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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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, 2001

Commission File Number: 1-13591

AXS-ONE INC.
(Exact name of registrant as specified in its charter)

201-935-3400
(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act:

None

        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 ý    No o

        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. o

        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, 2002 as reported on the American Stock Exchange, was approximately $12.7 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, 2002, Registrant had outstanding 24,802,742 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 2002 Annual Meeting of Stockholders.

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 that allow a company to achieve efficiency in its business processes and to 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 its Workflow (the precursor to the current AXS Process Manager), a "Best of AIIM" award for the first Internet/Java COLD product and the 2002 "Best of AIIM" award for Best Practices in Enterprise Content Management for AXS-One's AXSPoint Travel Industry Solution implemented at one of our clients, Brittany Ferries.

        AXS-One believes that the ultimate success of 21st century organizations will be determined by how seamlessly these organizations conduct business internally and with their partners, customers and suppliers. The Company's objective is to deliver Internet-based business solutions to allow organizations to establish transparent and seamless processes throughout their value-network, thus enabling true collaborative commerce. AXS-One's approach allows companies to preserve investments in existing systems by extending them with the creation of collaborative web services that automate business processes across corporate boundaries. This results in manageable investments, quick implementation schedules and rapid return on investments (ROIs).

        For the past three years, AXS-One has invested significantly in the development of e-commerce technology, and will continue to so invest throughout 2002. In particular, AXS-One will launch its AXS-One Web Services solutions in 2002, the result of multiple years of investment in upgrading its technology to a fully web services compliant architecture.

        AXS-One is organized around three product families that represent separate lines of business ("LOB") within AXS-One:

AXS-One™ Enterprise—a suite of solutions that address mission critical business processes that directly affect the overall performance of an enterprise.

AXSPoint™—a suite of solutions encompassing process automation, enterprise report management and distribution, and delivery of web content.

Tivity™—AXS-One's verticalized version of AXS-One Enterprise specifically focused on the Professional Services Organization (PSO) industry.

        Each of these families of solutions has been enhanced using AXS-One's e-Cellerator™products. e-Cellerator products utilize a web services-based messaging, transaction and process-centric architecture that AXS-One has developed to support the design and development of large-scale,

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Internet-based collaborative commerce solutions. It is an "n-tier" (desktop browser, web servers, application servers and database server), component-based, Internet-deployable, scalable architecture fully compliant with WSDL, XML and SOAP web services protocols and architectures. At the core of the architecture is an advanced process engine that handles large volumes of complex business process logic. The user interface is very intuitive and is accessible over the Internet utilizing a combination of HTML, XML Style Sheets and Java applets or Visual Basic for the client/server desktop.

        e-Cellerator products run on Windows NT/Windows 2000, Sun Unix, HP UNIX, Tru64 UNIX and IBM RS/6000 Unix application servers. Linux is available, but not deployed. The e-Cellerator products support the following database engines: Oracle on all platforms, MS SQLServer on Windows NT/Windows 2000, and Informix and Sybase on the Unix servers. Solutions using e-Cellerator products can be hosted in-house or remotely by third-party application service providers (ASP). AXS-One is committed to delivering solutions that allow organizations to conduct business seamlessly with their customers, suppliers and partners in a collaborative Internet operating environment.

        AXS-One's Foundation products, included in the AXS-One Enterprise LOB, which are deployed in a client/server (with Visual Basic thin client and Browser based desktops) or web services-based model, continue to be maintained, enhanced and upgraded. These products are the back-office system of choice for large information-centric, global organizations such as AIG, Pfizer, AOL, Deutsche Bank, Emery, TNT, Ricoh and United Airlines. AXS-One's Foundation 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 process 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 Process Manager (workflow), a critical component of the e-Cellerator family of products, can 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 and achieving true collaborative business communications.

        In this emerging Net economy, with the virtual office becoming more prevalent, AXS-One believes it is well positioned to meet the e-business needs of complex organizations. AXS-One's e-Cellerator products provide the ability to leverage technology and collaboratively disseminate business knowledge electronically throughout the enterprise or across enterprises.

Organization and Products

        The Company is organized into three LOBs: AXS-One Enterprise Solutions, AXSPoint Solutions and Tivity Solutions. AXS-One's international subsidiaries and distributors are responsible for selling and marketing the products of these three LOBs into their respective local markets.

        Further information specific to these three operating segments is presented in Note 10 to the Consolidated Financial Statements.

