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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 0-19872

Walker Interactive Systems, Inc.

303 Second Street, 3 North

(415) 495-8811

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

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

     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 þ          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 the 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

      Based on the average bid and ask prices of the Registrant’s common stock on the Over the Counter Bulletin Board on March 8, 2002, the aggregate market value of the voting stock held by non-affiliates of the Registrant was $19,880,866. Shares of the Registrant’s common stock held by each officer and director and by each person who owns 5% or more of the Registrant’s 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.

      The number of shares of the Registrant’s common stock outstanding as of March 8, 2002 was 15,188,644.

DOCUMENTS INCORPORATED BY REFERENCE

      Part III of this Report on Form 10-K incorporates information by reference from the Registrant’s definitive Proxy Statement to be used in conjunction with its 2001 Annual Meeting of Stockholders, to be held in May 2002.

Table of Contents

WALKER INTERACTIVE SYSTEMS, INC.

FORM 10-K

INDEX

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PART I

Item 1.     Business

Overview

     Introduction

      Walker Interactive Systems, Inc. (hereinafter “Walker”, “Elevon”, “we”, “our”, “us”, or the “Company”) was incorporated in California in 1973 and reincorporated in Delaware in March 1992. In February 2002, Walker announced that it would do business as Elevon, Inc. We design, develop, market and support, on a worldwide basis, a family of enterprise financial, operational and analytical software products that enable large and medium-sized organizations, higher education institutions, and federal, state and government agencies to optimize their business processes, reduce business costs, and improve management information needed to run their business. We derive our revenue from software licenses, software maintenance and professional consulting services. Our collaborative commerce solutions and analytical applications are licensed to large and mid-size companies and similarly sized governmental organizations worldwide.

     Recent Update

      On November 28, 2000, we received a Nasdaq Staff Determination indicating that we failed to comply with the net tangible assets requirement set forth in Marketplace Rule 4450(a)(3) and the requirements of Maintenance Standard 2 for market capitalization, market value of public float, and minimum bid price, and that our securities were, therefore, subject to delisting from The Nasdaq National Market. We attended an appeal hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination on February 15, 2001. On March 5, 2001 the Nasdaq Listings Qualifications Panel made the determination to delist our securities from the Nasdaq Stock Market effective with the opening of business March 6, 2001. Since March 6, 2001, our common stock has traded on the Over the Counter Bulletin Board.

      On November 1, 2001, we announced the acquisition of certain assets of QSP Group PLC (“QSP”). QSP, headquartered in the United Kingdom, provided financial systems to Global 2000 companies and was placed in administrative receivership on October 17, 2001. We acquired QSP’s intellectual property and a consulting services contract for $2.0 million in cash. We intend to provide customer support and consulting services to QSP’s customers, and sell and market the solutions through our existing sales channels. In February 2002, after taking into consideration the change in products and services we are delivering to the market, as well as our recent acquisition of the QSP intellectual property, we decided that to change the marketplace’s perception of us as primarily a provider of mainframe financial software, it was necessary to change our brand name to “Elevon.”

     Strategic Direction

      During 1999, we changed our strategic direction to emphasize e-business solutions and analytical applications, and began to refocus ourselves as a provider of e-business and collaborative commerce solutions. As part of our strategic redirection, we redesigned our software products specifically for the Internet architecture and business-to-business e-business models. We believe that our architecture is among the most scalable and adaptable for enterprise-level business software, and our strategy is to offer enterprise financial, operational and analytical solutions to a variety of industries. Our collaborative commerce solutions integrate processes within and across enterprise boundaries for the benefit of the enterprise, its suppliers and its customers. These processes include procurement, revenue management, financial management and insight, business planning, budgeting, forecasting and financial consolidation.

