outstanding preferred shares into ordinary shares; and



     - on a pro forma as adjusted basis to give effect to the receipt of the
       estimated net proceeds from the sale of 4,000,000 ordinary shares offered
       hereby at the initial public offering price of $7.00 per share.



<TABLE>
<CAPTION>
                                                                    AS OF MARCH 31, 2000
                                                            ------------------------------------
                                                                                      PRO FORMA
                                                             ACTUAL     PRO FORMA    AS ADJUSTED
                                                            --------    ---------    -----------
                                                                       (IN THOUSANDS)
<S>                                                         <C>         <C>          <C>
Current portion of long-term obligations..................  $    194    $    194      $    194
                                                            ========    ========      ========
Long-term obligations, excluding current portion..........  $    156    $    156      $    156
                                                            --------    --------      --------
Shareholders' equity:
  Preferred shares, NIS 0.02 par value: 17,333,623 shares
     authorized, 13,499,898 shares issued and outstanding
     actual; 5,000,000 shares authorized, no shares issued
     and outstanding pro forma and pro forma as
     adjusted.............................................        60          --            --
  Ordinary shares, NIS 0.02 par value: 82,666,377 shares
     authorized, 7,479,645 shares issued and outstanding
     actual; 100,000,000 shares authorized, 20,979,543
     shares issued and outstanding on a pro forma basis,
     and 24,979,543 shares issued and outstanding on a pro
     forma as adjusted basis..............................        14          74            94
Additional paid in capital................................    40,385      40,385        65,155
Deferred compensation.....................................    (2,308)     (2,308)       (2,308)
Accumulated deficit.......................................   (31,993)    (31,993)      (31,993)
                                                            --------    --------      --------
Total shareholders' equity................................     6,158       6,158        30,948
                                                            --------    --------      --------
Total capitalization......................................  $  6,314    $  6,314      $ 31,104
                                                            ========    ========      ========
</TABLE>


     This table excludes the following:

     - 1,544,941 shares underlying options outstanding as of March 31, 2000 at a
       weighted exercise price of $2.99 per share;

     - 393,552 shares subject to warrants outstanding as of March 31, 2000 at a
       weighted exercise price of $1.96 per share;

     - 2,675,400 ordinary shares available for future grants under our 2000
       Share Option Plans subject to an automatic increase of the lesser of 5%
       of the then outstanding shares or 1,250,000 shares annually; and

     - 800,000 ordinary shares available for issuance under our 2000 Employee
       Share Purchase Plan subject to an automatic increase of the lesser of 2%
       of the then outstanding shares or 500,000 shares annually.

     Since March 31, 2000, we have issued additional options to three directors
to purchase 80,000 ordinary shares in the aggregate at an exercise price of
$10.00 per share. As of March 31, 2000, we also had additional outstanding
employee options to purchase 939,039 ordinary shares at a weighted average
exercise price of $0.58 per share. All the underlying shares to be issued upon
exercise of these options are issued and held by a trustee and were included in
the ordinary shares outstanding.

                                       23
<PAGE>   25

                                    DILUTION


     Our pro forma net tangible book value as of March 31, 2000 was $6.2 million
or approximately $0.29 per share. Pro forma net tangible book value per share
represents the amount of our total tangible assets less total liabilities,
divided by the number of ordinary shares outstanding. Dilution in pro forma net
tangible book value per share represents the difference between the amount per
share paid by purchasers of ordinary shares in the offering made hereby and the
pro forma net tangible book value per ordinary share immediately after the
completion of this offering. After giving effect to the sale of the 4,000,000
ordinary shares offered by us hereby at the initial public offering price of
$7.00 per share and after deducting the underwriting discount and estimated
offering expenses payable by us, our pro forma net tangible book value at March
31, 2000 would have been $30.9 million or approximately $1.24 per share. This
represents an immediate increase in pro forma net tangible book value of $0.95
per share to existing shareholders and an immediate dilution in net tangible
book value of $5.76 per share to new investors in this offering. The following
table illustrates this dilution on a per share basis:



<TABLE>
<S>                                                           <C>     <C>
Initial public offering price per share.....................          $7.00
     Pro forma net tangible book value per share as of March
       31, 2000.............................................  $0.29
     Increase per share attributable to new investors.......   0.95
                                                              -----
Pro forma net tangible book value per share after the
  offering..................................................           1.24
                                                                      -----
Dilution in net tangible book value per share to new
  investors.................................................          $5.76
                                                                      =====
</TABLE>



     The following table sets forth on a pro forma basis, as of March 31, 2000,
after giving effect to the automatic conversion upon the closing of the offering
of all our outstanding preferred shares into 13,499,898 ordinary shares, the
total number of ordinary shares purchased from us, the total consideration paid
and the average price per share paid by existing holders of ordinary shares and
by the new investors, before deducting the underwriting discount and estimated
offering expenses payable by us, at the initial public offering price of $7.00
per share.



<TABLE>
<CAPTION>
                                         SHARES PURCHASED        TOTAL CONSIDERATION       AVERAGE
                                      ----------------------    ----------------------      PRICE
                                        NUMBER       PERCENT      AMOUNT       PERCENT    PER SHARE
                                      -----------    -------    -----------    -------    ---------
<S>                                   <C>            <C>        <C>            <C>        <C>
Existing shareholders...............   20,979,543       84%     $32,069,000       53%       $1.53
New public investors................    4,000,000       16       28,000,000       47         7.00
                                      -----------      ---      -----------      ---
     Total..........................   24,979,543      100%     $60,069,000      100%
                                      ===========      ===      ===========      ===
</TABLE>


     This table excludes the following:

     - 1,544,941 shares underlying options outstanding as of March 31, 2000 at a
       weighted exercise price of $2.99 per share;

     - 393,552 shares subject to warrants outstanding as of March 31, 2000 at a
       weighted exercise price of $1.96 per share;

     - 2,675,400 ordinary shares available for future grants under our 2000
       Share Option Plans subject to an automatic increase of the lesser of 5%
       of the then outstanding shares or 1,250,000 shares annually; and

     - 800,000 ordinary shares available for issuance under our 2000 Employee
       Share Purchase Plan subject to an automatic increase of the lesser of 2%
       of the then outstanding shares or 500,000 shares annually.

     Since March 31, 2000, we have issued additional options to three directors
to purchase 80,000 ordinary shares in the aggregate at an exercise price of
$10.00 per share. As of March 31, 2000, we also had additional outstanding
employee options to purchase 939,039 ordinary shares at a weighted average
exercise price of $0.58 per share. All the underlying shares to be issued upon
exercise of these options are issued and held by a trustee and were included in
the ordinary shares outstanding.

                                       24
<PAGE>   26

                      SELECTED CONSOLIDATED FINANCIAL DATA

     The selected consolidated statement of operations data for the years ended
December 31, 1997, 1998 and 1999 and the selected consolidated balance sheet
data as of December 31, 1998 and 1999 have been derived from our audited
financial statements included elsewhere in this prospectus. The consolidated
statements of operations data for the years ended December 31, 1995 and 1996 and
the selected consolidated balance sheet data as of December 31, 1995, 1996 and
1997 are derived from audited consolidated financial statements that are not
included herein. For the years ended December 31, 1995 and 1996 the audited
financial statements were adjusted to eliminate the results of operations of two
divisions, our Nester and Systems divisions, that were spun off from our
operations in 1997. Therefore the numbers presented here for 1995 and 1996
represent unaudited adjusted numbers for these periods. The consolidated
statement of operations data for the three months ended March 31, 1999 and 2000
and the consolidated balance sheet data at March 31, 2000 are derived from
unaudited interim financial statements that have been prepared on a basis
consistent with our audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, that we consider necessary for
a fair presentation of our financial position and results of operations at those
dates. These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States. Operating results
for the three months ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. The
historical results are not necessarily indicative of results to be expected for
any future period. 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
prospectus.


<TABLE>
<CAPTION>
                                                                                                           THREE MONTHS ENDED
                                                            YEAR ENDED DECEMBER 31,                             MARCH 31,
                                        ---------------------------------------------------------------   ---------------------
                                           1995         1996         1997         1998         1999        1999        2000
                                        ----------   ----------   ----------   ----------   -----------   -------   -----------
                                                (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)                 (UNAUDITED)
<S>                                     <C>          <C>          <C>          <C>          <C>           <C>       <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
  Software license....................  $    2,111   $    1,491   $    1,235   $    3,932   $     5,414   $   758   $     2,126
  Service and maintenance.............       1,660        1,893        1,080        2,139         4,912     1,271         1,385
                                        ----------   ----------   ----------   ----------   -----------   -------   -----------
    Total revenues....................       3,771        3,384        2,315        6,071        10,326     2,029         3,511
Cost of revenues:
  Software license....................          21           14           13           25            71         7           110
  Service and maintenance.............       1,387        1,458        1,035        2,301         4,299       925         1,213
                                        ----------   ----------   ----------   ----------   -----------   -------   -----------
    Total cost of revenues............       1,408        1,472        1,048        2,326         4,370       932         1,323
                                        ----------   ----------   ----------   ----------   -----------   -------   -----------
Gross profit..........................       2,363        1,912        1,267        3,745         5,956     1,097         2,188
Operating expenses:
  Research and development expenses,
    net...............................         858          862        1,339        2,284         2,910       553         1,064
  Sales and marketing expenses........       1,848        2,184        3,172        6,019         8,274     1,894         3,174
  General and administrative
    expenses..........................         672        1,025        1,120        1,333         1,759       423           952
  Share based compensation............          --           --           --           --           738        26           355
                                        ----------   ----------   ----------   ----------   -----------   -------   -----------
    Total operating expenses..........       3,378        4,071        5,631        9,636        13,681     2,896         5,545
                                        ----------   ----------   ----------   ----------   -----------   -------   -----------
Loss from operations..................      (1,015)      (2,159)      (4,364)      (5,891)       (7,725)   (1,799)       (3,357)
Interest and other (expenses) income,
  net.................................        (210)        (278)        (148)          33          (254)      (22)           (5)
                                        ----------   ----------   ----------   ----------   -----------   -------   -----------
Net loss..............................  $   (1,225)  $   (2,437)  $   (4,512)  $   (5,858)  $    (7,979)  $(1,821)  $    (3,352)
                                        ==========   ==========   ==========   ==========   ===========   =======   ===========
Dividend related to convertible
  preferred shares....................  $       --   $       --   $       --   $       --   $    (4,989)  $    --   $        --
                                        ==========   ==========   ==========   ==========   ===========   =======   ===========
Net loss attributable to ordinary
  shareholders........................  $   (1,225)  $   (2,437)  $   (4,512)  $   (5,858)  $   (12,968)  $(1,821)  $    (3,352)
                                        ==========   ==========   ==========   ==========   ===========   =======   ===========
Net loss per ordinary share...........  $    (0.24)  $    (0.47)  $    (0.80)  $    (0.99)  $     (2.18)            $     (0.56)
Shares used in computing basic and
  diluted net loss per share..........   5,081,265    5,216,705    5,657,728    5,914,735     5,948,816               6,001,896
Pro forma basic and diluted net loss
  per share (unaudited)...............                                                      $     (0.73)            $     (0.17)
Shares used in computing pro forma
  basic and diluted net loss per share
  (unaudited).........................                                                       17,692,964              19,501,794
</TABLE>


<TABLE>
<CAPTION>
                                                                               DECEMBER 31,                    MARCH 31,
                                                              ----------------------------------------------   ---------
                                                               1995      1996      1997      1998     1999       2000
                                                              -------   -------   -------   ------   -------   ---------
                                                                              (IN THOUSANDS)
<S>                                                           <C>       <C>       <C>       <C>      <C>       <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................................  $    72   $   104   $   301   $3,770   $ 7,838    $ 4,739
Working capital.............................................   (1,180)   (2,770)     (604)   4,178     8,007      5,149
Total assets................................................    2,683     1,866     2,604    7,983    14,195     10,801
Long-term liabilities, net of current portion...............    1,334     1,954     1,530    1,254     1,112      1,171
Shareholders' equity (net capital deficiency)...............   (1,416)   (3,954)   (3,177)   4,657     8,821      6,158
</TABLE>

                                       25
<PAGE>   27

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

OVERVIEW

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

     We believe that in today's economy successful businesses must provide
customer service over the Internet and increase the performance of their
existing service resources. In response to this need, we repositioned our
products to emphasize that they enable our clients to offer self-scheduling
capabilities and automated diagnostic and repair capabilities over the Internet.
Accordingly, in September 1999 we began marketing our product lines under new
names, ClickSchedule and ClickFix and in January 2000 we changed our name to
ClickService Software Ltd. In May 2000, we changed our name to ClickSoftware
Technologies Ltd. While some of our clients use the web-based features of our
products in an intranet environment, as of the date of this prospectus, none of
our clients is currently offering Internet self-scheduling options to its
customers. As of the date of this prospectus, three of our clients are
implementing our solutions to offer Internet self-scheduling options to their
customers.

     In conjunction with the repositioning of our ClickSchedule and ClickFix
product lines, we introduced additional software license pricing structures to
our clients. Until November 1999, our pricing model was based upon an initial
license fee determined by the number of service resources to be scheduled,
followed by periodic maintenance fees. Our new pricing structures include lower
initial license fees followed by monthly payments which are based on either the
number of service resources to be scheduled or the number of scheduling
transactions conducted. We introduced this pricing structure to offer a more
flexible pricing structure for our clients with seasonal businesses and for our
clients which do not schedule their own resources or experience a high degree of
variability in the number of scheduling transactions conducted. We believe that
rapid acceptance of our new pricing structures may reduce the initial amount of
our software license revenues we realize at the time of sale and could cause our
revenue growth to decrease in the short term.

     We derive revenues from software licensing and service and maintenance
fees. Prior to 1997, substantially all of our revenues were derived from
professional service and maintenance fees for customized solutions and related
software license fees. Professional service and maintenance revenues comprised
48% of our total revenues for 1999 and 39% of our total revenues for the three
months ended March 31, 2000. We believe that as our client base matures, and as
an increasing number of existing clients purchase additional licenses, the
percentage of revenues derived from license fees will increase as a percentage
of revenues while the percentage of revenues derived from service and
maintenance fees will increase on an absolute basis but decrease as a percentage
of revenues. Our gross margins on service and maintenance revenues were 12% for
1999 and 12% for the three months ended March 31, 2000, as

                                       26
<PAGE>   28

compared with gross margins on license revenues of 99% for 1999 and 95% for the
three months ended March 31, 2000.

     Our operating history shows that a significant percentage of our quarterly
revenues come from orders placed toward the end of a quarter. For example, in
the year ended December 31, 1999, an average of 41% of recognized revenue was
realized in the last two weeks of each quarter and in the three months ended
March 31, 2000, 57% of realized revenue was recognized in the last two weeks of
the quarter. A delay in the completion of a sale past the end of a particular
quarter could negatively impact results for that quarter. In addition, we expect
that revenues in the first quarter of each year will be lower than in the last
quarter of the previous year primarily due to the seasonality resulting from our
current and prospective clients' budgetary, procurement and sales cycles. As of
December 31, 1999, we had outstanding trade receivables of approximately $4.0
million which represented approximately 38% of 1999 total revenues. As of March
31, 2000, we had outstanding trade receivables of approximately $3.2 million.
Our trade receivables typically have 30 to 60 day terms, although we also
negotiate longer payment plans with some of our clients.

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

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

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

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

     Research and development expenses consist primarily of personnel costs to
support product development, net of grants received from the Chief Scientist.
These personnel expenses accounted for 83% of gross research and development
expenses for the year ended December 31, 1999 and 86% for the three months ended
March 31, 2000. In return for some of these grants, we are obligated to pay the
Israeli Government royalties as described below which are included in sales and
marketing expenses. Software research and development costs incurred prior to
the establishment of technology feasibility are included in research and
development expenses as incurred.

     Personnel and related costs, primarily from our direct sales force and
marketing staff, comprised 56% of our sales and marketing expenses for the year
ended December 31, 1999 and 58% for the three months ended March 31, 2000.
Marketing programs, including advertising, public relations, trade shows and
promotional events comprised 44% of our sales and marketing expenses for the
year ended December 31, 1999 and 42% for the three months ended March 31, 2000,
net of grants received from the Fund for the

                                       27
<PAGE>   29

Encouragement of Marketing Activities established by the Government of Israel.
In return for these grants, we are obligated to pay the Israeli Government
royalties as described below. We expect that sales and marketing expenses will
increase on an absolute basis over the next year, as we hire additional sales
and marketing personnel, continue to promote our brand and our new corporate
name, continue our Internet initiative and increase our international sales
efforts.

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

     Share based compensation represents the aggregate difference, at the date
of grant, between the respective exercise price of stock options and the deemed
fair market value of the underlying stock. Share based compensation is amortized
over the vesting period of the underlying options, generally four years. We
recorded deferred share based compensation totaling $3.4 million for the year
ended December 31, 1999. We expensed share based compensation of $0.7 million in
the year ended December 31, 1999 and $0.4 million in the three months ended
March 31, 2000. The total deferred compensation of $2.3 million recorded as of
March 31, 2000 will be amortized as follows: $1.0 million in the year ended
December 31, 2000; $0.8 million in the year ended December 31, 2001; $0.4
million in the year ended December 31, 2002; and $0.1 million in the year ended
December 31, 2003. As of March 31, 2000, no additional deferred compensation was
recorded.

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


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


     In 1997, 36% of our revenues were generated in North America, 25% in
Europe, 29% in Israel and 10% in Singapore. In 1998, 71% of our revenues were
generated in North America, 20% in Europe, 8% in Israel and 1% in Singapore. In
1999, 67% of our revenues were generated in North America, 21% in Europe, 9% in
Israel and 3% in Singapore. In the three months ended March 31, 2000, 79% of our
revenues were generated in North America, 14% in Europe, 3% in Israel and 4% in
Singapore. Additionally, as of December 31, 1998 we had long-lived assets in
North America of $220,000, in Europe of $47,000 and Israel of $973,000. As of
December 31, 1999 we had long-lived assets in North America of $352,000, in
Europe of $94,000 and Israel of $1.1 million. As of March 31, 2000, we had
long-lived assets in North America of $385,000 in Europe of $112,000 and in
Israel of $1.2 million. See also Note 5 to the Consolidated Financial
Statements.

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

     The effects of foreign currency exchange rates on our results of operations
for the years ended December 31, 1997, 1998 and 1999 and for the three months
ended March 31, 1999 and March 31, 2000 were immaterial.

                                       28
<PAGE>   30

RESULTS OF OPERATIONS

     Our historical operating results for each of the three years ended December
31, 1997, 1998 and 1999 and for the three months ended March 31, 1999 and March
31, 2000 as a percentage of total revenues are as follows:


<TABLE>
<CAPTION>
                                                                                    THREE MONTHS
                                                                                        ENDED
                                                       YEAR ENDED DECEMBER 31,        MARCH 31,
                                                      -------------------------     -------------
                                                      1997      1998      1999      1999     2000
                                                      -----     -----     -----     ----     ----
<S>                                                   <C>       <C>       <C>       <C>      <C>
Revenues:
  Software license..................................    53%       65%       52%      37%      61%
  Service and maintenance...........................    47        35        48       63       39
                                                      ----       ---      ----      ---      ---
     Total revenues.................................   100       100       100      100      100
Cost of revenues:
  Software licenses.................................    --        --        --       --        3
  Service and maintenance...........................    45        38        42       46       35
                                                      ----       ---      ----      ---      ---
     Total cost of revenues.........................    45        38        42       46       38
                                                      ----       ---      ----      ---      ---
Gross profit........................................    55        62        58       54       62
Operating expenses:
  Research and development expenses, net............    58        38        28       27       30
  Sales and marketing expenses......................   137        99        80       93       90
  General and administrative expenses...............    48        22        17       21       27
  Share based compensation..........................    --        --         7        1       10
                                                      ----       ---      ----      ---      ---
     Total operating expenses.......................   243       159       132      142      157
                                                      ----       ---      ----      ---      ---
Loss from operations................................  (189)      (97)      (75)     (89)     (96)
Interest and other (expenses) income, net...........    (6)        1        (2)      (1)       1
                                                      ----       ---      ----      ---      ---
Net loss............................................  (195)%     (96)%     (77)%    (90)%    (95)%
                                                      ====       ===      ====      ===      ===
Dividend related to convertible preferred shares....    --        --       (48)%     --       --
                                                      ====       ===      ====      ===      ===
Net loss attributable to ordinary shareholders......  (195)%     (96)%    (126)%    (90)%    (95)%
                                                      ====       ===      ====      ===      ===
</TABLE>


  THREE MONTHS ENDED MARCH 31, 1999 AND 2000

     Revenues. Revenues increased $1.5 million or 73% to $3.5 million in the
three months ended March 31, 2000 from $2.0 million in the three months ended
March 31, 1999. Revenues from clients outside North America accounted for 21% of
revenues during the three months ended March 31, 2000, of which 14% were in
Europe, and 26% of revenues during the three months ended March 31, 1999, of
which 19% were in Europe.

     Software License. Software license revenues were $2.1 million or 61% of
revenues in the three months ended March 31, 2000 and $0.8 million or 37% of
revenues in the three months ended March 31, 1999. The increase in software
license revenues was due to a large sale to one client, an increase in our
client base and recurring sales to our installed base of clients.

     Service and Maintenance. Service and maintenance revenues were $1.4 million
or 39% of revenues in the three months ended March 31, 2000 and $1.3 million or
63% of revenues in the three months ended March 31, 1999. The decrease in
service and maintenance revenues as a percentage of revenues for the three
months ended March 31, 2000 from the three months ended March 31, 1999 was due
primarily to increased sales of ClickSchedule software licenses and decreased
implementation times.

     Cost of Revenues. Cost of revenues were $1.3 million or 38% of revenues in
the three months ended March 31, 2000 and $0.9 million or 46% of revenues in the
three months ended March 31, 1999. The

                                       29
<PAGE>   31

increase in the cost of revenues on an absolute basis was due to an increased
number of licenses sold which resulted in an increased demand for our
professional services, as well as an increase in our use of third party
contractors to provide a portion of these services. Gross profit was 62% in the
three months ended March 31, 2000 as compared to 54% in the three months ended
March 31, 1999. These fluctuations are primarily due to increased sales of
software licenses and increased efficiency. The gross margins for our service
and maintenance revenues were 12% for the three months ended March 31, 2000 as
compared to gross margins of 95% for license revenues for the same period.

     Cost of Software Licenses. Cost of software license revenues were $0.1
million or 3% of total revenues in the three months ended March 31, 2000 and
$7,000 or less than 1% of revenues in the three months ended March 31, 1999. The
increase in cost of software license revenues was due to our purchase of third
party software products.

     Cost of Service and Maintenance. Cost of service and maintenance revenues
were $1.2 million or 35% of revenues in the three months ended March 31, 2000
and $0.9 million or 46% of revenues in the three months ended March 31, 1999.
This absolute increase in the cost of service and maintenance revenues from 1999
to 2000 was due to increased professional services required as a result of the
increase in sale of licenses, which resulted in an additional $0.2 million in
personnel related costs, and an increase in the use of third party consultants,
which resulted in an additional $0.1 million in costs. The total number of
professional services employees employed by us was 42 on March 31, 2000 and 27
on March 31, 1999.

     Operating Expenses. Total operating expenses were $5.5 million or 157% of
revenues in the three months ended March 31, 2000 and $2.9 million or 142% of
revenues in the three months ended March 31,1999.

     Research and Development Expenses, Net. Research and development expenses,
net of related grants, were $1.1 million or 30% of revenues in the three months
ended March 31, 2000 and $0.6 million or 27% of revenues in the three months
ended March 31, 1999. We received or accrued grants from the Chief Scientist in
the amounts of $0.1 million in the three months ended March 31, 2000 and $0.3
million in the three months ended March 31, 1999. The increase in research and
development expenses on an absolute basis was due to an increase of $0.3 million
in personnel related costs related to our development of ClickSchedule and
ClickFix product lines. The decrease in grants from the three months ended March
31, 1999 to the three months ended March 31, 2000 is due to pending approvals
grants from the Chief Scientist for the year 2000.

     Sales and Marketing Expenses. Sales and marketing expenses were $3.2
million or 90% of revenues in the three months ended March 31, 2000 and $1.9
million or 93% of revenues in the three months ended March 31, 1999. The
increase in sales and marketing expenses was due to additional sales and
marketing efforts related to the new marketing focus for our ClickSoftware
product lines, which resulted in an increase of $0.9 million of personnel
related costs as well as additional marketing costs. We expect that sales and
marketing expenses will increase on an absolute basis in future periods, as we
hire additional sales and marketing personnel, continue to promote our brand and
establish sales in additional geographic areas. The total number of sales and
marketing employees employed by us was 54 on March 31, 2000 and 31 on March 31,
1999.

     General and Administrative Expenses. General and administrative expenses
were $1 million or 27% of revenues in the three months ended March 31, 2000 and
$0.4 million or 21% of revenues in the three months ended March 31,1999. The
increase in general and administrative expenses is due to a $0.3 million
specific allowance for doubtful accounts and increased personnel costs related
to the growth of our business and operations.

     Share Based Compensation. Share based compensation for the three months
ended March 31, 2000 amounted to approximately $0.4 million of previously
recorded deferred compensation. Share based compensation for the three months
ended March 31, 1999 amounted to $26,000.

                                       30
<PAGE>   32

  Years Ended December 31, 1999, 1998 and 1997

     Revenues.  Revenues increased $4.2 million or 70% to $10.3 million in 1999
from $6.1 million in 1998. In 1998 revenues increased $3.8 million or 162% to
$6.1 million, from $2.3 million in 1997. Revenues from clients outside North
America accounted for 32% of revenues during 1999, of which 21% were in Europe,
29% of revenues during 1998, of which 20% were in Europe and 64% of revenues
during 1997, of which 29% were in Israel, 25% were in Europe and 10% were in
Singapore.

     Software License.  Software license revenues were $5.4 million or 52% of
revenues in 1999, $3.9 million or 65% of revenues in 1998 and $1.2 million or
53% of revenues in 1997. The increase in software license revenues was due to
increased average sales per client, growth of our client base among Internet
access and telecommunication service companies and recurring sales to our
installed base of clients. The decrease in software license revenues as a
percentage of revenues in 1999 was primarily due to the fact that many of our
new implementations require higher initial service and maintenance and a small
number of software licenses.

     Service and Maintenance.  Service and maintenance revenues were $4.9
million or 48% of revenues in 1999, $2.1 million or 35% of revenues in 1998 and
$1.1 million or 47% of revenues in 1997. The increase in service and maintenance
revenues from 1998 to 1999 was primarily due to an increase in the number of our
clients during these periods, and increased sales of professional services
related to ClickSchedule, primarily implementations, that these new clients
require. The increase in service and maintenance revenues from 1997 to 1998 was
due to an increase in the number of our clients.

     Cost of Revenues.  Cost of revenues were $4.4 million or 42% of revenues in
1999, $2.3 million or 38% of revenues in 1998 and $1.0 million or 45% of
revenues in 1997. This increase in the cost of revenues on an absolute basis was
due to an increased number of clients which resulted in an increased demand for
our professional services. Gross profit was 58% in 1999 as compared to 62% in
1998 and 55% in 1997. These fluctuations are primarily due to the changing mix
of service and maintenance revenues compared to software license revenues. Our
service and maintenance revenues have significantly lower gross margins than our
software license revenues.

     Cost of Software Licenses.  Cost of software license revenues were $71,000
in 1999, $25,000 in 1998 and $13,000 in 1997. Cost of software license revenues
were less than 1% of revenues in 1999, 1998 and 1997.

     Cost of Service and Maintenance.  Cost of service and maintenance revenues
were $4.3 million or 42% of revenues in 1999, $2.3 million or 38% of revenues in
1998, and $1.0 million or 45% of revenues in 1997. This increase in the cost of
service and maintenance revenues from 1998 to 1999 was due primarily to an
increase in the sale of licenses, which resulted in an increase of $1.4 million
in personnel related costs, an increase of $0.3 million in third party related
costs and an increase of $0.3 million in other expenses. The total number of
professional services employees employed by us was 35 on December 31, 1999, 23
on December 31, 1998 and 14 on December 31, 1997.

     Operating Expenses.  Total operating expenses were $13.7 million or 132% of
revenues in 1999, $9.6 million or 159% of revenues in 1998 and $5.6 million or
243% of revenues in 1997.

     Research and Development Expenses, Net.  Research and development expenses,
net of related grants, were $2.9 million or 28% of revenues in 1999, $2.3
million or 38% of revenues in 1998 and $1.3 million or 58% of revenues in 1997.
We received or accrued grants from the Chief Scientist in the amounts of $1.0
million in 1999, $0.9 million in 1998 and $0.5 million in 1997. The increase in
research and development expenses on an absolute basis from 1997 to 1998 and
1998 to 1999 was primarily due to an increase of $1.8 million in personnel
related costs related to our ClickSchedule and ClickFix product lines. We are
continuing to invest substantially in research and development, and we expect
that research and development expenses will increase on an absolute basis in the
future.

     Sales and Marketing Expenses.  Sales and marketing expenses were $8.3
million or 80% of revenues in 1999, $6.0 million or 99% of revenues in 1998 and
$3.2 million or 137% of revenues in 1997. The increase in 1999 was primarily due
to additional sales and marketing efforts related to the new marketing

                                       31
<PAGE>   33

focus for our ClickSoftware product line in the fourth quarter and expansion of
our sales and marketing efforts worldwide during 1999. Personnel related costs
increased $1.4 million from 1998 to 1999 and other expenses increased $0.9
million. We expect that sales and marketing expenses will increase on an
absolute basis in future periods, as we hire additional sales and marketing
personnel, continue to promote our brand and establish sales in additional
geographic areas.

     General and Administrative Expenses.  General and administrative expenses
were $1.8 million or 17% of revenues in 1999, $1.3 million or 22% of revenues in
1998 and $1.1 million or 48% of revenues in 1997. We expect that the absolute
dollar amount of general and administrative expenses will continue to increase
as we expand our operations and incur incremental costs of being a public
company.

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

     Interest and Other (Expenses) Income, Net.  Interest expenses, net, were
$0.3 million or 2% of revenues in 1999, income was $33,000 or less than 1% of
revenues in 1998 and expenses were $0.1 million or 6% of revenues in 1997.

     Income Taxes.  As of December 31, 1999, we had approximately $9.8 million
of Israeli net operating loss carryforwards, approximately $10.0 million of U.S.
federal net operating loss carryforwards and approximately $0.7 million of
British net operating loss carryforwards available to offset future taxable
income. The Israeli and British net operating loss carryforwards have no
expiration date. The U.S. net operating loss carryforwards will expire in
various amounts in the years 2008 to 2013.


