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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
COMMISSION FILE NUMBER: 1-13591
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AXS-ONE INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-2966911
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
301 ROUTE 17 NORTH, RUTHERFORD, NEW JERSEY 07070
(Address of principal executive offices) (Zip Code)
201-935-3400
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock $.01 par value American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
COMPUTRON SOFTWARE, INC.
(Former name, if changed since last report)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Common Stock on March 15, 2001
as reported on the American Stock Exchange, was approximately $9.1 million.
Shares of Common Stock held by each officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
As of March 15, 2001, Registrant had outstanding 24,784,742 shares of Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE
ITEMS 10, 11, 12 AND 13 OF PART III ARE INCORPORATED BY REFERENCE FROM A
PORTION OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FURNISHED TO
STOCKHOLDERS IN CONNECTION WITH THE 2001 ANNUAL MEETING OF STOCKHOLDERS.
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ITEM 1. BUSINESS
This Report contains statements of a forward-looking nature within the
meaning of the safe harbor provisions of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, relating to future events or future financial results of the Company.
Investors are cautioned that such statements are only predictions and that
actual events or results may differ materially. In evaluating such statements,
investors should specifically consider the various factors identified in this
Report which could cause actual events or results to differ materially from
those indicated by such forward-looking statements, including the matters set
forth in "Business--Risk Factors" below.
GENERAL
AXS-One Inc. ("AXS-One" or the "Company") (which, until October 31, 2000,
was known as Computron Software, Inc.) is a provider of robust, secure business
solutions which allow a company to achieve efficiency in its business processes
and extend those efficiencies to its customers, suppliers, and business
partners. AXS-One has over 20 years of experience in designing and building
process-centric business solutions for global organizations. AXS-One has a
proven track record in developing flexible, high-volume, scalable, secure and
effective business solutions for global 2000 organizations. AXS-One's ability to
quickly identify emerging market opportunities and build high-quality innovative
solutions has won many awards over the years, including Imaging Magazine's
"Product of the Year" award for AXS-One Workflow and a "Best of AIIM" award for
the first Internet/Java COLD product.
AXS-One believes that the ultimate success of 21st century organizations
will be determined by how seamlessly they conduct business internally and with
their partners, customers and suppliers. The Company's objective is to deliver
business solutions which, through enablement via the Internet, allow
organizations to establish transparent and seamless processes throughout their
value-network.
In 1999 and 2000, AXS-One invested significantly in the development of
e-commerce technology, and will continue to invest throughout 2001. In order to
better focus on emerging e-commerce opportunities, effective January 1, 2000,
AXS-One reorganized around three product families that represent separate lines
of business ("LOB") within AXS-One:
AXS-ONE-TM- ENTERPRISE-- a suite of solutions that address mission critical
business processes that directly affect the overall
performance of an enterprise.
AXSPOINT-TM--- a solution for sharing knowledge internally and between
business partners.
TIVITY-TM--- a complete e-commerce solution for the professional services
industry.
Each of these families of solutions has been enhanced using AXS-One's
e-Cellerator-TM- products. e-Cellerator products utilize a next generation,
messaging, transaction and process-centric architecture that AXS-One developed
to support the design and development of large-scale, Internet-based commerce
solutions. It is an "n-tier" (desktop browser, web servers, application servers
and database server), component-based, Internet-deployable, scalable
architecture. At the core of the architecture is an advanced workflow engine
that handles large volumes of complex business process logic. The user interface
is very intuitive and is accessible over the Internet.
e-Cellerator products run on Windows NT, Sun Unix, HP UNIX, Tru64 UNIX and
IBM RS/6000 Unix. Linux is available, but not deployed. The e-Cellerator
products support the following database engines: Oracle, MS SQLServer, Informix
and Sybase. The component-based architecture enables rapid integration and
deployment of advanced technologies. Solutions using e-Cellerator products can
be hosted in-house or remotely by third-party application service providers
(ASP).
AXS-One's foundation products, which are client/server based, continue to be
maintained, enhanced and upgraded. These products are the back-office system of
choice for large information-
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centric, global organizations such as AIG, Pfizer, AOL, Deutsche Bank, Emery,
TNT, Toys "R" Us, Ricoh and United Airlines. AXS-One's client/server products
have been particularly well received in those organizations that have adopted an
internal "shared services" approach to back-office administration functions.
AXS-One Financials have extensive functionality and are able to handle large
volumes of complicated business transactions. They are designed to manage
end-to-end business processes. AXS-One Financials are integrated with a robust
workflow engine that allows organizations to manage and track a wide range of
business-process metrics. The Process Design Workbench is a critical component
of the solution. It enables organizations to quickly tailor standard business
process templates to meet their own unique needs. The underlying "n-tier"
architecture is highly scalable and able to meet the transaction volume needs of
Fortune 100 organizations. AXS-One Workflow, enhanced using e-Cellerator
products, can now be used to automate business processes both within and across
organizations, thus extending the reach of end-to-end process control outside of
the walls of traditional bricks and mortar organizations.
In this emerging Net economy, with the virtual office becoming more
prevalent, AXS-One is well positioned to meet the business needs of
e-organizations. AXS-One's e-Cellerator products provide the ability to leverage
technology and to disseminate business knowledge electronically throughout the
enterprise or across enterprises.
ORGANIZATION AND PRODUCTS
Effective January 1, 2000, AXS-One Software reorganized itself into three
LOBs: AXS-One Enterprise Solutions, AXSPoint Solutions and Tivity Solutions.
Each of these LOBs is responsible for its own global business strategy and its
operations in North America. AXS-One's international subsidiaries and
distributors are responsible for selling and marketing the products of these
three LOBs into their respective local markets. In addition, the Company
continues to provide support for its Yorvik-Registered Trademark- work
management software.
Further information specific to these three operating segments is presented
in Note 11 to the Consolidated Financial Statements.
AXS-ONE ENTERPRISE SOLUTIONS. Is a suite of solutions that addresses
mission critical business processes that directly affect the overall performance
of an enterprise. The degree of success or failure of these processes is
measured in terms of speed, accuracy, control and accountability. AXS-One
Enterprise manages the revenue process, including relationships with customers,
with Revenue Manager (scheduled to be available in the summer of 2001); the
expense process, including relationships with vendors, with Expense Manager; the
procurement process, including relationships with employees and vendors, with
Procurement Manager; and the business planning, budgeting, analysis and
reporting process with Business Manager. Collectively, AXS-One Enterprise
enables enterprises to effectively manage entire process lifecycles with proven
transactional applications, templated and automated process workflow, and by
maximizing the efficiencies of the Internet.
The AXS-One Enterprise Solutions LOB is also responsible for maintaining,
supporting and enhancing AXS-One's foundation suite of world-class back-office
financial products, and existing AXS-One North American customers, including
Pfizer, AIG, Toys "R' Us, Ricoh, United Airlines and Emery.
The AXS-One Enterprise Solutions LOB currently markets its products and
services primarily through a direct sales force in the United States and
directly and indirectly in other parts of the world. The AXS-One Enterprise
Solutions LOB conducts comprehensive marketing programs in the United States,
which include telemarketing, public relations, direct mail, advertising,
seminars, trade shows and ongoing customer communications programs.
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The AXS-One Enterprise Solutions LOB's sales efforts in the United States
are conducted by a direct sales force, which is located at the Company's
headquarters in Rutherford, New Jersey, and in the Chicago and Atlanta areas.
Outside of the United States, the AXS-One Enterprise Solutions LOB utilizes
the Company's sales and support offices in Australia, Poland, Bulgaria,
Singapore, South Africa and the United Kingdom. In the past the Company has
established distribution arrangements with third parties around the world and
continually evaluates future third party arrangements. Currently, the AXS-One
Enterprise Solutions LOB does not generate significant revenues from its
distributors.
This family of solutions leverages and shares the core functional components
of AXS-One foundation products, such as AXS-One Financials, and the benefits of
e-Cellerator products. The ability to utilize existing foundation components
enables AXS-One Enterprise Solutions to support a powerful set of core business
functionality, such as multi-language and multi-currency, and the ability to
handle complex, process-centric business and accounting requirements such as
different forms of payment. As a result, AXS-One Enterprise Solutions have all
the features of a powerful e-commerce solution, backed by the solid
functionality of a world-class, global back-office suite of business products.
AXS-One Enterprise Solutions and foundation products are described below.
AXS-ONE ENTERPRISE REVENUE MANAGER manages the entire billing, collection and
cash application process. Revenue Manager begins with the invoice to the
customer that goes against a managed inventory of open items. Once payment is
received, Revenue Manager handles the entire cash application process by using
either the customer's instructions or system-constructed algorithms to apply the
payment. Revenue Manager automates the monitoring of the receivable asset.
Customers falling behind in payments are notified by system generated dunning
letters and/or by collectors who are alerted to call the account. Revenue
Manager extends its value by providing customers with a web based self-service
portal that allows for bill presentation, account reconciliation, request for
change of credit limit and/or address and e-mail correspondence with the
Accounts Receivable personnel assigned to the account. Revenue Manager is
scheduled to be available by the summer of 2001.
AXS-ONE ENTERPRISE EXPENSE MANAGER supervises the expense management process.
From invoice entry through Purchase Order matching and supervisor approval,
Expense Manager allows for simplified data-entry with automated routing of
invoices for payment approval(s). Once paid, a robust reconciliation process
matches payments to statement detail supplied by the bank. Like Revenue Manager,
Expense Manager extends its value by providing vendors with a web based
self-service secure portal that allows them a real-time view of their invoice
and payment data, thereby reducing the need for direct contact with the Accounts
Payable department. Expense Manager streamlines the internal payment process and
strengthens the customer/supplier relationship.