      Our software products utilize the Microsoft Windows operating systems on the desktop, NT, UNIX and S/390 operating systems on the server and industry-leading On Line Analytical Processing (“OLAP”), Relational Database Management Systems (“RDBMS”) including IBM’s DB2 and DB2 OLAP server, Hyperion Solutions’ Essbase and Microsoft SQL/ Server. Our collaborative commerce solutions utilize the

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      Elevon Collaborative Synergies^TM solutions represent our core suite of business and financial solutions, utilizing the power of the enterprise server for highly scalable transaction processing and reliability/ availability, with the thin client architecture of the browser based interface. This Internet-based architecture provides an optimized platform for delivery of collaborative commerce solutions. We also develop and market analytical applications, which provide financial reporting, budgeting and financial consolidation solutions for large and mid-sized organizations. These analytical applications integrate with Elevon Collaborative Synergies solutions and also work on a standalone basis with leading Enterprise Resource Planning applications. Our software products include productivity tools that allow applications to be extensively customized to fit the customer’s particular requirements. We complement our software products by providing specialized consulting services to assist customers with customization and implementation.

      We derive our revenue from software licenses, software maintenance and professional consulting services. Our solutions are licensed primarily to Global 2000 companies and similarly sized business and governmental organizations worldwide. Our solutions and services are marketed primarily through a direct sales force located in the United States and the United Kingdom.

INDUSTRY BACKGROUND

      Large, geographically diverse organizations generate enormous amounts of financial, operational, sales, marketing and other data. We believe that the transaction-oriented information systems used by these organizations are typically critical to their efficiency, productivity and competitiveness, providing the availability of continuous and simultaneous information to employees, customers and suppliers. In the day-to-day operations of large organizations, transactional data needs to be promptly and easily retrieved from a variety of financial and operational systems, summarized and organized into meaningful business information that has a consistent business context. The process of integrating the data is complex when large organizations employ multiple accounting systems, operational systems and transactional databases, spread their business across many different geographies and have different information requirements by function and across the organization. Furthermore, we believe that the current business climate of deregulation and merger/acquisition activities in many industries has added additional complications as well as the need for scalable and adaptable business processes.

      Organizations attempt to collect, summarize, organize and present information from heterogeneous computer systems and transactional data sources in various ways. Reports can be assembled through entry of data into spreadsheets and by using data from accounting systems and other operational systems. Many organizations have tried to automate information systems through the use of software developed internally or through assistance from outside consultants. We believe that these custom-built systems are becoming increasingly obsolete because they are rigid in structure, expensive and time consuming to create and maintain, and difficult to update when business processes and requirements change. Moreover, we believe growing competition has increased the demand for more timely business information specific to each function within the organization.

MARKET OPPORTUNITIES

      The following market dynamics are important factors shaping our strategy moving forward:

e-Business and Collaborative Commerce

      The term e-business means many things to many people, but we believe it is well defined as the transformation of key business processes through the use of Internet technologies. The core processes that are the foundation of business are merged with the standards, simplicity and connectivity of the Internet. This melding of Internet technologies with key business processes creates opportunities for powerful interactive, transaction-intensive solutions that let companies do business in ever more efficient and effective ways.

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Analytical Applications

      The need for better business information has created a growing need for analytical application software to help organizations gain business knowledge from the large volumes of transactional data available from daily operations. These software solutions work on a stand-alone basis, or in conjunction with core financial systems to translate data into business insight, and thus maximize the value of financial information. We believe our analytical applications, by integrating financial applications and analytical solutions, should deliver a solution that links business goals to operational data so organizations have deeper insight into their business operations.

Internet Architectures

      In recent years, the market has seen the rapid adoption of thin client/centralized server architecture models, a significant contrast to the client/server architectures that have been prevalent since the mid-1990s. Internet based computing can enable companies to protect their existing information technology investments while taking advantage of new technologies by dynamically linking Internet, client/server and legacy systems. We believe that our Internet architecture model has created opportunities for competitive advantage in our market, and for our customers, through a combination of business processes optimized for the Internet model, improved collaboration, browser based interfaces, enhanced services, shared services and lower transaction costs. Elevon Collaborative Synergies solutions are designed to support this integrated Internet architecture and the e-business process model.

Shared Services

      Large organizations should be able to reduce the costs and complexity of information systems by centralizing many administrative functions. These centralized functions are now being combined with distributed operational procedures. We believe our high-volume, collaborative synergies solutions support both models for distributing information when and where it is needed within the extended organization, significantly enhancing the availability of timely information.

High Volume Transactions

      Large, geographically diverse organizations generate large volumes of transactions and data. As organizations extend their business beyond traditional enterprise boundaries through collaborative commerce, their transaction-oriented systems will often require increasing scalability to handle the increased volume from additional users and ever-growing transaction volumes. We believe our solutions provide scalable, cost-effective, high transaction volume capabilities.