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


                                       32
<PAGE>   34

QUARTERLY RESULTS OF OPERATIONS

     The following table presents our historical unaudited quarterly results of
operations for the four quarters ended December 31, 1999 and for the quarter
ended March 31, 2000. The 1999 data is unaudited and derived from our audited
annual Consolidated Financial Statements and Notes appearing elsewhere in this
prospectus. The data for the quarter ended March 31, 2000 is unaudited and
derived from our unaudited financial statements appearing elsewhere in this
prospectus. In the opinion of management, such quarterly financial information
has been prepared on the same basis as our annual financial statements and
includes all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial results set forth therein. The
statement of operations data should be read in conjunction with the Consolidated
Financial Statements and Notes in this prospectus. Our results of operations
have fluctuated and are likely to continue to fluctuate significantly from
quarter to quarter. Results of operations for any previous quarter are not
necessarily indicative of results for any future period.


<TABLE>
<CAPTION>
                                                                             THREE MONTHS ENDED
                                               ------------------------------------------------------------------------------
                                               MAR. 31, 1999   JUNE 30, 1999   SEPT. 30, 1999   DEC. 31, 1999   MAR. 31, 2000
                                               -------------   -------------   --------------   -------------   -------------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                            <C>             <C>             <C>              <C>             <C>
Revenues:
  Software license...........................     $   758         $ 1,033         $ 1,352          $ 2,271         $ 2,126
  Service and maintenance....................       1,271           1,308           1,407              926           1,385
                                                  -------         -------         -------          -------         -------
    Total revenues...........................       2,029           2,341           2,759            3,197           3,511
Cost of revenues:
  Software license...........................           7              11               3               50             110
  Service and maintenance....................         925             958           1,156            1,260           1,213
                                                  -------         -------         -------          -------         -------
    Total cost of revenues...................         932             969           1,159            1,310           1,323
                                                  -------         -------         -------          -------         -------
Gross profit.................................       1,097           1,372           1,600            1,887           2,188
Operating expenses:
  Research and development expenses, net.....         553             625             843              889           1,064
  Sales and marketing expenses...............       1,894           1,811           1,993            2,576           3,174
  General and administrative expenses........         423             435             404              497             952
  Share based compensation...................          26              14             622               76             355
                                                  -------         -------         -------          -------         -------
    Total operating expenses.................       2,896           2,885           3,862            4,038           5,545
                                                  -------         -------         -------          -------         -------
Loss from operations.........................      (1,799)         (1,513)         (2,262)          (2,151)         (3,357)
Interest and other (expenses) income, net....         (22)            (65)             85             (252)             (5)
                                                  =======         =======         =======          =======         =======
Net loss.....................................     $(1,821)        $(1,578)        $(2,177)         $(2,403)        $(3,352)
                                                  =======         =======         =======          =======         =======
Dividend related to convertible preferred
  shares.....................................     $    --         $    --         $    --          $(4,989)        $    --
                                                  =======         =======         =======          =======         =======
Net loss attributable to ordinary
  shareholders...............................     $(1,821)        $(1,578)        $(2,177)         $(7,392)        $(3,352)
                                                  =======         =======         =======          =======         =======
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
  Software license...........................          37%             44%             49%              71%             61%
  Service and maintenance....................          63              56              51               29              39
                                                  -------         -------         -------          -------         -------
    Total revenues...........................         100             100             100              100             100
Cost of revenues:
  Software license...........................          --              --              --                2               3
  Service and maintenance....................          46              41              42               39              35
                                                  -------         -------         -------          -------         -------
    Total cost of revenues...................          46              41              42               41              38
                                                  -------         -------         -------          -------         -------
Gross profit.................................          54              59              58               59              62
Operating expenses:
  Research and development expenses, net.....          27              27              31               28              30
  Sales and marketing expenses...............          93              77              72               81              90
  General and administrative expenses........          21              19              15               16              27
  Share based compensation...................           1               1              23                2              10
                                                  -------         -------         -------          -------         -------
    Total operating expenses.................         142             124             141              127             157
                                                  -------         -------         -------          -------         -------
Loss from operations.........................         (89)            (65)            (83)             (68)            (96)
Interest and other (expenses) income, net....          (1)             (3)              3               (8)              1
                                                  -------         -------         -------          -------         -------
Net loss.....................................         (90)%           (68)%           (80)%            (76)%           (95)%
                                                  =======         =======         =======          =======         =======
Dividend related to convertible preferred
  shares.....................................          --              --              --             (156)%            --
                                                  =======         =======         =======          =======         =======
Net loss attributable to ordinary
  shareholders...............................         (90)%           (68)%           (80)%           (231)%           (95)%
                                                  =======         =======         =======          =======         =======
</TABLE>


                                       33
<PAGE>   35

     Our quarterly operating results for the five quarters ended March 31, 2000
were driven by the continued acceptance of our ClickSchedule and ClickFix
product lines, and increased expenses related to these products. Our revenues
have grown on a quarterly basis due to increased sales of software licenses and
related professional services to an expanding base of clients, as well as
increased levels of recurring sales to existing clients. The increase in the
cost of revenues was due primarily to the increase in the number of our
professional services personnel from 23 at the beginning of 1999 to 42 as of
March 31, 2000. In the quarter ended December 31, 1999, the gross margin on
service and maintenance was negative due to the substantial increase in the
number of professional services personnel hired during these periods and was 12%
in the three months ended March 31, 2000. Research and development expenses,
net, increased primarily due to the continued development of our ClickSchedule
and ClickFix product lines. The increase in sales and marketing expenses is
attributable to the new marketing campaign for our ClickSchedule and ClickFix
product lines and costs related to increased sales personnel and spending on
trade shows and media advertising. General and administrative expenses increased
in the fourth quarter of 1999 as well as the first quarter of 2000 primarily due
to greater personnel expenses and costs associated with our anticipated public
offering. In the first quarter of 2000, general and administrative expenses also
increased as a result of a $0.3 million increase in the specific allowance for
doubtful accounts. We intend to further increase our sales and marketing
expenses as we continue to promote our ClickSchedule and ClickFix product lines
and also anticipate general and administrative expenses will increase as a
result of this offering.

     The amount and timing of our operating expenses generally will vary from
quarter to quarter depending on our level of actual and anticipated business
activities. Our revenues and operating results are difficult to forecast and
will fluctuate, and we believe that period-to-period comparisons of our
operating results will not necessarily be meaningful. Additionally, as a
strategic response to a changing competitive environment, we may elect from time
to time to make pricing, service, marketing or acquisition decisions that could
have a negative effect on our quarterly financial performance. Our operating
history has shown that a significant percentage of our quarterly revenues come
from orders placed toward the end of a quarter. For example, in 1999, an average
of 41% of recognized revenue was realized in the last two weeks of each quarter
and in the three months ended March 31, 2000, 57% of realized revenue was
recognized in the last two weeks of the quarter. A delay in the completion of a
sale past the end of a particular quarter could negatively impact results for
that quarter. In addition, we expect that revenues in the first quarter of each
year will be lower than in the last quarter of the previous year primarily due
to the seasonality resulting from our current and prospective clients'
budgetary, procurement and sales cycles. Our future quarterly operating results
may not meet the expectations of security analysts or investors in any given
quarter, which may cause our ordinary shares to decline significantly.

LIQUIDITY AND CAPITAL RESOURCES

     Since our inception, we have funded operations primarily through the
private placement of equity securities and, to a lesser extent, borrowings from
financial institutions. We have raised an aggregate of approximately $32.0
million, net of issuance costs, from the sale of preferred shares and ordinary
shares. As of March 31, 2000, we had cash and cash equivalents of $4.7 million,
a decrease from $7.8 million of cash and cash equivalents as of December 31,
1999.

     Cash used in operations includes expenditures associated with research and
development activities and marketing efforts related to promotion of our
products. For the three months ended March 31, 2000, cash used in operations was
$2.9 million, comprised of our net loss of $3.4 million, a decrease in trade
receivables of $0.7 million, partially offset by non-cash charges of $1.4
million, and a decrease in accrued expenses of $0.1 million and a decrease in
deferred revenues of $0.5 million. For the year ended December 31, 1999, cash
used in operations was $6.5 million, comprised of our net loss of $8.0 million,
an increase in trade receivables of $1.9 million, partially offset by non-cash
charges of $1.1 million. For the year ended December 31, 1998, cash used in
operations was $6.7 million, comprised of the net loss of $5.9 million, an
increase in trade receivable of $1.1 million, partially offset by non-cash
charges of $1.3 million. For the year ended December 31, 1997, cash used in
operations was $4.6 million, comprised

                                       34
<PAGE>   36

of the net loss of $4.5 million, an increase in accounts receivable of $0.6
million, and an increase in deferred revenues of $0.3 million.

     As of March 31, 2000, we had outstanding trade receivables of approximately
$3.2 million. As of December 31, 1999, we had outstanding trade receivables of
approximately $4.0 million which represented approximately 38% of 1999 total
revenues. Our trade receivables typically have 30 to 60 day terms, although we
also negotiate longer payment plans with some of our clients. As of December 31,
1999, 14% of our outstanding trade receivables had terms in excess of 60 days
with a median term of 144 days. $0.9 million of the trade receivables that were
outstanding on December 31, 1999 which did not have extended payment terms had
not been paid as of March 31, 2000. As of the date of this prospectus, $0.3
million of these outstanding trade receivables had been paid and $0.3 million
had been written off. As of March 31, 2000, 15% of our outstanding trade
receivables had terms in excess of 60 days, with a median term of 118 days.
$586,000 of the trade receivables that were outstanding on March 31, 2000 which
do not have extended payment terms have not been paid as of the date of this
prospectus.

     We have also received aggregate payments from the Government of the State
of Israel in the amount of $3.2 million related to research and development and
$707,000 related to marketing activities. As of March 31, 2000, we have paid or
accrued royalties related to these funds in the amount of $1.2 million. See
"Israel's Taxation and Investment Programs -- Law for Encouragement of Capital
Investments," "-- Law for Encouragement of Industrial Research and Development,
1984" and Note 10 to our Consolidated Financial Statements.

     Expenditures on property and equipment were approximately $0.4 million for
the three months ended March 31, 2000, $0.7 million for the year ended December
31, 1999, $1.0 million in 1998 and $0.2 million in 1997.


     We have a $2.5 million revolving line of credit with a U.S. bank that bears
interest at a rate of prime plus 1%. The line of credit is limited to 80% of
accounts receivable and is secured by these accounts receivable. This line of
credit also prohibits us from paying dividends or making other distributions
without the lender's prior written consent. We also had a $1.0 million unsecured
line of credit with an Israeli bank that expired on March 31, 2000. We are
currently in negotiations to renew this line of credit. No amounts were
outstanding under either of these lines of credit as of March 31, 2000.


     The Company also has an aggregate of $350,000 in term loans relating to
borrowings for working capital. One loan is in dollars and bears interest at a
rate of LIBOR plus 1% and the other is linked to the Israeli CPI and bears
interest at a rate of 5.4%.


     Our bank in Israel has issued two standby letters of credit on our behalf.
One is for $125,000 for tenant improvements related to our facilities in Israel.
The other is for $350,000 and secures our performance pursuant to projects with
the Government of Israel.


     Our capital requirements depend on numerous factors, including market
acceptance of our products, the resources we devote to developing, marketing,
selling and supporting our products, the timing and extent of establishing
additional international operations and other factors. We intend to continue
investing significant resources in our sales and marketing and research and
development operations in the future. We also expect to incur capital
expenditures of approximately $0.7 million in connection with the relocation of
our California facilities. We believe that our current cash balances along with
the proceeds raised from this offering will be sufficient to fund our operations
for at least the next twelve months. After that time, we cannot assure you that
cash generated from operations will be sufficient to satisfy our liquidity
requirements, and we may need to raise additional capital by selling additional
equity or debt securities or by increasing the size of our credit facility. If
additional funds are raised through the issuance of equity or debt securities,
these securities could have rights, preferences and privileges senior to those
of holders of ordinary shares, and the terms of these securities could impose
restrictions on our operations. The sale of additional equity or convertible
debt securities could result in additional dilution to our shareholders, and we
cannot be certain that additional financing will be available in amounts or on
terms acceptable to us, if at all. If we are unable to obtain this additional
financing, we may be required to reduce the scope of our

                                       35
<PAGE>   37

planned product development and marketing efforts, which could harm our
business, financial condition or operating results.

EFFECTIVE CORPORATE TAX RATE

     Our tax rate will reflect a mix of the United States statutory tax rate on
our United States income and the Israeli tax rate discussed below. We expect
that most of our taxable income will be generated in Israel. Israeli companies
are generally subject to income tax at the rate of 36% of taxable income. The
majority of our income, however, is derived from our company's capital
investment program with "Approved Enterprise" status under the Law for the
Encouragement of Capital Investments, and is eligible therefore for tax
benefits. Pursuant to these benefits, we will enjoy a tax exemption on income
derived during the first two years in which this investment program produces
taxable income, subject to certain timing restrictions, provided that we do not
distribute such income as a dividend, and a reduced tax rate of 10-25% for the
next 5 to 10 years. See "Israeli Taxation and Investment Programs -- Law for the
Encouragement of Capital Investments, 1959." There can be no assurance that we
will obtain approval for additional Approved Enterprises Programs, or that the
provisions of the law will not change. Since we have incurred tax losses through
December 31, 1999, we have not yet used the tax benefits for which we are
eligible. See "Risk Factors" and Note 13 to our Consolidated Financial
Statements.

IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS

     Our sales are primarily in U.S. dollars and, to a lesser extent, British
pounds. However, a significant portion of the cost of our Israeli operations,
mainly personnel and facility-related expenses, is incurred in NIS. Accordingly,
inflation in Israel and dollar exchange rate fluctuations have some influence on
our expenses and, as a result, on our net income. Any increase in the rate of
inflation in Israel will increase the dollar cost of our operations in Israel,
unless the increase is offset on a timely basis by a devaluation of the NIS in
relation to the dollar.

     In 1997 and 1998, the rate of devaluation of the NIS against the dollar has
exceeded the rate of inflation. This was not the case in 1999. We have benefited
from the 1999 reversal, but we cannot be certain that it will continue, or that
the rate of inflation will not rise. We cannot be certain that we will not be
materially adversely affected in the future if inflation in Israel exceeds the
devaluation of the NIS against the dollar or if the timing of such devaluation
lags behind increases in inflation in Israel.

     We do not presently engage in any hedging or other transactions intended to
manage risks relating to foreign currency exchange rate or interest rate
fluctuations. We also do not own any market risk sensitive instruments. However,
we may in the future undertake hedging or other similar transactions or invest
in the market risk sensitive instruments if management determines that it is
necessary to offset these risks. See "Risk Factors -- Risks Relating to Our
Location in Israel."

                                       36
<PAGE>   38

     The following table sets forth, for the periods and dates indicated,
certain information concerning the representative dollar exchange rate for
translating NIS as determined by the Federal Reserve Bank of New York for the
years ended December 31, 1995 through 1999, and the five quarters ended March
31, 2000. "Average" represents the average of the exchange rates between the NIS
and the dollar on the last day of each month during the period, as reported by
the Federal Reserve Bank of New York.

<TABLE>
<CAPTION>
                                                                  DOLLARS PER NIS
                                                      ----------------------------------------
                                                                                       PERIOD
              YEAR ENDED DECEMBER 31,                 AVERAGE     HIGH        LOW        END
              -----------------------                 -------    -------    -------    -------
<S>                                                   <C>        <C>        <C>        <C>
1995................................................   0.3322     0.3406     0.3140     0.3189
1996................................................   0.3138     0.3241     0.3023     0.3081
1997................................................   0.2901     0.3084     0.2781     0.2827
1998................................................   0.2641     0.2827     0.2291     0.2404
1999................................................   0.2416     0.2491     0.2333     0.2404

QUARTER ENDED
March 31, 1999......................................   0.2462     0.2491     0.2404     0.2484
June 30, 1999.......................................   0.2446     0.2483     0.2403     0.2448
September 30, 1999..................................   0.2391     0.2454     0.2333     0.2337
December 31, 1999...................................   0.2365     0.2411     0.2336     0.2404
March 31, 2000......................................   0.2469     0.2519     0.2410     0.2481
</TABLE>

YEAR 2000 READINESS

     The year 2000 issue is the potential for system and processing failures of
date-related data and is the result of the computer-controlled systems using two
digits rather than four to define the applicable year. For example, computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.

     We have designed our products for use in the year 2000 and beyond. To date,
our products have not revealed any significant year 2000 problems. As of the
date of this prospectus we have not experienced any significant issues as a
result of year 2000 problems and do not anticipate incurring material
incremental costs in future periods due to such issues.

QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

     The following discusses our exposure to market risk related to changes in
interest rates, equity prices and foreign currency exchange rates. This
discussion contains forward-looking statements that are subject to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors including those set forth in the risk factors section of this
prospectus.

  Foreign Currency Exchange Rate Risk

     We develop products in Israel and sell them primarily in North America and
Europe. As a result, our financial results could be affected by factors such as
changes in foreign currency exchange rates or weak economic conditions in
foreign markets. As most of our sales are currently made in U.S. dollars, a
strengthening of the dollar could make our products less competitive in foreign
markets. Our interest income is sensitive to changes in the general level of
U.S. interest rates, particularly since the majority of our investments are in
short-term instruments. We regularly assess these risks and have established
policies and business practices to protect against the adverse effects of these
and other potential exposures. As a result, we do not anticipate material losses
in these areas. Due to the nature of our short-term investments, we have
concluded that there is no material market risk exposure. Therefore, no
quantitative tabular

                                       37
<PAGE>   39

disclosures are required. Additionally, we do not participate in any speculative
investments or hedging contracts related to foreign currency exchange rate
risks.

  Interest Rate Risk

     As of March 31, 2000, we had cash and cash equivalents of $4.7 million
which consist of cash and highly liquid short-term investments. Our short-term
investments will decline in value by an immaterial amount if market interest
rates increase, and, therefore, our exposure to interest rate changes has been
immaterial. Declines of interest rates over time will, however, reduce our
interest income from our short-term investments.

     As of March 31, 2000, we had total short term debt of $0.2 million and
long-term debt net of current maturities of $0.2 million which bear interest at
rates that are linked to LIBOR or the Israeli consumer price index. We also have
a revolving, accounts receivable-based, secured credit facility of up to $2.5
million for working capital purposes. Amounts outstanding bear interest at the
U.S. prime rate plus 1%. As of March 31, 2000, there were no amounts outstanding
under this facility.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
established accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement. SFAS No. 133 is effective
for fiscal years beginning after June 15, 2000. We believe that the adoption of
SFAS No. 133 will not have a material effect on our financial statements.

     In March 2000, the FASB issued interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation -- an Interpretation of APB
Opinion No. 25." The interpretation clarifies the application of APB Opinion No.
25 in certain situations, as defined. The interpretation is effective July 1,
2000, but covers certain events occurring during the period after December 15,
1998, but before the effective date. To the extent that events covered by this
interpretation occur during the period after December 15, 1998, but before the
effective date, the effects of applying this interpretation would be recognized
on a prospective basis from the effective date. Accordingly, upon initial
application of the final interpretation, (a) no adjustments would be made to the
financial statements for periods before the effective date and (b) no expense
would be recognized for any additional compensation cost measured that is
attributable to periods before the effective date. We expect that the adoption
of this interpretation would not have any effect on the accompanying financial
statements.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. We will adopt
SAB 101 as required in the second quarter of 2000. We do not expect the adoption
of SAB 101 to have a material impact on our consolidated results of operations
and financial position.

GRANTS FROM THE GOVERNMENT OF THE STATE OF ISRAEL

     In connection with our research and development, we have received
participation grants from the Chief Scientist of the State of Israel in the
total amount of $3.2 million. 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.
All amounts related to these grants are denominated in U.S. dollars. Total
royalties to be paid relating to grants already received are $3.5 million, of
which $0.9 million have been paid to date.

                                       38
<PAGE>   40

     In connection with our export marketing activities, we have received
participation payments from the Government of Israel through the Fund for the
Encouragement of Marketing Activities in the amount of $0.7 million. We
committed to pay royalties at a rate of 3% of the increase in export sales over
a base amount, up to the amount of the participations received. We have accrued
or paid royalties to date amounting to $0.3 million.

     The Government of Israel does not own proprietary rights in any technology
developed using its funding and there is no restriction on the export of any
products manufactured using the technology. Some restrictions with respect to
the technology do apply, however, including the obligation to manufacture the
product based on the funded technology in Israel and to obtain the Chief
Scientist's consent for the transfer of the technology to a third party, for the
merger or acquisition of our company or for any transfer of our shares by an
Israeli shareholder to a non-Israeli shareholder. Because we have received
approval from the Chief Scientist for the transfer of up to 30% of our
outstanding ordinary shares on a fully-diluted basis to the public upon the
consummation of the offering, public transfers of our shares sold in this
offering will not be impacted by this restriction. We will need to obtain
approval from the Chief Scientist prior to the sale of additional shares to
entities located outside of Israel and there can be no assurance that we will be
able to obtain this consent in the future. These restrictions will continue to
apply to us even when we have paid the full amount of royalties payable in
respect of the grants. If the Chief Scientist consents to the manufacture of the
products outside Israel, the regulations allow the Chief Scientist to require
the payment of increased royalties, ranging from 120% to 300% of the amount of
the Chief Scientist grant, depending on the percentage of foreign manufacture.
If we determine to manufacture our product outside of Israel, there can be no
assurance that we will receive approval from the Chief Scientist. In the event
that we do receive approval, we may be required to pay the Chief Scientist
additional royalties. We currently conduct all of our manufacturing activities
in Israel and intend to remain doing so throughout the year 2000.

                                       39
<PAGE>   41

                                    BUSINESS

     We provide software for optimizing service operations by improving customer
responsiveness and the utilization of service resources. Our ClickSchedule
product line allows our clients to respond quickly to customers' demands for
service and to assign the right resource to the right service request at the
right time and place. Customers may place their service requests either via the
telephone to customer service representatives in call centers or via the
Internet. The ClickSchedule product line provides ease of use and convenience to
end user customers and optimizes utilization of clients' fulfillment resources,
thus maximizing the number of service calls that are delivered per day. While
ClickSchedule arranges service calls in order to reduce travel time and idle
time, our ClickFix product line is aimed at supporting the troubleshooting
process and reducing the need to dispatch repair personnel. ClickFix provides
customers with the information needed to diagnose equipment failures and conduct
remedial action thus speeding up the resolution process and increasing the
number of repairs completed per day. Our ClickSchedule and ClickFix product
lines can operate both internally within organizations and on an Internet, or
web-centric, basis. Our solution is designed to enable our clients to increase
the productivity of their service resources, resulting in reduced costs and
increased revenue opportunities that would otherwise be lost.

     We were incorporated in Israel in 1979. We have a wholly-owned subsidiary
incorporated in California, ClickSoftware, Inc., and a wholly-owned subsidiary
incorporated in the United Kingdom, ClickService Software Limited. Our product
development efforts are conducted primarily in Israel. Our sales and marketing
and implementation efforts in North America are conducted by our California
subsidiary. Our sales and marketing and implementation efforts in Europe are
conducted by our United Kingdom subsidiary.

INDUSTRY BACKGROUND

  Growing Market for Service and Product Delivery

     We believe the market for service and product delivery has grown
significantly, both in terms of the variety of services and products available
as well as transaction volume. Businesses engaged in service and product
delivery must deploy substantial resources in order to schedule and complete
transactions that require a same time and/or same place interaction between the
service provider and the customer. Examples of these services include telephone,
cable and Internet access installation, computer and appliance delivery and
repair, and delivery of other consumer goods. In order to schedule these
transactions, most of these service providers expend substantial resources to
maintain telephone call centers staffed with customer service representatives,
or CSRs, who answer calls from customers and assign and schedule service and
fulfillment resources. According to International Data Corporation, worldwide
call center services revenues are estimated to increase from $23.1 billion in
1998 to $58.6 billion in 2003.

     Supply chain optimization technology successfully enabled manufacturing
organizations, which mainly rely on raw materials, machines and production
lines, to streamline their operations and begin to take advantage of the
benefits that the Internet offers. In contrast, we believe that service
organizations, which mainly rely on personnel, are still facing significant
challenges in today's economy:

     - Service operations face increasing pressure to allocate scarce resources
       and reduce operating costs in order to improve profitability;

     - The scheduling of service personnel to customers and the effective
       planning of their schedules and travel routes is a complex problem that
       involves many parameters and business rules;

     - In today's high speed economy, customers expect immediate, or real-time,
       responses to their scheduling and troubleshooting needs;

     - Call centers, which often require customers to wait in phone queues for
       extended periods of time, are an inconvenient medium of communication;

                                       40
<PAGE>   42

     - Global deregulation of industries, such as telecommunications and
       utilities, is driving many businesses into a new era of intense
       competition, further increasing the need to improve their customer
       service while lowering the total cost of service;

     - Knowledge gained by service personnel in solving equipment related
       problems must be shared with other service personnel in an organization
       and made available to its customers; and

     - The inability of service organizations to effectively schedule the
       fulfillment of the services they offer to their customers also inhibits
       their ability to offer services online.

  Customer Service is Critical in Today's Economy

     To build and maintain relationships with customers, businesses are
attempting to improve the quality and speed of their service and product
fulfillment in order to distinguish themselves from their competitors. This
competitive edge may be even more important in today's business environment
where customers expect rapid and comprehensive customer service, and companies
that fail to provide superior customer service may lose sales and customers to
competitors located a phone call or mouse click away. Whether scheduling
telephone or Internet access installation or the repair of office equipment,
consumers and businesses need assurance that services and products will be
delivered quickly and efficiently. Currently, to obtain service, customers must
rely on traditional methods of communication and contact CSRs, either in person,
by phone, or by e-mail.

  Growing Use of the Internet in the Fulfillment of Service and Product Delivery

     The emergence and acceptance of the Internet as a medium for commerce is
fundamentally changing the way companies communicate with their customers and
offer services and products. Growing numbers of companies are transacting
business online in an attempt to capitalize on the compelling benefits that the
Internet offers, including increased revenue, reduced operating costs and
improved customer retention. International Data Corporation estimates that
business-to-business and business-to-consumer transactions will grow from $50.4
billion in 1998 to over $1.3 trillion in 2003. We believe that businesses such
as utilities and telecommunications service providers have only begun to
recognize the benefits that the Internet can offer in delivering services to
their customers. Traditional "bricks and mortar" businesses are finding that
they also must offer their services and goods online in order to remain
competitive, as Internet-based businesses offering services and products online
acquire increasing market share. Forrester Research estimates that the
percentage of Fortune 1000 companies, that are using the Internet as a channel
for commerce will increase from 23% in 1999 to 70% in 2002. Because customers
have a growing number of easily accessible choices both on and off the Internet,
companies must differentiate their products and services to meet customers'
individual requirements and build and maintain customer loyalty.

  Need to Enable Online Solutions for the Fulfillment of Service and Product
Delivery

     Service organizations have continued to rely primarily on conventional
methods of scheduling the fulfillment of services primarily via telephone-based
customer service representatives. We believe that for traditional businesses,
the inability to effectively schedule the fulfillment of services also inhibits
their ability to grow their business online. For online businesses, this
requires an inconvenient two-step process involving online and telephone
interaction, which is inefficient, costly and difficult to manage, and is
proving to be the bottleneck for an otherwise streamlined online transaction.
These inefficiencies also impact organizations providing commercial, or
business-to-business, and retail, or business-to-consumer, solutions. While
applications aimed at cost reduction in the supply chain have generally been
successful, service organizations have realized that these initiatives are only
part of the solution of providing seamless and timely fulfillment of services
and products. In the face of growing business challenges, such as the high cost
of attracting new customers, the proliferation of customer purchasing options,
increased customer sophistication and decreased customer loyalty, the importance
of on-time fulfillment of services continues to increase.

                                       41
<PAGE>   43

     Service organizations are seeking a solution that enables them to improve
customer service as well as optimize and allocate internal resources. These
organizations are coping with these challenges in various ways, ranging from
developing software tools internally to increasing the number of service
personnel they employ. These approaches have difficulty scaling cost-effectively
to keep pace with the current volume of business and the rapid expansion of
transactions and do not provide the need for timely fulfillment of services and
products. In addition, these approaches do not offer a solution for the
limitations of the telephone as a medium of communication and are very limited
in the amount of personalization they offer to the calling customer.
Accordingly, we believe there is a need for a new class of applications and
technologies designed to optimize the utilization of fulfillment resources and
ensure successful completion of online transactions.

THE CLICKSOFTWARE SOLUTION

     We provide software that enables companies to efficiently schedule and
fulfill service and product delivery in enterprise environments and over the
Internet. Our ClickSchedule product line allows our clients to respond quickly
to customers' demand for service and to assign the right resource to the right
service request at the right time and place. Customers may place their service
requests either via the Internet or the telephone to customer service
representatives in call centers. The ClickSchedule product line provides ease of
use and convenience to end user customers and optimizes utilization of clients'
fulfillment resources, thus maximizing the number of service calls that are
delivered per day. Our ClickSchedule product line also includes management tools
such as ClickAnalyze for generating business performance indicators and
ClickPlan for resource planning. While ClickSchedule arranges service calls in
order to reduce travel times, our ClickFix product line is aimed at supporting
the troubleshooting process and reduce the need to dispatch repair personnel.
ClickFix provides customers with the information needed to diagnose system
errors and conduct remedial action. ClickSchedule and ClickFix also enable our
clients to provide their own employees greater flexibility and reliability in
coordinating internal business processes. Our solution offers the following
benefits to our clients and ClickSoftware end-users, whether customers or the
client's internal staff:

     - Greater Customer Service.  Our products enable our clients to offer their
       customers better customer service, including the ability to schedule the
       delivery of services and products online. Clients using our solution
       provide their customers with more control over the fulfillment process by
       offering instant quotes of narrow appointment time windows, flexibility
       to choose from a greater variety of dates and time slots, and immediate
       confirmation of scheduled appointments, leading to an enhanced customer
       experience and increased convenience.

     - Optimized Utilization of Fulfillment Resources.  Our solution offers the
       efficient optimization of service and product fulfillment resources for
       both our business-to-business and business-to-consumer clients,
       providing:

        - significant cost savings due to optimized utilization of resources
          such as field representatives, CSRs and delivery vehicles;

        - scalability to manage increased customer calls as clients' businesses
          grow;

        - greater customer satisfaction and retention as a result of increased
          scheduling flexibility and more timely completion of transactions; and

        - greater control of an organization's fulfillment resources by
          providing current reporting of individual resource allocation status
          and needs.

       ClickSchedule allows our clients to create and configure optimization
       parameters for their business needs, such as required service levels,
       geographic territories, overtime policies, outsourcing availability and
       other company-specific requirements. It continuously monitors the status
       of the client's logistical resources and automatically allocates these
       resources efficiently in response to changing demands and resource
       availability.

                                       42
<PAGE>   44

     - Seamless Integration into Existing Client Environments. Our solution
       integrates with back-end enterprise resource planning, or ERP,
       applications that are located within an organization and used by
       employees to coordinate internal business processes. Our solution also
       integrates with front-end customer relationship management, or CRM,
       applications which businesses currently use to provide responses to their
       customers through the use of CSRs. By using already existing customer and
       internal company data, we believe our solution allows companies to turn
       their currently under-utilized applications into powerful and robust
       competitive tools. Our solution empowers our clients to offer their
       customers a streamlined, end-to-end online purchasing and improved
       customer service experience. We believe our solution provides a simple,
       one-stop, real-time appointment scheduling and self-help experience for
       customers.

