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UNITED STATES
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, 2003

Commission File Number: 1-13591

AXS-ONE INC.

(Exact name of registrant as specified in its charter)

        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 (the "Act") 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

        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 under the Act). Yes o    No ý

        The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based upon the closing sale price of Common Stock on June 30, 2003 (the last business day of the Registrant's most recently completed second fiscal quarter) as reported on the American Stock Exchange, was approximately $15.0 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 12, 2004, Registrant had outstanding 25,362,309 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

        Items 10, 11, 12, 13 and 14 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 2004 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") 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 a 25-year proven track record in developing flexible, high- performance, secure and effective business solutions for global 2000 organizations. AXS-One's ability to quickly identify emerging market opportunities and to build high-quality innovative solutions has won many awards over the years. Since 1999, the Company has devoted significant resources to developing new products which serve the Collaboration Systems Management, Content Archival and Compliance Management, and Information Management Markets. Additionally, the Company has re-architected its offerings to allow its customers to take full advantage of Web Services.

        As a consequence of the above, the Company has received recognition by industry analysts. Specifically, in 2003, one leading analyst positioned AXS-One as the leading "visionary" in two of its magic quadrants: integrated document archival and retrieval systems, emphasizing the Company's innovative use of web services technology, and for Email active-archiving, discovery and life-cycle management. Previously, AXS-One won 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 both internally and with their partners, customers and suppliers. As a result of today's highly volatile business environment, corporations need to be very agile and solutions that address specific points of pain may be more appropriate than traditional broad-based Enterprise Resource Planning (ERP) solutions. To meet this need, the Company's objective is to deliver Internet-based business solutions that 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 collaborative web services that automate business processes across corporate boundaries. This results in manageable investments, quick implementation schedules and rapid return on investments (ROIs).

        During 2003, the Company extended the ability of its AXSPoint Solutions to handle and manage additional data types such as Email, Instant Messages, desktop documents and other document types. The Company believes it is well positioned to handle the Information Life Cycle Management needs of the modern day corporation.

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        AXS-One has two main product lines:

        Each of these families of solutions has been enhanced using AXS-One's e-Cellerator™ products which utilize a process-centric web services architecture that AXS-One has developed to support the design and development of large-scale, 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 the industry standard interface definition language (WSDL), eXtensible Markup Language (XML) and Simple Object Access Protocol (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 Sun UNIX, HP UNIX, IBM RS/6000 UNIX, Windows 2000, and starting in 2004, Windows 2003 application servers. Linux is available with some products, but not deployed. The e-Cellerator products support the following database engines: Oracle on all platforms, MS SQLServer on 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 product line, 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, America Online, Menlo Worldwide Forwarding, TNT, and United Airlines. AXS-One's Foundation products are very well suited to those organizations that have adopted an internal "shared services" approach to back-office administration functions, or organizations in the Financial Services, Transportation or Communications industries and in the public sector. 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

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meet their own unique needs. The underlying "n-tier" architecture is highly scalable and able to meet the transaction volume needs of global 2000 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 the 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 distribute and process business knowledge electronically throughout the enterprise or across enterprises.

Organization and Products

        The Company has two main product lines: AXS-One Enterprise Solutions and AXSPoint Solutions. AXS-One conducts comprehensive marketing programs in the United States, which include telemarketing, public relations, direct mail, advertising, seminars, trade shows and ongoing customer communications programs.

        AXS-One generally markets its products and services primarily through a direct sales force in the United States and directly and indirectly in other parts of the world. The Company is currently establishing indirect sales channels in the U.S. operations to complement the sales efforts conducted by its direct sales force located at the Company's headquarters in Rutherford, New Jersey, and in the Tampa, Dallas and Washington D.C areas.

        Outside of the United States, the Company utilizes its 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, 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, AXS-One does not generate significant revenues from its distributors.

        Further information specific to these two product lines are presented in Note 10 to the Consolidated Financial Statements.