AXS-ONE ENTERPRISE PROCUREMENT MANAGER supervises the entire procurement
lifecycle process. From supply need to payment for received goods
(requisition-to-payment), Procurement Manager allows employees to securely buy
supplies via an Intranet web site in a controlled environment. Procurement
Manager manages the internal catalogs and/or links to external supplier catalogs
via eXtensible Markup Language (XML), manages budgetary controls, controls the
approval process and creates the final purchase order. Once an ordered supply
has been received, Procurement Manager is notified by receipt verification from
the receiver. Once an invoice is received from the supplier, Procurement Manager
conducts a three-way match between the original purchase order, the invoice and
the receipt verification for accuracy. If everything matches then Procurement
Manager triggers a scheduled payment. If a match is not found, Procurement
Manager begins exception processing. Procurement Manager streamlines and
automates the entire procurement process including budgetary controls, catalog
maintenance, inventory and approval management.
AXS-ONE ENTERPRISE BUSINESS MANAGER encompasses the entire business planning,
forecasting and reporting process. This process starts with the business plan,
which then goes through the budget
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process, and continues through monthly reporting. Business Manager then conducts
periodic variance analysis and generates applicable reports that may be
available over the web, which may then be compared to the original business plan
and revisions made as necessary. Business Manager also handles and controls
corporate budgeting (including the Encumbrance Accounting Module), the treasury
function and total assets in a dynamic workflow and Internet based environment
for maximum efficiency.
AXS-ONE FINANCIALS:
This is AXS-One's foundation suite of products. It is a world-class suite of
back-office administrative systems being used by some of the largest
organizations in the world. It is built on a highly scalable, component-based,
robust, n-tiered architecture.
MODULE FEATURES
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GENERAL LEDGER.......... The General Ledger (GL) module provides comprehensive
financial accounting and management information across
multiple companies, currencies, and reporting calendars. It
stores and maintains financial, statistical, and budgetary
information for summary, comparison, calculation, inquiry,
and reporting. AXS-One believes that the product fulfills
statutory, consolidation, and management requirements while
offering benefits such as complete user control of all
functions and the ledger structure,
POWER INTERACTIVE....... Power Interactive is a set of components used to define GL
financial reports. Created in Visual Basic, Power
Interactive provides a traditional Windows look and feel
with standard icons, while allowing users report access and
drill down capability to virtually any data available in the
GL. Its components include the Power Interactive Definer and
Power Interactive Viewer. The Power Interactive Definer
allows the specification of a report using a graphical user
interface, without having to consider the details of the
actual report layout. Its Power Interactive Viewer component
is a user-friendly tool that facilitates end-user financial
report modifications and customizations. With Power
Interactive, users can define financial report data lines
and columns using the Definer, and use the Viewer to define
and/or view the layout. For performance and scalability, all
data is gathered on the server.
BUDGET CYCLE
MANAGEMENT............ The Budget Cycle Management (BCM) module is workflow-based
and is designed to allow organizations to automate the ways
in which budget information is downloaded/uploaded,
disseminated and collected throughout the enterprise. It
provides the ability to track the status of each form,
reducing the frequent manual intervention involved in the
budget cycle process. With BCM, organizations in virtually
any industry can improve the overall quality and control of
the budgeting process, decrease wait time by speeding the
manual process, and reduce manual effort.
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MODULE FEATURES
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ACCOUNTS RECEIVABLE..... The Accounts Receivable module provides efficient and
comprehensive debtor management facilities, offering
complete financial accounting and management information, in
multiple currencies, to fulfill statutory and management
requirements and is suitable for Internet Service Providers
(ISPs), because of its ability to consolidate invoice line
details. It is parameter-driven for precise matching to user
requirements and offers users control of many functions
including the ledger structure. Users can create Call Back
Queue records based on data from the customer master,
customer statistics, and open item files using the Credit
Manager's workbench function. Additionally, AXS-One Accounts
Receivable has an optional Direct Invoicing module that
handles pick list generation, invoice generation, deal
pricing, and pricing and discount tables for goods and
services. It also provides comprehensive financial
accounting and management reporting and inquiry (statistical
and financial), in multiple currencies. It supports the EDI
820 and 823 requirements. Through the use of various
standard AXS-One utilities, data can be uploaded to and/or
downloaded from external sources.
EXPENSE CYCLE........... Management Expense Cycle Management (ECM) is a complete
application that integrates portions of AXS-One's financial
modules with workflow technology and is delivered with a
graphical process design wizard called the Process Design
Workbench. It comes with all of the workflow tasks necessary
for re-engineering the payment cycle, such as several
scanning, faxing and invoice capture tasks, tasks for
indexing documents, voucher approval routing options, EFT
payments, exception handling, and full online inquiry to the
workflow and financial data.
PROCUREMENT CYCLE
MANAGEMENT............ Procurement Cycle Management (PCM) is a complete application
that integrates portions of AXS-One's financial modules with
workflow technology, including the Process Design Workbench.
It allows individual organizations to define the procurement
cycle process and provides a view of the current processes,
identifying areas that can be improved. By coupling the
value of workflow with AXS-One's standard functional
richness, PCM helps organizations decrease wait time, reduce
manual effort, and improve the control of the procurement
process. PCM can electronically create both requisitions and
purchase orders, and upon completion of an online
requisition, perform custom business rules, or automatically
route the requisition to a supervisor for approval and
release.
INVENTORY CONTROL....... The Inventory Control module is a highly flexible inventory
system with full integration to both AXS-One
Financials/Purchase Order and AXS-One Financials/General
Ledger. This system features extensive inventory transaction
capabilities and detailed reporting functionality. Notable
features include Item Master File maintenance and inquiry
capability, Bill of Materials, full integration to AXS-One
Financials/Purchase Order through Requisition and Receiving,
Pick List processing, a full range of inventory transactions
including warehouse moves, transfers, issues, and returns,
inventory count capabilities and inventory reporting, and
costing methods. Through the use of various standard AXS-One
utilities, data can also be uploaded and/or downloaded from
external sources.
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MODULE FEATURES
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FIXED ASSETS............ The Fixed Assets (FA) module tracks fixed assets, maintains
related financial and accounting records and provides for
flexible, unlimited depreciation calendars, user-defined
asset identification and make, model and number
descriptions. It can generate fixed asset information
directly for the AXS-One Financials/General Ledger. This
will produce the data required to update asset accounts,
accumulated depreciation accounts, depreciation expense
accounts, and disposition gain or loss accounts, and relieve
the appropriate FA clearing accounts. This update can then
be posted directly to the AXS-One Financials/ General Ledger
and with the integrated reconciliation of GL and FA, can be
easily monitored. Through the use of various standard
AXS-One utilities, data can also be uploaded and/or
downloaded from external sources.
ENCUMBRANCE
ACCOUNTING............ The Encumbrance Accounting module enables public sector and
not-for-profit organizations to avoid exceeding budgeted
amounts by enforcing strict controls over disbursements and
purchasing.
AXSPOINT SOLUTIONS: Is responsible for the development and marketing of
core technology for solutions that enable organizations to electronically and
securely share knowledge both within the enterprise, and with its customers and
other business partners. The AXSPoint LOB enables its customers to gain and
maintain competitive advantage by providing the technology that captures and
delivers content and information across the enterprise and throughout the
value-network. AXSPoint, through its professional services offerings, also
provides customers with resources who have technology and industry expertise.
AXSPoint solutions have been deployed as self-service information systems,
Internet report publishing and distribution systems, Internet-enabled
information reconciliation systems, and transaction confirmation solutions.
These solutions are typically implemented in weeks, thus providing a rapid
time-to-value. AXSPoint's technology captures Metacode, Text, and APA document
data and places this information in a repository that provides easy access to
this data for re-tasking. By combining this data with other data sources and
supplying easy access via a robust user interface, AXSPoint facilitates a
shorter time-to-market for custom web applications. This rapid time-to-market is
a critical selling point that differentiates this LOB's product lines from
competitive offerings. AXSPoint Solutions scale easily from small companies to
large multinational enterprises.
The AXSPoint Solutions LOB has 75 North American customers, and over 125
clients globally, including First Union, Deutsche Bank, Chicago Mercantile
Exchange, and Chase Manhattan. Most of these organizations use client/server
versions of AXS-One COOL-TM- software, but during 2001 the Company hopes to
upgrade many of these customers to the e-Cellerator products-based AXSPoint
family of solutions.
The AXSPoint Solutions LOB's marketing efforts in the United States are
conducted by a direct sales force that is located at the Company's headquarters
in Rutherford, New Jersey, and in Atlanta. In addition, the Company plans to
establish strategic alliances with hardware, database and software vendors to
enhance its marketing efforts. The AXSPoint Solutions LOB is able to offer its
customers highly flexible licensing methods that match the methods by which
customers measure their return on investment.
Comprehensive marketing programs are conducted in the United States, and
include telemarketing, public relations, direct mail, advertising, seminars,
trade shows and ongoing customer communications programs. To maintain a high
level of customer satisfaction, the LOB has launched a Client Care Program with
the primary goal of increasing client awareness around the flexibility that has
been added to the AXSPoint products.
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Outside of the United States, the AXSPoint Solutions LOB utilizes the
Company's sales and support offices in Australia, Poland, Singapore, South
Africa, Canada, and the United Kingdom. In the past the Company has established
distribution arrangements with third parties around the world and continually
evaluates future third party arrangements. Currently, the AXSPoint Solutions LOB
does not generate significant revenues from its distributors; however, it
recognizes that active involvement with potential channel partners is a key to
maintaining its worldwide presence.
AXSPOINT SOLUTIONS:
MODULE FEATURES
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COOL-TM-................ COOL is a client/server product that allows clients to store
reports in an electronic format. It includes a suite of
tools that allow business process owners to view portions of
a report or multiple reports, such as purchase orders,
checks and financial reports, on-line thus eliminating the
need to distribute a paper report. The product includes
report mining as a standard feature and facilitates report
distribution by allowing access to the information via user
login to the core system or via e-mail.
This product's value lies in its ability to provide large
enterprises with the ability to view, archive and
disseminate massive amounts of information rapidly and with
great flexibility. This speed and flexibility reduces the
costs associated with printing reports and resource time
required to search, view, and analyze data appearing in
multiple reports.