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OUR STRATEGY

      Our objective is to be a leading provider of collaborative solutions for the real-time enterprise. Our strategy for achieving this goal is as follows:

Enable the Transformation of Key Business Processes through the Use of Internet Technologies

      We believe that the collaborative commerce enablement of key business processes has created opportunities for competitive advantage in our market through Internet/ intranet-enabled solutions. We expect that our collaborative synergies solutions will allow organizations to transform core business processes utilizing existing information technology investments while taking advantage of powerful interactive, transaction-intensive solutions that let companies do business in ever more efficient and effective ways. We believe that our customers will have the ability to extend the reach of their business applications directly to employees, customers and suppliers worldwide.

Deliver Solutions which Provide Management Insight into Key, Complex Business Processes in Selected Vertical Markets

      We believe that large, complex businesses are best understood in a multidimensional context, by key performance indicators and across business units, time periods, geographies and product lines. Our solutions capture and warehouse key business processes and business information while retaining the business context of the information through our analytical solutions. These solutions analyze the transactional data within the applications to deliver information that we expect will allow managers to be more informed about their organization’s performance. Empowered by management insight, managers at all levels of the organization should then have the opportunity to better run their area of the business, enhancing competitiveness and bottom-line profitability. Our solutions use OLAP and relational database technology, which was developed specifically for multidimensional business analysis.

Provide Analytical Applications, which Complement Multiple Transaction Applications

      We focus on analytical applications for budgeting, consolidation, and management reporting, which we believe offer the greatest short-term market potential. These applications provide analytical analysis and reporting capabilities not available in traditional transaction systems. Most organizations recognize the need to integrate enterprise-wide financial and operational data to monitor company-wide performance. To respond to this need, our analytical applications integrate data from both our and non-Elevon applications, including leading Enterprise Resource Planning and best-of-breed application vendors.

Extend New and Existing Long-Term Relationships with Strategic Partners

      We have existing strategic relationships with leading hardware and software suppliers such as IBM, Microsoft, Hyperion Solutions, Inc., Commerce One, Inc., Information Builders, Inc., and Showcase Corporation, as well as with third-party providers, including global accounting and consulting firms. We believe that the development of our relationships with these partners, as well as expanding the scope of the relationships to include e-business and e-commerce solutions, will contribute to our future revenue growth.

Deliver Lower Cost/ Higher Performance Solutions

      While many vendors of enterprise software solutions are focusing their technology efforts on supporting a distributed client/server model, we intend to continue to build and enhance our e-business solutions for the IBM z900 as an e-business server. We build collaborative applications using Java technologies with a process we call Shared Transformation Enterprise Processes (“STEPs”). In addition, we intend to enhance the UNIX-based solution acquired from QSP. We believe that this puts us in a position to support multiple high-volume Internet-based computing environments. We believe that this capability, together with the growth of collaborative commerce, Internet bandwidth and processes that reflect an e-business way of working, supporting both shared and distributed service models, is a far more cost effective model than other distributed architecture models available in the market today.

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Retain and Extend Long-Term Customer Relationships

      We intend to continue our focus on generating additional revenues from existing customers through software licenses, the introduction of new Elevon Collaborative Synergies solutions and services, and warranty maintenance. In addition, providing consulting and support services to existing customers represents a significant portion of our total revenues. We expect that follow-on revenues will create efficiencies for deployment of sales and marketing resources and strengthen relationships with our customers.

ELEVON SOLUTIONS AND SERVICES

      Elevon Collaborative Synergies solutions for the enterprise are designed to improve core business processes and to provide the functionality to create competitive advantage in an ever-changing global marketplace. We attempt to achieve this by offering solutions that combine flexible collaborative commerce solutions, analytical applications, deep industry knowledge and best practices expertise.

      Our family of solutions and services include:

	•	Elevon Collaborative Synergies solutions for Global 2000 organizations; and
	•	our analytical applications aimed at better managing company performance.