AXS-One Enterprise Solutions

        Offers a suite of supply chain management solutions that addresses mission critical business processes directly affecting 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; and the expenditure process, including relationships with vendors and employees, with Expense Manager and Procurement Manager. The business planning, budgeting, analysis and reporting process, key performance indicators (KPI's) and business performance are managed with Business Manager. Collectively, AXS-One Enterprise solutions enable enterprises to effectively manage entire process lifecycles with proven transactional applications, templated and automated process workflow, and by harnessing the power of the Internet. AXS-One Enterprise solutions are built on AXS-One's web services architecture and can be deployed as integral parts of other solutions thus making them a solution of choice for third-party software vendors wishing to include world-class financials within their state-of-the-art solutions. AXS-One Enterprise solutions have been successfully deployed within hosted Internet solutions such as those provided by an Internet-based property management solution in Australia.

        AXS-One's Foundation suite of world-class back-office financial solutions are continually maintained and enhanced to support existing customers, including Pfizer, AIG, America Online, TNT, United Airlines and Menlo Worldwide Forwarding.

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        The AXS-One Enterprise 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-business 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, including customer disputes, inquiries, and adjustments. 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 remittance instructions or system-constructed algorithms to apply the payment. Customers falling behind in payments are notified by system generated dunning letters and/or by collectors who are alerted to call the account. Receivables and Business Management are kept informed of progress through an automated escalation process, tuned to reflect local business rules. Revenue Manager extends its value by providing customers with a web-based self-service portal that allows for bill and statement presentation, account reconciliation, the registering and tracking of inquiries and disputes, and requests for change of credit limit and/or address. Sales and Customer Service representatives are also served through the provision of real time account status.

        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. 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 XML, manages budgetary controls, controls the approval process and creates the final purchase order. 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 for accuracy. If everything matches, then Procurement Manager allows payment to be made. 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, and inventory and approval management.

        AXS-One Enterprise Business Manager utilizes workflow rules to enforce company policies and establish effective controls over general ledger transactions and financial reporting, assisting firms in their efforts to comply with the Sarbanes-Oxley Act and related government regulations. Business Manager allows accountants to attach supporting documents and explanatory notes to specific journal transactions, then automatically routes journals to authorized persons for approval prior to posting to the general ledger. It also automates the preparation of Excel-based "budget packs" based on prior year actuals and the distribution of these preliminary budgets to department managers. The system keeps track of where each person is in the approval process, consolidating budget revisions, and transferring final budget figures to the general ledger. Business Manager streamlines the generation of periodic departmental profit and loss reports, actuals versus budget comparisons, and other key performance indicators. Reports are distributed to responsible individuals via email or may be made available over the web, ensuring timely and informed decision-making.

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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.

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AXSPoint Solutions

        Solutions that enable organizations to electronically and securely capture, manage, and share corporate content and knowledge both within the enterprise, and with such enterprise's customers, suppliers and other business partners. AXS-One, through professional service offerings, also provides customers with resources who have technology and industry expertise. AXSPoint solutions are a powerful solution set 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 solutions, compliance solutions, customer service solutions, Internet-enabled information reconciliation solutions, and transaction confirmation solutions. These solutions are typically implemented in weeks, thus providing a rapid time-to-value. AXSPoint technology provides for the archiving and management of reports, legacy systems data, email and instant message communications, and other business documents. By combining this data with other data sources and process management and supplying easy access via a robust user interface, AXSPoint solutions facilitate short time-to-market for custom web applications. This rapid time-to-market combined with advanced process management functionality is a critical selling point that differentiates this AXS-One product line from competitive offerings. AXSPoint solutions scale easily from small companies to large multinational enterprises. AXS-One has clients globally using AXSPoint solutions, including Wachovia, Deutsche Bank, Chicago Mercantile Exchange, and JP Morgan Chase.

        AXSPoint technology is also an electronic books and records repository and, as such, not only delivers a powerful portal to information but can also eliminate many paper production and storage costs. AXSPoint solutions are able to store and manage many forms of information in various medias, including e-mail, business reports, compliance reporting, and much more. As a result, AXSPoint solutions are excellent replacements for microfiche. When utilized together with qualifying hardware systems and media, AXSPoint repository technology is also fully compliant with SEC Rule 17a-4 requirements for electronic communications such as email, instant messaging, reports, etc. The AXSPoint repository is able to store terabytes of information and is also an excellent tool for operational email management.