        AXS-One Enterprise Solutions.    Offers a suite of supply chain management solutions that address 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 solutions manage the revenue process, including relationships with customers, with Revenue Manager; 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

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Business Manager. Collectively, AXS-One Enterprise solutions enable enterprises to effectively manage entire process lifecycles with proven transactional applications, templated and automated process workflow, by maximizing and harnessing the power 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 solutions and existing AXS-One North American customers, including Pfizer, AIG, Deutsche Bank, Ricoh, United Airlines and Emery.

        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.

        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. Sales efforts in the United States are conducted by a direct sales force 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, Singapore, South Africa, Central and Eastern Europe (sold as of September 20, 2001), and in the United Kingdom. In the past the Company has established distribution arrangements with third parties around the world including the reseller agreement entered into in 2001 with its former subsidiary located in Central and Eastern Europe 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, (such as the dissemination of purchase orders to suppliers utilizing the Internet), 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 and continues with an automated payment process. 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.

        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 and status, thereby reducing

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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 process, and continues through monthly reporting. Business Manager then conducts periodic variance analysis and generates applicable reports that may be made 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.

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        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 technology enables customers to gain and maintain competitive advantage by providing technology that captures and delivers content and information across the enterprise and throughout the value-network. AXSPoint, through professional service offerings, also provides customers with resources who have technology and industry expertise. AXSPoint utilizes the same underlying e-Cellerator architecture as other AXS-One products. AXSPoint can be used to rapidly transform traditional systems into powerful web services solutions. AXSPoint is a powerful tool for extending existing systems and for rapidly deploying collaborative commerce capabilities throughout a value network.

        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 technology captures Text, XML, and APA (AFP, Metacode, PCL) 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 short time-to-market for custom web applications. This rapid time-to-market is a critical selling point that differentiates this LOB's product line from competitive offerings. AXSPoint Solutions scale easily from small companies to large multinational enterprises.

        AXSPoint Solutions has approximately 75 North American customers, and over 125 clients globally, including First Union, Deutsche Bank, Chicago Mercantile Exchange, and JP Morgan Chase Bank. During 2001 many of these organizations were upgraded from the client/server versions of AXS-One COOL™software to the e-Cellerator products-based AXSPoint family of solutions. The Company anticipates that many clients remaining on the older technology will upgrade during 2002; however, no assurances regarding such upgrades can be made at this time.

        AXSPoint Solution's sales efforts in the United States are conducted by a direct sales force that is located at the Company's headquarters in Rutherford, New Jersey. In addition, the Company has begun establishing strategic alliances with hardware, database and software vendors to enhance its marketing efforts. AXSPoint Solutions 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, AXSPoint 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.

        Outside of the United States, the AXSPoint Solutions LOB utilizes the Company's sales and support offices in Australia, Central and Eastern Europe (sold as of September 20, 2001), Singapore, South Africa and the United Kingdom. In the past the Company has established distribution

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arrangements with third parties around the world including the reseller arrangement entered into in 2001 with its former subsidiary in Central and Eastern Europe 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:

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        In 2000, AXSPoint Central and AXSPoint Exchange were enhanced to leverage the power of eXtensible Markup Language (XML). In 2001, this capability was enhanced to allow AXSPoint Exchange to be deployed as a web service thus extending its value to organizations that wish to employ a centralized portal strategy. Significant enhancements were also made to the AXSPoint Exchange development capabilities via the deployment of Macromedia Ultradev Extensions. With these extensions a company can rapidly design and deploy complex ESS applications either as dedicated systems or through portals.

        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 is tasked with establishing AXSPoint as "the provider of choice" for acquisition of Information Management knowledge and services. These services are delivered directly by AXSPoint subject matter experts and alliance partners.

        AXSPoint's market approach focuses on the development of alternate channels of distribution that leverages new incremental sources of revenue. Partnerships with systems integrators specialized in EBPP, ESS and document management solutions are being 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 are supplied with the ability to present their information on an enterprise basis by leveraging AXSPoint presentation and analysis functions. Lastly, AXSPoint is pursuing opportunities with web-based companies that require AXSPoint features and functionality as a complement to their business. The likelihood of success of these efforts cannot be determined at this time.

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        Tivity Solutions.    By leveraging the Company's proven experience in building easy-to-customize, process-centric systems to automate business processes both within and outside an organization, 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, while increasing the utilization of knowledge workers. 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 provides these same solutions to Internal Service Organizations (ISOs). While ISOs do not need to bill external organizations, ISOs need to track project costs for internal allocation and have the same needs as PSOs in maximizing the utilization of resources and in effectively managing the work product of these resources.