     - Rapid Return on Investment. We believe that once we integrate and
       customize our products for specific client needs, immediate efficiencies
       can be realized. These efficiencies in resource utilization translate
       into capturing revenue opportunities that otherwise would have been lost,
       resulting in a rapid return on investment. We believe our solutions
       integrate with our clients' existing software applications and
       infrastructure in a shorter period of time than typically required to
       deploy similar solutions. As a result, our clients can more quickly
       deploy our products in a cost-effective manner, further improving their
       return on investment.

THE CLICKSOFTWARE STRATEGY

     Our objective is to be the leading provider of web-based application
software for optimizing service operations of business-to-business and
business-to-consumer enterprises. The key elements of our strategy include:

     - Expand Market Acceptance of Our Products. By building on our existing
       technology, we intend to be the leader in providing resource optimization
       solutions to businesses that must support operator assisted and Internet
       transactions. We believe that additional offerings, such as products with
       decision support capabilities including forecasting, resource planning,
       capacity planning and monitoring will enable us to sell more products to
       our existing client base. Additionally, we believe that by building upon
       our existing customer base, we can further penetrate those sectors where
       our customers are concentrated. We believe these efforts will enable us
       to further expand market acceptance of our products and our brand
       recognition.

     - Enhance Our Sales and Implementation Channels. We intend to expand our
       direct sales force and enhance our indirect sales program with additional
       strategic relationships. We intend to increase the number of direct sales
       personnel focusing on specific industries and geographic areas. We
       currently have co-marketing arrangements which provide us with access to
       new customers. We intend to enter into additional relationships to expand
       our coverage of geographic locations and augment our internal
       professional services organization. Finally, we intend to form additional
       relationships with OEMs and resellers in order to strengthen our market
       position.

     - Extend the Breadth and Depth of Our Product Offerings. Our core
       technologies are based on over ten years of research and development. Our
       strategy is to continue to invest in research and development of our core
       technologies and our product offerings to provide more functionality and
       to increase our competitive advantage. We are developing offerings to
       provide decision support capabilities such as forecasting, resource
       planning, capacity planning, and monitoring. We also intend to offer new
       products which provide online comparison and bidding capabilities based
       on service and delivery availability as well as pricing. We currently
       anticipate making initial releases of these products in the year 2000
       with additional new products being released as they are developed.

     - Target Online Service Businesses. We believe our products are designed to
       address the specific scheduling and fulfillment needs of online service
       businesses. Our products incorporate many web-based technologies, such as
       Extensible Markup Language, or XML, browser interfaces and server side
       scripting, which provide scalability and speed of integration. We intend
       to continue to sell our products to companies that offer their customers
       online scheduling of various services, such as installing and
                                       43
<PAGE>   45

       servicing products and home improvement. We intend to also target various
       companies that maintain and host software applications, also known as
       application service providers, that are seeking to offer hosted services
       including self-help and scheduling solutions.

     - Provide Customized Solutions for Additional Industries.  Our
       ClickSchedule product line provides a scheduling and service fulfillment
       optimization package that can be customized to meet specific business
       rules established by our clients. We believe we have developed experience
       in specific industries, such as telecommunications and Internet access,
       and we intend to pre-configure versions of our products for additional
       industries such as financial services and health care.

PRODUCTS

     We have two product lines, ClickSchedule and ClickFix, which we sell to
companies to effectively fulfill service and product delivery both internally
within organizations and on an Internet, basis.

  ClickSchedule

     ClickSchedule is a scheduling solution capable of operating over the
Internet that enables service organizations and their customers to schedule
service, installation, product delivery and consulting. ClickSchedule, which is
based on our W-6 Service Scheduler technology, addresses the dual challenge of
simultaneously optimizing for company resource utilization and customer
responsiveness. ClickSchedule allows our clients to customize their optimization
parameters such as service levels, geographic territories, overtime policies,
outsourcing availability and other company-specific business policies in order
to optimize their internal resource utilization. ClickSchedule provides a
scalable solution that supports changes in business policies, and increases in
customer calls and the amount of client resources available to allocate and
schedule. In addition, ClickSchedule offers a web-based scheduling feature which
enables our clients' customers to directly schedule appointments online, which
we believe will result in improved customer satisfaction.

     ClickSchedule performs scheduling functions by integrating with our
clients' CRM applications. Using a CRM application, an online customer or a CSR
providing information on behalf of the customer, provides details regarding the
service request, such as the customer's name, location, desired service or
product and requested time of delivery. The CRM application transmits the
details regarding the request to the ClickSchedule web server. The ClickSchedule
software application examines the business rules established by the client, the
client's available resources, such as service technicians' appointment schedules
and routes and then immediately recommends preferred scheduling options based on
the parameters of the customer's request. The CRM application then presents the
scheduling options to the

                                       44
<PAGE>   46

customer or CSR and finally provides notification of the customer's selection
back to ClickSchedule. Primary features of ClickSchedule include:

<TABLE>
<CAPTION>
PRIMARY FEATURES                                                 DESCRIPTION
----------------------------------------  ----------------------------------------------------------
<S>                                       <C>  <C>
Sophisticated optimization capabilities   -    Provides instant and accurate response.
                                          -    Allows application of multiple client business rules.
                                          -    Can be customized for specific client needs.

Continuous optimization                   -    Improves resource scheduling and route optimization.
                                          -    Automatic real-time adjustment of scheduling
                                               according to changes in customer requests and
                                               resource availability.

Open web-based architecture               -    Enables seamless integration with clients' other
                                               information systems, such as CRM and ERP
                                               applications.
                                          -    Allows easy access via a browser.

Scalability                               -    Supports thousands of requests per hour.
                                          -    Enables scheduling of thousands of client resources.

Real time monitoring                      -    Permits tracking of service delivery execution.

XML interface                             -    Enhances integration with other web applications.
</TABLE>

     ClickBroker and ClickAnalyze, which were introduced in March 2000, are
add-on modules to ClickSchedule. ClickBroker is designed to offer comparisons of
service availability and price comparisons, along with bidding capabilities, to
customers for use over the Internet. ClickAnalyze is designed to provide our
clients with the ability to monitor and review key business performance metrics
of their service operations, such as the percentage of on-time appointments,
numbers of calls delivered per day and utilization of service personnel.

  ClickFix

     ClickFix is a troubleshooting solution capable of operating over the
Internet, which offers equipment-related problem resolution support. ClickFix
supports the complete call life cycle from home users to help-desk operators and
service engineers and technicians on-site. ClickFix's web-based architecture is
designed to enable end-user equipment owners or our client's service personnel
access over the Internet by logging into a service provider's web site.

     ClickFix communicates with equipment that has the capability to output
messages such as event logs or errors which are then transmitted to the client
via a modem. The ClickFix application then allows the user to either select from
a list of common or potential problems associated with the particular equipment
or to enter a free-text description of the actual problem. Based on information
provided by the user as well as knowledge obtained from prior troubleshooting
experiences with the same equipment, ClickFix 'walks' the user through the
problem resolution process and proposes corrective actions. In addition,
ClickFix has a remote diagnostics capability that enables the equipment itself
to "phone in" for a service request and trigger the problem resolution sequence.
For example, a refrigerator could be equipped with ClickFix software and a
modem, and the refrigerator could contact and provide diagnostic information to
a repair

                                       45
<PAGE>   47

company when service is needed. ClickFix has self-learning algorithms that
enable it to expand its problem resolution knowledge base. Primary features of
ClickFix include:

<TABLE>
<CAPTION>
PRIMARY FEATURES                                              DESCRIPTION
-----------------------------------  --------------------------------------------------------------
<S>                                  <C>  <C>
Optimizes the diagnostic process     -    Decreases number of steps required to diagnose.
                                     -    Increases first time fix rate.

Supports remote connectivity         -    Enables performance of remote diagnostics.
                                     -    Enables connectivity with various hand-held devices.

Facilitates predictive maintenance   -    Allows for automatic detection of potential problems
                                          before they occur.
                                     -    Automatic creation of service orders when faults are
                                          detected.

Open web-based architecture          -    Enables seamless integration with clients' other
                                          information systems, such as CRM and ERP applications.

Online documentation                 -    "How to fix" instructions online.

"Learning" capability                -    Automatic enhancement of knowledge base over time.
                                     -    Knowledge authoring tools for efficient creation of
                                          knowledge base.
</TABLE>

TECHNOLOGY

     Our ClickSchedule and ClickFix product lines are based upon our internally
developed core technologies, W-6 Service Scheduler and TechMate. These two core
technologies have been developed over the last decade and include sophisticated
algorithms and business scenario representation tools. Our research and
development personnel have been working on various service technology solutions
since 1985 including software solutions, system integration and troubleshooting
implementations. Based on those efforts, we have gained significant experience
with the complex scheduling and troubleshooting needs of service organizations.
These scheduling and troubleshooting needs involve scheduling personnel, rather
than machines and raw materials, and are therefore different from and more
complex than the scheduling needs of supply chain or manufacturing operations.
We have incorporated many of the complex needs of service organizations into our
products, such as optimization objectives, skill levels and labor policies.

     Our applications are fully standards-based and are designed for the
Internet. Our applications can be run on standard web browsers and servers and
support leading relational database management systems, including Oracle and
Microsoft SQL Server. The multi-tier architecture connects browser-based
applications to Windows NT application servers through local area networks, wide
area networks, intranet or Internet connections. Our technology performs
messaging between clients and the application server in real time over a
standard communication protocol, TCP/IP. Our applications are inherently
scalable due to our multi-tier architecture that uses thin clients,
multi-threaded application servers and relational databases.

Specifically, our core technologies include:

     - Internally developed scheduling optimization algorithms.  These
       algorithms provide efficient solutions for complex scheduling problems
       arising from, among others, the following:

      - the vast number of possible solutions associated with optimized
        scheduling of personnel;

      - the number of service organization-specific resources and variables;

      - the need to instantly respond to concurrent users' service requests;

      - the vast number of potential routes within a specific geographic area;
        and

      - various time zone considerations.

                                       46
<PAGE>   48

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

     - Open, multi-tiered architecture. Our architecture incorporates the
       following key components:

      - Application software and web servers capable of performing high-speed
        optimization, problem resolution, and Internet access to the system
        which is hosting the applications.

      - Extensible Markup Language, or XML, Application Programming Interfaces
        (APIs), which enable other applications to integrate and access the data
        and services of ClickSchedule or ClickFix.

      - ClickSchedule scheduling engine which includes business rules and
        objectives which define the constraints and policies of the service
        organization, and optimization algorithms which schedule the service
        resources based on these rules and objectives. These rules and
        objectives and optimization algorithms are designed in a generic fashion
        so that they can be applicable to a wide range of service scheduling
        problems.

      - ClickFix problem resolution engine that includes algorithms for fast
        problem resolution based on equipment model diagrams, a knowledge base
        with learning capabilities, and a component that creates new trouble
        shooting solutions based on modeling the equipment structure as well as
        historical cases.

      - Industry Segment Layer, which includes data, algorithms, and APIs that
        are specifically developed to address the needs of particular industry
        segments.

      - External customization points that enable ClickSoftware professional
        services personnel and third party system integrators to configure our
        software to provide customization for particular customers.

      - A Relational Database, which resides on a separate server and saves all
        transactions and data to an accessible database.

     - Problem resolution technology. Our problem resolution technology includes
       the following key capabilities:

      - Sophisticated algorithms for fast problem resolution based on equipment
        model diagrams;

      - Problem resolution knowledge base with learning capabilities; and

      - Problem resolution authoring technology based on modeling the equipment
        structure as well as historical cases.

          Our development methodology is based on techniques which facilitate
     development of components that can be incorporated in future products. This
     methodology enables us to reduce the time required to introduce
     functionality enhancements and new products. Our development methodology
     involves analysis of business requirements, software module design to meet
     these requirements, software development and coding, testing and quality
     assurance, or QA. Our QA and testing facilities include automated test
     tools and dedicated hardware to simulate load on the system.

PROFESSIONAL SERVICES AND CUSTOMER SUPPORT

     Our professional services organization is integral to our ability to
provide our clients with our software solutions and is staffed by professionals
with significant experience in the resource optimization field. We provide our
clients with consulting services, upgrades, and comprehensive training and
support to help them achieve their business goals with a quick return on
investment. We also offer implementation services to assist our clients with the
installation and operation of our solutions and also work with the

                                       47
<PAGE>   49

clients' information technology departments to refine and support their
strategies for resource optimization. Our consulting services include the
following:

     - Business Analysis Assessment.  Our consultants assess the client's
       current or planned scheduling needs, develop and document a project plan
       and deliver a design specification to address those needs. We provide a
       configuration and implementation roadmap to help clients meet their
       business goals, including a return on their investment.

     - Project Implementations.  Our professional services consultants
       individually, or as members of our clients' teams, implement and assist
       in the configuration of our solutions, to accelerate the project
       deployment schedule and ensure a successful implementation process. These
       professional service consultants perform the following tasks to implement
       a ClickSchedule application for a client:

      - develop a work plan to integrate ClickSchedule with the client's
        existing information systems, such as CRM or ERP applications;

      - customize the ClickSchedule logic to meet the client's business needs;
        and

      - install and test the application at the client's facilities.

     - ClickSchedule Fast Track.  In order to increase the number of our
       implementations and facilitate market acceptance of our ClickSchedule
       solution, we have recently introduced our ClickSchedule Fast Track to
       provide accelerated ClickSchedule implementation. We believe this
       initiative will enable clients to achieve benefits quickly from a rapid
       implementation of the ClickSchedule solution. Once the ClickSchedule Fast
       Track implementation is completed we offer enhancements and
       customizations that provide additional functionality to our ClickSchedule
       product.

     Customer support is available by telephone and over the Internet. Customer
support is billed as a percentage of license fees depending upon the level of
support coverage requested by the customer. A fee of 18% of license fees is
charged for five day a week, eight hour a day coverage and 24% of license fees
for seven day a week, twenty-four hour coverage. This support is provided by the
technical support team in our product development group, ensuring detailed
product knowledge and access to experts and testing facilities when required.
The customer support team works closely with the professional services
organization in providing technical support during client project
implementations, and transferring completed projects from professional services
organization to client support team.

CUSTOMERS

     We sell our products to a broad base of clients representing a variety of
industries with unique needs, including telecommunications and telephone and
Internet access providers, high-technology service providers and retailers. The
following is a representative list of our clients or end-users using our
products internally within their organizations. This list of clients is
representative of our geographically dispersed client base, the various
industries utilizing our products and the various stages of deployment of our
product lines. Each of these clients accounted for at least $100,000 of our
revenues for 1999 and as a group, these clients accounted for approximately 42%
of our total revenues for 1999. Caterpillar, Covad Communications, Crawfords and
Company, Level 3 Communications, Maritime Telephone and Telegraph and Montgomery
Ward represented between 3% and 8% of our total revenues for 1999.

Agilent Technologies
Bell Atlantic
Canadian Red Cross
Caterpillar
Compaq Computer Corporation
Covad Communications
Crawfords & Company
EMC
Enbridge Services
Level 3 Communications
Maritime Telephone & Telegraph
New Brunswick Telephone
Montgomery Ward
Schindler Elevator

     For the three months ended March 31, 2000 sales to Installinc.com, a
web-based installation resource for products purchased online, constituted
greater than 10% of our revenues. No customer accounted for greater than 10% of
revenues during 1999. For the year ended December 31, 1998, sales to the
Canadian

                                       48
<PAGE>   50

Red Cross, Caterpillar and Montgomery Ward each constituted greater than 10% of
our revenues. For the year ended December 31, 1997, sales to Caterpillar and the
Government of Israel each constituted greater than 10% of our revenues.

SALES AND MARKETING

     We market and sell our products primarily through our direct sales force,
which is located in North America and Europe. Our multi-disciplined sales teams
consist of field sales executives, sales support engineers and internal sales
staff. The internal sales staff is responsible for generating leads and
qualifying prospective clients. Sales support engineers assist the sales
executives in the technical aspects of the sales process, including preparing
demonstrations and technical proposals. Our sales executives are responsible for
completing the sales process and managing the post-sale client relationship,
which consists of ongoing relationship management and the sale of additional
licenses as clients require additional resources. Our management also takes an
active role in our sales efforts. Because our solutions have broad
functionality, we can rapidly develop custom demonstrations, which we, or our
business partners, can use to design models for full-scale implementations. The
knowledge gained by our sales and marketing force is also communicated to our
development team which uses this knowledge to improve the functionality of our
products for specific industries.

     We typically direct our sales efforts to the chief executive officer, the
chief information officer, the vice presidents of customer service and other
senior executives responsible for improving customer service at our clients'
organizations, including, more recently, executives responsible for the
organizations' Internet strategies.

     We focus our marketing efforts on identifying potential new clients,
generating new sales opportunities, and creating awareness in our target markets
about the value of our products and their applications. Our programs target
prospective clients across a wide variety of industries, business relationships
and geographies. In order to effectively promote product awareness, we engage in
marketing activities in a wide variety of areas including public relations and
analyst relations, creation and placement of advertising, direct mailings and
internal and external participation in leading trade shows. As of March 31,
2000, we employed over 54 individuals in our sales and marketing department.


     Our marketing organization also supports joint marketing activities with
our business partners. Our business relationships enable us to use our partners'
market presence and sales channels to create additional revenue opportunities.
We have entered into co-marketing arrangements with leading enterprise resource
planning, or ERP, and customer relationship management, or CRM, vendors under
which we join together in our sales efforts or sell software solutions to them
for resale to their customers. These vendors include Clarify, Eftia, Essential
Markets, i2 Technologies, JD Edwards, Orbital, SAP, Semtor and Siebel. These
partners have committed resources depending on the strength of the relationship,
ranging from building an interface for our product, to training their employees,
co-marketing programs and incorporating our products into their marketing
strategies. We provide sales materials and training to these resellers on the
implementation of our software solutions. These agreements generally provide the
parties with the rights to use each other's names in marketing and advertising
materials, and occasionally conduct joint marketing programs. These agreements
are generally for a one-year period and are automatically renewable. We believe
these relationships will extend our presence and brand name in new and existing
markets.


RESEARCH AND DEVELOPMENT

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

                                       49
<PAGE>   51

its software development procedures to maintain an ongoing improvement process
and high quality products.

     Our future research and development strategies will concentrate on
broadening our product offerings to provide more functionality, including
decision support capabilities such as forecasting, resource planning, capacity
planning and monitoring, and to continue developing packaged offerings for
specific vertical industries.

     Our research and development expenses, prior to participation grants from
the Office of the Chief Scientist of the Government of Israel, totaled $1.1
million for the three months ended March 31, 2000, $3.9 million for the year
ended December 31, 1999, $3.1 million for the year ended December 31, 1998, and
$1.8 million for the year ended December 31, 1997. As of March 31, 2000, we
employed 46 individuals in our research and development group. See "Israeli
Taxation and Investment Programs."

COMPETITION

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

     Our current and potential competitors include:

     - independent systems integrators, such as Electronic Data Systems
       Corporation, consulting firms and in-house information technology
       departments of bricks and mortar and Internet-based businesses which may
       develop their own solutions that compete with our products;

     - traditional ERP and CRM software application vendors, including Oracle
       Corporation;

     - software vendors in the utility, telecommunications, Internet access,
       field services, home delivery and other markets including Mobile Data
       Solutions Inc.;

     - other providers of service scheduling software and components as well as
       various logistics solutions providers such as ServicePower, Inc.; and

     - providers of software that allows manufacturing organizations to optimize
       their resources.

     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. Some of our potential competitors are among the
largest and most well-capitalized software companies in the world.

     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:

     - copyright laws;

     - trademark laws; and

     - trade secret laws.


     We do not own any patents or patent applications. We have filed trademark
applications in the United States for the use of ClickSoftware, ClickBroker,
ClickAnalyze, ClickPlan, ClickForecast, ClickPerformance Monitor, ClickSchedule,
ClickFix and W-6. However, we may not receive registrations for these
trademarks. We have been involved in a legal dispute regarding our former
company name and Internet domain names. We have also been contacted by an
unrelated third party which is alleging that

                                       50
<PAGE>   52


our new company name ClickSoftware Technologies Ltd. may infringe their company
name and trademarks. See "Legal Proceedings."


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

     In the United States and Israel, we also generally enter into
non-disclosure agreements with our employees and consultants and generally
control access to and distribution of our software, documentation and other
proprietary information.

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

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

EMPLOYEES

     As of March 31, 2000, we had 165 full-time employees, 46 of whom were
engaged in research and development, 54 in sales, marketing and business
development, 42 in professional services and technical support and 23 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.

                                       51
<PAGE>   53

     In addition, 76 of our employees are located in Israel. Israeli law and
certain provisions of the nationwide collective bargaining agreements between
the Histadrut (General Federation of Labor in Israel) and the Coordinating
Bureau of Economic Organizations (the Israeli federation of employers'
organizations) apply to our Israeli employees. These provisions principally
concern the maximum length of the work day and the work week, minimum wages,
paid annual vacation, contributions to a pension fund, insurance for
work-related accidents, procedures for dismissing employees, determination of
severance pay and other conditions of employment. We provide our employees with
benefits and working conditions above the required minimums. Furthermore,
pursuant to such provisions, the wages of most of our employees are subject to
cost of living adjustments, based on changes in the Israeli CPI. The amounts and
frequency of such adjustments are modified from time to time. Israeli law
generally requires the payment of severance pay upon the retirement or death of
an employee or upon termination of employment by the employer or, in certain
circumstances, by the employee. We currently fund our ongoing severance
obligations for our Israeli employees by making monthly payments for managers
insurance policies and severance funds. Severance pay expenses amounted to
$105,000 in 1997, $272,000 in 1998, $202,000 in 1999 and $57,000 in the three
months ended March 31, 2000.

     Israeli law provides that employment arrangements with employees who are
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 45 hour work week or for maximum daily work hours and
compensation for overtime work. The maximum number of hours of overtime is
limited by law. Certain of our employment compensation arrangements are fixed
and do not differentiate between compensation for regular hours and overtime
work. Therefore, we may face potential claims from these employees asserting
that the fixed salaries do not compensate for overtime work; however, we do not
believe that these claims would have a material adverse effect on us.

FACILITIES

     ClickSoftware leases approximately 22,500 square feet in an office building
located in Tel Aviv, Israel. The office space in Tel Aviv, Israel is leased
pursuant to a lease that expires in June 2003 with an option to extend the lease
until April 2008. We have also recently entered into a seven year lease for
approximately 17,130 square feet of office space in Campbell, California. Our
U.K. subsidiary currently operates from a leased facility of approximately 3,000
square feet in London. Anticipated minimum net rents for these facilities are
approximately $884,000 for the nine months ending December 31, 2000, $983,000 in
2001, $929,000 in 2002 and $947,000 in 2003.

LEGAL PROCEEDINGS

     On February 28, 2000, a trademark infringement complaint was filed against
us in the United States District Court, Northern District of California, by
Clickservices.com, an unrelated third party. The complaint was served on us on
March 17, 2000. The complaint alleges that our use of the CLICKSERVICE trademark
and "clickservice.com" and "clickservice.net" Internet domain names have
resulted in trademark infringement and unfair competition in violation of
federal law. The complaint also alleges unfair competition, false advertising,
and false designation of origin in violation of California's Business and
Professions Code and trademark infringement in violation of California common
law. Additionally, Clickservices.com is seeking damages from us in an
unspecified amount.

     On May 2, 2000, the District Court granted Clickservices.com's motion for a
preliminary injunction and enjoined us from using the CLICKSERVICE trademark and
the domain names "clickservice.com" and "clickservice.net." We have complied
with the District Court's order and changed our corporate name to ClickSoftware
Technologies Ltd. and our domain name to clicksoftware.com.


     Discovery is proceeding. Based on our preliminary investigation, we believe
that we have meritorious defenses to Clickservices.com's claims for damages and
intend to continue to vigorously defend ourselves in this action. We are unable
at this time to predict the outcome of this litigation. If this litigation is


                                       52
<PAGE>   54

decided adversely to us, we might be required to pay damages and we could be
subject to significant costs of litigation.


     In addition, we have been contacted by Click Commerce, Inc., an unrelated
third party, which has alleged that our new company name, ClickSoftware
Technologies Ltd., may infringe their company name and trademark. Although we
have engaged in discussions with them to resolve this dispute, there can be no
assurance that we will be able to resolve this matter or that they will not
initiate litigation against us with respect to this matter.


                                       53
<PAGE>   55

                                   MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

     Our executive officers and directors and their ages are as follows:

<TABLE>
<CAPTION>
NAME                             AGE                             POSITION
----                             ---                             --------
<S>                              <C>    <C>
Dr. Moshe Ben-Bassat...........   52    Chief Executive Officer and Chairman of the Board
Shimon M. Rojany...............   52    Senior Vice President and Chief Financial Officer
David Schapiro.................   42    Vice President and General Manager, Product Development
                                        Group
Ami Shpiro.....................   46    Vice President and General Manager, Europe Operations
Robert Spina...................   38    Vice President, Sales
Hannan Carmeli.................   41    Vice President and General Manager, ClickFix Division
Mark Trimue....................   48    Vice President, Business Development and Channels
                                        Development
Amit Bendov....................   35    Vice President, Product Marketing
Roni Einav.....................   44    Director
Dr. Israel Borovich(1).........   58    Director
Nathan Gantcher................   59    Director
Fredric W. Harman(1)(2)........   39    Director
Eddy Shalev(1)(2)..............   52    Director
James W. Thanos................   51    Director
</TABLE>

---------------
(1) Member of audit committee.

(2) Member of compensation committee.

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

     SHIMON M. ROJANY co-founded ClickSoftware and has served as our Senior Vice
President and Chief Financial Officer since November 1999. From 1989 to the
present, Mr. Rojany has also served as Senior Vice President and Chief Financial
Officer of our U.S. subsidiary. From 1990 to 1999, Mr. Rojany also served as a
Senior Associate with Adizes Institute, Inc., a consulting company. Mr. Rojany
holds a Bachelor of Science degree in Accounting from California State
University at Northridge and a Master of Business Administration in Management
Decision Systems from the University of Southern California and is a certified
public accountant.

     DAVID SCHAPIRO has served as our Vice President and General Manager of the
Product Development Group since November 1999. From October 1996 to November
1999, Mr. Schapiro served as the ClickSchedule Division General Manager. Prior
to November 1999, Mr. Schapiro served in various management and marketing
positions at ClickSoftware including Vice President of Business Development.
Since 1984 Mr. Schapiro has served in positions at Applied Materials, a
semiconductor equipment manufacturer, and Scitex Corporation, a digital printing
system company. Mr. Schapiro holds 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.

     AMI SHPIRO has served as Vice President and General Manager of European
Operations and Managing Director of ClickService Software Limited since October
1996. From 1994 to October 1996, Mr. Shpiro served as Vice President, W-6
division. Prior to 1994, Mr. Shpiro had various roles in

                                       54
<PAGE>   56

developing the W-6 scheduling system. Mr. Shpiro holds a Bachelor of Science
degree in Computer Science and a Master of Science degree from the Hebrew
University of Jerusalem.

     ROBERT SPINA has served as our Vice President of Sales since March 1999.
From February 1998 to March 1999, Mr. Spina served as our Vice President, Sales,
Eastern Region. From December 1995 to February 1998, Mr. Spina was a Vice
President at Berkeley Software Design, Inc., a provider of internet server
software to service providers and network equipment OEMs. Mr. Spina holds a
Bachelor of Science degree from Utica College.

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

     MARK TRIMUE has served as our Vice President for Business Development since
November 1998. From January 1998 to November 1998, Mr. Trimue served as our Vice
President, Sales, Southern Region. From June 1995 to January 1998, Mr. Trimue
served as Vice President of Marketing of Berkeley Software Design, Inc. From
January 1994 to April 1995, Mr. Trimue served as Vice President of Sales
Management and Marketing of Equinox Systems, Inc. Mr. Trimue holds a Bachelor of
Arts degree in Economics from the University of Arkansas.

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

     RONI EINAV has served as a director of ClickSoftware since April 2000. From
1983 to April 1999, Mr. Einav served as Chairman of the Board of Directors of
New Dimension Software, Ltd., a software company which he founded. Mr. Einav has
also played a role in founding over ten additional Israeli high-tech companies
including: Liraz Computers, which owns Level 8, Jacada, UDS-Ultimate
Distribution Systems, CreditView, CePost, CeDimension, ComDa and Einav Systems.
Mr. Einav is a Major in the Israeli Defense Forces, serving in the Systems
Analysis Division. Mr. Einav holds a Bachelor of Science degree in Management
and Industrial Engineering and a Master of Science degree in Operations Research
from the Technion Institute.

     DR. ISRAEL BOROVICH has served as a director of ClickSoftware since July
1997. Since 1988, Dr. Borovich has served as President of Arkia Israeli Airlines
and Knafaim-Arkia Holdings Ltd. Mr. Borovich also serves as a director of
Knafaim-Arkia Holdings, Ltd., Maman-Cargo Terminals & Handling Ltd., Issta Lines
Israel Students Travel Company Ltd., Ogen Investments, Ltd., Granit Hacarmel
Investments, Ltd. and Vulcan Batteries Ltd. Mr. Borovich holds Bachelor of
Science, Master of Science and a Doctor of Philosophy degrees in Industrial
Engineering from the Polytechnic Institute in Brooklyn.

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

     FREDRIC W. HARMAN has served as a director of ClickSoftware since April
1997. Since July 1994, Mr. Harman has served as a General Partner of several
venture capital limited partnerships including Oak
                                       55
<PAGE>   57

VI Affiliates, one of our shareholders. Mr. Harman also serves as director of
ILOG, S.A., Inktomi Corporation, Primus Knowledge Solutions, Inc., InterNAP
Networking Services Corp., Quintus Corporation and Avenue A, Inc. Mr. Harman
holds a Bachelor of Science degree in Electrical Engineering and a Master of
Science degree in Electrical Engineering from Stanford University and Master of
Business Administration degree from the Harvard Graduate School of Business.

     EDDY SHALEV has served as a director of ClickSoftware since April 1997.
Since April 1997, Mr. Shalev has also served as a director of Fundtech Corp. Mr.
Shalev has served as Chief Executive Officer of E. Shalev Ltd. since January
1997 and as the Managing General Partner of E. Shalev Management since 1983. Mr.
Shalev holds a Master of Science degree in Management Information Systems from
Tel Aviv University.

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

ELECTION OF DIRECTORS

     An annual general meeting is required to be held at least once in every
calendar year, but not more than fifteen months after the last preceding annual
general meeting. Our articles of association currently provide that the number
of directors shall be no less than two nor more than eleven directors including
independent or external directors. There are no family relationships among any
of our directors, officers or key employees. Pursuant to the Companies Law,
commencing three months after the date our shares are listed for trading on a
stock exchange, the general manager of our company shall not serve as the
chairman of the board unless it was authorized by a majority that includes at
least two-thirds of the shareholders who are not controlling shareholders, as
that term is defined in the Companies Law, who are present and voting, and for a
period of not more than three years from the date such decision was adopted. On
March 2000, our shareholders approved that Dr. Ben-Bassat may serve as general
manager and as chairman of the ClickSoftware board of directors until March
2003.