AXSPOINT CENTRAL........ Consists of a central repository for storing business
information, together with tools that allow information to
be published from the repository. The base system comes with
the ability to extract information from external report
formats such as ASCI, PDF, PCL and XML. These report files
may be either internal reports or report files received from
third-party organizations such as vendors, customers or
business partners. Once information is stored in the
repository, users can gain access to this information via a
standard browser. The system will also allow users to
subscribe to information and receive notifications or
reports via email. The repository stores historical views of
the same information and allows users to analyze data from
historical reports. This product was designed for clients
presently using the COOL product who need the ability to
access information using a Web browser, but do not need the
extensive capabilities of the Exchange product.
AXSPOINT EXCHANGE....... The AXSPoint Exchange solution allows rapid development of
web based Electronic Self Service and dynamic content
creation systems. AXSPoint Exchange solutions are designed
to meet specific business needs, such as Electronic Bill
Presentment and Payment, Vendor Self-Service, Customer Self-
Service, Billing Consolidation, and Report Consolidation and
Analysis. Access to the software is via a standard
web-browser and is authenticated for data-level secured
access to AXSPoint Central reports. Users can search, view,
or download reports as MS Excel spreadsheets or XML-tagged
files for further analysis. These solutions are designed
using e-Cellerator products and can be combined with the
AXS-One Workflow module. AXSPoint Exchange's enhanced rapid
development environment makes it one of the easiest products
to use when building and supporting web-based information
management applications.
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MODULE FEATURES
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The value of this product lies in its ability to provide
enterprise wide access to mission critical data on a secured
platform with rapid time-to-value. Recent advances in the
design of this product have reduced the skill level needed
to produce such applications, thus reducing the overall cost
of implementation.
AXSPOINT PROCESS
MANAGER............... Will significantly extend the capabilities of AXSPoint. As a
multi-platform product, AXSPoint Process Manager will allow
a global enterprise, as well as its trading partners, to
view and exchange information on a highly controlled and
secured platform. An enhanced repository will allow data to
be drawn from any AXS-One supported data source and stored
in the Process Manager repository. Alternately, the data may
remain in its original database and be used on a real time
basis. A state of the art information process manager will
manage access, analysis, and routing of this data. The
information process manager will allow the enterprise to
manage how information is shared based on process ownership,
trading partner status, and data values, to mention a few
criteria.
Process Manager's value to the enterprise lies in its
ability to rapidly deploy and economically maintain
large-scale Business Process Management (BPM) solutions for
AXSPoint's customers. This product is scheduled for release
late in 2001.
In 2000, the AXSPoint Central and AXSPoint Exchange products were enhanced
to leverage the power of eXtensible Markup Language (XML). By placing
information in an XML format, AXSPoint provides an extremely powerful platform
that can communicate to virtually any other package or system that uses XML.
In 2001, AXSPoint's product strategy will address specific BPM solutions
that will enable the enterprise, its customers, vendors and business partners to
easily access critical information. AXSPoint Exchange will be enhanced with
Workflow and will be used as the infrastructure for Electronic Self Service
(ESS) and Electronic Bill Presentment and Payment (EBPP) solutions. This
specific strategy has resulted in the alpha release of AXSPoint Travel, a
solution designed to assist tour operators and agents in the tedious effort of
statement reconciliation. This solution was designed using a combination of
AXSPoint Exchange and Workflow.
The AXSPoint Professional Services Group provides strategic services to
corporate executives who develop enterprise plans for the dissemination and
analysis of mission critical information. In conjunction with the development of
seminars directed specifically to executives, this group will be tasked with
establishing AXSPoint as "the provider of choice" for acquisition of Information
Management knowledge and services. These services will be delivered directly by
AXSPoint subject matter experts and alliance partners.
AXSPoint's market approach will focus on the development of alternate
channels of distribution that leverage new incremental sources of revenue.
Partnerships with systems integrators specialized in EBPP and ESS will be
pursued and supported to establish AXSPoint products as core products used to
deliver services to their clients. Software vendors that lack the ability to
extend the functionality of their product will be supplied with the ability to
present their information on an enterprise basis by leveraging AXSPoint
presentation and analysis functions. Lastly, AXSPoint will pursue opportunities
with web-based companies that require AXSPoint features and functionality as a
complement to their business.
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TIVITY SOLUTIONS. By leveraging the Company's proven experience in building
easy-to-customize, workflow-enabled systems to automate business processes,
Tivity provides solutions to Professional Services Organizations (PSOs) that
decrease the time to bill and the effort involved in the billing and revenue
recognition processes. This family of solutions allows PSOs to operate virtually
and globally across the enterprise. PSOs are among the first of the virtual
workforces requiring the ability to connect a complex network of clients,
employees, contractors and partners in a truly global environment. Tivity is
able to provide that connectivity across all trading partners of a PSO.
Tivity has adopted a business partner strategy to provide a full-suite
solution whereby PSOs can benefit from the years of experience of its employees
in this industry and the breadth of all components of its solution. Tivity's
core solutions allow PSOs to effectively and efficiently manage their revenue
and gross margins from anywhere in the world.
Tivity has formed a strategic partnership with PlanView Inc. who designs and
markets a world-class suite of resource and project management/scheduling tools.
The ability to integrate third party tools and products with Tivity's family of
solutions is a key component of being able to offer an integrated full suite
solution to PSOs. Tivity is also actively seeking other partnerships during
2001.
Tivity's business partners also include the other AXS-One LOBs. By using
AXS-One's e-Cellerator products, Tivity is able to provide PSOs with world-class
Internet transaction processing (ITP) and Internet knowledge processing (IKP)
systems tailored to the specific requirements of PSOs.
Tivity has 15 global customers, including Mercer Management Consulting, Cap
Gemini America, William M. Mercer and America Online. These organizations use
client/server versions of AXS-One's TEAM (Time & Expense Accounting Management)
software, but during 2001 the Company hopes to migrate many of these customers
to e-Cellerator products based on Tivity's family of solutions.
Tivity currently markets its products and services primarily through a
direct sales force dispersed throughout the United States and directly and
indirectly in other parts of the world. Tivity conducts comprehensive marketing
programs in the United States, which include telemarketing, public relations,
direct mail, advertising, seminars, trade shows and ongoing customer
communications programs.
Outside of the United States, Tivity utilizes the Company's sales and
support offices in Australia, Poland, Singapore, South Africa and the United
Kingdom. In the past the Company has established distribution arrangements with
third parties around the world and continually evaluates future third party
arrangements. Currently, Tivity does not generate significant revenues from its
distributors.
During 2001, Tivity will look to establish agreements with major ASP
providers in the United States and the United Kingdom. Under these agreements,
Tivity's solutions will be hosted and "rented" to end-user organizations. Tivity
expects to take a share in this revenue stream; however, Tivity does not expect
this to be a significant contribution to revenue during 2001. This distribution
model will allow Tivity's solutions to be used by a much wider audience of
organizations. Traditionally, Tivity has focused on PSOs with in excess of 500
billable consultants, but an ASP model will allow any sized organization to
access the functionality of Tivity's solutions.
9
TIVITY SOLUTIONS:
MODULE FEATURES
- ------ --------
TEAM
(TIME & EXPENSE
ACCOUNTING
MANAGEMENT)........... The Time and Expense module gives business and practice
managers complete control over the process of recording and
billing time and expenses at every level (client,
engagement, project, office, responsible employee, etc.), as
well as multiple options for cost and billing rates,
contract billing and revenue recognition. Time and expense
information, editing, and billing facilities can all be
accessed from an industry standard browser permitting
up-to-the-minute accuracy and prompt invoicing of time and
expenses incurred on multiple levels of clients and/or
projects. This powerful management tool can be utilized to
increase the productivity and profitability of all
chargeable time and services, while providing flexibility in
defining the billing rules for each client project. Along
with missing time alerts and remote time and expense
logging, Tivity's Time & Expense solution delivers accurate
and timely management of employees and billing tasks, which
is particularly suitable for PSOs. Through the use of
various standard AXS-One utilities, such as Genex
(Generalized External Interface) and XML documents,
information can also be uploaded and/or extracted from
external sources.
SWIFT-AXS............... This module allows employees and contractors of PSOs to
remotely enter their timesheets and expense reports via the
Internet or off-line on a personal computer. The off-line
option of this module is currently available; the online
version is planned for the second quarter of 2001.
TIME & EXPENSE CYCLE
MANAGEMENT............ This module will be a process-centric, user definable
timesheet and expense report approval module that allows
PSOs to review and approve the timesheets and expense
reports of its employees prior to generating revenue for the
reported work. This module is planned for the second quarter
of 2001.
REVENUE CYCLE MANAGEMENT
(RCM)................. This module is a process-centric revenue management module
that allows PSOs to manage changes to their revenue stream
more effectively. Phase I of RCM, currently available,
automates the pre-billing approval process, which enables
organizations to manage their billing process more
efficiently. Phase II of RCM, scheduled for release in
fourth quarter of 2001, will manage the ways in which
changes to already recorded revenue are controlled and
approved throughout the enterprise.
With RCM, organizations will be able to improve the quality
and control of revenue. RCM will enhance the practice
manager function by allowing fast and accurate access to
pertinent information for clear and quick decision-making.
10
MODULE FEATURES
- ------ --------
PROJECT & RESOURCE
MANAGEMENT............ This solution (available directly from Tivity's business
partner, PlanView Inc.) allows project managers to plan,
staff and manage the projects under their responsibility. It
also allows resource managers to forecast resource
requirements and to manage and schedule resources.
Individual employees may update their skills inventory and
preferences for future assignments.
PSO PROCUREMENT......... This module is AXS-One Enterprise's Procurement Manager
solution tailored to meet the needs of PSOs. The PSO
Procurement solution allows employees of PSO's to securely
purchase products and services from vendors over the
Internet.
PSO ANALYSIS............ Built upon the capabilities of AXSPoint solutions, this is a
central repository for storing business performance
information. It includes the ability to design and produce
views of business performance metrics, such as project
profitability, project backlog and employee utilization. It
also has the ability to publish these reports across the
Internet or through e-mail. The distribution of reports will
have the ability to be optionally tracked from a process
viewpoint and to require feedback and updates from
subscribers.
PSO CUSTOMER............ This will be AXS-One Enterprise's Revenue Manager solution
tailored to meet the unique needs of PSOs. This module will
manage the incoming cash flow of a PSO. It will allow a
customer of a PSO to get status information on existing
projects, update contact and billing information, etc.--all
of which will provide an electronic means of communicating
with their PSO. This product is planned for the fourth
quarter of 2001.
PSO VENDORS............. This is AXS-One Enterprise's Expense Manager solution
tailored for PSOs. This module monitors the outgoing cash
flow processes. It allows third-party contractors to
electronically manage their profile and business
information.
ARCHITECTURE
At the heart of the AXS-One's new e-commerce solutions are e-Cellerator
products, which utilize an open, Internet-ready, n-tier modular architecture
designed to adapt to new technological innovation, such as XML, and enable
organizations to capitalize on these innovations quickly and cost-effectively.
The architecture was created to simplify continuous process re-engineering (CPR)
and allow companies to achieve their goals of increased competitiveness and
reduced costs. e-Cellerator products allow AXS-One's business solutions to
either be installed on in-house computing resources or to be remotely hosted by
third-party application service providers (ASPs). This in turn leads to rapid
implementation times and reduced project risks.
The e-Cellerator products are process-centric, highly scalable and robust,
able to handle the very high levels of transaction volumes and availability
demanded by e-commerce solutions. These next generation products embrace the use
of many third-party e-commerce tools. e-Cellerator products have been designed
by AXS-One to enable the design and creation of e-commerce solutions that
seamlessly glue together disparate business processes and legacy systems across
the Internet. These products can access information through a variety of
approaches and extract information contained in multiple data sources.
Information can be extracted from computer reports, relational databases, HTML
Internet pages, XML documents, etc. e-Cellerator products can interface to
legacy systems through API calls and multiple messaging protocols, including
XML, and can publish information via e-mails, reports, direct updates, messages,
HTML pages or XML documents.
11
The AXS Desk interface is a technology that sits on a Web server and allows
a user to access certain functionality and information through an intuitive, no
training, HTML interface (e.g. a standard Web browser). The AXS Desk Designer
module will allow customers to construct and change AXS-One's Java-based applets
using an industry standard form design environment. AXS-One's traditional
client/server solutions, which utilize an ultra thin Microsoft VB forms-based
client is also available. Any mix of these interfaces may be used in a single
implementation.
AXS-One's e-Cellerator products support relational database management
systems (RDBMS) from vendors such as Microsoft Corporation (Microsoft SQL),
Oracle Corporation (Oracle), Sybase, Inc. (Sybase), and Informix Corporation
(Informix). AXS-One's solutions run on a variety of UNIX-based platforms--Sun
Microsystems, Inc. (Sun), Hewlett-Packard Corporation (HP), Compaq Tru64 UNIX
and International Business Machines Corporation (IBM), as well as Intel-based
servers running Windows NT. During the latter half of 2001, AXS-One intends to
deploy certain of its products which will support the Linux operating system.
AXS-One's solutions are designed to take advantage of diverse configurations
and processing capabilities at the customer or ASP site. For example, an AXS-One
installation can be configured to execute discrete application functions
(components) on multiple application servers. Additional application servers can
be applied as users are added.
EXTENSIVE USE OF OBJECT-ORIENTED DESIGN TECHNIQUES
Since 1990, AXS-One has relied heavily on object-oriented design techniques.
The results can be seen throughout the architecture. For example, user interface
controls and display components are treated as objects that can be individually
manipulated, customized, and extended by user organizations.
AXS-One uses the Java programming language as one of the tools to build its
e-Cellerator products. However, e-Cellerator products go beyond the traditional,
more technical view of object-oriented design techniques. e-Cellerator
products-based solutions are built on an inventory of "business components", or
logical decompositions of discrete business processes. These business components
are combined with the AXS-One Workflow product to build robust, adaptable
business processes.
The Company believes that the benefits of business component orientation are
becoming increasingly apparent. Component-oriented applications tend to be more
modular than those developed with traditional methods, have cleaner interfaces,
more shared code, and fewer entry points. Developers work in a simpler
development environment that is less prone to error, and they produce
applications that are easy to maintain, enhance, and distribute across the
network. As a result, end-users get applications that are reliable, manageable,
and easy to adapt to changing business requirements.
N-TIERED ARCHITECTURE
First-generation client/server systems utilized a two-tier architecture in
which presentation and application logic were combined on client workstations,
and data was stored on one or more servers.
Though the classic two-tier client/server architecture is surprisingly still
at the heart of many enterprise solutions, its limitations have been widely
acknowledged. For example, the two-tier model requires application logic to be
executed on individual client workstations, reducing performance dramatically.
When using the two-tier model, increasing network traffic limits the
Information Technology ("IT") organization's ability to eliminate bottlenecks by
increasing server resources, and increases the complexity of applications,
thereby reducing their reliability, and more importantly, their availability.
12
In contrast, AXS-One's architecture has, for many years, separated
application functions into multiple logical groupings or tiers. At the heart of
AXS-One's architecture are four tiers: PRESENTATION, PROCESS LOGIC, APPLICATION
LOGIC and INFORMATION ACCESS tiers.
AXS-One's traditional four tiers may themselves be partitioned into multiple
physical tiers. For example, it will be possible to deploy presentation services
across the Internet or private intranets and extranets, using either the AXS
Desk/C module (presentation services on the client only) or the AXS Desk module
(presentation services on the client and the web server). Therefore, it is more
appropriate to define the AXS-One architecture as N-TIER.
During 2000, AXS-One has been enhancing its foundation products by use of
its e-Cellerator technology. The revised architecture differs from AXS-One's
traditional client/server architecture in that it adds a "templates and
components" infrastructure deployed in an Internet Server tier. This provides
for a rich, intuitive end user experience, and reduces the need to upgrade and
support client software, since use is made of industry standard browsers. In
addition, AXS-One has made significant changes in the application and database
tiers to better support high volume Internet transaction traffic.
Many first-generation client/server and Internet products rely on the
database vendor's remote Structured Query Language (SQL) network software to
communicate with the server. In contrast, AXS-One believes that for a
multi-tiered product to perform efficiently in diverse network and system
environments, it is critical that communication among the tiers be efficient and
flexible. AXS-One believes that the communication service is a crucial piece of
the architecture because of its performance impact and because it defines the
extent to which application components can be distributed across different nodes
in the network. The remote SQL APIs provided by most relational database vendors
are useful for retrieving data from a remote database server, but they do not
support a generalized interface for interprogram communication.
In its data access tier, AXS-One is free to exploit the database access
mechanism that is most appropriate for that database, and not use a "least
common denominator" solution across RDBMS's. AXS-One's RDBMS interfaces are
custom coded, and are focused on high function, high reliability, high security,
high performance information access issues.
CUSTOMIZATION AND EXTENSIBILITY
With many e-commerce solutions, customers often require extensive
modifications to obtain the capabilities they desire. Some architectures provide
this capability by requiring the customer to modify the product source code.
These modifications add complexity and potential instability; there is no
guarantee that customized source code versions of the product will translate to
newer versions. Customers may later find themselves unable to utilize new
features or technologies that could provide a competitive advantage.
AXS-One's e-Cellerator products are designed to avoid this problem by using
components that can be customized and extended without modifying the source
code, including:
- Presentation/user interface
- Process logic
- Application logic
- Inquiry reporting
- Drill-down modules
- The relational information model
- Validation and rules
13
- Business components for integration with other systems
- Business process rules
PROCESS DRIVEN
End-to-end process management is increasingly recognized as a critical
element in successful e-commerce solutions. For years, AXS-One has included with
its financial applications, a world-class product, AXS-One Workflow, as an
integral part of its business solutions. AXS-One's e-commerce solutions are not
merely integrated with workflow; they have been designed and built with a
workflow engine.
The AXS-One Workflow module enables AXS-One e-commerce solutions to bridge
and automate the process void that exists between organizations. Business
solutions constructed with e-Cellerator products are rules based, allow user
defined decision processing, manage business processes and documents, and are
able to operate across the Internet.
The AXS-One Workflow module is used to build total business solutions. Since
a powerful rules engine is integrated directly into the AXS-One Workflow
runtime, organizations are able to extend the reach of AXS-One applications to
drive all facets of their business. AXS-One will enable companies to build
high-performance production oriented end-to-end process systems that directly
access line-of-business and horizontal application data sources in batch mode
and in real time without compromising information.
AXS-One believes that the AXS-One Workflow module is capable of being
partitioned to a fine level of granularity, helping organizations increase
performance at low cost. It is capable of being implemented in global
environments characterized by high volumes, large user bases, complex
conditional routing and extensive exception handling and it is part of the core
of our new self-service solution.
MAINTAINING SECURITY
AXS-One's e-Cellerator products provide multiple levels of security,
including ways to define update versus read-only access within specific
transactions. An organization's security hierarchy exists both across systems
and within individual applications.
For information level security, AXS-One's applications support NO ACCESS,
READ-ONLY ACCESS and READ-WRITE ACCESS for business documents. This is defined
in a security maintenance function, and uses application based security schemes.
AXS-One's security extends the native security mechanisms built into UNIX or
Windows NT, as well as native RDBMS security on a PER USER, USER GROUP or
SYSTEM-WIDE basis.
AXS-One offers an additional security authorization server, targeted toward
self-service and self-deployable applications. Further, since AXS-One leverages
standard web server technologies, standard Internet security schemes, such as
SSL and RSA can be used to provide additional transactional security.
LOWERING TOTAL COST OF OWNERSHIP
AXS-One believes that there are many ways in which its products and
architecture lower the total cost of ownership for an organization. For example:
- AXS-One provides Implementation Certainty, a proven methodology for
assuring a smooth transition to, and rapid implementation of, its
software.
14
- AXS-One's architecture allows organizations to leverage existing
development environments and partition applications for maximum
performance.
- By customizing the software outside of the source code, it is easier to
upgrade from one version of the software to another--a feature that lowers
internal support costs.
- New client forms, menus, and messages can be uploaded; reducing the
maintenance required for new release implementations.