        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. Tivity is actively seeking partnerships during 2002 to enhance its product offerings. The likelihood of success of these efforts cannot be determined at this time.

        Tivity's business partners include the other AXS-One LOBs. By using AXS-One's e-Cellerator products, Tivity is able to provide PSOs and ISOs with world-class Internet transaction processing (ITP) and Internet knowledge processing (IKP) systems tailored to the specific requirements of these organizations.

        Tivity has global customers, including Mercer Management Consulting, Cap Gemini Ernst & Young, William M. Mercer and America Online. These organizations use client/server versions of AXS-One's TEAM (Time & Expense Accounting Management) software, and during 2002 the Company hopes to migrate many of these customers to e-Cellerator products based on Tivity's family of solutions. The likelihood of success of these efforts cannot be determined at this time.

        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, 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.

Tivity Solutions:

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Architecture

        At the heart of AXS-One's new e-commerce solutions are e-Cellerator products, which utilize an open, Internet-ready, n-tier web-services architecture designed to adapt to new technological innovation 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.

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        The e-Cellerator products are Internet-based, 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 are built upon web services architecture and promote collaborative business communications. 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, e-mail messages, XML documents, etc. e-Cellerator products can interface to legacy systems through Application Programming Interface (API) calls and multiple messaging protocols, including XML, and can publish information via e-mails, reports, direct updates, messages, HTML pages or XML documents. AXS-One technology can rapidly extend legacy applications with modern web services solutions. AXS-One tools can transform various forms of information into a standardized XML and store this information in an XML repository without the need for retrofitting a company's legacy applications.

        The AXS Desk interface is a technology that sits on a web server and allows a user to access certain functionality of, and information from, AXS-One solutions through an intuitive, no training, browser interface. 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 or to design HTML forms using XML style sheets and directly communicate with AXS-One web services components. AXS-One's traditional client/server solutions, which utilize an ultra-thin Microsoft VB forms-based client, are 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 application servers—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/Windows2000. Linux is available, but not deployed.

        AXS-One's solutions are designed to take advantage of diverse configurations and processing capabilities at the customer or hosted 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 licensed and utilized 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 Process Manager product to build robust, adaptable business processes.

        AXS-One has adapted these robust business components to a new web services architecture. AXS-One's e-Cellerator architecture is based on the latest technology, including web services, Simple Object Access Protocol (SOAP), XML, HTTP and other standards. This architecture provides a simple, firewall friendly, easily deployable web services interface. At the same time, this architecture provides for excellent scalability and reliability through the use of sophisticated resource pooling and request routing techniques.

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        The web services infrastructure provides access to both existing and new business process components. These business components provide real time access to system information, and can be used to process transactions in real time. They are very flexible; in that customer (and caller) defined data sets can be created and managed by the web services.

        All AXS-One web services are based on the industry standard interface definition language (WSDL), and support the SOAP protocol. Therefore, AXS-One web services are compatible with modern development and deployment environments, such as Microsoft's.Net and Sun's Java 2 Enterprise Edition. This allows customers to use these environments to take advantage of the AXS-One web services.

        The AXS Process Manager (workflow) and AXSPoint solutions can access and manage information from a variety of sources, including RDBMS systems, XML files, message queue products such as IBM's MQ-Series, e-mail messages, images, faxes, reports, and other sources.

        Using the e-Cellerator architecture, web services can now be valid information sources. For example, a static report can be enhanced with real time information from a web service (such as current status, or credit limit) enhancing the business value of that report, without recreating the report.

        The Company believes that the benefits of a web services-based 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 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.

        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 is 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 2001, AXS-One continued 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 and re-engineered components to communicate with a standard XML web services protocol. 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.

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        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. AXS-One's RDBMS interfaces are custom coded, and are focused on high function, high reliability, high security, and 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 migrate 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:

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Presentation/user interface



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Direct access to component level via web services



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Direct access to application modules via web services



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Process logic



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Application logic



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Inquiry reporting



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Drill-down modules



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The relational information model



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Validation and rules



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Business components for integration with other systems



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Business process rules

Interoperability

        AXS-One's e-Cellerator products now contain extensive support for XML-based processing. For example, AXS-One's traditional Genex interfaces, which provide straightforward techniques for importing and exporting information, have been extended with support for XML interfaces.

        AXS-One's report generation sub-system (Epic) has been extended to provide the ability to create XML reports in addition to standard text based reports. Now, for example, XML purchase orders can be constructed and sent to a vendor over the Internet.