SOLUTIONS

Collaborative Synergies Solutions

      Elevon Collaborative Synergies solutions are designed to support new processes as organizations redefine existing processes as a result of collaborating with their suppliers and customers beyond the four walls of the enterprise. These STEPs solutions are intended to align stakeholder incentives and transform unproductive processes into win/win workflows. The goal of Elevon Collaborative Synergies solutions is to streamline inefficiencies, eliminate redundancies, reengineer roadblocks and reassign misplaced processes — those where work is done on one side of a barrier while the best resources and incentives for the task wait on the other — to match mission with motivation. We expect these improvements to compress business cycles, increase process velocity, and enhance value chain visibility.

      Elevon Collaborative Synergies solutions are organized into the following key operational areas:

	•	STEPs — a suite of targeted, granular software applications that provide the specific incremental functionality needed to effect process transformation by complementing — rather than replacing — existing systems.
	•	e-procurement — automates the purchasing process within and across enterprises.
	•	e-revenue — automates the credit to collection process within and across enterprises.
	•	e-insight — provides the information needed to manage the business.
	•	e-technology — consists of the architecture, technologies and components that enable and support collaborative synergies. This technology is designed for large-scale, collaborative synergies environments.
	•	Unified Collaborative Process (“UCP”) — the service element of Elevon Collaborative Synergies solutions. UCP melds new vision with innovative business process transformation and knowledge management methodologies.

Analytical Applications

      We have broadened the scope of our collaborative synergies offerings with the addition of analytical solutions that work with transactional data to provide in-depth insight into the enterprise. We expect this combination of collaborative synergies solutions and analytical applications, which include planning, forecast-

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      The analytical applications employ a flexible architecture that leverages a single OLAP engine for all its applications. This provides companies with a solution that should ensure data integrity and be easy to deploy and maintain. As a result, we expect that organizations can gain the ability to make fast, informed business decisions and continually monitor performance improvement at all levels of the organization.

      The analytical applications are available for multiple operating systems and OLAP databases. They allow companies to track performance metrics that are specific to their organization. Any combination of these applications complements Elevon’s Collaborative Synergies solutions as well as non-Elevon financial and operational solutions.

      Our analytical applications include:

	•	Planning and Forecasting — Automates the planning, forecasting and budgeting processes to reduce planning cycles, facilitate continuous planning and enable the prediction of company performance.
	•	Financial Consolidation — Manages the collection, adjustment and reporting of consolidated results for enterprise-wide statutory, management and tax reporting.
	•	OLAP Reporting and Analysis — A powerful reporting and analysis solution for enabling financial reports and analysis using any OLAP technology.

      In addition, we plan to launch our new “Active Financial Planning” solution in the second quarter of fiscal 2002. Active Financial Planning is a best-of-breed, web-based planning and decision support system that offers real-time collaboration focused on predictive and corrective planning.

PRODUCT DEVELOPMENT

      We continually work to enhance our existing products and develop new products to meet our customers’ ever-changing requirements. Our success will depend, in part on our ability to develop product enhancements and new products that keep pace with technological changes and changes in customers’ business practices. Product development costs charged to operations, including amortization of capitalized software development costs, were 24% of total revenues in 2001, 35% in 2000, and 22% in 1999.

      Due to the layered architecture of our collaborative synergies solutions, and our efforts to continually enhance our products in order to respond to evolving technologies, we believe that our core products have long life cycles. As operating systems, databases and presentation software technologies evolve, we expect to be able to modify our collaborative synergies solutions through an upgrade and by changing only the corresponding layer of software without having to change the other components of the system. Therefore, our customers should not have to completely replace our products in response to technological change. We work closely with our customers and prospective customers to determine their requirements and to define the functionality of our new products and enhancements to our existing products.

SERVICES

Professional Services

      It is our experience that organizations are increasingly leveraging information technology to accomplish their business objectives. Large, global organizations often rely heavily on their software investments to remain competitive. We provide a full range of services to support these needs. We believe our professional services organization adds significant incremental value, offering implementation, customization, migration, training and related services to our customers. We have suites of reusable tools and utilities designed to enable customers to complete customizations efficiently and cost effectively.