     Our board of directors will be divided into three classes, only one of
which will be elected each year, having terms of approximately three years each
with the following terms of office:

     - Class I directors, whose term will expire at the annual meeting of
       shareholders to be held in 2001;

     - Class II directors, whose term will expire at the annual meeting of
       shareholders to be held in 2002; and

     - Class III directors, whose term will expire at the annual meeting of
       shareholders to be held in 2003.

     The Class I directors shall initially consist of Dr. Borovich and Mr.
Harman, the Class II directors shall initially consist of Mr. Gantcher and Mr.
Einav and the Class III directors shall initially consist of Dr. Ben-Bassat, Mr.
Shalev and Mr. Thanos.

     Directors whose class is up for election will be elected by shareholders at
our annual general meeting and hold office until the annual general meeting held
in the third year following the year of their election and until their
successors have been duly elected and qualified. Vacancies on the board of
directors may be filled by a majority of the directors then in office. A
director so chosen will hold office until the next annual general meeting.

     Our ordinary shares do not have cumulative voting rights in the election of
directors, which means that the holders of ordinary shares conferring more than
50% of the voting power represented in person or by proxy and voting on the
election of directors at a general meeting have the power to elect all of the
directors and, in such event, holders of the remaining ordinary shares will not
be able to elect any
                                       56
<PAGE>   58

directors. See also "Risk Factors -- Risks Relating to this Offering -- Our
officers, directors and affiliated entities own a large percentage of our
company and could significantly influence the outcome of actions."

EXTERNAL AND INDEPENDENT DIRECTORS

     Under the Companies Law, Israeli companies whose shares have been offered
to the public in or outside of Israel are required to appoint two people to
serve as external directors on the board of directors of a company. The
Companies Law provides that a person may not be appointed as an external
director if the person or the person's relative, partner, employer or any entity
controlled by that person has at the date of appointment, or has had at any time
during the two years preceding that date, any affiliation with the company, any
entity controlling the company or any entity controlled by the company or by
this controlling entity. The term "affiliation" includes:

     - an employment relationship;

     - business or professional relationship maintained on a regular basis;

     - control; or

     - service as an officer.

     No person can serve as an external director if the person's position or
other business creates, or may create, conflict of interests with the person's
responsibilities as an external director or if such position or other business
may impair such director's ability to serve as an external director. No person
who is a director in one company can serve as an external director in another
company, if at that time a director of the other company serves as an external
director in the first company. The Companies Law further provides that when, at
the time of appointment of an external director, all members of the board of
directors of the company are of one gender, then the external director appointed
shall be of the other gender.

     External directors are appointed by a majority vote at a shareholders'
meeting, provided that either: (1) the majority of shares voted at the meeting,
including at least one third of the shares of non-controlling shareholders voted
at the meeting, vote in favor of appointment of the director or (2) the total
number of shares of non-controlling shareholders voted against the election of
the director does not exceed one percent of the aggregate voting rights in the
company. The initial term of an external director will be three years and may be
extended for an additional three-year period. Each committee of a company's
board of directors will be required to include at least one external director
and all external directors must be members of the company's audit committee.
Regulations promulgated under the Companies Law provide that the applicability
of the Companies Law with respect to the nomination by an Israeli company whose
shares are publicly traded outside Israel only shall commence three months
following the offering of the Company's shares to the public. At such time, we
shall be required to appoint two external directors. These regulations also
provide that, with respect to a company whose shares are publicly traded outside
Israel only, the external directors do not have to be residents of Israel. As
required by the Companies Law, since all the members of our Board of Directors
are men, one of the external directors must be a woman.

     In addition, we are obligated under the requirements for quotation on the
Nasdaq National Market to have at least two independent directors on our board
of directors, who also may serve as external directors under the Companies Law,
and to establish an audit committee, at least a majority of whose members are
independent of management. We intend to appoint a director in addition to Dr.
Israel Borovich, who will qualify as an independent director under the Nasdaq
National Market requirements. Dr. Borovich may not serve as an external
director.

     An external director is entitled to consideration and to the refund of
expenses, only as provided in regulations adopted under the Companies Law and is
otherwise prohibited from receiving any other consideration, directly or
indirectly, in connection with service provided as an external director.
Nevertheless, the grant of an exemption from liability for breach of fiduciary
duty or duty of care, an

                                       57
<PAGE>   59

undertaking to indemnify, indemnification or insurance under the provisions of
the Companies Law shall not be deemed as consideration. Under the Companies Law,
an external director cannot be dismissed from the office unless:

     - the board of directors determines that the external director no longer
       meets the requirements for holding such office, as set forth in the
       Companies Law or that the director is in breach of his or her fiduciary
       duties to the company and the shareholders of the company vote (by the
       same majority required for the appointment) to remove the external
       director after the external director has been given the opportunity to
       present his or her position;

     - an Israeli court determines, upon a request of a director or a
       shareholder, that the director no longer meets the requirements for
       holding such office as set forth in the Companies Law or that the
       director is in breach of his or her fiduciary duties to the company; or

     - the court determines, upon a request of the company or a director,
       shareholder or creditor of the company, that the external director is
       unable to fulfill his or her duty or has been convicted of certain crimes
       as specified in the Companies Law.

DUTY OF CARE AND FIDUCIARY AND LOYALTY DUTIES

     The Companies Law codifies the duty of care and fiduciary and loyalty
duties that an officer owes to a company. The term officer includes any
director, managing director, general manager, chief executive officer, executive
vice president, vice president, other managers who are directly subject to the
general manager and any other person fulfilling or assuming any of these
positions or responsibilities without regard to such person's title. The
fiduciary and loyalty duties of an officer include:

     - avoiding any conflict of interest between the officer's position with the
       company and his personal affairs;

     - avoiding any competition with the company;

     - avoiding exploiting any of the company's business opportunities in order
       to receive personal advantage for himself or others; and

     - revealing to the company any information or documents relating to the
       company's affairs which the officer has received due to his position as
       an officer of the company.

     In addition, the Companies Law requires disclosure by an officer to the
company in the event that an office holder is aware of a "personal interest" in
any transaction or proposed transaction of the company (including, generally, a
personal interest of certain relatives in an extraordinary transaction of the
company). We do not have any conflict of interest policy.

AUDIT COMMITTEE, INTERNAL AUDITOR AND CERTIFIED PUBLIC ACCOUNTANT

     The Companies Law provides that public companies must appoint an audit
committee of the board of directors. The number of members of the audit
committee shall not be fewer than three and it shall include all of the external
directors. The chairman of the board of directors, any director who is employed
by the company or gives services to the company, on a regular basis, a
controlling shareholder or his relative cannot be a member of the audit
committee. Our audit committee consists of Mr. Borovich, Mr. Harman and Mr.
Shalev. These directors are not external directors. Following the offering, we
intend to appoint two external directors to the audit committee in addition to,
or in the place of, one or more of the current members.

     Under the Companies Law, the board of directors must also appoint an
internal auditor in accordance with the recommendations of the audit committee.
The role of the internal auditor is to examine, among other matters, whether the
company's actions comply with the law, integrity and orderly business procedure.
The internal auditor may be an employee of the company but not a person holding
5% or more of a company's capital, a person who has the power to appoint one or
more directors or the general

                                       58
<PAGE>   60

manager, an officer, or a relative of the foregoing or the company's certified
public accountant or its representative. We intend to appoint an internal
auditor shortly after this offering. In addition, under the Companies Law, all
companies must appoint a certified public accountant to audit the company's
financial statements and report any material improprieties that he may discover
to the chairman of the board of directors.

APPROVAL OF SPECIAL TRANSACTIONS UNDER ISRAELI LAW

     Each person listed in the table under "-- Executive Officers and Directors"
above is an officer. Under the Companies Law, the approval of the board of
directors is required only for arrangements with respect to compensation of a
company's chief executive officer. Arrangements regarding the compensation of
directors also require audit committee and shareholder approval.

     The Companies Law requires that an officer or a controlling shareholder in
a public company, including an Israeli company that is publicly traded outside
of Israel, promptly disclose to the audit committee, board of directors and, in
certain circumstances, the shareholders, any personal interest that he may have
and all related material information known to him, in connection with any
existing or proposed transaction by the company (an officer and a controlling
shareholder are under no such duty of disclosure when the personal interest
stems only from the personal interest of a relative in a transaction that is not
exceptional). In addition, if the transaction is an exceptional transaction, as
defined in the Companies Law, the officer must also disclose any personal
interest held by the officer's spouse, siblings, parents, grandparents,
descendants, spouse's descendants and the spouse of any of the foregoing, or by
a corporation in which the officer is a 5% or greater shareholder, director or
general manager or in which he or she has the right to appoint at least one
director or the general manager. The disclosure must be made without delay and
not later than the board of directors meeting as which the transaction is first
discussed. For these purposes, the definition of a controlling shareholder under
the Companies Law includes a shareholder that holds 25% or more of the voting
rights in a company, unless another shareholder holds more than 50% of the
voting rights (if two or more shareholders are interested parties in the same
transaction their shareholdings shall be deemed cumulative).

     Once the officer or controlling shareholder complies with these disclosure
requirements, the company may approve the transaction in accordance with the
provisions of the Companies Law and its articles of association. Generally, the
approval of the majority of the disinterested members of the audit committee and
the board of directors is required. If audit committee approval is required for
a transaction with an interested party, an officer or a controlling shareholder,
such approval may not be given unless, at the time the approval was granted two
members of the audit committee were external directors and at least one of them
was present at the meeting at which the audit committee decided to grant the
approval. Shareholder approval may also be required if the transaction is an
exceptional transaction. An exceptional transaction is a transaction outside of
the ordinary course of business, otherwise than on market terms or that is
likely to have a material impact on the company's profitability, assets or
liabilities. Examples of an exceptional transaction include a transaction
between a public company and a controlling shareholder, and a transaction
between a public company and a controlling shareholder who is also an officer of
the company relating to his terms of employment or affiliation. In such event,
the principal terms of such transaction must be disclosed in a notice to the
shareholders which will include all substantive documents relating to the
transaction. If the transaction is with an officer or with a third party in
which the officer or the controlling shareholder has a personal interest, the
approval must confirm that the transaction is not adverse to the company's
interest. Shareholders must also approve all compensation paid to directors in
whatever capacity, company's undertaking to indemnify a director or
indemnification under a permit to indemnify and any transaction in which a
majority of the board members have a personal interest. An officer with a
personal interest in any matter may not be present at any audit committee or
board of directors meeting where such matter is being approved, and may not vote
thereon, unless the majority of the members of the audit committee or of the
board of directors have a personal interest in such approval. Shareholders'
approval for an exceptional transaction must include at least one third of the
shareholders who have no personal interest in the transaction and are present at
the meeting. However, the transaction

                                       59
<PAGE>   61

can be approved by shareholders without this one-third approval if the total
shareholdings of those who vote against the transaction do not represent more
than one percent of the voting rights in the company, unless the Minister of
Justice shall determine a different percentage.

     For information concerning the direct and indirect personal interests of
certain officers and principal shareholders of ClickSoftware in certain
transactions with ClickSoftware, see "Certain Transactions."

DUTY OF SHAREHOLDERS

     Under the Companies Law, in exercising their rights and in fulfilling their
obligations to the company and the other shareholders, shareholders must act in
good faith and in a customary manner and refrain from abusing their power when,
among other things, voting at general or class meetings on any amendment of the
articles of association, an increase of the company's registered (authorized)
share capital, a merger or approval of certain acts and transactions which
require shareholder approval. The laws governing breach of contract apply, with
the necessary modifications, to breach of the above obligations. Furthermore, a
shareholder who may control the company, a shareholder who knows that his vote
will be decisive at a general or class meeting and a shareholder who has the
power to appoint or prevent the appointment of an office holder or who has any
other power with respect to the company, must act fairly towards the company.
Any breach by any such shareholder of these obligations is treated in the same
way as a breach by an office holder of his fiduciary duty, with the necessary
modifications.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

     The Companies Law permits a company to insure an officer in respect of
liabilities incurred by him by reason of acts or omissions committed in his
capacity as an officer with respect to: a breach of the officer's duty of care
to the company or to another person, or a breach of the officer's fiduciary duty
to the company, to the extent that he acted in good faith and had reasonable
cause to believe that the act would not prejudice the company. Furthermore, the
Companies Law provides that a company can indemnify an officer for monetary
liabilities or obligations imposed upon him in favor of other persons pursuant
to a court judgement, including a compromise judgement or an arbitrator's
decision approved by a court, and reasonable litigation expenses, including
attorney's fees, actually incurred by the officer or imposed upon him by a
court, in an action, suit or proceedings brought against him by or on behalf of
the company or by other persons, in connection with a criminal action from which
he was acquitted or in connection with a criminal action which does not require
proof of criminal intent in which he was convicted, in each case by reasons of
acts or omissions of such person in his capacity as officer.

     Furthermore, the Companies Law provides that the company's articles of
association may provide for indemnification of an officer post-factum and may
also provide that a company may undertake to indemnify an officer in advance,
provided such undertaking is limited to types of occurrences which, in the
opinion of the company's board of directors, are, at the time of the
undertaking, foreseeable and, to an amount the board of directors has determined
is reasonable in the circumstances.

     Our articles of association allow us to insure and indemnify officers to
the fullest extent permitted by law. We have approved indemnification for
officers and directors of up to $50,000,000 in the aggregate. We intend to enter
into indemnification agreements with each of our officers and directors.

COMPENSATION COMMITTEE, INSIDER PARTICIPATION AND INTERLOCK

     Our compensation committee consists of Messrs. Harman and Shalev.

     None of the current members of our compensation committee is an officer or
employee of ClickSoftware. No interlocking relationship exists between our board
of directors or compensation committee and the board of directors or
compensation committee of any other company, nor has such an interlocking
relationship existed in the past.

                                       60
<PAGE>   62

DIRECTOR COMPENSATION

     Our directors may be compensated for their service as directors to the
extent such compensation is approved as required by the Companies Law. This
approval will generally require the approvals of our audit committee, our board
of directors and our shareholders.

     Our directors who are not executive officers do not receive cash
compensation for their service on the board of directors or any board of
directors committee. However, all non-management directors are reimbursed for
their expenses for each board of directors meeting attended.

     As of the date of this offering, options to purchase 815,000 ordinary
shares granted to our directors are outstanding, of which options to purchase
80,000 shares are subject to shareholder approval. The weighted average exercise
price of these options is $2.67 per share. Of these options, options to purchase
178,110 ordinary shares are exercisable or will become exercisable within 60
days of March 31, 2000.

EXECUTIVE COMPENSATION

     The following table sets forth all compensation paid or accrued during 1999
to our Chief Executive Officer and our four other most highly compensated
executive officers whose salary and bonus for the fiscal year ended December 31,
1999 was more than $100,000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                    LONG-TERM
                                                                                   COMPENSATION
                                                                                   ------------
                                                           ANNUAL COMPENSATION      SECURITIES
                                                           --------------------     UNDERLYING
               NAME AND PRINCIPAL POSITION                  SALARY      BONUS        OPTIONS
               ---------------------------                 --------    --------    ------------
<S>                                                        <C>         <C>         <C>
Moshe Ben-Bassat
  Chief Executive Officer................................  $190,000    $160,000      720,000
Amit Bendov
  Vice President, Product Marketing......................   105,000      48,120        9,000
Ami Shpiro
  Vice President and General Manager, Europe
  Operations.............................................   146,700      82,180        6,781
Robert Spina
  Vice President, Sales..................................    83,917      66,484       21,000
Mark Trimue
  Vice President, Business Development and Channels
  Development............................................   126,663      38,753       24,000
</TABLE>

                                       61
<PAGE>   63

                       OPTION GRANTS IN LAST FISCAL YEAR

     The following table provides information relating to stock options awarded
to each of the Named Executive Officers during the year ended December 31, 1999.
Other than the options granted to Moshe Ben-Bassat, all such options were
awarded under our 1999 Option Plans and generally vest over four years.


<TABLE>
<CAPTION>
                                              INDIVIDUAL GRANTS                                            POTENTIAL REALIZABLE
                            -----------------------------------------------------                            VALUE AT ASSUMED
                            NUMBER OF      PERCENT OF                                   POTENTIAL            ANNUAL RATES OF
                            SECURITIES    TOTAL OPTIONS                                 REALIZABLE       STOCK PRICE APPRECIATION
                            UNDERLYING       GRANTED                                 VALUE AT INITIAL      FOR OPTION TERMS(2)
                             OPTIONS        IN FISCAL      EXERCISE    EXPIRATION    PUBLIC OFFERING     ------------------------
NAME                         GRANTED         1999(1)        PRICE         DATE            PRICE              5%           10%
----                        ----------    -------------    --------    ----------    ----------------    ----------    ----------
<S>                         <C>           <C>              <C>         <C>           <C>                 <C>           <C>
Moshe Ben-Bassat
  Chief Executive
  Officer.................   720,000(3)       48.2%         $1.83       12/31/02        $3,722,400       $4,516,830    $5,390,640
Amit Bendov(4)
  Vice President, Product
  Marketing...............     9,000           0.6%         $0.83       12/31/07            55,530           85,610       127,576
Ami Shpiro(5)
  Vice President and
  General Manager, Europe
  Operations..............     6,781           0.5%         $0.83       12/31/07            41,839           64,502        96,122
Robert Spina(6)
  Vice President, Sales...    21,000           1.4%         $0.83       12/31/07           129,570          199,756       297,678
Mark Trimue(7)
  Vice President, Business
  Development and Channels
  Development.............    24,000           1.6%         $0.83       12/31/07           148,080          228,293       340,203
</TABLE>


---------------
(1) Based on an aggregate of 1,493,809 options and warrants we granted in the
    year ended December 31, 1999 to our employees, directors and consultants,
    including the Named Executive Officers.


(2) The 5% and 10% assumed annual rate of compounded stock price appreciation
    are mandated by rules of the Securities and Exchange Commission and do not
    represent our estimate or projection of our ordinary share prices. These
    figures are based on the initial public offering price of $7.00 per share.


(3) The options granted to Dr. Ben-Bassat vest over a period of 41 months.

(4) Excludes an additional option for 14,400 ordinary shares at an exercise
    price of $8.50 per share granted to Mr. Bendov on March 21, 2000.

(5) Excludes an additional option for 18,000 ordinary shares at an exercise
    price of $8.50 per share granted to Mr. Shpiro on March 21, 2000.

(6) Excludes an additional option for 7,200 ordinary shares at an exercise price
    of $8.50 per share granted to Mr. Spina on March 21, 2000.

(7) Excludes an additional option for 7,200 ordinary shares at an exercise price
    of $8.50 per share granted to Mr. Trimue on March 21, 2000.

                                       62
<PAGE>   64

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

     The following table set forth information for each of the Named Executive
Officers concerning option exercises for the fiscal year ended December 31,
1999, and exercisable and unexercisable options held at December 31, 1999. The
Named Executive Officers did not exercise any options during the fiscal year
ended December 31, 1999.


     The value of unexercised in-the-money options at December 31, 1999 is based
on a value of $7.00 per share of our ordinary shares, which is the initial
public offering price, less the per share exercise price, multiplied by the
number of shares issuable upon exercise of the option. All options other than
those held by Dr. Ben-Bassat were granted under our 1996 Stock Plan, our 1997
Stock Plan, our 1998 Stock Plan or our 1999 Stock Plans.



<TABLE>
<CAPTION>
                                                NUMBER OF SECURITIES            VALUE OF UNEXERCISED
                                               UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS AT
                                            OPTIONS AT DECEMBER 31, 1999         DECEMBER 31, 1999
                                            ----------------------------    ----------------------------
NAME                                        EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
----                                        -----------    -------------    -----------    -------------
<S>                                         <C>            <C>              <C>            <C>
Moshe Ben-Bassat..........................     87,805        632,195        $  453,952      $3,268,448
  Chief Executive Officer
Amit Bendov...............................    131,315         59,785           843,042         381,570
  Vice President, Product Marketing
Ami Shpiro................................     11,741         24,522            75,377         155,736
  Vice President and General Manager,
  Europe Operations
Robert Spina..............................     12,375         35,625            79,448         223,463
  Vice President, Sales
Mark Trimue...............................     11,000         37,000            70,620         231,540
  Vice President, Business Development and
  Channels Development
</TABLE>


MANAGEMENT EMPLOYMENT AGREEMENTS

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

OPTION PLANS AND OTHER OPTIONS AND WARRANTS

     The purpose of our option plans is to afford an incentive to employees and
consultants of ours, or any of our subsidiaries, to acquire a proprietary
interest in us, to continue as officers, directors, employees and consultants,
to increase their efforts on behalf of us and to promote the success of our
business.

     As of December 31, 1999, we maintained five option plans, the 1996 Option
Plan, the 1997 Option Plan, the 1998 Option Plan and the two 1999 Option Plans.
In 1996, we adopted an Employees' Share Option Plan (1996 Option Plan) according
to which options for the purchase of up to 360,000 Ordinary A shares may be
granted to employees. The options have an exercise price of $0.58 per share and
vest over a four year period at the rate of 33% per year, commencing in the
second year from the date of the grant. In 1997, we adopted an Employees' Share
Option Plan (1997 Option Plan) according to which options for the purchase of up
to 900,000 Ordinary B shares may be granted to employees. The options are
exercisable at a price of $0.58 per share and vest over a four year period, with
monthly vesting after two years. The options issued to U.S. employees vest after
one year. In 1998, we adopted an option plan (1998 Option

                                       63
<PAGE>   65

Plan) according to which options for the purchase of Ordinary B shares may be
granted to employees at an exercise price of $0.58 per share. In 1999 we adopted
new option plans according to which options for the purchase of 660,810 Ordinary
B shares may be granted to employees at an exercise price of $0.83 per share.
Shares granted under the 1998 Option Plan and the 1999 Option Plans vest over a
four year period at the rate of 33% per year commencing in the second year from
the date of grant. We do not intend to grant additional options under these
plans.

     In 2000, we adopted three new option plans -- the 2000 U.S. Option Plan,
the 2000 Israeli Plan and the 2000 Unapproved U.K. Plan. In March 2000 we issued
options for 324,600 ordinary shares pursuant to the 2000 U.S. Option Plan, the
2000 Israeli Plan and the 2000 Unapproved U.K. Plan. After March 2000, we issued
additional stand-alone options to purchase 80,000 ordinary shares in the
aggregate. These options vest over a four year period beginning one year
following the grant date in the case of the 2000 U.S. Option Plan, and two years
following the grant date in the case of the 2000 Israeli Plan and the 2000
Unapproved U.K. Plan. As of the date of this offering, options to purchase
2,957,532 ordinary shares were outstanding under our existing option plans,
stand-alone options and a warrant. The weighted average exercise price of
options outstanding under our option plans is $2.28. We do not intend to grant
additional options under these plans. Following the completion of this offering,
we plan to issue options to our U.S., U.K. and Israeli employees under the 2000
Share Option Plan and the U.K. 2000 Approved Scheme.

     Our option plans are administered by our board of directors and, following
the closing of this offering, the compensation committee of our board of
directors. Under the option plans, options to purchase our ordinary shares may
be granted to officers, directors, employees or consultants of ours or our
subsidiaries. In addition, pursuant to the option plans, the exercise price of
options shall be determined by our compensation committee but may not be less
than the par value of the ordinary shares. The vesting schedule of the options
is also determined by our compensation committee but generally the options vest
over a three to four year period. Each option granted under the option plans is
exercisable until the expiration date of the respective option plans.

2000 U.S. OPTION PLAN

     We have a stock option plan for our U.S. employees, the 2000 U.S. Option
Plan. Options issued under the plan will be for ordinary shares at an exercise
price determined by the plan administrator. Options issued under the plan will
be exercisable for one fourth the number of shares granted under the option
after one year from the date of grant and will vest fully over a four year
period.

2000 ISRAELI PLAN

     We also have a stock option plan for our Israeli employees, the 2000
Israeli Plan. Options issued under the plan will be for ordinary shares at an
exercise price of $8.50. Options issued under the plan will be exercisable for
one third the number of shares granted under the option after two years from the
date of grant and will vest fully over a four year period.

U.K. 2000 UNAPPROVED SCHEME

     We also have a stock option scheme, the U.K. 2000 Unapproved Share Scheme,
for our U.K. employees. Options issued under the plan will be for ordinary
shares. Our board of directors or a committee of the board administers the plan.
The plan provides that options may be granted at an exercised price and subject
to the criteria that the board determines. In the absence of an alternative
provision determined at the date of grant, an option will be exercisable for
half the number of shares granted under option after two years from the date of
grant and will vest fully over a four year period. If an employee is terminated
for cause, his options lapse immediately. In other circumstances, an employee
has two months to exercise his option. Options must be exercised within 10 years
of their grant date. This plan will lapse in 2010.

                                       64
<PAGE>   66

U.K. 2000 APPROVED SCHEME

     We are also in the process of adopting a U.K. Inland Revenue Approved share
option scheme, the U.K. 2000 Approved Share Option Scheme. Options granted under
this scheme will be over ordinary shares and will be granted at the market value
of the shares at the date of grant. Provisions on vesting of options and rights
of exercise on termination are similar to the unapproved scheme. Options must be
exercised within 10 years of the date of grant. This plan will lapse in 2010.

2000 SHARE OPTION PLAN

     Our 2000 Share Option Plan was adopted by our board of directors on
February 10, 2000, and was approved by our shareholders on March 20, 2000. This
plan provides for the grant of incentive share options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, to our employees
and nonstatutory share options to our employees, directors and consultants. A
total of 3,000,000 ordinary shares have been reserved for issuance pursuant to
the plans created in 2000. The number of ordinary shares reserved for issuance
under the plan will increase annually on January 1 of each calendar year,
effective beginning in 2001, equal to the lesser of 5% of the outstanding shares
on the first day of the year, 1,250,000 shares or such lesser amount as our
board of directors may determine.

     Our board of directors or a committee of our board administers the plan.
The committee may consist of two or more "outside directors" to satisfy certain
tax and securities requirements. The administrator has the power to determine
the terms of the options granted, including the exercise price, the number of
shares subject to each option, the exercisability of the options and the form of
consideration payable upon exercise. The administrator determines the exercise
price of options granted under our share option plan, but with respect to
incentive stock options, the exercise price must at least be equal to the fair
market value of our ordinary shares on the date of grant. The administrator may
reduce the exercise price of any option if the fair market value of the shares
covered by such option has declined since the date of grant. Additionally, the
term of an incentive stock option may not exceed ten years.

     After termination of one of our employees, directors or consultants, he or
she may exercise his or her option for the period of time stated in the option
agreement. If termination is due to death or disability, the option will
generally remain exercisable for 12 months following such termination. In all
other cases, the option will generally remain exercisable for 3 months. An
option may never be exercised later than the expiration of its term. Unless
otherwise determined by the administrator, the share option plan generally does
not allow for the transfer of options and only the optionee may exercise an
option during his or her lifetime. Our share option plan provides that in the
event of our merger with or into another corporation or a sale of substantially
all of our assets, the successor corporation will assume or substitute for each
option. If the outstanding options are not assumed or substituted, all
outstanding options will accelerate and become fully vested prior to the closing
of such merger or sale of assets.

     The plan will automatically terminate in 2010, unless we terminate it
sooner. In addition, our board of directors has the authority to amend, suspend
or terminate the plan provided it does not adversely affect any option
previously granted under the plan. In the event of our dissolution or
liquidation, the administrator, in its discretion, may provide that the options
will vest and be exercisable until fifteen days prior to such transaction.

2000 EMPLOYEE SHARE PURCHASE PLAN

     Concurrently with this offering, we intend to establish a 2000 Employee
Share Purchase Plan. A total of 800,000 ordinary shares will be made available
for sale under the plan. In addition, our plan provides for annual increases in
the number of shares available for issuance under the plan on January 1 of each
year, beginning in 2001, equal to the lesser of 2% of the outstanding shares on
the first day of the calendar year, 500,000 shares, or such other lesser amount
as may be determined by our board of directors. All of our employees are
eligible to participate if they are customarily employed by us or any
participating subsidiary

                                       65
<PAGE>   67

for at least 20 hours per week and more than five months in any calendar year.
However, an employee may not be granted the right to purchase shares under the
plan if such employee:

     - immediately after the grant would own shares possessing 5% or more of the
       total combined voting power or value of all classes of our capital
       shares, or

     - whose rights to purchase shares under all of our employee share purchase
       plans accrues at a rate that exceeds $25,000 worth of shares for each
       calendar year.

     Our plan is intended to qualify for preferential tax treatment and contains
consecutive six-month offering periods. The offering periods generally start on
the first trading day on or after May 1 and November 1 of each year, except for
the first such offering period which will commence on the first trading day on
or after the effective date of this offering and will end on the last trading
day on or before October 31, 2000.

     The plan permits participants to purchase ordinary shares through payroll
deductions of up to 12% of their eligible compensation which includes a
participant's base straight time gross earnings but excludes all other
compensation paid to our employees. A participant may purchase no more than
5,000 shares during any six-month offering period.

     Amounts deducted and accumulated by the participant are used to purchase
full ordinary shares at the end of each six-month offering period. The exercise
price will be 85% of the lower of the fair market value of our ordinary shares
at the beginning or end of an offering period. Participants may end their
participation at any time during an offering period, and will be paid their
payroll deductions to date. Participation ends automatically upon termination of
employment with us.

     A participant may not transfer rights granted under our employee share
purchase plan other than by will, the laws of descent and distribution or as
otherwise provided under the plan.

     In the event of our merger with or into another corporation or a sale of
all or substantially all of our assets, a successor corporation may assume or
substitute each outstanding option. If the successor corporation refuses to
assume or substitute for the outstanding right, the offering period then in
progress will be shortened, and a new exercise date will be set. In the event of
a dissolution or liquidation, an offering period in progress will be shortened
by setting a new exercise date to precede the date of such transaction unless
otherwise provided by our board.

     Our plan will terminate in 2010. However, our board of directors has the
authority to amend or terminate our plan, except that, subject to certain
exceptions described in the plan, no such action may adversely affect any
outstanding rights to purchase shares under our plan.

  401(k) Plan

     We provide a tax-qualified employee savings and retirement plan, commonly
known as a 401(k) plan, which covers our eligible employees in the United
States. Under our 401(k) plan, United States employees may elect to reduce their
current annual compensation, on a pre-tax basis, up to the lesser of 15% or the
statutorily prescribed limit, which was $10,000 in calendar year 1999 and will
be $10,500 in calendar year 2000, and have the amount of the reduction
contributed to the 401(k) plan. The 401(k) plan is intended to qualify under
Sections 401(a) and 401(k) of the Internal Revenue Code so that contributions by
our employees to the 401(k) plan and income earned on plan contributions are not
taxable to employees until withdrawn from the 401(k) plan and so that
contributions will be deductible by us when made. The trustee of the 401(k) plan
invests the assets of the 401(k) plan in the various investment options as
directed by the participants.