        AXSPoint solutions can now archive and retrieve XML documents, providing a high performance repository of business information with little effort. Or traditional reports can be converted into XML documents, creating new uses for existing reports.

        AXS-One's e-Cellerator web services provide the ability to access and update information in batch or real-time using XML messages, allowing the solutions to be tailored to meet specific customer requirements. Finally, AXS-One Financial and AXS Process Manager solutions can be executed with XML messages, providing the ability to embed all or part of these solutions in customer systems.

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Process Driven

        End-to-end process management is becoming increasingly recognized as a critical element in successful e-commerce solutions. For years, AXS-One has included with its financial applications a world-class workflow product, now known as AXS Process Manager, 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.

        AXS Process Manager 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.

        AXS Process Manager is used to build total web-based business solutions. Since a powerful rules engine is integrated directly into AXS Process Manager, 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 AXS Process Manager 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 solutions.

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.

        AXS-One Web Services are built on industry standards including XML, SOAP and WSDL. Its Web Services include a full set of proven, pre-built financial services to assist in billing, collections, payments, etc., for full end-to-end control of business processes. AXS-One Web Services allow applications to share services and exchange information regardless of operating system, platform, device or interface. Its Web Services provide a robust ticket-based security envelope, modeled on Kerberos authentication protocol, to control user and application access to services and information.

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.

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•

AXS-One's architecture allows organizations to leverage existing development environments and to 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, 2001, the Company had 116 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 Johannesburg, London, Melbourne, Singapore, and Sydney. 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

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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 course catalog and schedule are provided to the Company's customers describing courses to be delivered at the Company's facilities throughout the year. 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, 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, or 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, 2001, the Company had 67 employees engaged in product development and engineering.

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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 the financial applications software offered by SAP, Oracle Corporation, PeopleSoft, Inc. and others. In addition, many of the traditional ERP software providers have entered the e-commerce marketplace. In the web-based procurement market traditional ERP vendors, Ariba and others 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 Mobius and others. The principal AXSPoint Solutions' competitors in the area of statement presentment include Mobius, Bluegill, Alysis and others. The principal competition to Tivity is PeopleSoft, Lawson, Changepoint 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, 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

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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®," "Yorvik®," and "TransAXS®," and its applications for Federal registrations for its trademarks "AXS One™" and a distinctive AXS-One logo, "Access Tomorrow Today™," "AXSPoint™," "Powering the Virtual Economy™" and "Virtual Trust Network™" 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, 2001, the Company had 258 full-time employees, 180 within the United States and 78 outside the United States, including 67 in product development and engineering, 116 in customer service and support, 39 in sales and marketing, and 36 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 $3.7 million for 1999, $0.3 million for 2000 and $4.7 million during our year that ended December 31, 2001. As of December 31, 2001, we had an accumulated deficit of $80.7 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,



•

the size and timing of individual license transactions,



•

the products and enhancements that we, or our competitors, introduce,



•

changes in our customers' budgets,

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•

potential customers unwillingness to undertake major expenditures with us due to our past operating results, and



•

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 which 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 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 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,

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•

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, and



•

our product distribution.

        AXS-One Enterprise Solutions are positioned in a new, highly dynamic market, with competition from traditional ERP vendors such as the financial applications software offered by SAP, Oracle Corporation, PeopleSoft, Inc. and others. 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,



•

AXSPoint Solutions, and



•

Tivity Solutions.

        We expect that these products and services will continue to account for substantially all of our revenues during 2002. Accordingly, our future operating results will depend, in part, on

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•

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 2002, our AXS-One Enterprise Solutions, AXSPoint Solutions and Tivity Solutions each need to gain greater 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 have a material adverse affect on our business, operating results and financial condition.

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 e-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,



•

changes in customer requirements, or



•

emerging industry standards.

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•

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 that 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.

        On March 28, 2002, the American Stock Exchange notified us that we are not in compliance with their continued listing requirements due to our continuing losses and our stockholders' deficit. The Exchange will continue the listing of our Common Stock at least until March 31, 2003, on the conditions that we submit to them by May 1, 2002, a satisfactory plan for regaining compliance with their listing requirements no later than March 31, 2003 and then demonstrate satisfactory progress toward implementing that plan. We intend to do so. If we do not satisfy the Exchange's conditions, they may institute immediate delisting proceedings. If our common stock were to be de-listed by the American Stock Exchange, we might be unable to list our 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

24

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.

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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 and the Central and Eastern Europe subsidiary during 2001, upon revenues from our foreign customers. In 1999, 2000 and 2001 the Company's total revenues from customers outside the United States were as follows:

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 foreig