- AXS-One supports multiple languages, including double-byte enablement
using the same code. Therefore, the same product can be implemented across
the enterprise.
PROFESSIONAL SERVICES
The Company considers its Professional Services to be a major asset and key
differentiator from other vendors. With its twenty-four hours a day, seven days
a week client support, Implementation Certainty methodology, standard and
customized training, product certification, and its level of dedicated support,
AXS-One has created a professional services program to handle the needs of its
customers.
As of December 31, 2000, the Company had 159 employees worldwide providing
customer support, consulting and training services. To maintain a high standard
of service, the Company requests customer evaluations of service personnel on a
quarterly basis. Bonus compensation for these personnel is based, in part, on
the results of these reviews. The Company's services are described below.
CLIENT SUPPORT
Support for domestic U.S. clients is based out of the Company's corporate
headquarters in Rutherford, New Jersey. Client support centers are also based in
Toronto (for the Yorvik software), Johannesburg, London, Melbourne, Singapore,
Bulgaria, Sydney and Warsaw. Annual maintenance contracts are generally required
for the first year of a customer's use of the Company's products, and are
renewable on an annual basis. The maintenance contract entitles the customer to
any upgrades to licensed products released during the term of the contract.
Maintenance fees vary depending on the hours of hot-line support requested by
the customer, and typically range between 18% and 25% of the license fees.
The Company also provides management overview and product information
bulletins on an ongoing basis and periodic informational updates about installed
products. These bulletins generally answer commonly asked questions and provide
information about new product features. The Company also provides services for
the development of customized documentation about the customer's system to
reflect, among other things, user-defined modifications and specific business
logic and processes.
TECHNICAL SERVICES
The Company offers assistance in developing interfaces with third party
software or legacy systems. These services are designed to enable the
development of additional client-specific functionality, and to integrate with
other mission critical systems. The Company also provides network
troubleshooting and assists its customers in deploying Internet systems, RDBMS
software and operating systems.
CONSULTING SERVICES
The Company's consulting services organization provides project assurance,
business systems review, technical design, functional design, business modeling,
system tailoring, system certification, change management and ongoing project
support in connection with customer implementation of the Company's products.
Similar services are also provided for upgrades to later versions of the
software
15
and migrations to different operating platforms. The Company frequently works
with third-party consultants and system integrators to provide customers with a
full range of installation, customization and project management services.
EDUCATION SERVICES
The Company provides education services in North America through its
Instructional Services group. This group is responsible for the development and
delivery of training courses designed to familiarize users with the Company's
products. A standard schedule of courses is delivered at the Company's
facilities. A course catalog and schedule are provided to the Company's
customers. In addition to regularly scheduled classroom training, the Company
works with its customers to develop tailored training courses for delivery at
their site. The group also provides standard courses at the customer's location.
Training courses vary in length from one to five days. Education services are
also provided at the Company's international facilities including Australia,
Poland, Singapore, South Africa and the United Kingdom.
STRATEGIC ALLIANCES
The Company has established strategic alliances and relationships with a
number of organizations that it believes are important to the development,
sales, marketing, integration, and support of its products. The Company's
relationships with software and hardware vendors, systems integrators and
consulting firms provide marketing and sales leads to the Company's direct sales
force and expand the distribution of its products. The Company's strategic
alliances and relationships also assist the Company in keeping pace with the
technological developments of major software and hardware vendors. The Company
intends to continue to develop its strategic alliances with leading hardware and
software vendors, consulting firms, systems integrators and distributors in the
future. The Company provides education services for its strategic business
partners.
PRODUCT DEVELOPMENT
The Company has a dedicated product development and engineering organization
and periodically releases new products and enhancements to existing products.
Product development efforts are directed at increasing product functionality,
improving product performance, providing support to existing products, expanding
the capabilities of the products to inter-operate with third-party software and
hardware, developing new products and integrating new technologies. In
particular, the Company has from time to time devoted substantial resources to
develop additional modules for its products and the capability to support
additional platforms, databases, GUIs, toolsets and emerging technologies. While
the Company anticipates that certain new products and enhancements will be
developed internally, the Company has in the past and may continue to acquire or
license technology or software from third parties when appropriate.
There can be no assurance that the Company will be successful in developing
and marketing product enhancements or new products that respond to technological
change, changes in customer requirements, or emerging industry standards, that
the Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of such products and
enhancements, or that any new products or enhancements that it may introduce
will achieve market acceptance. The inability of the Company, for technological
or other reasons, to develop and introduce new products or enhancements in a
timely manner in response to changing customer requirements, technological
change or emerging industry standards, would have a material adverse effect on
the Company's business, results of operations and financial condition. See
"Business--Risk Factors."
As of December 31, 2000, the Company had 73 employees engaged in product
development and engineering.
16
COMPETITION
The e-commerce software market is intensely competitive and rapidly
changing. A number of companies offer products similar to the Company's products
and target the same customers as the Company. The Company believes its ability
to compete depends upon many factors within and outside its control, including
the timing and market acceptance of new products and enhancements developed by
the Company and its competitors, product functionality, performance, price,
reliability, customer service and support, sales and marketing efforts and
product distribution. The Company's AXS-One Enterprise Solutions are positioned
in a new, highly dynamic market, with competition from traditional ERP vendors
such as Ariba, and many other smaller companies. In addition, many of the
traditional ERP software providers have entered the e-commerce marketplace. In
the Web-based procurement market, products from Harbinger, Intellisys and Ariba
are in competition with the Procurement Manager Solution. The Company also
expects new start-ups to enter this very large untapped market. The traditional
competitors for the Company's client/server version of the AXSPoint Central
product are Anacomp, IBM, MicroBank, and FileNet Corporation. The principal
AXSPoint Solutions' competitors in the area of statement presentment include
Mobius, Bluegill, and Alysis. The principal competition to Tivity are of two
types: existing vendors retooling their offerings for the newly defined PSA
market and new companies attempting to enter this new market. The first group
includes Peoplesoft, Lawson, Changepoint, Great Plains and others. The second
group includes companies such as Niku and Evolve. The primary competition for
AXS-One Enterprise Solutions are the financial applications software offered by
SAP, Oracle Corporation, PeopleSoft, Inc. and others. See "Business--Risk
Factors."
INTELLECTUAL PROPERTY
The Company's success is heavily dependent upon its proprietary technologies
as well as products from third parties, software vendors, hardware vendors, etc.
The Company regards its software as proprietary, and relies primarily on a
combination of contractual provisions and trade secrets, copyright and trademark
law to protect its proprietary rights. The Company has no patents or patent
applications pending, and existing trade secrets and copyright laws afford only
limited protection. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary. Policing unauthorized use of the Company's products is difficult,
and while the Company is unable to determine the extent to which piracy of its
software products exists, software piracy can be expected to be a persistent
problem. The Company makes source code available to certain of its customers
which may increase the likelihood of misappropriation or other misuse of the
Company's software. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States. There can be no assurance that the steps taken by the Company
to protect its proprietary rights will be adequate or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technologies.
The Company does not believe that any of its products, trademarks or other
proprietary rights infringe the proprietary rights of third parties. However,
there can be no assurance that third parties will not assert infringement claims
against the Company in the future with respect to current or future products. As
the number of software products in the industry increases and the functionality
of these products further overlap, the Company believes that software developers
may become increasingly subject to infringement claims. In addition, the
e-commerce field has recently seen an increase in the number of "business
method" patents issued, and infringement claims asserted based on such patents.
Any such claims, with or without merit, can be time consuming and expensive to
defend, cause product shipment delays or require the Company to enter into
royalty or licensing agreements. Such royalty and license agreements, if
required, may not be available on terms acceptable to the Company, or at all,
17
which could have a material adverse effect on the Company's business, results of
operations and financial condition.
The Company also licenses software from third parties which is incorporated
into its products. These licenses expire from time to time. In addition, the
Company generally does not have access to source code for the software supplied
by these third parties. Certain of these third parties are small companies that
do not have extensive financial and technical resources. If any of these
relationships were to be terminated or if any of these third parties were to
cease doing business, the Company may be forced to expend significant time and
development resources to replace the licensed software. Such an event would have
a material adverse effect upon the Company's business, results of operations and
financial condition.
The Company has obtained Federal registrations for its trademarks
"Computron-Registered Trademark-" and "Yorvik-Registered Trademark-," and its
applications for Federal registrations for its trademarks "AXS-One-TM-," "Access
Tomorrow Today-TM-," "TransAXS-TM-," "AXSPoint-TM-" and "Powering the Virtual
Economy-TM-" are pending in the United States. In addition, the Company has
certain U.S. common law rights, and rights under foreign laws in relation to its
trademarks, service marks and product names. Although the Company believes that
the trademarks and service marks it uses are distinct, there can be no assurance
that the Company will be able to register or protect such trademarks and service
marks. See "Business--Risk Factors."
EMPLOYEES
As of December 31, 2000, the Company had 338 full-time employees, 220 within
the United States and 118 outside the United States, including 73 in product
development and engineering, 159 in customer service and support, 54 in sales
and marketing, and 52 in finance, administration and executive management. The
Company's employees are not covered by any collective bargaining agreements. The
Company believes that its relations with its employees are good.
RISK FACTORS
WE HAVE A HISTORY OF NET LOSSES.
AXS-One may never generate sufficient revenues or reduce costs to be
profitable. Even if we do become profitable, we may not sustain or increase
profitability on a quarterly or annual basis in the future. AXS-One has incurred
net losses of $9.0 million for 1998, $3.7 million for 1999 and $0.3 million
during our fiscal year that ended December 31, 2000. As of December 31, 2000, we
had an accumulated deficit of $76.0 million.
AXS-One's quarterly operating results may fluctuate as a result of various
factors inherent in our business that may cause the market price of our common
stock to fall. Additionally, our business has and will continue to experience
significant seasonality.