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AXSPoint Solutions:

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        Since the development of the AXSPoint Central and AXSPoint Exchange solutions, enhancements were made to leverage the power of eXtensible Markup Language (XML) which were further enhanced to allow AXSPoint Exchange to be deployed as a set of web services 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 Electronic Self Service (ESS) applications either as dedicated systems or through portals. In 2002, the AXSPoint product line released industry standard web services, based on SOAP and Universal, Description, Discovery and Integration (UDDI) protocols, to further enable content access for both end-user interfaces as well as enterprise application integration. Also in 2002, AXSPoint technology was extended to accept additional sources of information such as email and instant messages.

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        In March of 2002, AXS-One was awarded AIIM's Enterprise Content Management Best Practice Award for an AXSPoint-based implementation at Brittany Ferries, a major European passenger and freight carrier, which enabled the rapid reconciliation of travel agent statements. In April 2002, AXS-One's web services technology was named "Best of AIIM 2002" by CMP Media's Transform Magazine.

        In 2003, the AXSPoint Central and AXSPoint Exchange solutions were enhanced to meet (when utilized together with qualifying hardware and media) the amended SEC regulatory compliance requirements, namely SEC Rule 17a-4, for long-term retention of electronic mail and instant messaging. The new product offerings are enterprise class platform solutions for solving the complex issues of compliance, storage and risk mitigation through a single mature comprehensive platform for digital archival and process driven application development. The new software components deliver functionality for policy driven active email archival, monitoring, supervision, records management and disposition for multiple email systems such as Microsoft Exchange and Lotus Notes and multiple instant messaging providers such as America Online, MSN and Yahoo. Our core offerings also provide pre-defined integrations with industry leading best-of-breed providers of instant messaging capture applications.

        Partnerships with key vertical industry providers for service based (Hosted and ASP) email, instant messaging and records management and disposition archival and compliance offerings either have been or are in the process of being established for 2004.

AXS-One Collaboration FrameWorks Solutions

        AXS-One Collaboration FrameWorks Solutions are rapid response, high return on investment (ROI), point solutions that address many issues confronting companies under pressure to compete effectively with limited budget and personnel resources. These solutions include best practice templates and integrated software components from both the AXSPoint Exchange and AXS-One Enterprise product lines.

        AXS-One Collaboration FrameWorks Solutions allow organizations to significantly improve their business performance in keys areas without the need for replacing existing systems by plugging process and information gaps with point solutions. AXS-One Collaboration FrameWorks Solutions are tactical solutions that are designed to be implemented in days or weeks rather than months or years. The result is very focused projects, with short-term ROIs and without the risks normally associated with typical strategic IT initiatives. AXS-One Collaboration FrameWorks Solutions are deployed over the Internet and are based on a very robust web-services architecture.

        These solutions streamline the way companies do business with their suppliers, customers and trading partners. They provide more rapid access to key business information. AXS-One Collaboration FrameWorks Solutions address the following business areas:

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Risk Assessment and Resolution



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Aggregation and Distribution of Information and Reports



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Reconciliation, Exception and Dispute Resolution



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Improving Service Levels to Employees, Customers and Suppliers



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Automated Approval Processing



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Period-end Variance Analysis and Budgeting



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Help and Support Desk Management

Architecture

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

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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.

        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-business solutions. These products are built to promote collaborative business communications and integration through web services. e-Cellerator products have been designed by AXS-One to enable the design and creation of e-business solutions that connect 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 be interfaced to legacy systems through Application Programming Interfaces (API) available via web services and multiple messaging protocols, including XML, and can publish information via e-mails, reports, direct updates, messages, HTML pages or XML documents. AXS-One tools can transform various forms of information into standardized XML and store this information in an XML repository without the need for retrofitting a company's legacy applications.

        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 may be available on a variety of UNIX-based application servers—Sun Microsystems, Inc. (Sun), Hewlett-Packard Corporation (HP), and International Business Machines Corporation (IBM), as well as Intel-based servers running Windows 2000 and, starting in 2004, Windows 2003. Linux is available for certain solutions, but not deployed.