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      Some of the areas addressed by our services include:

	•	Integration — to integrate the customers’ existing applications into the Elevon Collaborative Synergies solutions.
	•	Performance tuning — to increase computer throughput, reduce processing time and otherwise improve performance.
	•	Migration — to assist in making cost-effective migrations to a new release or from one platform to another.
	•	Conversion and integration — to integrate third-party applications into our framework or convert these products to our applications through our re-usable components, methodologies and e-technology.

Customer Support and Maintenance

      Our customer support and maintenance program includes 24-hour hotline telephone support for problem determination and resolution, account management, ongoing functional and technical enhancements for installed products, and membership in our user group, which meets annually and holds periodic regional conferences throughout the year.

REPORTABLE SEGMENTS

      Our product and service offerings are considered a single reportable segment. Information regarding domestic and international revenues and assets is contained in Note 11 to the Consolidated Financial Statements.

SALES AND MARKETING

      We sell our products primarily through our direct sales force in North America and the United Kingdom. In support of our sales force, we conduct marketing programs, which include direct mail, public relations, advertising, seminars, trade shows and ongoing customer communication programs. The sales cycle begins with the generation of a sales lead, or often the receipt of a request for proposal (“RFP”) from a prospect, which is followed by qualification of the lead, an analysis of the customer’s needs, response to the RFP (one or more presentations to the customer), customer internal approval activities and contract negotiation and finalization. While our sales cycle varies by product and by customer, our sales cycle has historically required three to twelve or more months.

      We market our products primarily to large or complex organizations with collaborative commerce and e-business requirements having intensive data processing and information management requirements. In each of the last three fiscal years, a substantial portion of our product revenue was derived from existing customers licensing either new products or products for additional sites.

      We regard our professional services and product development organizations as integral parts of our marketing strategy because of the length and technical nature of the sales process. Professional services and product development employees participate directly in the sales cycle and educate prospective customers on the advantages of using Elevon solutions rather than those developed internally or by other third parties.

COMPETITION

      The business and financial application software market for large, complex organizations is intensely competitive. The principal competitors with Elevon Collaborative Synergies solutions are SAP AG, Oracle Corporation and PeopleSoft, Inc. Our analytical applications compete primarily with Hyperion Solutions Corporation, Adaytum Software Inc. and Comshare, Inc.

      We also compete to a lesser extent with other independent software application vendors. Some of our current and potential competitors have substantially greater financial, technical, marketing and sales resources

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      We encounter competition from a broad range of firms in the professional services market. These competitors include the consulting divisions of the major accounting firms, which possess greater resources than we do and compete with us mainly on the basis of the scope of services offered, and small independent firms that compete primarily on the basis of price.

PROPRIETARY RIGHTS

      We regard our products as proprietary and attempt to protect them with a combination of trade secrets, copyright and trademark laws, our license agreements with customers, our internal security systems, confidentiality procedures and employment agreements. Although we take steps to protect our trade secrets, we cannot assure you that misappropriation will not occur. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States.

      We typically provide our products to users under non-exclusive, non-transferable, perpetual licenses. Under the general terms and conditions of our standard product license agreement, the licensed software may be used only for internal operations on designated computers at specific sites. We make source code for some of our products available to our customers under agreements that restrict access to and use of the source code.

      We seek to protect our software, documentation and other written materials under copyright laws, which afford only limited protection. We also assert trademark rights in our product names. We have not sought to protect our products under patent laws, as we believe that the rapid pace of technological change in the computer industry makes patent or copyright protection of less significance than such factors as the knowledge and experience of management and personnel, name recognition, maintenance and support of software products and our ability to develop, enhance, market and acquire software products and services.

      Although we believe that our products do not infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not assert infringement claims against us in the future with respect to current or future products, or that any such assertions will not require us to enter into royalty arrangements or result in costly litigation.

      For a description of certain proprietary risk factors, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Additional Risk Factors.”

EMPLOYEES

      As of December 31, 2001, we had 253 employees, 152 of whom were based in the United States and 101 were based internationally. Of the total, 38 employees were engaged in sales and marketing, 33 were in customer support, 85 were in professional services, 49 were in product development and 48 were in data processing, administration and finance positions.

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Item 2.     Properties

      We currently lease the properties described below:

      We believe that we have adequate facilities to accommodate our operations in the near term and that additional space will be available at commercially reasonable terms as needed.