AXS-One's revenue and operating results have fluctuated and may continue to
fluctuate significantly from quarter to quarter in the future, causing our
common stock price to be quite volatile. A variety of factors, many of which are
not in our control, cause these fluctuations and include, among others,
- the proportion of revenues we attribute to license fees versus fees for
the services we provide,
- the number of third parties we use to perform services,
- the amount of revenues we generate from our sale of third party software,
- changes in our product mix,
- demand for our products,
18
- the size and timing of individual license transactions,
- the products and enhancements that we, or our competitors, introduce,
- changes in our customers' budgets,
- potential customers unwillingness to undertake major expenditures with us
due to our past operating results
- competitive conditions in the industry and general economic conditions.
Additionally, clients' licensing of our products is often delayed because
- our clients must commit a significant amount of capital, and
- frequently, a license must be authorized through the appropriate channels
within a client's organization.
Because of these reasons, as well as others, our products' sales cycles are
typically lengthy and subject to a number of significant risks over which we
often have little or no control that include a customer's budgetary constraints
and internal authorization reviews.
Historically, AXS-One has operated with little backlog, since products are
generally shipped as we receive orders. Because our license fees in any quarter
substantially depend on orders booked and shipped in the last month, and often
during the last week, of a given quarter, we typically recognize a substantial
portion of our revenues in the last month of a quarter, frequently concentrated
in the last week of the quarter.
Delays in the timing of when we recognize specific revenues may adversely
and disproportionately affect our operating results because
- a high percentage of our operating expenses are relatively fixed,
- planned expenditures are based primarily on sales forecasts, and
- only a small percentage of our operating expenses vary with our revenues.
Because of these factors, we believe that period to period comparisons of
our operating results are not necessarily meaningful and no one should rely on
quarter-to-quarter comparisons of our operating results to indicate our future
performance.
Additionally, our business has experienced, and we expect it to continue to
experience, significant seasonality, due, in part, to our customers' buying
patterns, caused primarily by:
- our customers' budgeting and purchase patterns, and
- our sales commission policies. Generally, we compensate our sales
personnel based on quarterly and annual performance quotas.
We expect that these patterns will likely continue in the future.
Because of all of these factors, in future quarters, our operating results
may be significantly lower than the estimates of public market analysts and
investors. Any discrepancy could cause the price of our common stock to be quite
volatile and to decline significantly. We cannot assure anyone that we will be
profitable in any future quarter.
THE ELECTRONIC COMMERCE SOFTWARE MARKET IS INTENSELY COMPETITIVE.
AXS-One cannot assure anyone that it will be able to compete successfully
against current or future competitors or that competitive pressures will not
have a material adverse effect on its business, operating results and financial
condition. The electronic commerce software market is intensely
19
competitive and is changing rapidly. A number of companies offer products
similar to ours and target the same customers. We believe that our ability to
compete depends upon many factors, many of which are not in our control,
including, among others,
- timing and market acceptance of new products and enhancements developed by
us, as well as by our competitors,
- whether our products are reliable, how they function, perform, and are
priced,
- our customer service and support,
- our sales and marketing efforts,
- our product distribution.
Our AXS-One Enterprise Solutions are positioned in a new, highly dynamic
market with competition from traditional ERP vendors such as Ariba, and many
other smaller companies. Additionally, many traditional enterprise resource
planning software providers have entered into the e-commerce marketplace.
Most of our competitors are substantially larger than us, and have
significantly greater financial, technical and marketing resources, and
extensive direct and indirect distributing channels. As a result, our
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to
developing, promoting and selling their products than we can. Our products also
compete with those offered by other vendors, and with proprietary software
developed by third-party professional service organizations, as well as by
potential customers' management information systems departments.
We expect established and emerging companies to compete with us, as the
electronic commerce software market continues to develop and expand, due to the
relatively low barriers necessary to enter the software market. We also expect
that competition will also increase as the software industry consolidates.
Furthermore, we cannot assure anyone that any of the companies with whom we
currently have relationships, many of which may have significantly greater
financial and marketing resources than we do, will not, in the future, develop
or market software products that compete with our products, or discontinue their
relationship or support of us.
Additionally, our current and potential competitors have established, or may
establish in the future, cooperative relationships among themselves or with
third parties to increase their products' ability to address the needs of our
prospective customers. Therefore, new competitors or alliance among competitors
could emerge and rapidly acquire a significant market share. Increased
competition is likely to result in
- reducing the price of our products,
- reducing our gross margins, and
- losing market share.
Any of these factors would adversely affect our business, our operating
results and financial condition.
AXS-ONE DEPENDS ON ITS PRINCIPAL PRODUCTS FOR ITS REVENUES.
Substantially all of our revenues are derived from licensing and fees from
related services of
- AXS-One Enterprise Solutions,
- AXS Point Solutions, and
- Tivity Solutions.
20
We expect that these products and services will continue to account for
substantially all of our revenues during 2001. Accordingly, our future operating
results will depend, in part, on
- achieving broader market acceptance of our products and services,
- maintaining our customer base, as well as,
- enhancing these products and services to meet our customers' evolving
needs.
Additionally, during 2001, our AXS-One Enterprise Solutions, AXSPoint
Solutions and Tivity Solutions each need to gain market acceptance. If
- demand in the market for electronic commerce software is reduced,
- competition increases, or
- sales of such products or services decline,
any of these factors could adversely our business, operating results and
financial conditions in a material way.
AXS-ONE'S MARKET IS CHARACTERIZED BY NEW PRODUCTS FREQUENTLY BEING INTRODUCED,
RAPID TECHNOLOGY CHANGES, PRODUCT DEFECT RISKS, AND DEVELOPMENT DELAYS.
If AXS-One is unable, for technological, financial or other reasons, whether
or not within its control, to timely develop and introduce new products or
enhancements to respond to changing customer requirements, technological change
or emerging industry standards, our business, operating results and financial
condition could suffer.
The electronic commerce software market is characterized by
- rapid technological change,
- changes in customer requirements,
- frequent new product introductions and enhancements, and
- emerging industry standards.
Our software performance, customization, reporting capabilities, or other
business objectives may or may not be affected by these changes and may or may
not render us incapable of meeting future customer software demands. Introducing
products embodying new technologies and emerging new industry standards can
render existing products obsolete and unmarketable. Accordingly, it is difficult
to estimate our products' life cycles. Our future success will depend in part on
our ability to maintain our client/server products and to develop and introduce
new electronic commerce products that respond to evolving customer requirements
and keep pace with technological development and emerging industry standards,
such as new
- operating systems,
- hardware platforms,
- interfaces, and
- third party application software.
We cannot assure anyone that
- we will be successful in developing and marketing product enhancements or
new products that respond to
- technological change,
21
- changes in customer requirements, or
- emerging industry standards.
- we will not experience difficulties that could delay or prevent our
successfully developing, introducing and marketing new products and
enhancements, or
- any new products or enhancements that we may introduce will be accepted by
our targeted market.
Software products as complex as those we offer often encounter development
delays and, when introduced or when new versions are released, may contain
undetected errors or may simply fail. These delays, errors or failures create a
risk that the software will not operate correctly and could cause our future
operating results to fall short of expectations published by certain public
market financial analysts. From time to time, we develop products that are
intended to be compatible with various new computer operating systems, although
we make no assurances that we will successfully develop software products that
will be compatible with additional operating systems or that will perform as we
intend. Additionally, our products, technologies and our business in general
rely upon third-party products from various sources including, among others,
- hardware and software vendors,
- relational database management systems vendors, or
- reporting software vendors.
In the future, it is unclear whether our dependence upon these third-party
products will affect our ability to support or make our products readily
available. In the past, we have experienced delays by third parties who develop
software that our products depend upon. These holdups have resulted in delays in
developing and shipping our products. Despite testing by our current and
potential customers, as well as by us, errors may be found in new products or
enhancements after we ship them which can delay or adversely affect market
acceptance. We cannot assure anyone that any of these problems would not
adversely affect our business, operating results and financial condition.
WE RISK BEING DE-LISTED FROM THE AMERICAN STOCK EXCHANGE WHICH COULD REDUCE OUR
ABILITY TO RAISE FUNDS
AXS-One has a negative stockholders' equity and our common stock has
recently been selling on the American Stock Exchange for less than $1.00 per
share. If these, or other, conditions persist, then, under its published
guidelines, the American Stock Exchange might de-list our common stock from
trading on that exchange. If its common stock were to be de-listed by the
American Stock Exchange, AXS-One might be unable to list its common stock with
another stock exchange. In that event, trading of our common stock might be
limited to the OTC Bulletin Board or similar quotation system.
Inclusion of our common stock on the OTC Bulletin Board or similar quotation
system could adversely affect the liquidity and price of our common stock and
make it more difficult for AXS-One to raise additional capital on favorable
terms, if at all. In addition, de-listing by the American Stock Exchange might
negatively impact AXS-One's reputation and, as a consequence, its business.
AXS-ONE DEPENDS UPON ITS PROPRIETARY TECHNOLOGY AND IF WE ARE UNABLE TO PROTECT
OUR TECHNOLOGY, OUR COMPETITIVE POSITION WOULD BE ADVERSELY AFFECTED.
We believe that our success greatly depends on our proprietary technology
and software. We rely primarily on a combination of trademark and copyright law,
trade secret protection and contractual agreements with our employees,
customers, partners and others to protect our proprietary rights. Despite our
efforts to protect our proprietary rights, unauthorized third parties may
attempt to copy all or part of our products or reverse engineer or obtain and
use information that we regard as
22
proprietary. Additionally, the laws of some foreign countries do not protect our
proprietary rights to the same extent as do the laws of the United States. We
cannot assure anyone that the steps we take to protect our proprietary rights
will be adequate or that our competitors will not independently develop
technologies that are substantially equivalent or superior to ours.
OUR PRODUCTS MAY BECOME SUBJECT TO INFRINGEMENT CLAIMS.