        The AXS Desk™ interface is a technology that sits on a web server and allows a user to access AXS-One solutions through an intuitive, browser interface that may be customized using an industry standard form design environment. AXS-One's traditional client/server solutions, which utilize a thin Microsoft VB forms-based client, are also available. Any mix of browser-based and VB-based interfaces may be used in a single implementation.

        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 web services architecture. AXS-One's e-Cellerator architecture is based on the latest technology, including web services, SOAP, XML, HTTP and other standards. This architecture provides a simple, firewall friendly, easily deployable web services

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interface. At the same time, this architecture provides for excellent scalability and reliability through the use of sophisticated resource pooling and request routing techniques.

        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.

        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 J2EE (including, for example, BEA WebLogic deployments). This allows customers to use these environments to take advantage of AXS-One web services.

        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. Application 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

        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.

        In June 2003, AXS-One announced the release of Enterprise 8w, a new version of its Foundation products built on a web services architecture. 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 architecture allows an organization to easily connect AXS-One systems with other internal systems and to integrate the systems of trading partners and customers into its processes.

        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-business solutions, customers often require extensive modifications to obtain the capabilities they desire. Some architectures provide this capability by requiring the customer to modify the

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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.

        By contrast, AXS-One's N-tier component based architecture allows customers to easily customize and extend the AXS-One applications without modifying the source code. The following types of customizations can be implemented without source code changes: changes to the presentation/user interface, extending process logic, application logic, validation rules, process rules, relational information model, inquiries, reports, and drill-down modules. In addition, web services provide direct access to application modules and to specific business components, facilitating integration and interoperability with other systems.

Integration and Interoperability

        AXS-One's e-Cellerator products now contain extensive support for XML-based processing. For example, AXS-One's Genex interfaces, which provide straightforward techniques for importing and exporting information, primarily utilize XML as the interface of choice.

        AXS-One's report generation sub-system (Epic) is optimized 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 archive and retrieve XML documents, providing a high performance repository of business information. Traditional reports can be converted into XML documents, creating new uses for existing reports.

        AXS-One's web services provide the ability to access and update information in batch or real-time using XML messages, allowing the solutions to be highly integrated and even 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.

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 2000/2003, as well as native RDBMS security on a per user, user group or system-wide basis. In 2003, the Foundation products were extended to support the use of LDAP servers (Lightweight Directory Access Protocol) as the repository for system user ID's and passwords. This allows customers to leverage this industry standard repository to manage user ID's.

        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. Our 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. Our Web Services provide a robust ticket-based security envelope, modeled on the Kerberos authentication protocol, to control user and application access to services and information.

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Client Services

        The Company considers its Client 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 client services program to handle the needs of its customers.

        As of December 31, 2003, the Company had 107 employees worldwide providing customer support, consulting and training services. To maintain a high standard of service, the Company requests customer evaluations of client support personnel on a quarterly basis. Incentive 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 a customer's implementation of the Company's products. Similar services are also provided for upgrades to later versions of the software 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

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courses vary in length from one to five days. Education services are also provided at the Company's international facilities in Australia, Singapore, South Africa and the United Kingdom.

Strategic Alliances and Business Partner Programs

        AXS-One's mission is to be a leading provider of e-business solutions. The solutions offered by the Company's product lines span a myriad of diverse industries. In order to keep pace with these markets, increase sales and deliver exceptional customer satisfaction, the Company realizes that it must leverage not only its own key resources but those of recognized "best of breed" providers of consulting and systems integration services, complementary software vendors and platform/technology leaders.

        Since its inception in 1978, the Company has established strategic alliances and relationships with a number of organizations as an integral component of its go-to-market strategy. The Company believes those relationships are important to the development, sales, marketing, integration, and support of its products. During 2004, the Company intends to continue to develop its strategic alliances and collaborate with hardware and software vendors, consulting firms, systems integrators and platform/technology firms.