                                       66
<PAGE>   68

                              CERTAIN TRANSACTIONS

STOCK AND WARRANT ISSUANCES

     On April 13, 1997, we sold 2,810,424 Series A-1 Convertible Preferred
Shares at a price of $0.9785 per share. On April 12, 1997, August 5, 1997 and
October 15, 1997, we sold an aggregate of 2,299,438 Series A Convertible
Preferred Shares at a price of $0.9785 per share. On March 23, 1998, we sold
3,826,809 Series B Convertible Preferred Shares pursuant to the conversion of
previous issued convertible notes at a price of $1.9598 per share. On November
2, 1998, we sold 2,731,141 Series C Convertible Preferred Shares at a price of
$2.3207 per share. On December 15, 1999, we sold 1,832,086 shares of Series D
Convertible Preferred Shares at a price of $6.2770 per share. Upon the
consummation of this offering, all of the outstanding Series A-1 Convertible
Preferred Shares, Series A Convertible Preferred Shares, Series B Convertible
Preferred Shares, Series C Convertible Preferred Shares and Series D Convertible
Preferred Shares will automatically convert into ordinary shares on a
one-for-one basis. The following directors, executive officers and holders of
more than 5% of a class of voting securities purchased Series A-1 Convertible
Preferred Shares, Series A Convertible Preferred Shares, Series B Convertible
Preferred Shares, Series C Convertible Preferred Shares and Series D Convertible
Preferred Shares:

<TABLE>
<CAPTION>
                                    SHARES OF     SHARES OF    SHARES OF    SHARES OF    SHARES OF
                                    SERIES A-1    SERIES A     SERIES B     SERIES C     SERIES D
PURCHASER                           PREFERRED     PREFERRED    PREFERRED    PREFERRED    PREFERRED
---------                           ----------    ---------    ---------    ---------    ---------
<S>                                 <C>           <C>          <C>          <C>          <C>
EXECUTIVE OFFICERS AND DIRECTORS
Moshe Ben-Bassat..................         --        51,098      237,772           --           --
Shimon M. Rojany..................         --       102,197           --           --           --
5% SHAREHOLDERS
Entities affiliated with Oak
  Investment Partners.............  2,810,424            --      922,070      861,797           --
Entities affiliated with Genesis
  Partners........................         --     1,686,254      568,550      538,624           --
Entities affiliated with Worldview
  Technology Partners.............         --            --    1,530,724    1,292,696           --
Entities affiliated with MeriTech
  Capital Partners................         --            --           --           --    1,752,430
</TABLE>

---------------
See the notes to table of beneficial ownership in "Principal Shareholders" for
information relating to the beneficial ownership of such shares. See
"Description of Share Capital -- Registration Rights" for a description of
registration rights of these holders.

     Concurrent with the issuance of Series B Convertible Preferred Shares in
April 1998, we issued warrants to purchase an aggregate of 393,552 Series B
Convertible Preferred Shares with an exercise price of $1.9598 per share and a
warrant to purchase 18,926 Ordinary Shares with an exercise price of $0.58 per
share. The warrant to purchase 18,926 Ordinary Shares was exercised in March
2000. The following directors, executive officer and holders of more than 5% of
our outstanding preferred shares received warrants to purchase Series B
Convertible Preferred Shares:

<TABLE>
<CAPTION>
                                                              NUMBER OF SERIES B
PURCHASER                                                       WARRANT SHARES
---------                                                     ------------------
<S>                                                           <C>
Entities affiliated with Oak Investment Partners............       129,736
Entities affiliated with Genesis Partners...................        77,842
Moshe Ben-Bassat............................................        88,277
Shimon M. Rojany............................................        23,466
</TABLE>

     In connection with the purchase of their shares of Series D Convertible
Preferred, on February 10, 2000 we issued entities affiliated with MeriTech
Capital Partners a warrant to purchase 76,200 Ordinary Shares with an exercise
price of $0.01 per share. These warrants were exercised in March 2000.

                                       67
<PAGE>   69

     The warrants for preferred shares can either be exercised for cash
consideration or any warrant may be exercised by applying the value of a portion
of the warrant, which is equal to the number of shares issuable under the
warrant being exercised, multiplied by the fair market value of the security
receivable upon exercise of the warrant, less the per share exercise price, in
lieu of payment of the exercise price per share.

OTHER AGREEMENTS WITH SHAREHOLDERS

     In early 1997, ClickSoftware spun off its textile software operations to
Nester, Ltd., a private Israeli company controlled by Moshe Ben-Bassat and other
ClickSoftware shareholders. ClickSoftware provides administrative services to
Nester in consideration for an annual payment of approximately $48,000. In
addition, Nester uses a portion of our Israeli office space and equipment for
which they are charged on a per employee basis. As of March 31, 2000, we owed
Nester approximately $99,000.

OTHER TRANSACTIONS

     Our Board of Directors granted a stand-alone option to purchase 720,000
ordinary shares to Moshe Ben-Bassat in August 1999 at an exercise price of $1.83
per share which was subsequently approved by our shareholders. This option vests
pro rata over a 41 month period, with vesting commencing on August 1, 1999.
Vesting of this option will accelerate upon a change of control of our company.

                                       68
<PAGE>   70

                             PRINCIPAL SHAREHOLDERS

     The following table sets forth information with respect to the beneficial
ownership of our ordinary shares as of March 31, 2000 and as adjusted to reflect
the sale of ordinary shares being offered by us, for:

     - each person or group known by us to beneficially own more than 5% of our
       outstanding ordinary shares;

     - each of our Named Executive Officers;

     - each of our directors; and

     - all of our executive officers and directors as a group.


     Beneficial ownership of ordinary shares is determined in accordance with
the rules of the Securities and Exchange Commission and generally includes any
ordinary shares over which a person exercises sole or shared voting or
investment powers, or of which a person has a right to acquire ownership at any
time within 60 days of March 31, 2000. Except as otherwise indicated, and
subject to applicable community property laws, the persons named in this table
have sole voting and investment power with respect to all ordinary shares held
by them. Applicable percentage ownership in the following table is based on
20,979,543 shares outstanding as of March 31, 2000 and 24,979,543 ordinary
shares outstanding immediately following completion of this offering. These
numbers assume the conversion of all outstanding preferred shares into ordinary
shares.


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


<TABLE>
<CAPTION>
                                                      ORDINARY SHARES
                                                BENEFICIALLY OWNED PRIOR TO    ORDINARY SHARES BENEFICIALLY
                                                       THE OFFERING              OWNED AFTER THE OFFERING
                                                ---------------------------    ----------------------------
NAME AND ADDRESS                                  NUMBER        PERCENTAGE        NUMBER        PERCENTAGE
----------------                                -----------    ------------    ------------    ------------
<S>                                             <C>            <C>             <C>             <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Moshe Ben-Bassat(1)...........................   4,493,774          21.3%        4,493,774         17.9%
Amit Bendov(2)................................     153,573             *           153,573            *
Ami Shpiro(3).................................     185,087             *           185,087            *
Robert Spina(4)...............................      15,188             *            15,188            *
Mark Trimue(5)................................      20,000             *            20,000            *
Israel Borovich(6)............................       2,500             *             2,500            *
Nathan Gantcher...............................          --             *                --            *
Roni Einav....................................          --             *                --            *
James W. Thanos...............................          --             *                --            *
Frederic W. Harman(7).........................   4,724,027          22.4         4,724,027         18.8
  c/o Oak Investment Partners
  525 University Avenue, Suite 1300
  Palo Alto, CA 94301
Eddy Shalev(8)................................   2,871,270          13.6         2,871,270         11.5
  c/o Genesis Partners
  50 Dizengoff Street
  Tel-Aviv 64332, Israel
5% SHAREHOLDERS
Entities affiliated with Oak Investments
  Partners(7).................................   4,724,027          22.4         4,724,027         18.8
  525 University Avenue, Suite 1300
  Palo Alto, CA 94301
Entities affiliated with Genesis
  Partners(8).................................   2,871,270          13.6         2,871,270         11.5
  50 Dizengoff Street
  Tel-Aviv 64332, Israel
</TABLE>


                                       69
<PAGE>   71


<TABLE>
<CAPTION>
                                                      ORDINARY SHARES
                                                BENEFICIALLY OWNED PRIOR TO    ORDINARY SHARES BENEFICIALLY
                                                       THE OFFERING              OWNED AFTER THE OFFERING
                                                ---------------------------    ----------------------------
NAME AND ADDRESS                                  NUMBER        PERCENTAGE        NUMBER        PERCENTAGE
----------------                                -----------    ------------    ------------    ------------
<S>                                             <C>            <C>             <C>             <C>
Entities affiliated with Worldview Technology
  Partners(9).................................   2,823,421          13.5         2,823,421         11.3
  435 Tasso Street, Suite 120
  Palo Alto, CA 94301
Entities affiliated with MeriTech Capital
  Associates L.L.C.(10).......................   1,828,629           8.7         1,828,629          7.3
  90 Middlefield Road, Suite 201
  Menlo Park, CA 94025
All executive officers and directors as a
  group (14 persons)(11)......................  13,059,564          61.2%       13,059,564         51.5%
</TABLE>


---------------
 (1) Includes 2,114,944 shares held by Dr. Ben-Bassat's spouse, Idit Ben-Bassat.
     Dr. Ben-Bassat disclaims beneficial ownership of these shares. Also
     includes options to purchase 35,122 ordinary shares and a warrant to
     purchase 88,277 Class B Convertible Preferred Shares exercisable within 60
     days of March 31, 2000 held by Dr. Ben-Bassat.

 (2) Includes options to purchase 145,760 Ordinary Shares exercisable within 60
     days of March 31, 2000 held by Mr. Bendov.

 (3) Includes options to purchase 14,350 Ordinary Shares exercisable within 60
     days of March 31, 2000 held by Mr. Shpiro.

 (4) Includes options to purchase 2,250 Ordinary Shares exercisable within 60
     days of March 31, 2000 held by Mr. Spina.

 (5) Includes options to purchase 20,000 Ordinary Shares exercisable within 60
     days of March 31, 2000 held by Mr. Trimue.

 (6) Includes options to purchase 2,500 Ordinary Shares exercisable within 60
     days of March 31, 2000 held by Mr. Borovich.


 (7) Includes 4,489,542 shares held by Oak Investment Partners VI, L.P., and
     104,749 shares held by Oak Affiliates Fund, L.P. Mr. Harman is a managing
     member of Oak Investment Partners VI, L.P. and Oak Affiliates Fund, L.P.
     Also includes a warrant to purchase 126,778 Class B Convertible Preferred
     Shares held by Oak Investment Partners VI, L.P. and a warrant to purchase
     2,958 Class B Convertible Preferred Shares held by Oak Affiliates Fund,
     L.P. exercisable within 60 days of March 31, 2000. Mr. Harman disclaims
     beneficial ownership of these shares, except for his proportional interest
     therein, if any. Includes 1,913,603 ordinary shares and 2,810,424
     non-voting shares after the offering.


 (8) Includes 1,897,297 shares held by Genesis Partners I L.P. and 896,131
     shares held by Genesis Partners I (Cayman) L.P. Eddy Shalev is a managing
     general partner of Genesis Partners I, L.P. and Genesis Partners I (Cayman)
     L.P. Also includes a warrant to purchase 52,870 Class B Convertible
     Preferred Shares held by Genesis Partners I L.P. and a warrant to purchase
     24,972 Class B Convertible Preferred Shares held by Genesis Partners I
     (Cayman) L.P. exercisable within 60 days of March 31, 2000. Mr. Shalev
     disclaims beneficial ownership of these shares, except for his proportional
     interest therein, if any.

 (9) Includes 1,913,029 shares held by Worldview Technology Partners I, L.P.,
     745,612 shares held by Worldview Technology International I, L.P. and
     164,780 shares held by Worldview Strategic Partners I, L.P.

(10) Includes 1,799,372 shares held by MeriTech Capital Partners L.P., and
     29,258 shares held by MeriTech Capital Affiliates L.P.

(11) Includes options to purchase 320,733 ordinary shares and warrants to
     purchase 319,320 Class B Convertible Preferred Shares exercisable within 60
     days of March 31, 2000.

                                       70
<PAGE>   72

                          DESCRIPTION OF SHARE CAPITAL

DESCRIPTION OF SHARES

     Set forth below is a summary of the material provisions governing our share
capital. This summary is not complete and should be read together with our
Memorandum of Association and Articles of Association, a copy of each of which
has been filed as an exhibit to the Registration Statement of which this
prospectus forms a part.


     As of the date of this offering, our authorized share capital will consist
of 105,000,000 shares, NIS 0.02 nominal value per share, including 97,000,000
voting ordinary shares, 3,000,000 non-voting ordinary shares and 5,000,000
special preferred shares. As of March 31, 2000, there were 20,979,543 ordinary
shares issued and outstanding on a pro forma basis and there were approximately
110 holders of our ordinary shares.


DESCRIPTION OF ORDINARY SHARES


     Our shareholders approved the increase of our authorized share capital to
100,000,000 ordinary shares, NIS 0.02 par value per ordinary share, effective
immediately prior to the completion of this offering. Immediately prior to the
completion of this offering, each preferred share will automatically convert
into one ordinary share. On March 20, 2000, our shareholders approved a 1-for-2
reverse stock split for each share outstanding as of the record date and the
issuance of bonus shares at a rate of 1 bonus share for every 5 shares held,
effective immediately. The effect of these transactions was a 3 for 5 reverse
share split. Immediately prior to the completion of this offering, there will be
20,979,543 ordinary shares issued and outstanding.


     Upon completion of this offering, all outstanding ordinary shares,
including the ordinary shares issued in this offering, will be validly issued
and fully paid and will not have preemptive rights. The ownership or voting of
ordinary shares by non-residents of Israel is not restricted in any way by our
memorandum of association, our articles of association or the laws of the State
of Israel, except that nationals of certain countries which are, or have been,
in a state of war with Israel may not be recognized as owners of ordinary
shares.

     Transfer of Shares and Notices.  Fully paid ordinary shares are issued in
registered form and may be freely transferred pursuant to our articles of
association unless such transfer is restricted or prohibited by another
instrument. Generally, pursuant to the Companies Law, each shareholder of record
in an Israeli public company, is entitled to receive at least twenty one days'
prior notice of a General Meeting, unless provided by the company's articles of
association that notice need not be sent. Our articles of association provide
for at least ten days' and not more than sixty days' prior notice of a General
Meeting of the shareholders unless a longer period is prescribed by the
Companies Law. The Companies Law and the regulations promulgated thereunder
provide that a notice of a General Meeting in a company whose shares are
publicly traded outside of Israel, shall be published pursuant to the
requirements of the Nasdaq National Market.

     Election of Directors.  Our ordinary shares do not have cumulative voting
rights in the election of directors. As a result, the holders of ordinary shares
that represent more than 50% of the voting power have the power to elect all of
our directors.

     Dividend and Liquidation Rights.  We may declare a dividend to be paid to
the holders of ordinary shares according to their rights and interests in our
profits. In the event of our liquidation, after satisfaction of liabilities to
creditors, our assets will be distributed to the holders of ordinary shares in
proportion to the nominal value of their respective holdings. This right may be
affected by the grant of preferential dividend or distribution rights to the
holders of a class of shares with preferential rights that may be authorized in
the future. See "Description of Preferred Shares." Dividends may be distributed
only out of profits available for dividends as determined by the Companies Law,
provided that there is no reasonable concern

                                       71
<PAGE>   73

that the distribution will prevent us from being able to meet our existing and
anticipated obligations when they become due.

     Generally, pursuant to the Companies Law, the decision to distribute
dividends and the amount to be distributed, whether interim or final, is taken
by the Board of Directors. However, a company may determine in its articles of
association that the decision to distribute dividends be made by the
shareholders in the general meeting after receiving the recommendations of the
Board of Directors, provided that the general meeting may reduce but not
increase the amount of the dividends proposed by the Board of Directors; after
the shareholders have determined at a general meeting the maximum amount which
may be distributed; or in any other way, provided that the board of directors
has had the opportunity to determine, prior to the distribution, that is not a
non-permissable distribution pursuant to the Companies Law. Our articles of
association provide that the Board of Directors has the authority to determine
the amount and time for payment of any dividends, whether interim or final and
the record date for determining the shareholders entitled thereto, provided such
date is not prior to the date of the resolution to distribute the dividend.

     Voting, Shareholders' Meetings and Resolutions.  Holders of ordinary shares
have one vote for each ordinary share held on all matters submitted to a vote of
shareholders. However, certain ordinary shares which are held by one of our
existing shareholders are non-voting ordinary shares. These voting rights may be
affected by the grant of any special voting rights to the holders of a class of
shares with preferential rights that may be authorized in the future. Any change
in our registered capital, including the creation of a new class of shares with
rights superior or inferior to existing classes of shares, may be adopted by a
resolution of the shareholders in a general meeting. Once the creation of a
class of shares with a preference rights has been approved, the Board of
Directors may issue such shares, unless it is limited from doing so by the
articles of association or a contractual provision.

     The Companies Law provides that a shareholder in a public company who
wishes to vote in the shareholders' General Meeting shall prove to the company,
that he owns the shares.

     Pursuant to the Companies Law the quorum required for shareholders'
meetings consists of at least two shareholders who hold between them at least
twenty five percent of the voting rights, unless a different quorum is
prescribed by the articles of association. Our articles provide that the
requisite quorum is 33%. A meeting adjourned for lack of a quorum generally is
adjourned to the same day in the following week at the same time and place or
any time and place as the directors designate in a notice to the shareholders.
At such reconvened meeting the required quorum consists of any two members
present in person or by proxy.

     Resolutions, such as those amending our articles of association, assuming
the authority of the board of directors in certain circumstances, appointing
auditors, appointing external directors, approving certain transactions,
increasing or decreasing our registered share capital and approving a merger
with another company must be made by the shareholders at a general meeting. A
company may determine in its articles of association certain additional matters,
resolutions with respect to which must be made by the shareholders in a general
meeting.

     Some corporate actions such as a merger or liquidation, may also require
the prior approval of an Israeli court, and would be subject to court approval.

DESCRIPTION OF SPECIAL PREFERRED SHARES

     As of the offering we will have an additional 5,000,000 million special
preferred shares authorized. The board of directors has the authority to issue
the preferred shares without further vote or action by the shareholders in one
or more series and to fix the rights, preferences, privileges and restrictions
of the preferred shares, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series. If the board of
directors issues special preferred shares, this may delay, defer or prevent a
change in control without further action by the shareholders. For example, the
board of directors could issue special

                                       72
<PAGE>   74

preferred shares that have a class vote with respect to a change of control
transaction. The issuance of special preferred shares with voting and conversion
rights may adversely affect the voting power of the holders of ordinary shares,
including the loss of voting control to others. We currently have no plans to
issue any of the unissued preferred shares. Although Israeli law does not
prohibit the issuance of preferred shares with rights which were not approved by
the shareholders at the time such preferred shares were authorized, this matter
has to date not been determined by Israeli courts, and there is a substantial
doubt as to the validity of such an issuance. Consequently, to the extent that
the rights, preferences and privileges attached to the preferred shares, if and
when issued, derogate from the rights of our ordinary shares, there can be no
assurance that, if such issuance was challenged in legal proceedings, the
legality of such issuance would be upheld by an Israeli court.

PROVISIONS AFFECTING POTENTIAL CHANGE OF CONTROL

     Our Articles of Association provide that we may not engage in any business
combination with an interested shareholder for a period of three years following
the date that such shareholder became an interested shareholder, unless: (a)
prior to such date, the Board of Directors approved either the business
combination or the transaction that resulted in the shareholder becoming an
interested shareholder; or (b) upon consummation of the transaction that
resulted in the shareholder becoming an interested shareholder, the interested
shareholder owned at least 66 2/3% of our voting shares outstanding at the time
the transaction commenced. A business combination includes: (i) any merger or
consolidation involving us and the interested shareholder; (ii) any sale,
transfer, pledge or other disposition of 10% or more of our assets in a
transaction involving the interested shareholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by us of
any shares to the interested shareholder; (iv) subject to certain minor
exceptions, any transaction involving us (or any of our direct or indirect
majority owned subsidiaries) which has the effect of increasing the
proportionate shareholding or convertible securities owned by the interested
shareholder; or (v) the receipt by the interested shareholder of the benefit of
any loans, advances, guarantees, pledges or other financial benefits provided by
or through us. In general, the Articles of Association define an interested
shareholder as any entity or person beneficially owning 15% or more of our
outstanding voting shares and any entity or person affiliated with, controlling
or controlled by such entity or person. In addition, the issuance of Special
Preferred Shares may have the effect of delaying, deferring or preventing a
change in control of ClickSoftware without further action by the shareholders.
See "Description of Share Capital -- Description of Special Preferred Shares."

OPTIONS AND WARRANTS

     As of March 31, 2000, options to purchase 2,483,980 voting and non voting
ordinary shares were outstanding, with a weighted average exercise price of
$2.08 per share. These options include a stand-alone option to purchase 720,000
ordinary shares granted to Dr. Ben-Bassat, our CEO, in August 1999 which was
subsequently approved by our shareholders. ClickSoftware has also issued
warrants to purchase an aggregate of 393,552 Preferred B Convertible Shares,
which are convertible into ordinary shares, at an exercise price of $1.96 per
share. Warrants are exercisable upon the earlier of March 31, 2003, following
our initial public offering, the sale or transfer of substantially all of our
assets or a change in the majority ownership of our voting securities. The
warrants can either be exercised for cash consideration or any warrant may be
exercised by applying the value of a portion of the warrant, which is equal to
the number of shares issuable under the warrant being exercised, multiplied by
the fair market value of the security receivable upon exercise of the warrant,
less the per share exercise price, in lieu of payment of the exercise price per
share. As of March 31, 2000, 939,039 ordinary shares were held by a trustee and
have been reserved for allocation against some employee options granted but not
yet exercised. Options granted to employees generally vest over a four year
period at the rate of 33% per year with the initial vesting either occurring
after the first twelve months or, in the case of Israeli options, the first
twenty-four months. These options shall terminate upon the optionees termination
of employment with us. Consideration for these options is payment of the
exercise price.

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<PAGE>   75

REGISTRATION RIGHTS


     In connection with the private placement of our Series A, Series A-1,
Series B, Series C, Series D Convertible Preferred Shares and Series B
Convertible Ordinary Shares, most of our shareholders were granted registration
rights with respect to the ordinary shares received by such shareholders upon
conversion of their preferred shares (13,499,898 ordinary shares in the
aggregate) (the "Registrable Securities"). The registration rights agreement
provides that at any time after the earlier of March 29, 2001, or 12 months
following this offering, we shall be required to effect registration at the
request of at least 20% of the outstanding Registrable Securities or such lesser
number which would result in an aggregate offering of at least $10 million. We
can delay the registration for up to 90 days if, in the good faith opinion of
the Board of Directors, it would be seriously detrimental to the Company and the
shareholders for such registration statement to be filed at that time.


     If we shall determine to register, or offer to the public in any
jurisdiction, any of our securities either for our own account or for the
account of a security holder or holders exercising their respective demand
registration rights, other than a registration (or its equivalent in other
jurisdictions) (i) relating solely to employee benefit plans or to a Rule 145
transaction, or (ii) on any form which does not permit secondary sales or does
not include substantially the same information as would be required to be
included in a registration statement covering the sale of Registrable
Securities, we must include all Registrable Securities requested to be included
in such registration. If the registration is an underwritten offering, the
amount of Registrable Securities to be registered is subject to underwriter's
cutback; in our initial public offering, the underwriters may exclude all
Registrable Securities from such registration and thereafter Registrable
Securities must constitute at least 25% of the total number of securities
offered to the public. In the event of underwriters cutbacks, the securities to
be registered in such registration and underwriting will be allocated as
follows: (i) 75% of the Registrable Securities to be included in such
registration and underwriting, and (ii) Moshe Ben-Bassat and Idit Ben-Bassat to
the extent of 25% of the Registrable Securities to be included in such
registration and underwriting. The holders of the Registrable Securities also
have unlimited Form S-3 registration rights.

     All expenses of registration shall be borne by us, except that underwriting
discounts and selling expenses will be borne by the selling shareholders.

ANTI-TAKEOVER PROVISIONS; MERGERS AND ACQUISITIONS UNDER ISRAELI LAW

     Pursuant to the Companies Law, if following any acquisition of shares of a
public company or of a class of shares of a public company the acquiror will
hold 90% or more of the company's shares or 90% of any class of the company's
shares, respectively, then the acquiror must make a tender offer for all of the
remaining shares or the particular class of shares of the company. In the event
that 5% or more of the shareholders have not responded favorably to a tender
offer, the offeror may not purchase more than 90% of that class of shares. This
rule does not apply if the acquisition is made by way of a merger. Furthermore,
the Companies Law provides that as long as a shareholder in a public company
holds more than 90% of the company's shares or of a class of shares, such
shareholder shall be precluded from purchasing any additional shares of that
type. The Companies Law further provides that if following the tender offer such
acquiring shareholder holds more than 95% of the outstanding shares of any
class, the holders of all the remaining shares will be obligated to transfer
such shares to the acquiror at the tender offer price. This entails the
possibility of additional delay and the imposition of further approval
requirements at the court's discretion.

     The Companies Law requires that each company that is party to a merger
approve the transaction by a vote of the Board of Directors and by a vote of the
majority of its outstanding shares, generally excluding shares voted by the
other party to the merger or any person holding at least 25% of the other party
to the merger, at a shareholders' meeting called on at least 21 days prior
notice. In addition, the Companies Law does not generally require court approval
of a merger. Pursuant to the Companies Law the articles of association of
companies such as ours, which have been incorporated prior to February 1, 2000,
are deemed to include a provision whereby the approval of a merger requires
approval of the transaction by the majority of

                                       74
<PAGE>   76

the shareholders present and voting on the proposed transaction who hold at
least 75% of the shares present and voting at such meeting. Upon the request of
a creditor to either party to the proposed merger, the court may delay or
prevent the merger if it concludes that there exists a reasonable concern that
as a result of the merger, the surviving company will be unable to satisfy the
obligations of any of the parties to the merger. In addition, a merger may not
be completed unless at least 70 days have passed from the time that a proposal
for approval of the merger has been filed with the Israeli Registrar of
Companies and certain notification and information have been provided to
debtors.

     Notwithstanding the approval requirements set forth in the Companies Law,
companies, such as ours, which have been incorporated prior to the Companies Law
coming into effect, must specifically amend their articles of association to
provide for the shareholder voting requirements contained in the Companies Law.

     The Companies Law also provides that an open market acquisition of shares
in a public company must be made by means of a tender offer if as a result of
the acquisition the purchaser would become a holder of 25% of the voting rights
in the company. This rule does not apply if there already is another holder of
25% of the voting rights in the company. Similarly, the Companies Law provides
that an open market acquisition of shares in a public company must be made by
means of a tender offer if as a result of the acquisition the purchaser would
become the holder of 45% of the voting rights in the company. This rule does not
apply if another party already holds more than 50% of the voting rights in the
company. Regulations promulgated under the companies law provide that these
tender offer requirements do not apply to companies whose shares are listed for
trading on a stock exchange outside of Israel only if, according to the laws in
the country in which its shares are traded there is either a limitation on the
acquisition of a specified percentage of control in the Company or the
acquisition of a specified percentage of control requires the purchaser to also
make a tender offer to the public.

MODIFICATION OF CLASS RIGHTS

     Our articles provide that the rights attached to any class (unless
otherwise provided by the terms of such class), such as voting, rights to
dividends and the like, may be varied by written consent of all holders of the
issued shares of that class, or by adoption of a majority resolution at a
meeting of the holders of the shares of such class.

ISRAELI SECURITIES LAW REQUIREMENTS

     We have received from the Israeli Securities Authority an exemption from
Israel's prospectus delivery requirements and an exemption from the reporting
obligations to which Israeli companies whose shares are publicly traded are
subject, provided that a copy of each of the reports filed by us pursuant to
applicable United States law shall be available for public review at our
offices.

ACCESS TO INFORMATION

     We file reports with the Israeli Registrar of Companies regarding our
registered address, our registered capital, our shareholders of record and the
number of shares held by each, the identity of the directors and details
regarding security interests on our assets. In addition, we must file with the
Registrar of Companies our articles of association and notices of resolutions
concerning the amendment of our articles of association, the change of our name,
the change of our registered address, merger with another company and any change
in our objectives. The information filed with the Registrar of Companies is
available to the public. In addition to the information available to the public,
our shareholders are entitled, upon request, to review and receive copies of all
minutes of meetings of our shareholders, our annual balance sheet, the register
of our shareholders and other documents provided for in the Companies Law.

TRANSFER AGENT AND REGISTRAR

     We have appointed Boston Equiserve as our transfer agent and registrar for
the Ordinary Shares.

                                       75
<PAGE>   77

                        SHARES ELIGIBLE FOR FUTURE SALE

     If our shareholders sell substantial amounts of our ordinary shares
(including shares issued upon the exercise of outstanding options and warrants)
in the public market following this offering, the market price of our ordinary
shares could fall dramatically. These sales also might make it more difficult
for us to sell equity or equity-related securities in the future at a time and
price that we deem appropriate.

     The number of shares of ordinary shares available for sale in the public
market is limited by restrictions under United States federal securities law and
by certain "lock-up" agreements that our shareholders have entered into with the
underwriters. The lock-up agreements restrict our shareholders from selling or
otherwise disposing of any of their shares for a period of 180 days after the
date of this prospectus without the prior written consent of Lehman Brothers
Inc. We and the beneficial holders, or trustees issuing shares to optionholders,
of 20,973,303 ordinary shares and options and warrants exercisable into an
aggregate of 1,598,893 ordinary shares have agreed not to sell ordinary shares
or any securities convertible into or exercisable for ordinary shares for 180
days after this offering and have entered into lock-up agreements. Lehman
Brothers Inc. may, however, in its sole discretion and without notice, release
all or any portion of the shares from the restrictions in the lock-up
agreements. The holders of options exercisable into an aggregate of 324,600
additional ordinary shares hold options which will not be exercisable within 180
days of the date of this prospectus.