We believe that none of our products, trademarks, or service marks,
technologies or other proprietary rights infringe upon the proprietary rights of
any third parties. However, as the number of software products in our industry
increases and the functionality of these products further overlap, we believe
that software developers like us may become increasingly subject to infringement
claims. Additionally, the e-commerce field has recently seen an increase in the
number of "business method" patents issued, and infringement claims asserted,
based on these newly issued patents. Any claims asserted, regardless of their
merit, can be time consuming and expensive to defend, could cause delays in
shipping our products or require us to enter into royalty or licensing
agreements that may not be available on terms acceptable to us. Any of these
factors would significantly impact our operating results and financial
conditions or materially disrupt the conduct of our business. We cannot assure
anyone that third parties will not assert infringement claims against us in the
future with respect to our current or future products or services.
A SECURITY BREACH COULD HARM OUR BUSINESS.
Our products provide security features designed to protect its users' data
from being retrieved or modified without being authorized. While AXS-One
continues to review and enhance the security features in its products, we can
make no assurances concerning the successful implementation of security features
and their effectiveness within a customer's operating environment. If an actual
security breach were to occur, our business, operating results and financial
condition could suffer.
A VARIETY OF RISKS ASSOCIATED WITH AXS-ONE'S INTERNATIONAL OPERATIONS COULD
ADVERSELY AFFECT ITS BUSINESS.
We believe that our continued growth and profitability will require AXS-One
to expand its sales in international markets, which require significant
management attention and financial resources. We cannot assure anyone, however,
that we will be able to maintain or increase international market demand for our
products and services.
The information below shows the effects of the sale of the Company's French
and German subsidiaries during 1999 upon revenues from our foreign customers. In
1998, 1999 and 2000 the Company's total revenues from customers outside the
United States were as follows:
CUSTOMERS OUTSIDE THE CUSTOMERS OUTSIDE THE
UNITED STATES UNITED STATES
(INCLUDING FRANCE AND (EXCLUDING FRANCE AND
GERMANY) GERMANY)
-------------------------- --------------------------
YEAR $ AMOUNT PERCENTAGE $ AMOUNT PERCENTAGE
- ---- ------------- ---------- ------------- ----------
1998......................... $29.9 million 47.1% $18.0 million 34.9%
1999......................... $21.9 million 37.9% $16.5 million 31.4%
2000......................... $17.4 million 35.8% $17.4 million 35.7%
AXS-One is subject to additional risks related to operating in foreign
countries. These risks generally include:
- unexpected changes in tariffs, trade barriers and regulatory requirements,
- costs of localizing products for foreign countries,
- lack of acceptance of localized products in foreign markets,
23
- longer accounts receivable payment cycles,
- difficulties managing international operations,
- potentially adverse tax consequences,
- restrictions on repatriation of earnings,
- reduced legal protection of our intellectual property, and
- the burden of complying with a wide variety of foreign laws
Any of these factors, or others, could adversely affect our future international
revenues and consequently, our business, operating results and financial
conditions.
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY DEVALUATION AND CURRENCY
RISKS.
Most of our international license fees and service revenues are denominated
in foreign currencies. Decreases in foreign currency values relative to the U.S.
dollar could result in losses to us from foreign currency translations.
Currently, we do not hedge against foreign currency exchange risks but in the
future we may commence hedging against specific foreign currency transaction
risks. We may be unable to hedge all our exchange rate exposure economically,
and exchange rate fluctuations may have a negative effect on our ability to meet
our obligations. For those international sales that are U.S. dollar-
denominated, any decreases in the value of foreign currencies relative to the
U.S. dollar could make our products less price competitive.
WE RELY ON CERTAIN THIRD-PARTY RELATIONSHIPS.
Our business, product development, operating results and financial condition
could be adversely impacted if we fail to maintain our existing relationships or
establish new relationships, in the future, with third parties because of
diverging interests, one or more of these third parties is acquired, or for any
other reason, whether or not within our control. We rely on third-party
relationships with a number of consultants, systems integrators and software and
hardware vendors to
- enhance our product development and marketing and sales efforts,
- implement our software products, and
- support our customers.
These relationships assist our product development process, and assist us in
marketing, servicing and implementing our products. A number of these
relationships are not memorialized in formal written agreements.
Our products also incorporate software that we license from third parties.
These licenses expire from time to time and generally, we do not have access to
the source code for the software that a third party will license to us. Certain
of these third parties are small companies without extensive financial
resources. If any of these companies terminate relationships with us, cease
doing business, or stop supporting their products, we may be forced to expend a
significant amount of time and development resources to try to replace the
licensed software. If that were to occur, our business, operating results and
financial condition could be adversely impacted.
AXS-ONE'S EXECUTIVE OFFICERS, DIRECTORS AND AFFILIATES OWN A CONTROLLING AMOUNT
OF ITS COMMON STOCK.
This control may prevent or discourage tender offers for our common stock
unless these controlling stockholders approve the terms of any such offers. As
of March 15, 2001, AXS-One's executive officers, directors and affiliates
together beneficially own approximately 39.6% of its
24
outstanding common stock. As a result, these stockholders are able to exercise
control over matters requiring stockholder approval including:
- electing directors, and
- mergers, consolidations, and sale of all or substantially all of our
assets.
AXS-ONE RELIES ON ITS KEY PERSONNEL AND MAY HAVE DIFFICULTY ATTRACTING AND
RETAINING THE SKILLED EMPLOYEES IT NEEDS TO OPERATE SUCCESSFULLY.
AXS-One's future success will depend, in large part, on the continued
service of its key executives, and if we fail to attract and maintain those
executives, the quality of our products, our business, financial condition and
operating results could suffer. AXS-One has experienced turn-over of its key
executives in the past. In 2000, Michael Jorgensen assumed responsibility for
North American Sales in the AXS-One Enterprise Division. Mr. Jorgensen was
confirmed as head of North American Operations, and William Levering was named
to replace Mr. Jorgensen as CFO, in March 2001. In January 2001, Dennis
Piccininni joined the Company as President of the Tivity Division, and Nat Bosco
joined the Company as Vice President and General Manager of AXS-Point Solutions.
We can not assure anyone that turn-over of our key executives will not continue,
and that such turn-over would not adversely affect our business, operating
results and financial condition.
We also believe that our future success will depend, in large part, on our
ability to attract, retain and motivate highly skilled employees, and,
particularly, technical, management, sales and marketing personnel. Competition
for qualified employees in our industry is intense. AXS-One has from time to
time in the past experienced, and expects to continue experiencing in the
future, difficulty in hiring and retaining employees with appropriate
qualifications. We cannot assure anyone that we will be able to retain our
employees or attract or retain highly qualified employees to develop, market,
service and support our products and conduct our operations.
AXS-ONE'S COMMON STOCK'S TRADING PRICE MAY BE VOLATILE FOR REASONS OVER WHICH IT
MAY HAVE LITTLE CONTROL.
AXS-One's common stock's trading price has, from time to time, experienced,
and is likely to continue to experience, significant price and volume
fluctuations, often responding to, among other factors,
- quarterly variations in our operating results,
- the gain or loss of significant contracts,
- changes in earning estimates by securities analysts,
- announcements of technological innovations by us or our competitors,
- announcements of new products or services by us or our competitors,
- general conditions in the software and computer industries, and
- general economic and market conditions.
Additionally, the stock market in general, frequently experiences extreme
price and volume fluctuations. In particular, the market prices of the
securities of companies such as ours have been especially volatile recently, and
often these fluctuations have been unrelated or disproportionate to the
operating performance of the affected companies. The market price of our common
stock may be adversely affected by these market fluctuations. Also, the low
market price of our common stock may make it prohibitive to obtain additional
equity funding.
25
AXS-ONE HAS NEVER PAID OR DECLARED DIVIDENDS AND DOES NOT EXPECT TO IN THE
FORESEEABLE FUTURE.
AXS-One has never paid or declared any cash dividends and it does expect to
pay any cash dividends in the foreseeable future. We currently intend that
future earnings, if any, will be retained for business use.
DIRECTORS, EXECUTIVE OFFICERS AND KEY MANAGEMENT EMPLOYEES
The current directors, executive officers and key management employees of
the Company as of March 9, 2001, are as follows:
NAME AGE POSITION
- ---- -------- ---------------------------------------------------
John A. Rade........................ 66 President, Chief Executive Officer, and Director
Michael R. Jorgensen................ 48 Executive Vice President, North America
Elias Typaldos...................... 50 Senior Vice President, Research and Development and
Chairman of the Board
Gennaro Vendome..................... 54 Vice President and Director
Paul Abel........................... 47 Vice President, Secretary and General Counsel
William G. Levering III............. 40 Vice President, Chief Financial Officer and
Treasurer
Nat Bosco........................... 45 Vice President and General Manager, AXSPoint
Solutions
Dennis Piccininni................... 53 President, Tivity
Daniel H. Burch(1).................. 49 Director
Robert Migliorino(2)................ 51 Director
William E. Vogel(1)................. 63 Director
Edwin T. Brondo(2).................. 53 Director
Allan Weingarten(1)................. 53 Director
- ------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
JOHN A. RADE joined the Company as a Director, President and Chief Executive
Officer in February 1997. Prior to joining the Company, Mr. Rade, was from
April, 1995, a Vice President of American Management Systems, Inc. and was also
still active at S-Cubed International (now named Mergence Technology
Corporation), a company in the client server system development and consulting
market, which he founded in February 1990.
MICHAEL R. JORGENSEN joined the Company as Executive Vice President and
Chief Financial Officer, Treasurer and Secretary in February 1997. Effective
March 2, 2001, Mr. Jorgensen became Executive Vice President, North America.
Prior to joining the Company, from June 1993 to December 1996, Mr. Jorgensen was
Senior Vice President and Chief Financial Officer of Ground Round
Restaurants, Inc., a publicly-held chain of family restaurants. Prior to that,
from March 1992, to April 1993, he was Vice President/Finance-Middle East of
Alghanim Industries. Mr. Jorgensen was Chief Financial Officer of International
Proteins Corporation from May 1988 to September 1991. Prior to 1991,
Mr. Jorgensen served in a senior financial role with several multinational
companies in the finance manufacturing and information technology/software
industry.
26
ELIAS TYPALDOS, a founder of the Company, has been Senior Vice President,
Research and Development and a director since the Company's formation in 1978,
and Chairman of the Board since March 1997.