      As of December 31, 2001, approximately 16,000 square feet of office space in Toronto, Canada, and Aylesbury, England is not occupied by us and we consider it excess capacity. Of the excess, substantially all is sublet. We have provided approximately $1.4 million for our excess capacity lease commitments, net of expected sublease income of approximately $327,000. This is included in our accrued liabilities and other long-term obligations at December 31, 2001.

      In February 2002, we executed an agreement to transfer our lease in The Gate House, Aylesbury to a third party. The agreement provided that the third party would sublet one floor of the building to us, and we were able to consolidate our operations from approximately 16,000 square feet to approximately 8,000 square feet. However, we are contingently liable to the landlord for the full rent in the event that the third party defaults on the lease. The maximum potential liability for the remainder of the lease, which expires in 2016, would be approximately $5.0 million. We do not consider it likely that the third party would default.

Item 3.     Legal Proceedings

      As of December 31, 2001, there were no pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or to which any of our property is subject, which we anticipate would have a material adverse effect on our financial condition or results of operations.

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Item 4.     Submission of Matters to a Vote of Security Holders

      No matters were submitted to a vote of security holders during the quarter ended December 31, 2001.

PART II

Item 5.     Market for Registrant’s Common Stock and Related Security Holder Matters

      Our common stock has been traded on the Over the Counter Bulletin Board under the symbol “WALK” since March 6, 2001. Prior to that time, our common stock was traded on the Nasdaq National Stock Market. As of March 8, 2002, there were approximately 2,673 stockholders of record of our common stock. We have not paid any cash dividends and do not anticipate paying any cash dividends in the foreseeable future. The high and low sale prices per share of our common stock, for the periods set forth below, are as reported by the Nasdaq National Stock Market System and the range of high and low bid information per share for our common stock for the periods set forth below are as quoted on the Over the Counter Bulletin Board.

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Item 6.     Selected Consolidated Financial Data

      The following table should be read in conjunction with our financial statements and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K.

(1)	Includes a $4.8 million charge for the impairment of certain capitalized software and a $1.9 million restructuring charge related to our reorganization.
(2)	Includes a $10.4 million charge for the impairment of certain capitalized software and goodwill, a $4.5 million restructuring charge in connection with the change in our strategic direction, and a $12.5 million increase in the tax valuation allowance.
(3)	Includes a $4.6 million charge for the write-off of in-process research and development from the acquisition of Revere, Inc. and a $1.3 million charge for the termination of an exclusive distribution agreement.

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

      The following discussion of our results of operations and financial condition should be read in conjunction with our financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains forward-looking statements, including statements related to industry trends, expected resolution of legal proceedings, cash commitments, liquidity, capital resources and working capital requirements. Discussions containing such forward-looking statements may be found in the material set forth under “Legal Proceedings” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” generally and specifically therein under the captions “Liquidity and Capital Resources” and “Additional Risk Factors,” as well as elsewhere in this Annual Report on Form 10-K. Actual events or results may differ materially from those discussed herein. We disclaim any obligation to update these forward-looking statements as a result of subsequent events. The risk factors on pages 19 through 24, among others, should be considered in evaluating our prospects and future financial performance.

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RECENT DEVELOPMENTS

      On February 4, 2002 we announced we would start doing business as Elevon, Inc.

      On November 1, 2001, we announced our acquisition of certain assets of QSP Group PLC (“QSP”). QSP, headquartered in the United Kingdom, provided financial systems to Global 2000 companies and was placed in administrative receivership on October 17, 2001. We acquired QSP’s intellectual property and a consulting services contract for $2.0 million in cash. We intend to provide customer support and consulting services to QSP’s customers, and market and sell the solutions through our existing sales channels.

      In the second quarter of 2000, we formed a wholly owned subsidiary, RareVision, Inc., to further the development and market testing of a business-to-business internet model for a web-based, knowledge management analytical application for smaller businesses. During fiscal 2000 and 2001, product development and marketing expenses totaling $6.6 million were incurred and charged to operations. During 2001, further development of the RareVision product line on a standalone basis was suspended and the remaining components of the development effort were integrated into our analytics product line.