     Upon completion of this offering, 24,979,543 ordinary shares, including
shares held by a trustee for issuance under some outstanding options, will be
outstanding, assuming that the underwriters do not exercise their over-allotment
option and there are no exercises of outstanding options or warrants after March
31, 2000. Of these shares, all of the 4,000,000 shares sold in this offering
will be freely tradable in the public market without restriction or further
registration under the Securities Act, unless these shares are held by
"affiliates," as that term is defined in Rule 144 under the Securities Act. For
purposes of Rule 144, an "affiliate" of an issuer is a person that, directly or
indirectly through one or more intermediaries, controls, or is controlled by or
is under common control with, the issuer. Shares purchased by an affiliate may
not be resold except pursuant to an effective registration statement or an
applicable exemption from registration, including an exemption under Rule 144 of
the Securities Act. The remaining 20,979,543 shares of our ordinary shares held
by existing stockholders, including 939,039 shares held by a trustee, are
"restricted securities," as that term is defined in Rule 144 of the Securities
Act. These restricted securities may be sold in the public market only if they
are registered or if they qualify for an exemption from registration under Rule
144 or 701 under the Securities Act. These rules are summarized below. Subject
to lock-up agreements with us and the underwriters and the provisions of Rule
144 and Rule 701, additional shares will be available in the public market as
follows:



<TABLE>
<CAPTION>
                 NUMBER
                OF SHARES                                    DATE
                ---------                                    ----
<S>                                        <C>
6,240 shares.............................  On the date of this prospectus
20,641,200 shares........................  180 days after the date of this
                                           prospectus
332,103 shares...........................  At various times beginning more than 180
                                           days after the date of this prospectus
</TABLE>



     The 332,103 number in the table above includes 236,979 ordinary shares
issued and held by a trustee to be issued upon the exercise of outstanding
employee options that vest at various times beginning more than 180 days after
the date of this prospectus. As of March 31, 2000, 1,544,941 ordinary shares are
issuable upon exercise of other outstanding options, an aggregate of 275,757 of
which will be vested on the 180th day following the date of this prospectus. In
addition, 393,552 shares issuable pursuant to outstanding warrants will be
available for sale in the public market at various times beginning 180 days
after the date of this prospectus.


RULE 144

     In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned ordinary shares
for at least one year from the later of the date those

                                       76
<PAGE>   78

ordinary shares were acquired from us or from an affiliate of ours would be
entitled to sell, within any three-month period, a number of shares that is not
more than the greater of:

          (1) 1% of the number of ordinary shares then outstanding, which will
     equal approximately 259,795 shares immediately after this offering; or

          (2) the average weekly trading volume of our ordinary shares on the
     Nasdaq National Market during the four calendar weeks before a notice of
     the sale on Form 144 is filed.

     Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about us.

RULE 144(k)

     In addition, under Rule 144(k), a person who is not one of our affiliates
at any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years from the later of
the date these ordinary shares were acquired from us or from an affiliate of
ours, including the holding period of any prior owner other than an affiliate,
is entitled to sell those shares without complying with the manner of sale,
public information, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted pursuant to the lock-up agreements, those
shares may be sold immediately upon the completion of this offering.

RULE 701

     In general, under Rule 701 of the Securities Act as currently in effect,
subject to specified exceptions, our employees, consultants or advisors who
purchased shares from us in connection with a stock option plan can resell,
unless otherwise restricted pursuant to the lock-up agreements those shares 90
days after the date of this prospectus in reliance on Rule 144, but without
complying with some of the restrictions, including the holding period, contained
in Rule 144.

OPTION PLANS AND REGISTRATION RIGHTS

     In addition, 3,475,400 additional ordinary shares have been reserved for
issuance pursuant to our stock option plans and employee share purchase plan.
After this offering, we intend to file a registration statement under the
Securities Act covering ordinary shares reserved for issuance pursuant to our
outstanding options described above and under our share option plans. This
registration statement is expected to be filed as soon as practicable after the
closing of this offering. See "Description of Share Capital -- Registration
Rights" for a description of registration rights of some of our shareholders.

                                       77
<PAGE>   79

                UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

     The following summary describes the material United States federal income
tax consequences relating to an investment in ordinary shares as of the date
hereof. The summary is based on the Internal Revenue Code of 1986, and existing
final, temporary and proposed Treasury Regulations, rulings and judicial
decisions, all of which are subject to prospective and retroactive changes. We
will not seek a ruling from the Internal Revenue Service with regard to the
United States federal income tax treatment relating to investment in ordinary
shares and, therefore, there can be no assurance that the IRS will agree with
the conclusions set forth below. The summary does not purport to address all
federal income tax consequences that may be relevant to you. For example, the
summary assumes that you are a U.S. Holder, as defined below, hold ordinary
shares as capital assets within the meaning of Section 1221 of the Code, and
does not address the tax consequences that may be relevant to investors in
special tax situations (including, for example, persons who are not U.S.
Holders, as defined below, insurance companies, tax-exempt organizations,
dealers in securities or currency, banks or other financial institutions,
investors that hold ordinary shares as part of a hedge, straddle or conversion
transaction, or holders that own, directly or indirectly, ten percent or more of
our outstanding ordinary shares or persons who are not entitled to benefits
under the "U.S.-Israel Tax Treaty" pursuant to Article 25 thereof). Further, it
does not address the alternative minimum tax consequences of an investment in
ordinary shares or the indirect consequences to persons that own equity
interests in investors in ordinary shares. ACCORDINGLY, YOU SHOULD CONSULT YOUR
OWN TAX ADVISOR CONCERNING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX
LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO
YOUR PARTICULAR SITUATION.

     For purposes of this discussion, "U.S. Holder" means a holder of ordinary
shares that is:

     - a citizen or resident of the United States;

     - a partnership or corporation created or organized in the United States or
       any State thereof (including the District of Columbia);

     - an estate, the income of which is includable in gross income for United
       States federal income tax purposes regardless of its source; or

     - a trust if (1) a United States court is able to exercise primary
       supervision over its administration and one or more United States persons
       have the authority to control all of its substantial decisions, or (2)
       the trust was in existence on August 20, 1996 and has properly elected to
       continue to be treated as a United States person.

TAXATION OF U.S. HOLDERS

     Distributions on Ordinary Shares.  Distributions made by us with respect to
ordinary shares generally will constitute foreign source dividends for federal
income tax purposes and will be taxable to you as ordinary income to the extent
of our undistributed current or accumulated earnings and profits (as determined
for United States federal income tax purposes). Distributions in excess of our
current or accumulated earnings and profits will be treated first as a
non-taxable return of capital reducing your tax basis in the ordinary shares,
thus increasing the amount of any gain (or reducing the amount of any loss)
which might be realized by you upon the sale or exchange of such ordinary
shares. Any such distributions in excess of your tax basis in the ordinary
shares will be treated as capital gain to you and will be long term capital gain
if you have held the ordinary shares for more than one year. Dividends paid by
us generally will not be eligible for the dividends received deduction available
to certain United States corporate shareholders. The amount of any cash
distribution paid in a foreign currency will equal the U.S. dollar value of the
distribution, calculated by reference to the exchange rate in effect at the time
the dividends are received. You should not recognize any foreign currency gain
or loss if such foreign currency is converted into U.S. dollars on the day
received. If you do not convert the foreign currency into U.S. dollars on the
date of receipt, however, you may recognize gain or loss upon a subsequent sale
or other

                                       78
<PAGE>   80

disposition of the foreign currency (including an exchange of the foreign
currency for U.S. dollars). Such gain or loss, if any, will be United States
source ordinary income or loss for United States federal income tax purposes.

     Subject to certain conditions and limitations, any Israeli withholding tax
imposed upon distributions which constitute dividends under United States income
tax law will be eligible for credit against your federal income tax liability.
Alternatively, you may claim a deduction for such amount, but only for a year in
which you elect to do so with respect to all foreign income taxes. The overall
limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. For this purpose, dividends distributed
by us with respect to ordinary shares will generally constitute "passive income"
or in the case of certain holders, "financial services income." The rules
governing the foreign tax credit are complex. You are urged to consult your tax
advisor regarding the availability of the foreign tax credit in your particular
circumstances.

     Sale or Exchanges of Ordinary Shares.  You generally will recognize capital
gain or loss upon the sale or exchange of the ordinary shares measured by the
difference between the amount realized and your tax basis in the ordinary
shares. Gain or loss will be computed separately for each block of shares sold
(shares acquired separately at different times and prices). The gain or loss on
such disposition will be long-term capital gain or loss if the ordinary shares
had been held for more than one year. Long-term capital gains of individuals is
eligible for reduced rates of taxation. The deductibility of capital losses is
restricted and generally may only be used to reduce capital gains to the extent
thereof.

     Passive Foreign Investment Company.  A foreign corporation generally will
be treated as a "passive foreign investment company" ("PFIC") if, after applying
certain "look-through" rules, either (1) 75% or more of its gross income is
passive income or (2) 50% or more of the average value of its assets is
attributable to assets that produce or are held to produce passive income
including cash (even if held or working capital). Passive income for this
purpose generally includes dividends, interest, rents, royalties and gains from
securities and commodities transactions. The look-through rules require a
foreign corporation that owns at least 25%, by value, of an operating subsidiary
to treat that proportion of the subsidiary's assets and income as held or
received directly by the foreign parent.

     We do not believe that we currently are a PFIC nor do we anticipate that we
will be a PFIC in the future because we expect that less than 75% of our annual
gross income will be passive income and less than 50% of our assets will be
passive assets, based on the look-through rules, the current income and assets
of our subsidiaries, and the manner in which we expect to conduct our businesses
in the future. However, there can be no assurance that we are not or will not be
treated as a PFIC in the future. This conclusion is a factual determination made
annually and thus subject to change. In reaching the conclusion that we do not
believe that we are a PFIC, we have valued our assets based on the price per
share of the ordinary shares. This valuation method results in substantial value
being given to intangible assets, including goodwill, that are considered
neither to produce nor to be held for the production of passive income for
purposes of the PFIC rules. The Internal Revenue Service has neither approved
nor disapproved of this valuation method, although we believe that this a
reasonable method of valuing our non-passive assets and is consistent with the
policy underlying the PFIC provisions. If we were to be treated as a PFIC, you
may 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, you (1) may be permitted to make a "qualified electing fund"
election, in which case, in lieu of such treatment you 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. Neither we nor our
advisors have the duty to or will undertake to inform you of changes in
circumstances that would cause us to become a PFIC. You should consult your own
tax advisors concerning our status as a PFIC at any point in time after the date
of this prospectus. We do not currently intend to take the action necessary for
you to make a "qualified electing fund" election in the event we are determined
to be a PFIC.

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     Foreign Personal Holding Company.  A foreign corporation may be classified
as a foreign personal holding company (a "FPHC", for federal income tax purposes
if both of the following tests are satisfied: (1) at any time during the taxable
year five or fewer individuals who are United States citizens or residents own
or are deemed to own (under certain attribution rules) more than 50% of its
stock (vote or value) and (2) at least 60% (50% for years subsequent to the year
in which it becomes a FPHC of its gross income (regardless of its source), as
specifically adjusted, "is foreign personal holding company income," which
includes dividends, interest, rents, royalties and gain from the sale of stock
or securities.

     We do not believe that we are currently a FPHC nor do we anticipate that we
will be a FPHC in the future; however, no assurance can be given that we are or
will not become a FPHC as a result of future changes of ownership or changes in
the nature of our income. If we were to be classified as a FPHC, you would be
required to include in income as a taxable constructive dividend your pro rata
share of our undistributed foreign personal holding company income.

BACKUP WITHHOLDING

     In general, information reporting requirements will apply to certain
distributions on the ordinary shares and to the proceeds of sale of ordinary
shares made to you (unless you are an exempt recipient such as a corporation). A
31% backup withholding tax will apply to such payments if you fail to provide a
taxpayer identification number, a certification of exempt status, or fail to
report in full dividend an interest income. If backup withholding applies, the
amount withheld is not an additional tax, but may be credited against your
United States federal income tax liability provided the required information is
furnished to the Internal Revenue Service.

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<PAGE>   82

                    ISRAELI TAXATION AND INVESTMENT PROGRAMS

     The following discussion summarizes the material current tax laws of the
State of Israel as they relate to our Company, its shareholders and ownership
and disposition of its ordinary shares. This summary does not discuss all
aspects of Israeli tax law that may be relevant to a particular shareholder in
light of his personal investment circumstances or to all types of investors
subject to special treatment under Israeli law (for example, traders in
securities or persons that own, directly or indirectly, 10% or more of a
company's outstanding voting shares). The following also includes a discussion
of all of the material Israeli government programs benefiting various Israeli
businesses such as the Company. To the extent that the discussion is based on
new legislation yet to be subject to judicial or administrative interpretation,
there can be no assurance that the views expressed herein will accord with any
such interpretation in the future. This discussion is for general information
only and does not cover all possible tax consequences or situations, and
investors should consult their tax advisors regarding the tax consequences
unique to their situation, including the effects of applicable Israeli or
foreign tax laws and possible changes to tax laws.

POSSIBLE TAX REFORM

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

GENERAL CORPORATE TAX RATE

     In general, Israeli companies are currently subject to Company Tax at the
rate of 36% of taxable income. However, the effective tax rate payable by a
company which derives income from an "Approved Enterprise" (as further discussed
below), may be considerably less. Subject to relevant tax treaties, dividends or
interest received by an Israeli corporation from foreign subsidiaries are
generally subject to tax regardless of its status as an Approved Enterprise.

LAW FOR THE ENCOURAGEMENT OF CAPITAL INVESTMENTS, 1959

     Certain of the Company's investment programs have been granted "Approved
Enterprise" status under the Law for the Encouragement of Capital Investments,
1959, as amended (the "Investment Law"). The Investment Law provides that a
capital investment in eligible facilities may, upon application to the Israel
Investment Center, be designated as an Approved Enterprise. Each certificate of
approval for an Approved Enterprise relates to a specific investment program
delineated both by its financial scope, including its capital sources and its
physical characteristics, e.g., the equipment to be purchased and utilized
pursuant to the program. The tax benefits derived from any such certificate of
approval relate only to taxable income attributable to the specific Approved
Enterprise.

     Taxable income of a company derived from an Approved Enterprise may be
subject to Company Tax at the rate of 0% for the first two years and 25% (rather
than 36% as stated above) for the following five years, each commencing with the
year in which the Approved Enterprise first generated taxable income (limited to
twelve years from commencement of the operation of the Approved Enterprise or of
production or fourteen years from the date of approval, whichever is earlier)
and, under certain circumstances (as further detailed below), extending to a
maximum of ten years from the date from which the company has taxable income.
The Tax Reform Committee has proposed that the Company Tax rate be increased
from 0% to 10% for the first two years. In the event a company is operating
under more than one approval or that its capital investments are only partly
approved, its effective Company Tax rate is the result of a weighted combination
of the various applicable rates. Income from an Approved Enterprise may be
eligible

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<PAGE>   83

for further reductions in tax rates, if the company qualifies as a Foreign
Investment Company, depending on the percentage of the foreign investment of not
less than 25% of the Company's share capital (conferring voting rights, rights
to profits and appointment of directors) and of its combined share and loan
capital which is owned by non-Israeli residents. The tax rate is 20% if the
foreign investment is 49% or more but less than 74%; 15% if the foreign
investment is 74% or more but less than 90%; and 10% if the foreign investment
is 90% or more. The lowest level of foreign investment during the year is used
to determine the relevant tax rate for that year. The Company anticipates that
following this offering, its foreign investments shall be between 50% and 60%.
The Tax Reform Committee has proposed to abolish the further reduction in tax
rates for Foreign Investment Companies

     In addition, a company may elect (as the Company has) to forego certain
Government grants extended to Approved Enterprises in return for an "alternative
package" of tax benefits (the "Alternative Package"). Under the Alternative
Package, a company's undistributed income derived from an Approved Enterprise
will be exempt from Company Tax for a period of between two and ten years,
depending on the geographic location of the Approved Enterprise within Israel,
and the type of approved enterprise, and such company will be eligible for the
standard tax benefits under the Investment Law for the remainder of the Benefit
Period.

     Should the Company's foreign shareholdings exceed 25%, future Approved
Enterprises would qualify for reduced tax rates for an additional three years,
after the seven years mentioned above. However, there can be no assurance that
the Company will attain approval for additional Approved Enterprises, or that
the provisions of this Law will not change, or that the above-mentioned
shareholding proportion will be reached or maintained.

     A company that has elected the Alternative Package and that subsequently
pays a dividend out of income derived from the Approved Enterprise(s) during the
tax exemption period will be subject to Company Tax in the year the dividend is
distributed in respect of the amount distributed at the rate that would have
been applicable had the company not elected the Alternative Package (between
10%-25%) depending on the percentage of the foreign investments in the Company.
The dividend recipient is taxed at the reduced rate applicable to dividends from
Approved Enterprises (15% as compared to 25%, subject to certain conditions), if
the dividend is distributed during the tax exemption period or within 12 years
after the benefit period. This tax must be withheld by the company at source,
regardless of whether the dividend is converted into foreign currency. In the
case of a Foreign Investment Company, such as us, the 12 years limitation on
reduced withholding tax on dividends does not apply.

     Subject to certain provisions concerning income subject to the Alternative
Package, all dividends are considered to be attributable to the entire
enterprise and the effective tax rate is the result of a weighted combination of
the various applicable tax rates. However, a company may elect to attribute any
dividend distributed by it only to income not subject to the Alternative
Package. Since we participate in the Alternative Package, in the event we
distribute a cash dividend from income which is tax exempt, as described above,
we would have to pay tax at the rate of 25% (or less, depending on the
percentage of foreign investment as aforesaid) on an amount equal to the amount
distributed and the Company Tax thereon.

     The Investment Law also provides that an Approved Enterprise is entitled to
accelerated depreciation on its property and equipment that are included in an
approved investment program. Future applications to the Investment Center will
be reviewed separately, and decisions as to whether or not to approve such
applications will be based, among other things, on the then prevailing criteria
set forth in the Investment Law, on the specific objectives of the applicant
company set forth in such applications and on certain financial criteria of the
applicant company. Accordingly, there can be no assurance that any such
applications will be approved.

     The above tax benefits are conditioned upon fulfillment of the requirements
stipulated by the aforementioned law and the regulations promulgated thereunder,
as well as the criteria set forth in the certificates of approval. In the event
of our failure to comply with these conditions, the tax benefits could be
canceled, in whole or in part, and we would be required to refund the amount of
the canceled benefits,
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<PAGE>   84

plus interest and certain inflation adjustments. A warning letter regarding our
latest program was issued to us alleging that we have partially performed the
program and therefore we may not be entitled to receive the benefits under that
program. We currently believe that we will be entitled to receive these
benefits, although there can be no assurances that we will be able to do so at
this time.

LAW FOR THE ENCOURAGEMENT OF INDUSTRY (TAXES), 1969

     The Company currently qualifies as an "Industrial Company" within the
meaning of the Law of the Encouragement of Industry (Taxes), 1969 (the "Industry
Encouragement Law"). According to the Industry Encouragement Law, an "Industrial
Company" is a company resident in Israel, at least 90% of the income of which in
any tax year, determined in Israeli currency (exclusive of income from specified
sources) is derived from an "Industrial Enterprise" that it owns. An "Industrial
Enterprise" is defined by that law as an enterprise whose major activity in a
given tax year is industrial production activity.

     The following preferred corporate tax benefits are available to an
Industrial Company such as the Company:

     - Amortization of purchases of know-how or patents that are utilized in
       development or advancement of its enterprise over eight years for tax
       purposes;

     - Election under certain conditions to file a consolidated tax return with
       additional related Israeli Industrial companies; and

     - Accelerated depreciation rates on equipment and buildings.

     In addition, an Industrial Company (but not an Industrial Holding Company)
is eligible to deduction of expenses incurred in connection with a public share
issuance over a three-year period. The tax authorities may construe this benefit
to be relevant only upon a public issuance of shares in Israel.

     Eligibility for the benefits under the Industry Encouragement Law is not
subject to receipt of prior approval from any governmental authority. No
assurance can be given that we will maintain our status under the Industry
Encouragement Law or that the benefits described above will be available in the
future.

TAXATION UNDER INFLATIONARY CONDITIONS

     The Income Tax Law (Inflationary Adjustments), 1985 (the "Inflationary
Adjustments Law") represents an attempt to overcome the problems presented to a
traditional tax system by an economy undergoing rapid inflation. Generally, the
Adjustment for Inflation Law was designed to neutralize for Israeli tax purposes
the erosion of capital investments in businesses and to prevent unintended tax
benefits resulting from the deduction of inflationary financing expenses. The
Adjustment for Inflation Law applies a supplementary set of inflationary
adjustments to a normal taxable profit computed according to regular historical
cost principles.

     The Adjustment for Inflation Law introduced a special adjustment for the
preservation of equity for tax purposes based on changes in the Israeli CPI,
whereby some corporate assets are classified broadly into fixed (inflation
resistant) assets and non-fixed assets. Where the shareholders' equity, as
defined in the Adjustment for Inflation Law, exceeds the depreciated costs of
fixed assets, a corporate tax deduction which takes into account the effect of
inflationary change on such excess is allowed (up to a ceiling of 70% of taxable
income in any single tax year, with the unused portion permitted to be carried
forward on an inflation-linked basis with no ceiling). If the depreciated costs
of fixed assets exceeds shareholders' equity, then such excess multiplied by the
annual rate of inflation is added to taxable income.

     In addition, subject to certain limitations, depreciation on fixed assets
and loss carry forwards are adjusted for inflation based on changes in the
Israeli CPI. Also, under the Adjustment for Inflation Law, results for tax
purposes are measured in real terms, in accordance with changes in the Israeli
CPI. As a result, the net effect of the Adjustment for Inflation Law on a
company might be that the company's taxable income, as determined for Israeli
corporate tax purposes, will be different from the company's U.S. dollar income,
as reflected in its financial statements, due to the difference between the
annual changes in
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<PAGE>   85

the CPI and in the NIS exchange rate with respect to the U.S. dollar, causing
changes in the actual tax rate.

     The Israeli Income Tax Ordinance and the Adjustment for Inflation Law allow
Foreign Invested Companies, which maintain their accounts in U.S. Dollars in
compliance with regulations published by the Israeli Minister of Finance, to
base their tax returns on operating results as reflected in the U.S. dollar
financial statements or to adjust their tax returns based on exchange rate
changes rather than changes in the Israeli CPI (in lieu of the principles set
forth in the Adjustment for Inflation Law). For these purposes, a Foreign
Investment Company is a company more than 25% of whose share capital (in terms
of shares, rights to profits, voting and appointment of directors) and of whose
combined share and loan capital is held by persons who are not residents of
Israel. The Company currently qualifies as a Foreign Invested Company and
anticipates that it will continue to do so following this offering.

LAW FOR THE ENCOURAGEMENT OF INDUSTRIAL RESEARCH AND DEVELOPMENT, 1984

     Under the Law for the Encouragement of Industrial Research and Development,
1984, (the "Research Law") and the Instructions of the Director General of the
Ministry of Industry and Trade, research and development programs and the plans
for the intermediate stage between research and development, and manufacturing
and sales approved by a governmental committee of the Chief Scientist are
eligible for grants of up to 50% of the project's expenditure if they meet
certain criteria. These grants are issued in return for the payment of royalties
from the sale of the product developed in accordance with the program as
follows: 3% of revenues during the first three years, 4% of revenues during the
following three years (3.5% for the year 2000 only), and 5% of revenues in the
seventh year and thereafter, with the total royalties not to exceed 100% of the
dollar value of the Chief Scientist grant (or in some cases as described below,
total royalties up to 300% of the grant). Following the full payment of such
royalties, there is no further liability for payment. For participation received
with respect to approvals granted after December 31, 1998, interest at the
12-month LIBOR rate as published on the first business day of each calendar year
will be added to the royalty payments. As of March 31, 2000, the Company has a
contingent liability to pay royalties in the amount of $2.6 million.

     The Research Law further requires that products developed with government
grants be manufactured in Israel unless a special approval has been granted.
However, in the event that any portion of the manufacturing is not conducted in
Israel, if approval is received from the Chief Scientist, the Company would be
required to pay royalties that are adjusted in proportion to manufacturing
outside of Israel as follows: when the manufacturing is performed outside of
Israel by the Company or an affiliate company, the royalties are to be paid as
described above with the addition of 1%, and when the manufacturing outside of
Israel is not performed by a company or an affiliate, the royalties paid shall
be equal to the ratio of the amount of grant received from the Chief Scientist
divided by the amount of grant received from the Chief Scientist and the
investment(s) made by the Company in the project. The payback will also be
adjusted to 120%, 150% or 300% of the grant if the portion of manufacturing that
is performed outside of Israel is up to 50%, between 50% and 90%, or more than
90%, respectively. The know how which is used to manufacture the products
developed pursuant to the terms of these grants may not be transferred to third
parties without the prior approval of the Research Committee. Such approval is
not required for the export of any products resulting from such research or
development. Approval of the transfer of such know-how may be granted only if
the recipient abides by all the provisions of the Research Law and the
regulations promulgated thereunder, including the restrictions on the transfer
of know-how and the obligation to pay royalties in an amount that may be
increased.

     In order to meet certain conditions in connection with the grants and
programs of the Chief Scientist, the Company has made certain representations to
the Israeli government about the Company's future plans for its Israeli
operations. From time to time the extent of the Company's Israeli operations may
in the future differ, from the Company's representations. If, after receiving
grants under certain programs sponsored by the Chief Scientist, the Company
fails to meet certain conditions to those benefits, the maintenance of a
material preserve in Israel, or if there is any material deviation from the
representations made by the Company to the Israeli government, the Company could
be required to refund to the State of
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<PAGE>   86

Israel tax or other benefits previously received (including interest and CPI
linkage difference) and would likely be denied receipt of such grants or
benefits, and participation of such programs, thereafter.

     The Company may elect to participate in future programs sponsored by the
Chief Scientist for the support of research and development activities.

DIVIDENDS

     Non-residents of Israel are subject to income tax on income derived from
sources in Israel. On distributions of dividends other than bonus shares (stock
dividends), income tax at the rate of 25% (15% for dividends generated by an
"Approved Enterprise") is withheld at source, unless a different rate is
provided in a treaty between Israel and the shareholder's country of residence.
The Convention Between the Government of the United States of America and the
Government of Israel with Respect to Taxes on Income (the "U.S.-Israel Tax
Treaty") provides for a maximum tax of 25% on dividends paid to a person who
qualifies as a resident of the United States within the meaning of the
U.S.-Israel Tax Treaty and who is entitled to claim the benefits afforded to
such resident by the U.S.-Israel Tax Treaty ("Treaty U.S. Resident"), and for a
rate of 12.5% on dividends paid to a United States corporation that holds 10% or
more of an Israeli company's voting power throughout the current year to the
date the dividend is paid and the preceding taxable year (as applicable) (unless
such dividends are generated by an "Approved Enterprise," in which case, the
dividends will be taxed at the rate of 15%). The lower 12.5% rate applies only
on dividends from income not derived from an Approved Enterprise in the
applicable period and does not apply if the company has certain amounts of
passive income.

     A non-resident of Israel who has had dividend income derived or accrued in
Israel from which the applicable tax was withheld at source is generally exempt
from the duty to file an annual Israeli tax return with respect to such income,
provided such income was not derived from a business carried on in Israel by
such non-resident.

CAPITAL GAINS TAX

     Israeli law imposes a capital gains tax on the sale of capital assets by
both residents and non-residents of Israel. The law distinguishes between the
"Real Gain" and the "Inflationary Surplus." The Real Gain is the excess of the
total capital gain over the Inflationary Surplus, computed on the basis of the
increase in the Israeli Consumer Price Index between the date of purchase and
the date of sale. The Inflationary Surplus is taxed at a rate of 10% for
residents of Israel (reduced to no tax for non-residents if calculated according
to the exchange rate of the dollar instead of the Israeli CPI), while the Real
Gain is added to ordinary income which is taxed at the ordinary rate for
individuals and 36% for companies, while Inflationary Surplus accumulated from
and after December 31, 1993 is exempt from any capital gains tax. Capital gain
realized from sales of securities of Israeli companies by both residents and
non-residents of Israel (other than certain Israeli companies) that qualify as
"Industrial Companies" or "Industrial Holding Companies" on or after the listing
of the shares for trading will be exempt from Israeli capital gains for the
shares of listed on an approved foreign securities market, which includes the
Nasdaq National Market in the U.S. The Tax Reform Committee proposes to
institute capital gains taxes on the real gain from the sale of securities
traded on foreign exchanges (including the securities of Israeli companies) at a
rate of up to 25%.

     Under the Adjustment for Inflation Law, all corporate investors that hold
listed securities (other than corporations only owned by individuals), generally
will be subject to the provisions of the Adjustment for Inflation Law. A
comprehensive set of rules apply in the Adjustment for Inflation Law to
determine the gains or losses from the sale of listed securities. Under a
literal reading of the Adjustment of Inflation Law, it would appear that its
provisions apply also to foreign corporations, even though the foreign
corporation may have no other activity in Israel other than having a
shareholding in an Israeli company. Consequently, unless a tax treaty exemption
is applicable, the capital gain exemption available for individual shareholders
would not apply.

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<PAGE>   87

     Pursuant to the U.S.-Israel Tax Treaty, the sale, exchange or disposition
of ordinary shares or redeemable warrants will not be subject to the Israeli
capital gains tax unless such Treaty U.S. Resident holds, directly or
indirectly, shares representing 10% or more of the voting power of a company
during any part of the 12-month period preceding such sale, exchange or
disposition. A sale, exchange or disposition of ordinary shares or redeemable
warrants by a Treaty U.S. Resident who holds, directly or indirectly, shares
representing 10% or more of the voting power of a company at any time during
such preceding 12-month period could be subject to such Israeli tax; however,
under the U.S.-Israel Tax Treaty, such Treaty U.S. Resident would be permitted
to claim a credit for such taxes against the U.S. income tax imposed with
respect to such sale, exchange or disposition, subject to the limitations
applicable to foreign tax credits.

     The tax treatment of capital gains tax of non-U.S. residents will depend on
the provisions of a tax treaty (if any) between Israel and the country of
residence of such shareholder.

FUND FOR THE ENCOURAGEMENT OF MARKETING ACTIVITIES

     The Israeli Government, through the Fund for the Encouragement of Marketing
Activities, awards to qualifying companies participations for marketing expenses
incurred to increase export sales from Israel. The participation, which has been
reflected as a reduction in selling expenses, is dollar-linked, does not bear
interest and is repaid through royalties on any increase in export sales at the
rate of 3.0% of the increased sales portion only up to the amount of the
participation. Until December 31, 1996, we received participation in the amount
of approximately $0.7 million. See Note 10 to the Consolidated Financial
Statements. The Company has paid or accrued royalties to date amounting to $0.3
million.

FOREIGN EXCHANGE REGULATIONS

     The Israeli Currency Control Law, 1978 imposes certain limitations
concerning foreign currency transactions and transactions between Israeli and
non-Israeli residents, which limitations may be regulated or waived by the
Controller of Foreign Exchange at the Bank of Israel, through "general" and
"special" permits. In May 1998, a new "general permit" was issued pursuant to
which substantially all transactions in foreign currency are permitted. Any
dividends or other distributions paid in respect of ordinary shares and any
amounts payable upon the dissolution, liquidation or winding up of the affairs
of a company, as well as the proceeds of any sale in Israel of the company's
securities to an Israeli resident are freely repatriable into non-Israeli
currencies at the rate of exchange prevailing at the time of conversion,
provided that any Israeli income tax owing has been paid on (or withheld from)
such payments. Because exchange rates between the NIS and the U.S. dollar
fluctuate continuously, U.S. shareholders will be subject to any such currency
fluctuation during the period from when such dividend is declared through the
date payment is made in U.S. dollars.

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                              CONDITIONS IN ISRAEL

     We are incorporated under the laws of the State of Israel, and
substantially all of our research and development and significant executive
facilities are located in Israel. Accordingly, we are directly affected by
political, economic and military conditions in Israel. Our operations would be
materially adversely affected if major hostilities involving Israel should occur
or if trade between Israel and its present trading partners should be curtailed.