GENNARO VENDOME, a founder of the Company, has been a Vice President and
director since the Company's formation in 1978. Mr. Vendome was Treasurer of the
Company from 1981 until 1991 and Secretary of the Company from 1982 until 1991.
PAUL ABEL joined the Company in April 1997 as Secretary and Corporate
Counsel and was promoted to Vice President, Secretary and General Counsel in
June 1998. From October 1996 to March 1997, Mr. Abel served as Project Manager
for Charles River Computers, an IT systems integrator. From 1983 to
September 1996, Mr. Abel was an attorney with Matsushita Electric Corporation of
America, an electronic products manufacturer/distributor.
WILLIAM G. LEVERING III joined the Company as Revenue Controller in
June 1996, was promoted to Corporate Controller in February 1997, Vice
President, Corporate Controller in July 1998, and became Vice President, Chief
Financial Officer and Treasurer on March 2, 2001. Prior to joining the Company,
Mr. Levering was a Senior Manager with the international accounting firm of KPMG
LLP. Mr. Levering was employed by KPMG LLP from August 1982 to June 1996 and is
a Certified Public Accountant.
DENNIS W. PICCININNI joined the Company in January 2001. Mr. Piccininni is
President of the Tivity LOB. Prior to joining the Company he was the President
and CEO of Systemcorp from December 1998 to July of 2000. From 1990 to 1998
Mr. Piccininni was Vice President and General Manager, Americas for ABT
Corporation.
NAT BOSCO joined the Company in January 2001 as Vice President and General
Manager of the AXSPoint LOB.. From May 2000 to January 2001 Mr. Bosco was a
Director at EE21, a recent Internet venture. From April 1998 to April 2000,
Mr. Bosco held the position of President at Legacy Consulting, a privately held
company. Coopers & Lybrand employed Mr. Bosco from 1992 through 1998, as a
managing associate.
DANIEL H. BURCH has been a director since October 1999. Mr. Burch is the
President and founder of MacKenzie Partners, Inc., a proxy solicitation and
mergers and acquisitions firm. From January 1990 to the founding of MacKenzie
Partners in February 1992, Mr. Burch was Executive Vice President at Dewe
Rogerson & Company, an investor and public relations firm.
ROBERT MIGLIORINO has been a director since 1991. Mr. Migliorino is a
founding partner of the venture capital partnership Canaan Partners, which
through its affiliates was until early 2000 a principal stockholder of the
Company. Prior to establishing Canaan Partners in 1987, he spent 15 years with
General Electric Co. in their Drive Systems, Industrial Control, Power Delivery,
Information Services and Venture Capital businesses.
WILLIAM E. VOGEL has been a director since August 1996. Since 1971,
Mr. Vogel has been Chief Executive Officer of Centennial Financial Group, Inc.,
which is in the health insurance business. He has also been the Chief Executive
Officer of W.S. Vogel Agency, Inc., a life insurance brokerage general agency,
since 1961. In November 2000, Mr. Vogel became an employee and Executive Sales
Manager for Benefitmall.com.
EDWIN T. BRONDO has been a director since May 1997. Mr. Brondo is currently
retired. From August 1998 to August 2000 he was Executive Vice President and
Chief Financial Officer of e-Vantage Solutions, Inc (formerly called Elligent
Consulting Group, Inc.), a technology consulting company. e-Vantage Solutions
may be deemed to be an affiliate of the Company by virtue of the relationship of
e-Vantage Solutions with a major stockholder of the Company. Mr. Brondo was
Chief Administrative Officer and Senior Vice President of First Albany
Companies, Inc., an investment banking firm, from June 1993 until
December 1997.
27
ALLAN WEINGARTEN has been a director since October 2000. Mr. Weingarten is
currently a Private Investor, and has been since January 2000 a Business
Consultant for Carl Marks Consulting Group LLC. From June 1997 to December 1999
he was Executive Vice President and Chief Financial Officer of VoCall
Communications Corporation. From October 1995 to June 1997, he was an
independent business consultant.
Each of the Directors shall be subject to re-election at the 2001 Annual
Stockholders meeting.
ITEM 2. PROPERTIES
FACILITIES
The Company's corporate headquarters are located in Rutherford, New Jersey
in leased facilities consisting of 48,800 square feet of office space occupied
under a lease expiring in December 2002 with an option to renew the lease for
one additional three-year period. The Company leases additional facilities and
offices, including facilities located in the Atlanta, Chicago, and Philadelphia
metropolitan areas, and Mississauga, Canada. The Company also leases sales and
support offices outside of North America in Australia, Bulgaria, Poland,
Singapore, South Africa and the United Kingdom. While the Company believes that
its facilities are adequate for its present needs, the Company periodically
reviews its needs. The Company believes that additional space, if needed, would
be available on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
Historically, the Company has been involved in disputes and/or litigation
encountered in its normal course of business. The Company believes that the
ultimate outcome of these proceedings will not have a material adverse effect on
the Company's business, financial condition and results of operations or cash
flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 2000.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock currently trades on the American Stock Exchange
under the symbol "AXO."
The following table lists the high and low sales prices for the periods set
forth below:
PERIOD HIGH LOW
- ------ ----------- -----------
1999
First quarter............................................... 1 7/16 1 5/16
Second quarter.............................................. 1 7/16 7/8
Third quarter............................................... 1 1/2
Fourth quarter.............................................. 4 3/8
2000
First quarter............................................... 11 7/8 1 3/4
Second quarter.............................................. 9 1 11/16
Third quarter............................................... 2 3/4 1 1/4
Fourth quarter.............................................. 2 3/16 7/16
As of March 15, 2001 the approximate number of record holders of the
Company's Common Stock was 648.
28
The Company has never paid cash dividends on its capital stock. The Company
currently intends to retain any earnings for use in its business and does not
anticipate paying any cash dividends in the foreseeable future.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for the years ended
December 31, 1996, 1997, 1998, 1999 and 2000 have been derived from the audited
consolidated financial statements of the Company. The consolidated statement of
operations data for the years ended December 31, 1998, 1999 and 2000, and the
consolidated balance sheet data as of December 31, 1999 and 2000 are derived
from, and are qualified by reference to, the audited consolidated financial
statements and the related notes thereto included elsewhere in this report. The
selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of the
Company and related notes thereto included elsewhere in this report.
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF
OPERATIONS DATA:(1)
Revenues:
License fees................................ $ 17,625 $ 20,372 $15,273 $11,468 $ 8,765
Services.................................... 36,770 47,219 48,248 46,400 40,011
-------- -------- ------- ------- -------
Total revenues............................ 54,395 67,591 63,521 57,868 48,776
Operating expenses:
Cost of license fees........................ 2,634 2,004 3,824 1,955 1,245
Cost of services............................ 28,255 28,440 28,389 24,647 21,005
Sales and marketing......................... 24,181 16,654 14,970 12,064 10,546
Research and development.................... 11,872 10,996 10,568 7,600 6,926
General and administrative.................. 20,014 14,280 13,586 12,213 9,242
Goodwill impairment......................... -- -- -- 573 --
Restructuring costs......................... -- -- 1,025 -- --
-------- -------- ------- ------- -------
Total operating expenses.................. 86,956 72,374 72,362 59,052 48,964
-------- -------- ------- ------- -------
Operating loss................................ (32,561) (4,783) (8,841) (1,184) (188)
Other income (expense):
Costs related to settlement of class action
litigation................................ (758) (9,591) (74) -- --
Loss on sales of subsidiaries............... -- -- -- (2,242) --
Other....................................... 1,572 745 (116) (580) (415)
-------- -------- ------- ------- -------
Total other income (expense).................. 814 (8,846) (190) (2,822) (415)
-------- -------- ------- ------- -------
Loss before income tax (provision) benefit and
extraordinary item.......................... (31,747) (13,629) (9,031) (4,006) (603)
Income tax (provision) benefit................ (100) (16) (12) 508 304
-------- -------- ------- ------- -------
Loss before extraordinary item................ (31,847) (13,645) (9,043) (3,498) (299)
Extraordinary loss on modification of debt.... -- -- -- (182) --
-------- -------- ------- ------- -------
Net loss...................................... $(31,847) $(13,645) $(9,043) $(3,680) $ (299)
======== ======== ======= ======= =======
Basic and diluted net loss per common share... $ (1.53) $ (0.65) $ (0.38) $ (0.15) $ (0.01)
======== ======== ======= ======= =======
Weighted average basic and diluted common
shares outstanding.......................... 20,787 20,834 23,963 23,914 24,624
======== ======== ======= ======= =======
29
AS OF DECEMBER 31,
----------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS)
BALANCE SHEET DATA:(1)
Cash and cash equivalents, short-term
investments and restricted cash.............. $23,884 $12,597 $ 8,865 $ 1,455 $ 2,257
Working capital (deficiency)................... 4,358 2,767 (6,317) (6,862) (6,990)
Total assets................................... 56,693 35,598 28,517 17,501 15,184
Deferred revenue............................... 18,551 9,078 9,558 8,534 7,496
Total long term debt and capital lease
obligations.................................. 97 23 2,229 2,425 1,222
Common stock subject to repurchase............. -- 5,000 -- -- --
Total stockholders' equity (deficit)........... 14,742 6,095 (2,375) (5,348) (3,808)
- ------------------------
(1) For the periods 1996 through 1999, the data above included subsidiaries in
France and Germany which were sold during 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and is qualified in its entirety by
reference thereto.
This Report contains statements of a forward-looking nature within the
meaning of the safe harbor provisions of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, relating to future events or the future financial performance of the
Company. Investors are cautioned that such statements are only predictions and
that actual events or results may differ materially. In evaluating such
statements, investors should specifically consider the various factors
identified in this Report which could cause actual results to differ materially
from those indicated by such forward-looking statements, including the matters
set forth in "Business--Risk Factors."
OVERVIEW
In November 2000, the Company changed its name to AXS-One Inc. from
Computron Software, Inc., in order to better reflect the direction of the
Company to the new family of products outlined below.
The Company was founded in 1978 as a developer of custom financial software
for mission-critical applications in large organizations, primarily financial
institutions. In