        The Company's relationships with software and hardware vendors, systems integrators and consulting firms may provide marketing and sales leads to the Company's direct sales force and may expand the distribution of its products across industries through its alliance partners. The Company's strategic alliances and relationships may also assist the Company in keeping pace with the technological developments of major software and hardware vendors. However, no assurances can be given that these efforts will produce the desired results.

        The Company provides education, technical support and training services to its strategic business partners. The Company is planning new sales and marketing programs in 2004, including updates to its website, direct mailers and newsletters, to find and contact potential new 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, graphical user interfaces (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, 2003, the Company had 69 employees engaged in product development and engineering.

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Competition

        The e-business 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 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-business marketplace. In the web-based procurement market traditional ERP vendors, Ariba and others are in competition with our Procurement Manager Solution. Traditional competitors for the Company's AXSPoint Central product are IBM, Systemware, Mobius IXOS and others. The principal AXSPoint Solutions' competitors in the area of statement presentment include Mobius, Bluegill, Alysis and others. AXSPoint Solutions' competitors for the email and instant messaging compliance platform products include IBM, EMC (Legato), iLumin and KVS 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 its 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-business field has 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 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 for any reason or if any of these third parties were to cease doing business, the Company may be forced to

20

expend significant time and development resources to replace the licensed software. There can be no assurance that critical third party software could in fact be replaced on a timely or cost effective basis. 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 "AXS One®," the distinctive AXS-One logo, "Access Tomorrow Today®," "AXSPoint®," "TransAXS®," and "Computron®. 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, 2003, the Company had 250 full-time employees, 164 within the United States and 86 outside the United States, including 69 in product development and engineering, 107 in customer service and support, 36 in sales and marketing, 31 in finance, administration and executive management and 7 in Hospitality Warehouse. 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 previous history of net losses.

        Although AXS-One generated revenues and reduced costs sufficient to be profitable in 2002 and 2003, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future. AXS-One generated net income of $1.9 million and $2.3 million during the years ended December 31, 2002 and 2003, respectively, and incurred a net loss of $4.7 million for 2001. As of December 31, 2003, we had an accumulated deficit of $76.5 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 earn from 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,



•

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



•

competitive conditions in the industry and general economic conditions and

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•

unrest in the Middle East or other world events.

        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 markets in which we compete are intensely competitive.

        AXS-One cannot assure anyone that we will be able to compete successfully against current or future competitors or that competitive pressures will not have a material adverse effect on our business, operating results and financial condition. Our markets are intensely competitive and changing rapidly. A number of companies offer products similar to ours and target the same customers. We believe that our ability to compete depends upon many factors, many of which are not in our control, including, among others,

•

timing and market acceptance of new products and enhancements developed by us, as well as by our competitors,

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•

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 solutions are positioned in a 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-business marketplace. In the web-based procurement market traditional ERP vendors, Ariba and others are in competition with our Procurement Manager Solution. Traditional competitors for our client/server version of the AXSPoint Central product are IBM, Systemware, Mobius and others. The principal AXSPoint Solutions' competitors in the area of statement presentment include Mobius, Bluegill, Alysis and others. AXSPoint Solutions' competitors for the email and instant messaging compliance platform products include IBM, EMC (Legato), iLumin and KVS.

        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.

        As our markets continue to develop and expand, we expect established and emerging companies to compete with us due to the relatively low barriers necessary to enter the software market. We 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 alliances 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 our market share.

        Any of these factors would adversely affect our business, our operating results and financial condition.

AXS-One depends on a few principal products for its revenues.

        Substantially all of our revenues are derived from licensing and fees from related services of

•

AXS-One Enterprise Solutions and



•

AXSPoint Solutions

        We expect that these products and services will continue to account for substantially all of our revenues during 2004. 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.

        During 2003, certain customers did not renew their annual maintenance, primarily due to our customers being acquired or merged with companies using other software. We cannot assure anyone that this trend will not continue or that we will be able to maintain our existing customers.

        Additionally, during 2004, our AXS-One Enterprise Solutions and AXSPoint Solutions each need to gain greater market acceptance. If

•

demand in the market for our type of 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 has a concentration of revenues from certain customers.