POLITICAL CONDITIONS

     Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its Arab neighbors. A state of
hostility, varying from time to time in intensity and degree, has led to
security and economic problems for Israel. However, a peace agreement between
Israel and Egypt was signed in 1979, a peace agreement between Israel and Jordan
was signed in 1994 and, since 1993, several agreements between Israel and
Palestinian representatives have been signed. In addition, Israel and several
Arab States have announced their intention to establish trade and other
relations and are discussing certain projects. Israel has not entered into any
peace agreement with Syria or Lebanon, and there have been difficulties in the
negotiations with the Palestinians. We cannot be certain as to how the peace
process will develop or what effect it may have upon us.

     Despite the progress towards peace between Israel, its Arab neighbors and
the Palestinians, certain countries, companies and organizations continue to
participate in a boycott of Israeli firms. We do not believe that the boycott
has had a material adverse effect on us, but restrictive laws, policies or
practices directed towards Israel or Israeli businesses may have an adverse
impact on the expansion of our business.

     Generally, all male adult citizens and permanent residents of Israel under
the age of 51 are obligated to perform up to 39 days, or longer under certain
circumstances, of military reserve duty annually. Additionally, all these
residents are subject to being called to active duty at any time under emergency
circumstances. Currently, a majority of our officers and employees are obligated
to perform annual reserve duty. While we have operated effectively under these
requirements since we began operations, no assessment can be made as to the full
impact of these requirements on our workforce or business if conditions should
change, and no prediction can be made as to the effect on us of any expansion or
reduction of the obligations. See "Risk Factors -- We are incorporated in Israel
and have important facilities and resources located in Israel."

ECONOMIC CONDITIONS

     Israel's economy has been subject to numerous destabilizing factors,
including a period of rampant inflation in the early to mid-1980s, low foreign
exchange reserves, fluctuations in world commodity prices, military conflicts
and civil unrest. The Israeli government has, for these and other reasons,
intervened in various sectors of the economy, employing, among other means,
fiscal and monetary policies, import duties, foreign currency restrictions and
controls of wages, prices and foreign currency exchange rates. The current
Israeli government elected in 1999 has expressed its intention to reduce
government involvement in the economy by various means, including relaxation of
foreign currency controls and certain budgetary restraints, and privatization of
certain government-owned companies. In 1998, the Israeli currency control
regulations were liberalized significantly, as a result of which Israeli
residents generally may freely deal in foreign currency and non-residents of
Israel generally may freely purchase and sell Israeli currency and assets. The
Israeli government has periodically changed its policies in all these areas.
There are currently no Israeli currency control restrictions on remittances of
dividends on the ordinary shares or the proceeds from the sale of the shares;
however, legislation remains in effect pursuant to which currency controls can
be imposed by administrative action at any time.

TRADE AGREEMENTS

     Israel is a member of the United Nations, the World Bank Group (including
the International Finance Corporation), the European Bank for Reconstruction and
Development and the Inter-American
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Development Bank. Israel is also a signatory to the General Agreement on Tariffs
and Trade, which provides for reciprocal lowering of trade barriers among its
members. In addition, Israel has been granted preferences under the Generalized
System of Preferences from Japan. These preferences allow Israel to export the
products covered by such programs either duty-free or at reduced tariffs.

     Israel has entered into preferential trade agreements with the European
Union, the United States, Canada, the European Free Trade Association and a
variety of other countries. In recent years, Israel has established commercial
and trade relations with a number of the other nations, including Russia and
China, with which Israel had not previously had such relations.

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                      ENFORCEABILITY OF CIVIL LIABILITIES

     Service of process upon our directors and officers and the Israeli experts
names herein, a substantial number of whom reside outside the United States, may
be difficult to obtain within the United States. Furthermore, since
substantially all of our assets and a significant number of our directors and
officers and the Israeli experts named herein are located outside the United
States, any judgment obtained in the United States against us or such directors,
officers or Israeli experts predicated upon the civil liability provisions of
the federal securities laws of the United States may not be collectible within
the United States.

     There are no treaties between the United States and Israel relating to the
reciprocal enforcement of foreign court judgments. We have been informed by our
legal counsel in Israel, Efrati, Galili & Co., that there is doubt as to the
enforceability of civil liabilities under the Securities Act and the Securities
Exchange Act of 1934 in original actions instituted in Israel. However, subject
to certain time limitations, Israeli courts may enforce United States final
executory judgments for liquidated amounts in civil matters, obtained after due
trial before a court of competent jurisdiction, according to the rules of
private international law currently prevailing in Israel, that enforces similar
judgments, provided that:

     - due service of process has been effected and the defendant has had a
       reasonable opportunity to be heard,

     - the judgments or the enforcement thereof are not contrary to the law,
       public policy, security or sovereignty of the State of Israel,

     - the judgments were not obtained by fraud and do not conflict with any
       other valid judgment in the same matter between the same parties, and

     - an action between the same parties in the same matter is not pending in
       any Israeli court at the time the lawsuit is instituted in the foreign
       court.

     We have irrevocably appointed ClickSoftware, Inc., our wholly-owned
subsidiary, as our agent to receive service of process in any action against us
in any federal court or state court in the State of California arising out of
this offering or any purchase or sale of securities in connection therewith. We
have not given our consent for such agent to accept service of process in
connection with any other claim. These appointments are irrevocable, provided
that we shall have the right to appoint a successor agent for service, if such
successor is acceptable to the representatives of the underwriters, in their
reasonable judgment.

     Foreign judgments enforced by Israeli courts will generally be payable in
Israeli currency and will be freely convertible into dollars or other foreign
currency and may be transferred out of Israel.

     The usual practice in an action before an Israeli court to recover an
amount in a non-Israeli currency is for the Israeli court to render judgment for
the equivalent amount in Israeli currency at the rate of exchange in force on
the date thereof. Under existing Israeli law, a foreign judgment payable in
foreign currency may be paid in Israeli currency at the rate of exchange of such
foreign currency on the date of payment. Pending collection, the amount of the
judgment of an Israeli currency ordinarily will be linked to the Israeli CPI
plus interest at the annual statutory rate set by Israeli regulations prevailing
at such time. Judgment creditors must bear the risk of unfavorable exchange
rates fluctuations.

                      WHERE YOU CAN FIND MORE INFORMATION

     ClickSoftware has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to the
ordinary shares offered hereby. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information set forth in the
registration statement and the exhibits filed as a part thereof, certain parts
of which are omitted in accordance with the rules and regulations of the SEC.
For further information with respect to ClickSoftware and the ordinary shares
offered hereby, reference is made to the registration statement and

                                       89
<PAGE>   91

to the exhibits filed as a part thereof. Statements contained in this prospectus
as to the contents of any contract, agreement or other document referred to are
not necessarily complete and are qualified in their entirety by reference to
each such contract, agreement or other document which is filed as an exhibit to
the registration statement. The registration statement, including the exhibits
and schedules thereto, may be inspected without charge at the principal office
of the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at
the Regional Offices of the Commission at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite
1300, New York, New York 10048. In addition, such material will be available for
inspection at the offices of The Nasdaq Stock Market, Inc., at 1735 K Street,
N.W., Washington D.C. 20006. Copies of such material may be obtained by mail
from the Public Reference Branch of the commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.

                                 LEGAL MATTERS

     Certain legal matters in connection with this offering with respect to
United States law will be passed upon for ClickSoftware by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California. The validity
of the ordinary shares offered hereby and certain other legal matters in
connection with this offering with respect to Israeli law will be passed upon
for ClickSoftware by Efrati, Galili & Co., Law Offices, Tel-Aviv, Israel.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Simpson Thacher & Bartlett, with respect to United States
law, and by Doron Cohen -- David Cohen, Law Offices, with respect to Israeli
law.

     As of the date of this prospectus, an investment partnership composed of
certain current and former members of and persons associated with Wilson Sonsini
Goodrich & Rosati, P.C. and certain persons associated with Wilson Sonsini
Goodrich & Rosati, P.C. beneficially owned an aggregate of 31,862 ordinary
shares and a member of Wilson Sonsini Goodrich & Rosati, P.C. owns a
fully-exercisable warrant exercisable into an aggregate of 75,000 ordinary
shares.

                                    EXPERTS

     The financial statements included in this prospectus and elsewhere in the
registration statement have been audited by Luboshitz Kasierer, a member firm of
Arthur Andersen, independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving said reports.

                                 ISA EXEMPTION

     The Israel Securities Authority has granted us an exemption from the
obligation to publish this prospectus in the manner required pursuant to the
prevailing laws of the State of Israel, and from the obligation to file reports
with the Israel Securities Authority. The exemption from filing reports is
subject to our maintaining a copy of each report filed in accordance with United
States law available for public review at our principal office in Israel. This
exemption will remain in force for as long as we have an obligation to report to
the U.S. authorities in accordance with U.S. law.

                                       90
<PAGE>   92

                                  UNDERWRITING

     Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, the underwriters, for whom Lehman Brothers Inc., CIBC
World Markets Corp., SG Cowen Securities Corporation and Fidelity Capital
Markets, a division of National Financial Services Corporation, are acting as
representatives, have each agreed to purchase from us the respective number of
ordinary shares shown opposite its name below:


<TABLE>
<CAPTION>
                                                                 NUMBER OF
                        UNDERWRITERS                          ORDINARY SHARES
                        ------------                          ---------------
<S>                                                           <C>
Lehman Brothers Inc. .......................................     1,788,000
CIBC World Markets Corp. ...................................       896,000
SG Cowen Securities Corporation.............................       896,000
Fidelity Capital Markets, a division of National Financial
  Services Corporation......................................        40,000
Banc of America Securities LLC..............................        40,000
Chase Securities Inc. ......................................        40,000
Deutsche Bank Securities Inc. ..............................        40,000
Donaldson, Lufkin & Jenrette Securities Corporation.........        40,000
A.G. Edwards & Sons, Inc. ..................................        40,000
FleetBoston Robertson Stephens Inc. ........................        40,000
Dain Rauscher Incorporated..................................        20,000
Doft & Co., Inc.............................................        20,000
Gruntal & Co., L.L.C. ......................................        20,000
Edward D. Jones & Co., L.P. ................................        20,000
Legg Mason Wood Walker, Incorporated........................        20,000
McDonald Investments Inc., a KeyCorp Company................        20,000
Sands Brothers & Co., Ltd. .................................        20,000
                                                                 ---------
     Total..................................................     4,000,000
                                                                 =========
</TABLE>


     The underwriting agreement provides that the obligations of the several
underwriters to purchase ordinary shares included in this offering depend on the
satisfaction of the conditions contained in the underwriting agreement, and that
if any of the ordinary shares are purchased by the underwriters under the
underwriting agreement, then all of the shares of the ordinary shares which the
underwriters have agreed to purchase under the underwriting agreement, must be
purchased. The conditions contained in the underwriting agreement include the
requirement that the representations and warranties made by us to the
underwriters are true, that there is no material change in the financial markets
and that we deliver to the underwriters customary closing documents.


     The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by us. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase 600,000 additional shares described below.



<TABLE>
<CAPTION>
                      PAID BY US                        NO EXERCISE   FULL EXERCISE
                      ----------                        -----------   -------------
<S>                                                     <C>           <C>
Per share.............................................  $     0.49     $     0.49
Total.................................................  $1,960,000     $2,254,000
</TABLE>



     The representatives have advised us that the underwriters propose to offer
the ordinary shares directly to the public at the public offering price set
forth on the cover page of this prospectus, and to dealers, who may include the
underwriters, at a public offering price less a selling concession not in excess
of $0.27 per share. The underwriters may allow, and the dealers may reallow, a
concession not in excess of $0.10 per share to brokers and dealers. After the
offering, the underwriters may change the offering price and other selling
terms.


                                       91
<PAGE>   93

     The underwriters have agreed that:

     - they will not offer the ordinary shares to the public in Israel within
       the meaning of Section 15(a) of the Israel Securities Law, 5728-1968;

     - they will not offer the ordinary shares in Israel to more than 35
       offerees in the aggregate;

     - they will deliver to us and the Israel Securities Authority the names and
       addresses of such offerees within 7 days of the consummation of the
       offering; and

     - they will obtain warranties from each such offeree that he or she is
       purchasing the ordinary shares for investment purposes only and not for
       purposes of resale.


     We have granted to the underwriters an option to purchase up to an
aggregate of 600,000 additional ordinary shares, exercisable solely to cover
over-allotments, if any, at the public offering price less the underwriting
discounts and commissions shown on the cover page of this prospectus. The
underwriters may exercise this option at any time until 30 days after the date
of the underwriting agreement. If this option is exercised, each underwriter
will be committed, so long as the conditions of the underwriting agreement are
satisfied, to purchase a number of additional ordinary shares proportionate to
the initial commitment of each underwriter as indicated in the preceding tables
and we will be obligated, under the over-allotment option, to sell the ordinary
shares to the underwriters.


     We, our executive officers and directors and certain of our other existing
shareholders have agreed not to directly or indirectly do any of the following,
whether any transaction described in clause (1) or (2) below is to be settled by
delivery of ordinary shares or other securities, in cash or otherwise, in each
case without the prior written consent of Lehman Brothers Inc. on behalf of the
underwriters, for a period of 180 days after the date of the underwriting
agreement:

     (1) offer, sell or otherwise dispose of, or enter into any transaction or
         arrangement which is designed or could be expected to, result in the
         disposition or purchase by any person at any time in the future of, any
         ordinary shares or securities convertible into or exchangeable for
         ordinary shares or substantially similar securities, other than any of
         the following:

          - the ordinary shares sold by us under this prospectus

          - ordinary shares we issue under employee benefit plans, qualified
            stock option plans or other employee compensation plans existing on
            the date of the underwriting agreement; or

     (2) sell or grant options, rights or warrants with respect to any of our
         ordinary shares or securities convertible into or exchangeable for our
         ordinary shares or substantially similar securities, other than the
         grant of options under option plans existing on the date of the
         underwriting agreement; or

     (3) enter into any swap or other derivatives transaction that transfers to
         another, in whole or in part, any of the economic benefits or risks of
         ownership of shares of ordinary shares.


     Prior to the offering, there has been no public market for the ordinary
shares. The initial public offering price was negotiated between the
representatives and us. In determining the initial public offering price of the
ordinary shares, the representatives considered various factors, including:


     - prevailing market conditions;

     - our historical performance and capital structure;

     - estimates of our business potential and earning prospects;

     - an overall assessment of our management; and

     - the consideration of the above factors in relation to market valuations
       of companies in related businesses.

                                       92
<PAGE>   94


     Our ordinary shares have been approved for quotation on The Nasdaq National
Market under the symbol "CKSW."


     Fidelity Capital Markets, a division of National Financial Services
Corporation, is acting as an underwriter of this offering and will be
facilitating electronic distribution through the Internet.

     We have agreed in the underwriting agreement to indemnify the underwriters
against liabilities under the Securities Act and to contribute to payments that
the underwriters may be required to make for these liabilities.

     We estimate that the total expenses of the offering, excluding underwriting
discounts and commissions, will be approximately $1,250,000.

     Until the distribution of the ordinary shares is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
selling group members to bid for and purchase ordinary shares. As an exception
to these rules, the representatives are permitted to engage in transactions that
stabilize the price of the ordinary shares. These transactions may consist of
bids or purchases for the purposes of pegging, fixing or maintaining the price
of the ordinary shares.

     The underwriters may create a short position in the ordinary shares in
connection with the offering, which means that they may sell more shares than
are set forth on the cover page of this prospectus. If the underwriters create a
short position, then the representatives may reduce that short position by
purchasing ordinary shares in the open market. The representatives also may
elect to reduce any short position by exercising all or part of the
over-allotment option.

     The underwriters have informed us that they do not intend to confirm sales
to discretionary accounts that exceed five percent of the total number of
ordinary shares offered by them.

     The representatives also may impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase ordinary
shares in the open market to reduce the underwriters' short position or to
stabilize the price of the ordinary shares, they may reclaim the amount of the
selling concession from the underwriters and selling group members who sold
those ordinary shares offered by them.

     In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of these purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
an offering.

     Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the ordinary shares. In addition,
neither we nor any of the underwriters makes any representation that the
representatives will engage in these transactions or that these transactions,
once commenced, will not be discontinued without notice.

     Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus in the relevant province of Canada in which
the sale is made.

     The ordinary shares offered in this prospectus are only being registered
for offering in the United States. No action will be taken by us and the
underwriters in any other jurisdiction where action is required to permit a
public offering of the ordinary shares offered in this prospectus. People who
obtain this prospectus are required by us and the underwriters to inform
themselves about and to observe any restrictions on the offering of the ordinary
shares and the distribution of this prospectus.

     Purchasers of the ordinary shares offered in this prospectus may be
required to pay stamp taxes and other charges under the laws and practices of
the country of purchase, in addition to the offering price listed on the cover
page of this prospectus.

                                       93
<PAGE>   95

     At our request, the underwriters have reserved up to 300,000 ordinary
shares offered by this prospectus for sale to our officers, directors, employees
and their family members and to our business associates at the initial public
offering price set forth on the cover page of this prospectus. These persons
must commit to purchase no later than the close of business on the day following
the date of this prospectus. The number of ordinary shares available for sale to
the general public will be reduced to the extent these persons purchase the
reserved ordinary shares. To the extent that these persons have signed a lock-up
agreement, as described above, ordinary shares purchased by them will be subject
to the provisions of the lock-up agreement.

                                       94
<PAGE>   96

                        CLICKSOFTWARE TECHNOLOGIES LTD.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Public Accountants....................  F-2
Consolidated Balance Sheets.................................  F-3
Consolidated Statements of Operations.......................  F-4
Consolidated Statements of Changes in Shareholders'
  Equity....................................................  F-5
Consolidated Statements of Cash Flows.......................  F-6
Notes to the Consolidated Financial Statements..............  F-7
</TABLE>

                                       F-1
<PAGE>   97

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
ClickSoftware Technologies Ltd.

     We have audited the accompanying consolidated balance sheets of
ClickSoftware Technologies Ltd. (an Israeli Corporation) as of December 31, 1998
and 1999, and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards in Israel and in the United States, including those prescribed under
the Auditors' Regulations (Auditor's Mode of Performance), 1973. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1998 and 1999, and the results of operations, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.

                                                  /s/ LUBOSHITZ KASIERER
                                              Member Firm of Arthur Andersen
Tel-Aviv, Israel
April 11, 2000

                                       F-2
<PAGE>   98

                        CLICKSOFTWARE TECHNOLOGIES LTD.

                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                                        PRO FORMA
                                                                                      SHAREHOLDERS'
                                                                                         EQUITY
                                                   DECEMBER 31,                       AT MARCH 31,
                                               --------------------     MARCH 31,         2000
                                                 1998        1999         2000          (NOTE 2)
                                               --------    --------    -----------    -------------
                                                                       (UNAUDITED)     (UNAUDITED)
<S>                                            <C>         <C>         <C>            <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents (note 3).........  $  3,770    $  7,838     $  4,739
  Trade receivables, net of allowance of $0,
     $130 and $385 as of December 31, 1998,
     1999 and March 31, 2000, respectively...     2,041       3,966        3,232
  Other receivables and prepaid expenses
     (note 4)................................       439         465          650
                                               --------    --------     --------
     Total current assets....................     6,250      12,269        8,621
Property and equipment, net (note 5).........     1,240       1,498        1,723
Severance pay deposits (note 9)..............       493         428          457
                                               --------    --------     --------
     Total assets............................  $  7,983    $ 14,195     $ 10,801
                                               --------    --------     --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short-term debt (note 6)...................  $    299    $    320     $    194
  Accounts payable and accrued expenses (note
     7)......................................     1,687       2,799        2,674
  Deferred revenues..........................        86       1,143          604
                                               --------    --------     --------
     Total current liabilities...............     2,072       4,262        3,472
                                               --------    --------     --------
LONG-TERM LIABILITIES:
  Long-term debt (note 8)....................       330         213          156
  Accrued severance pay (note 9).............       924         899        1,015
                                               --------    --------     --------
     Total long-term liabilities.............     1,254       1,112        1,171
                                               --------    --------     --------
     Total liabilities.......................     3,326       5,374        4,643
                                               --------    --------     --------
Commitments and contingencies (note 10)
SHAREHOLDERS' EQUITY: (NOTE 11)
  Convertible Preferred shares of NIS 0.02
     par value: Authorized -- 15,500,000
     shares as of December 31, 1998 and
     17,330,238 as of December 31, 1999 and
     17,333,623 as of March 31, 2000; Issued
     and outstanding -- 11,667,812 shares as
     of December 31, 1998 and 13,499,898 as
     of December 31, 1999 and as of March 31,
     2000; Authorized 5,000,000 shares,
     Issued and outstanding pro forma -- none
     as of March 31, 2000....................        52          60           60              --
  Ordinary shares of NIS 0.02 par value:
     Authorized -- 9,840,000 shares as of
     December 31, 1998 and 8,314,801 as of
     December 31, 1999 and 82,666,377 as of
     March 31, 2000; Issued and
     outstanding -- 7,208,816 shares as of
     December 31, 1998 and 1999 and 7,479,645
     as of March 31, 2000; Authorized
     100,000,000 shares, Issued and
     outstanding pro forma -- 20,979,543 as
     of March 31, 2000.......................        13          13           14        $     74
Additional paid-in capital...................    20,265      40,052       40,385          40,385
Deferred compensation........................        --      (2,663)      (2,308)         (2,308)
Accumulated deficit..........................   (15,673)    (28,641)     (31,993)        (31,993)
                                               --------    --------     --------        --------
     Total shareholders' equity..............     4,657       8,821        6,158        $  6,158
                                               --------    --------     --------        ========
     Total liabilities and shareholders'
       equity................................  $  7,983    $ 14,195     $ 10,801
                                               ========    ========     ========
</TABLE>



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

                                       F-3
<PAGE>   99

                        CLICKSOFTWARE TECHNOLOGIES LTD.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS )


<TABLE>
<CAPTION>
                                                                              THREE MONTHS
                                     YEAR ENDED DECEMBER 31,                 ENDED MARCH 31,
                             ---------------------------------------    -------------------------
                                1997          1998          1999           1999          2000
                             ----------    ----------    -----------    ----------    -----------
                                                                               (UNAUDITED)
<S>                          <C>           <C>           <C>            <C>           <C>
Revenues: (note 12)
  Software license.........  $    1,235    $    3,932    $     5,414    $      758    $     2,126
  Service and
     maintenance...........       1,080         2,139          4,912         1,271          1,385
                             ----------    ----------    -----------    ----------    -----------
     Total revenues........       2,315         6,071         10,326         2,029          3,511
                             ----------    ----------    -----------    ----------    -----------
Cost of revenues:
  Software license.........          13            25             71             7            110
  Service and
     maintenance...........       1,035         2,301          4,299           925          1,213
                             ----------    ----------    -----------    ----------    -----------
     Total cost of
       revenues............       1,048         2,326          4,370           932          1,323
                             ----------    ----------    -----------    ----------    -----------
     Gross profit..........       1,267         3,745          5,956         1,097          2,188
                             ----------    ----------    -----------    ----------    -----------
Operating expenses:
  Research and development
     expenses..............       1,836         3,150          3,935           843          1,146
  Less -- participation by
     the Chief Scientist of
     the Government of
     Israel (note 10)......         497           866          1,025           290             82
                             ----------    ----------    -----------    ----------    -----------
  Research and development
     expenses, net.........       1,339         2,284          2,910           553          1,064
  Sales and marketing
     expenses (note 10)....       3,172         6,019          8,274         1,894          3,174
  General and
     administrative
     expenses..............       1,120         1,333          1,759           423            952
  Share-based
     compensation..........          --            --            738            26            355
                             ----------    ----------    -----------    ----------    -----------
     Total operating
       expenses............       5,631         9,636         13,681         2,896          5,545
                             ----------    ----------    -----------    ----------    -----------
     Operating loss........      (4,364)       (5,891)        (7,725)       (1,799)        (3,357)
Interest and other
  (expenses) income, net...        (148)           33           (254)          (22)            (5)
                             ----------    ----------    -----------    ----------    -----------
     Net loss..............  $   (4,512)   $   (5,858)   $    (7,979)   $   (1,821)   $    (3,352)
                             ==========    ==========    ===========    ==========    ===========
Dividend related to
  convertible preferred
  shares...................  $       --    $       --    $    (4,989)   $       --    $        --
Net loss attributable to
  ordinary shareholders....  $   (4,512)   $   (5,858)   $   (12,968)   $   (1,821)   $    (3,352)
Basic and diluted net loss
  per share (note 2).......  $    (0.80)   $    (0.99)   $     (2.18)   $    (0.31)   $     (0.56)
                             ==========    ==========    ===========    ==========    ===========
Shares used in computing
  basic and diluted net
  loss per share...........   5,657,728     5,914,735      5,948,816     5,948,816      6,001,896
                             ==========    ==========    ===========    ==========    ===========
Pro forma net loss per
  share (unaudited)........                              $     (0.73)                 $     (0.17)
                                                         ===========                  ===========
Shares used in computing
  basic and diluted pro
  forma net loss per share
  (unaudited)..............                               17,692,964                   19,501,794
                                                         ===========                  ===========
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-4
<PAGE>   100

                        CLICKSOFTWARE TECHNOLOGIES LTD.

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                               NUMBER OF
                                 NUMBER OF    CONVERTIBLE            ADDITIONAL
                                 ORDINARY      PREFERRED    SHARE     PAID-IN       DEFERRED     ACCUMULATED
                                  SHARES        SHARES      AMOUNT    CAPITAL     COMPENSATION     DEFICIT      TOTAL
                                 ---------    -----------   ------   ----------   ------------   -----------   -------
<S>                              <C>          <C>           <C>      <C>          <C>            <C>           <C>
Balance as of January 1,
  1997.........................  5,710,232            --     $ 8      $ 1,341       $    --       $ (5,303)    $(3,954)
  Shares issued net of issuance
     costs of $121.............  1,498,584     5,109,862      28        5,261            --             --       5,289
  Net loss.....................         --            --      --           --            --         (4,512)     (4,512)
                                 ---------    ----------     ---      -------       -------       --------     -------
Balance as of December 31,
  1997.........................  7,208,816     5,109,862      36        6,602            --         (9,815)     (3,177)
  Shares issued net of issuance
     costs of $155.............         --     6,557,950      29       13,663            --             --      13,692
  Net loss.....................         --            --      --           --            --         (5,858)     (5,858)
                                 ---------    ----------     ---      -------       -------       --------     -------
Balance as of December 31,
  1998.........................  7,208,816    11,667,812      65       20,265            --        (15,673)      4,657
  Shares issued net of issuance
     costs of $126.............         --     1,832,086       8       11,366            --             --      11,374
  Dividend related to
     convertible preferred
     shares....................         --            --      --        4,989            --         (4,989)         --
  Employee options exercised...         --            --      --           31            --             --          31
     Deferred compensation.....         --            --      --        3,401        (3,401)            --          --
  Amortization of deferred
     compensation..............         --            --      --           --           738             --         738
  Net loss.....................         --            --      --           --            --         (7,979)     (7,979)
                                 ---------    ----------     ---      -------       -------       --------     -------
Balance as of December 31,
  1999.........................  7,208,816    13,499,898      73       40,052        (2,663)       (28,641)      8,821
Warrants exercised.............     95,126            --      --           12            --             --          12
Employee options exercised net
  of issuance costs of $111....    175,703            --       1          321            --             --         322
Amortization of deferred
  compensation.................         --            --      --           --           355             --         355
Net loss.......................         --            --      --           --            --         (3,352)     (3,352)
                                 ---------    ----------     ---      -------       -------       --------     -------
Balance as of March 31, 2000
  (unaudited)..................  7,479,645    13,499,898     $74      $40,385       $(2,308)      $(31,993)    $ 6,158
                                 =========    ==========     ===      =======       =======       ========     =======
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-5
<PAGE>   101

                        CLICKSOFTWARE TECHNOLOGIES LTD.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                             THREE MONTHS ENDED
                                               YEAR ENDED DECEMBER 31,           MARCH 31,
                                            -----------------------------    ------------------
                                             1997       1998       1999       1999       2000
                                            -------    -------    -------    -------    -------
                                                                                (UNAUDITED)
<S>                                         <C>        <C>        <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..................................  $(4,512)   $(5,858)   $(7,979)   $(1,821)   $(3,352)
Adjustments to reconcile net loss to net
  cash used in operating activities
  Expenses not affecting operating cash
     flows:
     Depreciation.........................      237        323        484        111        139
     Amortization of deferred
       compensation.......................       --         --        738         26        355
     Severance pay........................      164         15         40         70         87
     Other................................       78         37         (8)        --         --
  Changes in operating assets and
     liabilities:
     Trade receivables....................     (569)    (1,074)    (1,925)      (585)       734
     Other receivables....................      (66)      (189)       (26)      (120)      (185)
     Accounts payable and accrued
       expenses...........................     (227)       398      1,112         16       (125)
     Deferred revenues....................      290       (315)     1,057      1,171       (539)
                                            -------    -------    -------    -------    -------
       Net cash used in operating
          activities......................   (4,605)    (6,663)    (6,507)    (1,132)    (2,886)
                                            -------    -------    -------    -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment....................     (245)    (1,039)      (732)      (173)      (364)
Proceeds from sale of equipment...........       27         --         --         --         --
                                            -------    -------    -------    -------    -------
       Net cash used in investing
          activities......................     (218)    (1,039)      (732)      (173)      (364)
                                            -------    -------    -------    -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt...........................   (1,464)      (133)        14         50       (126)
Proceeds from long-term debt..............    1,975         --         35         35         --
Repayments of long-term debt..............     (370)      (368)      (147)       (47)       (57)
Net proceeds from issuance of convertible
  preferred shares........................    4,879     11,672     11,374         --         --
Net proceeds from warrants exercised......       --         --         --         --         12
Employee options exercised................       --         --         31         --        322
                                            -------    -------    -------    -------    -------
       Net cash provided by financing
          activities......................    5,020     11,171     11,307         38        151
                                            -------    -------    -------    -------    -------
Increase (decrease) in cash and cash
  equivalents.............................      197      3,469      4,068     (1,267)    (3,099)
Cash and cash equivalents at beginning
  of period...............................      104        301      3,770      3,770      7,838
                                            -------    -------    -------    -------    -------
Cash and cash equivalents at end of
  period..................................  $   301    $ 3,770    $ 7,838    $ 2,503    $ 4,739
                                            =======    =======    =======    =======    =======
Supplemental cash flow information
Cash paid for interest....................  $   119    $   152    $   137    $    11    $    21
                                            =======    =======    =======    =======    =======
Noncash transactions
Loans converted into shares...............  $   410    $ 2,020    $    --    $    --    $    --
                                            =======    =======    =======    =======    =======
Transfer of intangible assets to an
  affiliated company......................  $   496    $    --    $    --    $    --    $    --
                                            =======    =======    =======    =======    =======
Dividend on convertible preferred
  shares..................................  $    --    $    --    $ 4,989    $    --    $    --
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-6
<PAGE>   102

                        CLICKSOFTWARE TECHNOLOGIES LTD.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
        INFORMATION AS OF MARCH 31, 2000 AND FOR THE THREE MONTHS ENDED
                      MARCH 31, 1999 AND 2000 IS UNAUDITED
                           (IN THOUSANDS OF DOLLARS)

NOTE 1 -- GENERAL

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

     The Company has incurred net operating losses since inception and, as of
March 31, 2000, had an accumulated deficit of $32.0 million. The Company is
subject to various risks associated with companies in a comparable stage of
development, including competition from substitute products and larger
competitors, dependence on key individuals and the ability to obtain adequate
financing to support its growth.

     The Company changed its name from I.E.T. Intelligent Electronics Ltd. to
ClickService Software Ltd. in January 2000. A trademark infringement claim has
been filed against the Company in the U.S. in relation to the use of this name.
The complaint alleges that the use of the ClickService trademark and internet
domain names has resulted in trademark infringement, unfair competition and
false advertising in violation of the law. The plaintiff seeks damages of an
unspecified amount. The Court granted plaintiff's request for a preliminary
injunction, enjoining the Company from using the trademark and the domain names.
The Company has changed its name to ClickSoftware Technologies Ltd. and
discontinued use of these domain names. The Company intends to continue to
defend this litigation.

     The consolidated financial statements include the financial statements of
the Company and its wholly-owned subsidiaries in the U.S. (ClickSoftware, Inc.,
a California corporation) and in the U.K. (ClickService Software Limited). The
subsidiaries are primarily engaged in the sale and marketing of the Company's
products within North America, Europe and the Far East.

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

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

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

     - Non monetary items -- at historical exchange rates.

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

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

                                       F-7
<PAGE>   103
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The representative rate of exchange of the U.S. dollar in relation to the
New Israeli Shekel ("NIS") at March 31, 2000 -- U.S.$1.00 = NIS 4.03 (March 31,
1999, December 31, 1999, 1998, 1997 -- NIS 4.03, 4.15, 4.16 and 3.54,
respectively).

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

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

  Principles of Consolidation

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

  Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

  Unaudited Information

     The financial statements include the unaudited balance sheet as of March
31, 2000, and the unaudited statements of operations, changes in shareholders'
equity and cash flows for the three months ended March 31, 1999 and 2000. These
unaudited data have been prepared by the Company on the same basis as the
audited financial statements, and in management's opinion, reflect all regular,
recurring adjustments necessary for fair presentation of results of operations
for the interim periods presented. The results of operations for the three
months ended March 31, 2000, are not necessarily indicative of results to be
expected for the entire year.

  Cash and Cash Equivalents

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

  Concentration of Credit Risk

     The Company provides credit to its customers in the normal course of
business, performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses which, to date, have not been material.

  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.

                                       F-8
<PAGE>   104
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Software Research and Development Costs

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

  Revenue Recognition

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

  Unaudited Pro Forma Shareholders' Equity


     In February 2000 the Company's board of directors authorized the filing of
a registration statement with the Securities and Exchange Commission to register
ordinary shares in connection with the proposed initial public offering ("IPO").
If the IPO is consummated, all of the Convertible Preferred shares outstanding
will automatically be converted into Ordinary shares. The effect of this
conversion has been reflected as unaudited pro forma shareholders' equity in the
accompanying consolidated balance sheet as of March 31, 2000.


  Basic and Diluted Net Loss Per Share and Pro Forma Basic and Diluted Net Loss
  Per Share

     Basic and diluted net loss per share are presented in conformity with
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per
Share" for all years presented. Basic and diluted net loss per share have been
computed using the weighted-average number of Ordinary shares outstanding

                                       F-9
<PAGE>   105
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

during the year, excluding Ordinary shares held by a trustee reserved for
allocation against employee options granted but not yet exercised (see note 11).


<TABLE>
<CAPTION>
                                          DECEMBER 31,                          MARCH 31,
                             ---------------------------------------    -------------------------
                                1997          1998          1999           1999          2000
                             ----------    ----------    -----------    ----------    -----------
                                    (IN THOUSANDS EXCEPT PER SHARE DATA AND SHARE NUMBERS)
<S>                          <C>           <C>           <C>            <C>           <C>
Net loss attributable to
  ordinary shareholders....  $   (4,512)   $   (5,858)   $   (12,968)   $   (1,821)   $    (3,352)
Basic and diluted:
  Weighted average shares
     used in computing
     basic and diluted net
     loss per Ordinary
     share.................   5,657,728     5,914,735      5,948,816     5,948,816      6,001,896
                             ==========    ==========    ===========    ==========    ===========
  Basic and diluted net
     loss per Ordinary
     share.................  $    (0.80)   $    (0.99)   $     (2.18)   $    (0.31)   $     (0.56)
                             ==========    ==========    ===========    ==========    ===========
Net loss attributable to
  ordinary shareholders....                              $   (12,968)   $   (1,821)   $    (3,352)
Pro forma basic and
  diluted:
  Shares used above........                                5,948,816                    6,001,896
  Pro forma adjustment to
     reflect weighted
     effect of assumed
     conversion of
     Convertible Preferred
     shares (unaudited)....                               11,744,148                   13,499,898
                                                         -----------                  -----------
  Shares used in computing
     pro forma basic and
     diluted net loss per
     share (unaudited).....                               17,692,964                   19,501,794
                                                         ===========                  ===========
  Pro forma basic and
     diluted net loss per
     share (unaudited).....                              $     (0.73)                 $     (0.17)
                                                         ===========                  ===========
</TABLE>


     All Convertible Preferred shares, warrants for Convertible Preferred
shares, outstanding share options and shares issued and reserved for outstanding
share options have been excluded from the calculation of basic and diluted net
loss per share because all such securities are antidilutive for all years
presented. The total number of shares excluded from the calculations of basic
and diluted net loss per share were 6,369,862, 13,340,290 and 16,577,409 as of
December 31, 1997, 1998, 1999, respectively and 13,357,027 and 16,377,430 as of
March 31, 1999 and 2000, respectively.

     Pro forma basic and diluted net loss per share, as presented in the
statements of operations, has been computed as described above and gives effect
to the automatic conversion of the Convertible Preferred shares that will
convert upon the closing of an initial public offering (using the if-converted
method from original date of issuance). The total number of shares excluded from
the calculation of pro forma basic and diluted net loss per share were 3,077,511
as of December 31, 1999 and 2,877,532 as of March 31, 2000.

  Share-Based Compensation

     The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," in October 1995. This accounting standard permits the use of
either a fair value based method of accounting or the method prescribed in
Accounting Principles Board Opinion 25 ("APB 25"), "Accounting for Stock Issued
to

                                      F-10
<PAGE>   106
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Employees" to account for stock-based compensation arrangements. Companies that
elect to employ the method prescribed by APB 25 are required to disclose the pro
forma net loss that would have resulted from the use of the fair value based
method. The Company has elected to account for its share-based compensation
arrangements under the provisions of APB 25, and accordingly, has included in
note 11 the pro forma disclosures required under SFAS No. 123.

  Fair Value of Financial Instruments

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

  Income Taxes

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

  Recent Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement. SFAS No. 133 is effective
for fiscal years beginning after June 15, 2000. The Company believes that the
adoption of SFAS No. 133 will not have a material effect on its financial
statements.

     In March 2000, the FASB issued interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation -- an Interpretation of APB
Opinion No. 25." The interpretation clarifies the application of APB Opinion No.
25 in certain situations, as defined. The interpretation is effective July 1,
2000, but covers certain events occurring during the period after December 15,
1998, but before the effective date. To the extent that events covered by this
interpretation occur during the period after December 15, 1998, but before the
effective date, the effects of applying this interpretation would be recognized
on a prospective basis from the effective date. Accordingly, upon initial
application of the final interpretation, (a) no adjustments would be made to the
financial statements for periods before the effective date and (b) no expense
would be recognized for any additional compensation cost measured that is
attributable to periods before the effective date. We expect that the adoption
of this interpretation would not have any effect on the accompanying financial
statements.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements". SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. We will adopt
SAB 101 as required in the second quarter of 2000. We do not expect the adoption
of SAB 101 to have a material impact on our consolidated results of operations
and financial position.

                                      F-11
<PAGE>   107
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3 -- CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              ----------------   MARCH 31,
                                                               1998      1999      2000
                                                              ------    ------   ---------
                                                                     (IN THOUSANDS)
<S>                                                           <C>       <C>      <C>
In NIS......................................................  $   38    $   --    $   --
In Pounds Sterling..........................................     326        --       206
In U.S. dollars.............................................   3,406     7,838     4,533
                                                              ------    ------    ------
                                                              $3,770    $7,838    $4,739
                                                              ======    ======    ======
</TABLE>

NOTE 4 -- OTHER RECEIVABLES AND PREPAID EXPENSES

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                              ------------    MARCH 31,
                                                              1998    1999      2000
                                                              ----    ----   -----------
                                                                    (IN THOUSANDS)
<S>                                                           <C>     <C>    <C>
Government participations and other government
  receivables...............................................  $210    $142      $225
Employees...................................................    57      60        89
Other receivables and prepaid expenses......................   172     263       336
                                                              ----    ----      ----
                                                              $439    $465      $650
                                                              ====    ====      ====
</TABLE>

NOTE 5 -- PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              ----------------    MARCH 31,
                                                               1998      1999       2000
                                                              ------    ------   -----------
                                                                      (IN THOUSANDS)
<S>                                                           <C>       <C>      <C>
COST
Computers and office equipment..............................  $2,152    $2,747     $2,964
Leasehold improvements......................................     357       357        357
Motor vehicles..............................................     254       363        510
                                                              ------    ------     ------
                                                               2,763     3,467      3,831
ACCUMULATED DEPRECIATION....................................   1,523     1,969      2,108
                                                              ------    ------     ------
NET BOOK VALUE..............................................  $1,240    $1,498     $1,723
                                                              ======    ======     ======
</TABLE>

     For the years ended December 31, 1997, 1998 and 1999 and for the three
months ended March 31, 1999 and 2000, depreciation expense was $237,000,
$323,000, $484,000, $111,000 and $139,000, respectively.

     The net book value of the Company's property and equipment located in
Israel was $973,000 and $1,156,000 and $1,227,000 as of December 31, 1998 and
1999 and as of March 31, 2000, respectively.

NOTE 6 -- SHORT-TERM DEBT

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                              ------------    MARCH 31,
                                                              1998    1999      2000
                                                              ----    ----   -----------
                                                                    (IN THOUSANDS)
<S>                                                           <C>     <C>    <C>
Short-term debt.............................................  $ 11    $ 15      $ --
Current maturities of long-term debt (note 8)...............   156     173       194
Shareholder loan on demand..................................   132     132        --
                                                              ----    ----      ----
                                                              $299    $320      $194
                                                              ====    ====      ====
</TABLE>

                                      F-12
<PAGE>   108
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

NOTE 7 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              ----------------     MARCH 31,
                                                               1998      1999        2000
                                                              ------    ------    -----------
                                                                      (IN THOUSANDS)
<S>                                                           <C>       <C>       <C>
Suppliers...................................................  $  357    $  805      $  890
Employees and related expenses..............................     822     1,173       1,110
Accrued royalties...........................................     249       330         286
Other.......................................................     259       491         388
                                                              ------    ------      ------
                                                              $1,687    $2,799       2,674
                                                              ======    ======      ======
</TABLE>

NOTE 8 -- LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                              ------------     MARCH 31,
                                                              1998    1999       2000
                                                              ----    ----    -----------
                                                                    (IN THOUSANDS)
<S>                                                           <C>     <C>     <C>
Bank loans:
  In U.S. dollars...........................................  $210    $150       $135
  Linked to the Israeli CPI.................................   191     111         91
Other.......................................................    85     125        124
                                                              ----    ----       ----
                                                               486     386        350
Less -- current maturities (note 6).........................   156     173        194
                                                              ----    ----       ----
                                                              $330    $213        156
                                                              ====    ====       ====
</TABLE>

---------------
The loan in US dollars bears annual interest of LIBOR plus 1% (8% as of March
31, 2000). The loan linked to the Israeli CPI bears interest at 5.4% per annum.

     Long-term debt as of December 31, 1999 and March 31, 2000 net of current
maturities, is repayable as follows:

<TABLE>
<CAPTION>
                                                      DECEMBER 31,     MARCH 31,
                                                          1999           2000
                                                      ------------    -----------
                                                            (IN THOUSANDS)
<S>                                                   <C>             <C>
Second year.........................................      $148           $ 94
Third year..........................................        54             62
Fourth year.........................................        10             --
Fifth year..........................................         1             --
                                                          ----           ----
                                                          $213           $156
                                                          ====           ====
</TABLE>

NOTE 9 -- 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.

                                      F-13
<PAGE>   109
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Severance pay expenses amounted to $105,000, $272,000, $202,000, $45,000
and $57,000 for the years ended December 31, 1997, 1998 and 1999 and for the
periods ended March 31, 1999 and 2000, respectively.

NOTE 10 -- COMMITMENTS AND CONTINGENCIES

     In connection with its research and development, the Company received
participation payments from the State of Israel in the total amount of
$3,152,000. In return for the Government of Israel participation, the Company is
committed to pay royalties at a rate of 3% to 5% of sales of the developed
product, up to 100% -- 150% of the amount of grants received. The Company has
paid or accrued royalties to March 31, 2000 of $917,000.

     In connection with its export marketing activities, until December 31, 1996
the Company received participation payments from the Government of Israel
through the Fund for the Encouragement of Marketing Activities in the amount of
$707,000. The Company is committed to pay royalties at a rate of 3% of the
increase in export sales over a base amount, up to the amount of the
participations received. The Company has paid or accrued royalties to date
amounting to $345,000.

     Long-term bank debt, and liabilities to banks in respect of guarantees
given for the benefit of the Company are secured by fixed charges on vehicles
and on amounts receivable from certain major customers.

     The Company operates from facilities in Israel; the United States and the
U.K., leased for periods expiring in the years 2000 to 2003 (some with a renewal
option ending in May 2008) at annual rent of approximately $644,000. Minimum
future rental payments, at March 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                                (IN THOUSANDS)
                                                                --------------
<S>                                                             <C>
2000........................................................        $  644
2001........................................................           563
2002........................................................           492
2003........................................................           492
                                                                    ------
                                                                    $2,191
                                                                    ======
</TABLE>

     On February 2, 2000 the Company signed a seven year operating lease of new
office premises in the U.S. The lease commences on June 1, 2000 and the future
minimum annual payments are as follows:

<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)
                                                              --------------
<S>                                                           <C>
2000........................................................      $  240
2001........................................................         420
2002........................................................         437
2003........................................................         455
2004........................................................         473
2005 to 2008................................................       1,221
                                                                  ------
                                                                  $3,246
                                                                  ======
</TABLE>

                                      F-14
<PAGE>   110
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- SHAREHOLDERS' EQUITY

  A. SHARE CAPITAL -- comprises of shares of NIS 0.02 par value.

<TABLE>
<CAPTION>
                                                                 NUMBER OF SHARES
                                ----------------------------------------------------------------------------------
                                             AUTHORIZED                          ISSUED AND OUTSTANDING
                                ------------------------------------   -------------------------------------------
                                            DECEMBER 31,                              DECEMBER 31,
                                ------------------------------------   -------------------------------------------
                                   1997         1998         1999        1997             1998             1999
                                ----------   ----------   ----------   ---------       ----------       ----------
<S>                             <C>          <C>          <C>          <C>             <C>              <C>
Ordinary shares...............  15,000,000    8,000,000    6,474,801   5,468,816        5,468,816        5,468,816
Ordinary A
 shares -- non-voting.........     840,000      840,000      840,000     840,000(*)       840,000(*)       840,000(*)
Ordinary B Convertible
 shares -- non-voting.........   1,000,000    1,000,000    1,000,000     900,000(*)       900,000(*)       900,000(*)
                                ----------   ----------   ----------   ---------       ----------       ----------
                                16,840,000    9,840,000    8,314,801   7,208,816        7,208,816        7,208,816
                                ==========   ==========   ==========   =========       ==========       ==========
Preferred A-1 Convertible
 shares.......................   4,750,000    4,750,000    4,750,000   2,810,424        2,810,424        2,810,424
Preferred A Convertible
 shares.......................   3,750,000    3,750,000    3,750,000   2,299,438        2,299,438        2,299,438
Preferred B Convertible
 shares.......................          --    4,000,000    4,000,000          --        3,826,809        3,826,809
Preferred C Convertible
 shares.......................          --    3,000,000    3,000,000          --        2,731,141        2,731,141
Preferred D Convertible shares
 (see note 11B)...............          --           --    1,830,238          --               --        1,832,086
                                ----------   ----------   ----------   ---------       ----------       ----------
                                 8,500,000   15,500,000   17,330,238   5,109,862       11,667,812       13,499,898
                                ==========   ==========   ==========   =========       ==========       ==========

<CAPTION>
                                    NUMBER OF SHARES
                                ------------------------

                                             ISSUED AND
                                AUTHORIZED   OUTSTANDING
                                ----------   -----------
                                     MARCH 31, 2000
                                ------------------------
<S>                             <C>          <C>
Ordinary shares...............  80,826,377    5,704,430
Ordinary A
 shares -- non-voting.........     840,000      840,000(*)
Ordinary B Convertible
 shares -- non-voting.........   1,000,000      935,215(*)
                                ----------   ----------
                                82,666,377    7,479,645
                                ==========   ==========
Preferred A-1 Convertible
 shares.......................   4,750,000    2,810,424
Preferred A Convertible
 shares.......................   3,750,000    2,299,438
Preferred B Convertible
 shares.......................   4,000,000    3,826,809
Preferred C Convertible
 shares.......................   3,000,000    2,731,141
Preferred D Convertible shares
 (see note 11B)...............   1,833,623    1,832,086
                                ----------   ----------
                                17,333,623   13,499,898
                                ==========   ==========
</TABLE>


---------------
 (*) Includes shares reserved for allocation against employee options granted
     but not yet exercised, held by a trustee. The total number of Ordinary
     shares held by the trustee are 1,260,000 as of December 31, 1997 and 1998
     and 1,206,920 as of December 31, 1999, and 939,039 as of March 31, 2000.

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

     Preferred Convertible A-1 shares do not entitle the holder to voting rights
and are convertible to Preferred A Convertible shares or Ordinary B Convertible
shares.

     Preferred A, B, C, and D Convertible shares entitle the holder to full
voting rights and are convertible to Preferred A-1 Convertible shares or
Ordinary shares.

     All types of Preferred shares entitle the holder to a preference dividend
at the rate of 110% of the dividend distributed to the holders of the Ordinary
shares, in preference to any distribution to the holders of Ordinary shares. In
the event of liquidation, the holders of preferred shares are entitled to the
following preferences:

     - Preferred A and A-1 convertible shares to 3 times their initial effective
       purchase price.

     - Preferred B and C convertible shares to 2 times their initial effective
       purchase price.

     - Preferred D convertible shares to 1.75 times their initial effective
       purchase price.

     Preferred shares, Ordinary A shares and Ordinary B Convertible shares are
convertible to Ordinary shares on a one to one basis. In the event of an initial
public offering all of the aforementioned shares will automatically convert into
Ordinary shares.

                                      F-15
<PAGE>   111
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  B. Issuances

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


     The Company has recorded a preferred share dividend of approximately $5.0
million representing the value of the beneficial conversion feature on the
issuance of Series D in December 1999. The beneficial conversion feature was
calculated at the commitment date based on the difference between the conversion
price of $6.277 per share and the estimated fair value of the ordinary shares at
that date.


     In addition, in December 1999, certain employees exercised their options to
acquire 53,080 Ordinary shares (11,741 Ordinary A shares and 41,339 Ordinary B
Convertible shares). These shares had been previously issued and held by the
trustee and were included in the number of issued and outstanding Ordinary
shares.

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

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

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

     In addition during the three months ended March 31, 2000, certain employees
exercised their options to acquire 428,254 Ordinary shares (140,488 Ordinary
shares and 287,767 Ordinary B Convertible shares). Of the Ordinary B convertible
shares 252,552 had been previously issued and held by the trustee and were
included in the number of issued and outstanding Ordinary shares, whereas 35,215
represented newly issued shares.

  C. Warrants

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

     The warrants are exercisable in whole or in part at any time ending on the
earlier of March 31, 2003 or the date of any of the following:

     - an initial public offering; or

     - sale/transfer of substantially all of the Company's assets; or

     - change in ownership of more than 50% of the voting power of the Company.

     The warrants can either be exercised for cash consideration or any warrant
may be exercised by applying the value of a portion of the warrant, which is
equal to the number of shares issuable under the

                                      F-16
<PAGE>   112
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

warrant being exercised, multiplied by the fair market value of the security
receivable upon exercise of the warrant, less the per share exercise price, in
lieu of payment of the exercise price per share.

     The warrants are subject to antidilution provisions.

  D. Employee and Consultant Option Plans

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

     In 1999 the Company adopted new option plans according to which options for
the purchase of 660,810 Ordinary B shares may be granted to employees.

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

     The Board of Directors has approved the grant of a stand-alone option to
purchase 720,000 ordinary shares to the Company's CEO and a stand-alone option
to purchase 15,000 ordinary shares to a director.

     The Company has adopted new option plans in 2000 under which they have
granted 324,600 options at a weighted average exercise price of $8.50 per share.

     In connection with the grant of certain options to employees during fiscal
1999, the Company recorded deferred compensation of approximately $3,401,000,
representing the difference between the estimated fair value of the Ordinary
shares and the exercise price of these options at the date of grant. Such amount
is presented as a reduction of shareholders' equity and amortized over the
vesting period of the applicable options. The Company recorded amortization of
deferred compensation of approximately $738,000 during the year ended December
31, 1999 and $355,000 during the period ended March 31, 2000. At March 31, 2000,
the remaining deferred compensation of approximately $2,308,000 will be
amortized as follows: $1,062,000, $744,000, $378,000 and $124,000 during the
years ended 2000, 2001, 2002 and 2003, respectively. The amortization expense
relates to options awarded to employees in all operating expense categories. The
amount of deferred compensation expense to be recorded in future periods could
decrease if options for which accrued but unvested compensation has been
recorded, are forfeited.

     If deferred compensation had been determined under the alternative fair
value accounting method provided for under SFAS No. 123, "Accounting for
Stock-Based Compensation", using the "minimum value" method with the following
weighted average assumptions used for grants in all reported periods: (1)
average expected life of the options is 1.31; (2) dividend yield of 0%; (3)
expected volatility of 0% for 1997, 1998 and 1999 and expected volatility of 65%
for March 31, 2000; and (4) risk-free interest rate of 5%, the effect on the
Company's net loss and net loss per share would have been immaterial for all
reported periods.

     Transactions related to the above discussed options and warrants granted to
employees and consultants during the years ended December 31, 1997, 1998, 1999
and during the period ended March 31, 2000 and

                                      F-17
<PAGE>   113
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the weighted average exercise prices per share and weighted average fair value
of the options at the date of grant are summarized as follows:

<TABLE>
<CAPTION>
                                                                                      WEIGHTED
                                                                         WEIGHTED     AVERAGE
                                                                          AVERAGE       FAIR
                                            OPTIONS                      EXERCISE      VALUE
                                           AVAILABLE      OUTSTANDING    PRICE PER       OF
                                           FOR GRANT      OPTIONS(*)       SHARE       OPTION
                                         -------------    -----------    ---------    --------
<S>                                      <C>              <C>            <C>          <C>
Outstanding January 1, 1997............      180,307         179,693       $0.58
  Authorized...........................    1,200,000              --
  Granted..............................     (652,026)        652,026        0.58       $0.40
  Forfeited............................      170,189        (170,189)       0.58
                                          ----------       ---------
Outstanding December 31, 1997..........      898,470         661,530        0.58
  Granted..............................     (627,810)        627,810        0.58       $1.14
  Forfeited............................       65,035         (65,035)       0.58
                                          ----------       ---------
Outstanding December 31, 1998..........      335,695       1,224,305        0.58
  Authorized...........................    1,493,809              --
  Granted..............................   (1,493,809)      1,493,809        1.64       $2.62
  Exercised............................           --         (53,080)       0.58
                                          ----------       ---------
Outstanding December 31, 1999..........      335,695       2,665,034        1.16
  Authorized...........................    3,800,000              --
  Granted..............................     (324,600)        324,600        8.50       $2.02
  Forfeited............................       77,400         (77,400)       3.58
  Exercised............................           --        (428,254)       1.02
                                          ----------       ---------
Outstanding March 31, 2000
  (unaudited)..........................    3,888,495       2,483,980        2.08
                                          ==========       =========
</TABLE>

---------------
(*) As of December 31, 1997, 1998 and 1999 and March 31, 2000, 1,260,000,
    1,260,000, 1,206,920 and 939,039 Ordinary shares are held by a trustee and
    have been reserved for allocation against certain employee options granted
    but not yet exercised.

     The following table summarizes information about options outstanding and
exercisable at March 31, 2000:


<TABLE>
<CAPTION>
                                       OPTIONS OUTSTANDING                OPTIONS EXERCISABLE
                             ---------------------------------------    ------------------------
                               NUMBER        WEIGHTED-                    NUMBER
                             OUTSTANDING      AVERAGE      WEIGHTED-    OUTSTANDING    WEIGHTED-
                                 AT          REMAINING      AVERAGE         AT          AVERAGE
                              MARCH 31,     CONTRACTUAL    EXERCISE      MARCH 31,     EXERCISE
      EXERCISE PRICE            2000           LIFE          PRICE         2000          PRICE
      --------------         -----------    -----------    ---------    -----------    ---------
<S>                          <C>            <C>            <C>          <C>            <C>
$0.58......................     918,673        5.55          $0.58        356,511        $0.58
 0.83......................     571,195        8.67           0.83          5,588         0.83
 1.86......................     579,512        7.51           1.86             --         1.86
 3.67......................      90,000        5.27           3.67         10,027         3.67
 8.50......................     324,600        10.0           8.50             --           --
                              ---------                                   -------
                              2,483,980                                   372,126
                              =========                                   =======
</TABLE>


     Subsequent to period end, the Company granted options to acquire 80,000
shares to three directors at an exercise price of $10.00 per share.

                                      F-18
<PAGE>   114
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 12 -- SEGMENT REPORTING

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

     The Company's revenue by geographic area is as follows:

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                         YEAR ENDED DECEMBER 31,          MARCH 31,
                                       ---------------------------    ------------------
                                        1997      1998      1999       1999       2000
                                       ------    ------    -------    -------    -------
                                             (IN THOUSANDS)
<S>                                    <C>       <C>       <C>        <C>        <C>
North America........................  $  836    $4,293    $ 6,978    $1,502     $2,767
Europe...............................     570     1,193      2,163       387        496
Israel...............................     678       493        905        99        112
Singapore............................     231        92        280        41        136
                                       ------    ------    -------    ------     ------
                                       $2,315    $6,071    $10,326    $2,029     $3,511
                                       ======    ======    =======    ======     ======
</TABLE>

     Sales to a single customer exceeding 10%:

<TABLE>
<CAPTION>
                                         %         %          %         %         %
                                       ------    ------    -------    ------    ------
<S>                                    <C>       <C>       <C>        <C>       <C>
Customer A...........................      11        13        (*)       (*)       (*)
Customer B...........................      --        12        (*)       (*)       (*)
Customer C...........................      21       (*)        (*)       (*)       (*)
Customer D...........................      --        11        (*)       (*)       (*)
Customer E...........................      --       (*)        (*)        11        --
Customer F...........................      --        --         --        --        22
</TABLE>

---------------
(*) Under 10%

NOTE 13 -- TAXES ON INCOME

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

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

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

                                      F-19
<PAGE>   115
                        CLICKSOFTWARE TECHNOLOGIES LTD.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Final tax assessments in Israel have been received up to and including the
1993 tax year.

     The Company has net operating loss carryforwards in Israel of approximately
$11 million as of March 31, 2000. In addition losses of approximately $10.3
million are attributable to the U.S. subsidiary which will expire between 2008
and 2013. The UK subsidiary has carryforward tax losses of approximately $1.6
million as of March 31, 2000. The carryforward tax losses for Israel and the UK
have no expiration date.

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

NOTE 14 -- BALANCES AND TRANSACTIONS WITH RELATED PARTIES

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

<TABLE>
<CAPTION>
                                                  DECEMBER 31,
                                                 --------------       MARCH 31,
                                                 1998     1999           2000
                                                 -----    -----     --------------
                                                 (IN THOUSANDS)     (IN THOUSANDS)
                                                 --------------     --------------
<S>                                              <C>      <C>       <C>
Balances:
  Accounts payable and accrued expenses........  $ 75     $139           $99
  Loan from shareholder on demand..............   132      132            --
</TABLE>

<TABLE>
<CAPTION>
                                                                      THREE MONTHS
                                                                         ENDED
                                          YEAR ENDED DECEMBER 31,      MARCH 31,
                                          -----------------------    --------------
                                          1997     1998     1999     1999     2000
                                          -----    -----    -----    -----    -----
                                              (IN THOUSANDS)         (IN THOUSANDS)
                                          -----------------------    --------------
<S>                                       <C>      <C>      <C>      <C>      <C>
Transactions:
  Sales to Nester.......................  $ 20      $--      $--      $--     $ --
  Management fee income from Nester.....    48       89       48       12       12
  Transfer of intangible assets to
     Nester.............................   496       --       --       --       --
</TABLE>

                                      F-20
<PAGE>   116
                           [Inside Back Cover Artwork]

List of ClickSoftware's Selected Customers: Agilent Technologies, Inc., Bell
Atlantic Corporation, Canadian Red Cross, Caterpillar, Inc., Compaq Computer
Corporation, Covad Communications Group, Inc., Crawford & Company, EMC
Corporation, Enbridge Services, Level 3 Communications, Inc., Maritime Telephone
& Telegraph, New Brunswick Telephone, Schindler Elevator Corporation, Wards.
Lightly screened in background is graphic of computer screen. Also includes
graphics of computer screen, clock and person using telephone.

                          [Outside Back Cover Artwork]

Lightly screened across the entire back page is a line art graphic of the world
atlas. Near the top of the page is the text "4,000,000 Shares." Below this text
is the ClickSoftware logo. Below this is the term "Ordinary Shares." Below this
text is a two inch horizontal line, under which is the text "PROSPECTUS" and
below which is a date. This is followed by another two inch horizontal line.
Approximately half way down the center of the page are four text lines stacked
on top of each other: "LEHMAN BROTHERS," "CIBC WORLD MARKETS," "SG COWEN,"
"FIDELITY CAPITAL MARKETS," followed by the text "a division of National
Financial Services Corporation."

<PAGE>   117

                                      LOGO


                                4,000,000 Shares


                               CLICKSOFTWARE LOGO
                                Ordinary Shares
                          ----------------------------
                                   PROSPECTUS

                                 June 22, 2000

                          ----------------------------
                                LEHMAN BROTHERS
                               CIBC WORLD MARKETS
                                    SG COWEN

                            FIDELITY CAPITAL MARKETS
             A DIVISION OF NATIONAL FINANCIAL SERVICES CORPORATION


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