      On March 5, 2001, we announced that our common stock would be removed from the Nasdaq National Market and become eligible for trading on the Over the Counter Bulletin Board under the symbol “WALK.OB”, effective March 6, 2001. Nasdaq’s decision to delist our common stock from the Nasdaq National Market was based primarily on our net tangible assets, as defined by Nasdaq, falling below the minimum requirement.

      During the quarter ended September 30, 2000, the Board of Directors approved a strategic restructuring plan designed to reduce costs and strengthen our position to successfully execute our e-business strategy. We recorded pretax restructuring charges totaling $1.9 million comprised mainly of severance costs related to the involuntary termination of employees in our United States and United Kingdom operations and costs arising from the consolidation of facilities in San Francisco and Aylesbury (United Kingdom). We also recorded $4.8 million of impairment charges, primarily related to software capitalized in the development of the legacy Tamaris product.

      We divested our IMMPOWER product line in April 2000 and our Aptos product line in October 2000. Total revenues from all divested product lines were $3.8 million in fiscal 2000 and $13.6 million in fiscal 1999.

CRITICAL ACCOUNTING POLICIES

      We believe the accounting policies described below to be the most critical in determining and understanding our results of operations. For a more detailed discussion of these policies and significant estimates inherent in the preparation of our consolidated financial statements, see Note 1 to the Consolidated Financial Statements.

Revenue Recognition

      Our revenues are derived from the sale of software licenses and from providing consulting and support services, generally to our licensees. The amount and timing of our revenues is critical in determining our results of operations, particularly on a quarterly basis. Our revenue also is key in the determination of certain costs that vary with revenue, such as commissions and royalties. Notwithstanding the detailed guidelines we have established in determining periodic revenue, judgments and estimates are required in the application of our revenue recognition policy, particularly where we are providing consulting services to large, complex organizations. Estimates and assumptions are required in establishing the scope, pricing, and the periodic reviews of cost to complete the engagements. While we believe our estimates and assumptions are reasonable, based on our historical experience and our evaluation of current facts and circumstances, we cannot assure you that actual results will not differ from our estimates.

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Capitalization and Amortization of Product Development Costs

      Product development costs are a significant component of our operating costs. Our policy and its application in determining which costs are currently capitalized and amortized in future periods, or expensed as incurred, can impact our results of operations. Although our policy has definitive guidelines for the capitalization and amortization of software development costs, judgments are required in the estimation of future gross revenues from a product that are dependent upon factors such as market acceptance and the rate of technological change. We amortize capitalized software costs over a two-year period and review capitalized software costs on an on-going basis. If appropriate, we revise the amortization rate based on our then current assessment of future gross revenues. We cannot assure you that such future assessments will not differ from our initial estimates, which determine the capitalized amount and rate of amortization.

RESULTS OF OPERATIONS

2001 Compared to 2000

     Revenues

      Total revenues in 2001 were $49.1 million, a decrease of $ 2.4 million, or 4.6%, as compared to 2000. The decrease in total revenues relates primarily to divested product lines.

      License revenues in 2001 were $8.7 million, an increase of $3.5 million, or 68.9%, as compared to 2000. The increase in license revenue is due to the execution of several large license agreements during the year ended December 31, 2001, as customers migrated to our new generation of products. Our e-business enterprise solutions have a long sales cycle as collaborative commerce involves coordination with multiple vendors, which generally increases the value of each transaction and adds time and complexity to the process. A number of license agreements concluded in 2001 were the culmination of sales efforts that had started at least twelve months previously.

      Maintenance revenues in 2001 were $22.1 million, a decrease of $4.6 million, or 17.2%, as compared to 2000. Approximately $1.7 million of the decrease relates to divested product lines. The remainder of the decrease is attributable to lower license revenue from the legacy product lines during previous years resulting in the lapse of related maintenance contracts in excess of new contracts and renewals.

      Consulting revenues in 2001 were $18.3 million, a decrease of $1.3 million, or 6.6%, as compared to 2000. The decrease in consulting revenues is attributable to the divested product lines, which generated revenues of $2.1 million in the year ending December 31, 2000.

     Costs of Licenses, Maintenance and Consulting

      Cost of licenses, maintenance and consulting in 2001 were $18.2 million, a decrease of $7.5 million, or 29.2%, as compared to 2000, and represented 37.1% and 50.0% of total revenues