        During the last three years, AXS-One has generated a significant amount of revenues from a select number of customers. Because of the size of certain of our customers, it is likely that they will continue to generate a significant portion of our revenues especially in our services revenue area. If any of these customers should discontinue their business with us it could have a material adverse affect on our business, operating results and financial condition. There is no assurance that we would be able to replace these lost revenues with revenues from new or other existing customers.

        For the year ended December 31, 2003, two customers, Pfizer, Inc. and AIG Insurance, represented 18.7% and 12.1%, respectively, of total revenues. For the year ended December 31, 2002, two customers, AIG Insurance and Pfizer, Inc., represented 12.0% and 16.1%, respectively, of total revenues. For the year ended December 31, 2001 one customer, Pfizer Inc., represented 12.1% of total revenues. License revenues included 29.5% of revenue from two customers in 2003, 14.7% from one customer in 2002 and 27.3% from one customer in 2001. Services revenues included 31.9% of revenue from two customers in 2003, 30.7% from two customers in 2002 and 14.6% from one customer in 2001.

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.

        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-business products that respond to evolving customer requirements and keep pace with technological development and emerging industry standards, such as new

•

operating systems,



•

hardware platforms,

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•

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.



•

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 or others. 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,



•

reporting software vendors, or



•

email system 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.

        Although we are currently in compliance with the continued listing requirements of the American Stock Exchange, as we have previously reported, that has not always been true in the past, and no assurances can be made that we will continue to be in compliance with those requirements in the future. In the event that we were to cease being in compliance with those requirements at some time in the future, the American Stock Exchange could choose to de-list our stock from trading on that Exchange. 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

25

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.

In the future, AXS-One may not have sufficient capital resources to fully carry out its business plans.

        Our ability to carry out our future business plans and achieve the anticipated results will be affected by the amount of cash generated from operations. There is also the risk that cash held by our foreign subsidiaries will not be readily available for use in our U.S. operations as the transfer of funds is sometimes delayed due to various foreign government restrictions. Accordingly, we may in the future be required to seek new sources of financing or future accommodations from our existing lender or other financial institutions, or we may seek equity infusions from private investors. We may also be required to further reduce operating costs in order to meet our obligations.

        On March 26, 2004, we amended our existing Loan and Security Agreement (see Note 3 to the Consolidated Financial Statements) to extend the termination date, from March 31, 2004 to May 28, 2004, to give both parties sufficient time to potentially enter into a new debt agreement. We still expect to pay the remaining amount due on the term loan by March 31, 2004 as required prior to this extension. We are currently in discussions with our existing lender and other financial institutions for possible future financing arrangements.

        However, no assurance can be given that management's initiatives will be successful or that any such additional sources of financing, lender accommodations or equity infusions will be available. As a result our business, operating results and financial condition could be adversely impacted.

AXS-One depends upon its proprietary technology and if we were 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 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-business field has seen an increase in the number of "business method" patents issued, and infringement claims asserted, based on these 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.

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A security breach could harm our business.

        Our products provide security features designed to protect its users' data from being retrieved or modified without being authorized. While AXS-One continues to review and enhance the security features in its products, we can make no assurances concerning the successful implementation of security features and their effectiveness within a customer's operating environment. If an actual security breach were to occur, our business, operating results and financial condition could suffer.

A variety of risks associated with AXS-One's international operations could adversely affect our business.

        Risks inherent in international revenue include the impact of longer payment cycles, greater difficulty in accounts receivable collection, unexpected changes in regulatory requirements, tariffs and other trade barriers, and difficulties staffing and managing foreign operations. In addition, most of our international license fees and services revenues are denominated in foreign currencies which can have an impact on our consolidated revenues as exchange rates fluctuate. With respect to our international sales that are U.S. dollar denominated, decreases in the value of foreign currencies relative to the U.S. dollar could make our products less price competitive. These factors may have a material adverse effect on our future international revenue.

        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. As a result, we expect that revenues from customers outside the United States will continue to represent a significant percentage of our total revenues in the future. 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 Central and Eastern Europe (C.E.E.) subsidiary during 2001, upon revenues from our foreign customers. In 2003, 2002 and 2001 the Company's total revenues from customers outside the United States were as follows: