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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2002

[  ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Commission File No. 000-30389

EXE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware
(State or other jurisdiction of incorporation or organization)

75-1719817
(I.R.S. Employer Identification No.)

8787 Stemmons Freeway
Dallas, Texas 75247
(Address of principal executive offices)

(214) 775-6000
(Registrants telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

|                         |  |                                  
|------------------------ |  | ---------------------------------
|Title of Each Class
None |  | Exchange on Which Registered
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $0.01 par value

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes   [X]   No   [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes   [  ]   No   [X]





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The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of common stock as of the last
business day of the registrants most recently completed second fiscal quarter
as reported on the NASDAQ National Market, was approximately $25.6 million.

As of March 14, 2003, the Registrant had 6,665,681 outstanding shares of common
stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants definitive Proxy Statement for the 2003 Annual
Meeting of Stockholders, which will be filed with the Securities and Exchange
Commission within 120 days of the Registrants fiscal year end, are
incorporated by reference into Part III hereof.

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|                                                   |                                                                                                                    |  |  |  |  |  |  | 
|-------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|PART I                                            
|                                                   | ITEM 1. BUSINESS                                                                                                  
|                                                   | ITEM 2. PROPERTIES                                                                                                
|                                                   | ITEM 3. LEGAL PROCEEDINGS                                                                                         
|                                                   | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                       
|PART II                                           
|                                                   | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                     
|                                                   | ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA                                                                      
|                                                   | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                      RESULTS OF OPERATIONS
|                                                   | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                               
|                                                   | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                               
|PART III                                          
|                                                   | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                      
|                                                   | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                       
|                                                   | ITEM 11. EXECUTIVE COMPENSATION                                                                                   
|                                                   | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS           
|                                                   | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                           
|                                                   | ITEM 14. CONTROLS AND PROCEDURES                                                                                  
|PART IV                                           
|                                                   | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                                          
|SIGNATURES                                        
|CERTIFICATION                                     
|CERTIFICATION                                     
|INDEX TO EXHIBITS                                 
|EX-10.15 Employment Agreement - Joseph L. Cowan   
|EX-10.16 Separation Agreement - Kenneth Powell    
|EX-10.17 Loan and Security Agreement              
|EX-10.18 Negative Pledge Agreement                
|EX-23.1 Consent of Ernst & Young LLP              
|EX-99.1 Certification Pursuant to 18 USC Sec. 1350



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Table of Contents

Form 10-K

|                               |                                                                                                |     
|------------------------------ | ---------------------------------------------------------------------------------------------- | ----
|                               |                                                                                                | Page
|                               |                                                                                                |     
|PART I                         |                                                                                                |     
|Item 1.                        | Business                                                                                       | 4   
|Item 2.                        | Properties                                                                                     | 15  
|Item 3.                        | Legal Proceedings                                                                              | 15  
|Item 4.                        | Submission of Matters to a Vote of Security Holders                                            | 15  
|PART II                        |                                                                                                |     
|Item 5.                        | Market for Registrants Common Equity and Related Stockholder Matters                          | 17  
|Item 6.                        | Selected Consolidated Financial Data                                                           | 18  
|Item 7.                        | Managements Discussion and Analysis of Financial Condition and Results
of Operations          | 19  
|Item 7A.                       | Quantitative and Qualitative Disclosures About Market Risk                                     | 42  
|Item 8.                        | Financial Statements and Supplementary Data                                                    | 43  
|Item 9.                        | Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure           | 70  
|PART III                       |                                                                                                |     
|Item 10.                       | Directors and Executive Officers of the Registrant                                             | 70  
|Item 11.                       | Executive Compensation                                                                         | 70  
|Item 12.                       | Security Ownership of Certain Beneficial Owners and Management and
Related Shareholder Matters | 70  
|Item 13.                       | Certain Relationships and Related Transactions                                                 | 70  
|Item 14.                       | Controls and Procedures                                                                        | 71  
|PART IV                        |                                                                                                |     
|Item 15.                       | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                | 72  
|Signatures                     | 73                                                                                            
|Certifications                 | 74                                                                                            
|Index to Exhibits and Exhibits | 76                                                                                            

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Special Note Regarding Forward-Looking Statements

In addition to historical information, this Annual Report on Form 10-K
contains forward-looking statements. Any statements contained herein
(including, without limitation, statements to the effect that EXE or its
management believes, expects, anticipates, plans, estimates,
predicts, seeks, intends and similar expressions) that relate to future
events or conditions should be considered forward-looking statements. The
forward-looking statements are made pursuant to safe-harbor provisions of the
Private Securities Reform Act of 1995. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those reflected in these forward-looking statements.
Factors that might cause such a difference include, but are not limited to;
those discussed in the section entitled Managements Discussion and Analysis
of Financial Condition and Results of Operations - Certain Factors That May
Affect Future Results and in subsequently and previously filed reports.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect managements opinions only as of the date hereof. We
undertake no obligations to revise or publicly release the results of any
revision to these forward-looking statements, whether as a result of new
information, future events or otherwise.




PART I




ITEM 1. BUSINESS

Overview

EXE Technologies, Inc. (the Company) provides software that drives
customers supply chain execution processes, including fulfillment,
warehousing, distribution and inventory management. Our software allows
companies to efficiently manage and control the flow of inventory throughout
the supply chain. Companies use our software to increase revenue, reduce
distribution costs, manage inventory across the supply chain and improve
customer loyalty and satisfaction. We provide global service and support for
our software from established facilities in North America, Europe, the Middle
East, Asia, Australia and through partners in Latin America. Revenue from our
international operations for the year ended December 31, 2002 was approximately
$38.4 million, or 52.2% of our total revenue, and for the year ended December
31, 2001 was approximately $45.4 million, or 46.6% of our total revenue.

We sell our software worldwide through a direct sales force and through
strategic alliances with complementary software vendors, resellers and
consulting organizations. We target companies in industries characterized by
large product selections, high transaction volumes and increasing demands for
customer-specific order processing, including traditional and
direct-to-consumer retailers, manufacturers and outsourced logistics providers.

We began operations as a Delaware corporation under the name EXE
Technologies, Inc. following the acquisition of Dallas Systems Corporation
(Dallas Systems) by Neptune Systems, Inc. (Neptune) in September 1997. For
accounting purposes, the acquisition was accounted for as a purchase of Dallas
Systems by Neptune. Prior to the acquisition, Neptune was focused on
delivering packaged supply chain execution software solutions primarily for
manufacturing and third party logistics companies. Dallas Systems was focused
on the development and sale of supply chain execution software solutions,
primarily for retail companies, capable of operating in complex business
environments. Dallas Systems also provided implementation and consulting
services.

In response to our declining revenues over the past two years, we have
implemented several plans to reduce our costs. In 2001, we reduced our global
headcount by over 17% and abandoned certain excess leased facilities.
Additionally, during the last half of 2002, we took a number of actions to
further reduce our cost structure to more closely align with our current levels
of revenue. These actions included, among other things, the closure of our
Philadelphia office, consolidation of our North American professional services and development operations in Dallas and expanding
our lower cost offshore

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development activities. Our global headcount was
lowered an additional 17% in 2002. Also, several changes to our executive
management team were made during the year. Our new Chief Financial Officer,
Kenneth R. Vines, was hired in May, we eliminated the Chief Operating Officer
position in October and our new Chief Executive Officer, Joseph L. Cowan, was
hired in November 2002. The former Chief Executive Officer, Raymond R. Hood,
retained his position as Chairman of the Board of Directors.

Industry Background

In recent years, supply chain operations have come under pressure
from a variety of market and economic factors. The sales channels deployed by
most companies have grown in both number and complexity. Companies who
previously sold to a single class of customers now sell to multiple classes of
customers through multiple distribution channels, including traditional retail,
direct-to-consumer, through partners and others. Competition has intensified as
customers have more options for purchasing goods and services and higher
expectations for immediate availability at an attractive price. Furthermore,
companies now buy supplies and sell products to customers around the world,
requiring more elaborate logistics frameworks, including multiple modes of
travel and the requirement to comply with international customs regulations. To
address these new challenges, companies are opening up their systems to their
suppliers, customers and partners, requiring the capability to communicate with
industry standard technologies that is not present in existing legacy systems.

The ability to manage inventory is a key element in determining a
companys financial performance and its ability to satisfy customer demands.
Over the years businesses have deployed various technologies to reduce
inventory levels, improve inventory turns and ensure that products available
for sale are aligned with customer purchasing requirements. Warehouse
management systems have traditionally been deployed to manage resources within
a distribution center, including space, labor, equipment tasks and material
flows.

More recently, the Internet emerged as a powerful global commerce and
communications medium, creating opportunities for companies to conduct business
and interact directly with their suppliers and customers. We believe that the
rise of the Internet has established a common platform and standards, creating
the opportunity to bring increased efficiency to supply chain operations.
However, the new relationships created between buyer and seller are driving a
fundamental change in order execution and fulfillment, requiring increased
synchronization and collaboration among the parties. Since competitive
information is easily accessible over the Internet, companies are finding it
increasingly difficult to differentiate their offerings solely on product,
location or price. Accordingly, we believe that companies must distinguish
their product and service offerings by providing reliable delivery and
value-added services during the fulfillment process according to the consumers
individual preferences.

We believe the challenges of modern supply chain execution are more
complex than those in the past. These challenges include:



| |  |  | managing complex fulfillment processes across the supply chain;                                                                                                   
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | facilitating visibility of inventory, delivery and order status to both customers and suppliers;                                                                  
|
| |  |  | accurately forecasting demand and planning inventory and replenishment;                                                                                           
|
| |  |  | providing personalized service during fulfillment, including
value-added services such as customer-specific marketing, product
assembly and product configuration;
|
| |  |  | developing global fulfillment capabilities;                                                                                                                       
|
| |  |  | processing orders from multiple media, including the Internet,
facsimile, electronic data interchange and telephone;                                              
|
| |  |  | handling significant and rapid increases in the volume of
transactions;                                                                                           

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| |  |  | determining optimal locations from which to ship and optimal
methods of how to ship inventory; and
| | - |  | --------------------------------------------------------------------------------------------------
|
| |  |  | controlling reverse logistics functions such as product recall and
product returns.               

In addition to these challenges, companies are faced with the task of
rapidly developing their new supply chain capabilities in response to the
increased competition for customers.

Traditionally, supply chain execution systems have been highly customized,
difficult to upgrade and have required costly and lengthy implementations.
Moreover, many companies that implemented traditional systems have found that
their existing systems do not readily support the proliferation of trading
partners and sales channels and do not allow them to provide value added,
customer-specific order completion on a global scale. In addition, legacy
systems are unable to provide the real-time access to supply chain data to
interact with newer supply chain planning, optimization, procurement and
commerce applications. As a result, we believe many companies must invest in
and deploy new supply chain execution software to satisfy their customers, to
remain competitive and to achieve optimal operating efficiency and financial
performance.

The EXE Technologies Solution

Our software provides control over fulfillment processes both inside the
four walls and yard operations of logistics centers and across a companys
entire supply chain network. It manages the fulfillment of orders initiated
through both traditional and direct-to-consumer sales channels. Our software
gives customers and suppliers a real-time view of customer fulfillment and
provides the basis for developing improved inventory management, demand
planning, replenishment planning, procurement, logistics and distribution
processes and personalized customer-specific order fulfillment. In addition, we
complement our software with a global professional services organization, which
facilitates implementation, integration and modification of our software to
meet the specific needs of our customers.

We provide the following benefits to our customers:



| |  |  | Reduced Costs and Improved Efficiency. We believe our software
offers customers the opportunity to reduce operating costs by
automating and streamlining many of the labor-intensive processes in
both traditional and direct-to-consumer related logistics, distribution
and inventory management operations. Our software allows companies to
implement industry best practices to reduce inventory handling and
obsolescence, increase inventory turnover and optimize labor
requirements.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Increased Revenue Through Reduced Time to Enter New Markets. We
believe our software provides all of the functionality necessary for
fulfillment in a single, packaged solution. Our easy-to-install
applications reduce the time it takes for companies to launch new
products, enter new geographic markets, or enhance direct-to-consumer
initiatives, while simultaneously automating their traditional supply
chains.                                                                   
|
| |  |  | Supply Chain Wide Process Management. Our software enables
companies to exercise control over processes that span the supply
chains of both their suppliers and customers. These processes may
include product recall, returns processing, and merge-in-transit. By
automating these workflows and combining them with execution
capability, companies are able to maximize the utilization of their
supply chain network to reduce costs and improve revenue.                               
|
| |  |  | Customer-Specific Fulfillment.Our software allows companies to
treat each transaction individually by automating and coordinating
complex fulfillment, assembly, product configuration and customer-specific marketing campaigns across multiple
sales channels.                                                                                                                                                                                                                             

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| |   |  | Through the personalization of each customer order,
companies are able to enhance customer interaction and maximize customer
retention.                                                                                                                                                                                                                                                                                                                                                                                 
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Flexibility and Reliability.Our software has the flexibility to be
deployed across most major computer systems and can operate in a hosted
environment. Our software is expandable to meet growing client needs,
which is increasingly critical in direct-to-consumer fulfillment
environments, as well as in broader enterprise environments that
support multiple sales channels. Our software has been proven reliable
in high volume businesses that distribute through retail stores or sell
directly to customers.
|
| |  |  | Visibility.Our software provides a real-time view of customer
fulfillment activities and order status across multiple channels and
platforms. This allows suppliers to track orders and to implement
targeted marketing campaigns at strategic times during the fulfillment
cycle.                                                                                                                                                                                                                                      
|
| |  |  | Global Capability.Our software currently operates in 23 languages
and is designed to accommodate rapid translations of product upgrades.
In addition, we and/or our partners provide local service and support
from established facilities in North America, Europe, the Middle East,
Asia and Australia. We believe that our global presence benefits our
customers by providing localized service and global customer support.                                                                                        
|
| |  |  | Adaptability for Complex New Business Models.Our software is
designed to handle complex logistics situations. This adaptability is
increasingly critical for third-party logistics providers and exchanges
where the ability to handle products owned by multiple companies is
fundamental to their success.                                                                                                                                                                                                            

Strategy

Our goal is to be the leading global provider of supply chain execution
software. To achieve this goal, we plan to:



| |  |  | Take Advantage of Our Experience and Established Market Position.
We intend to continue to leverage our market position, our strategic
relationships and our brand recognition from the traditional warehouse
management and distribution market to increase our share of the supply
chain execution market. We intend to concentrate our efforts in the
high volume retail and third party logistics market segments where we
have a proven track record and deep domain knowledge.                                                                                                                                                                                                                                              
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Use Our International Infrastructure to Gain Global Market Share.
We believe there continues to be significant demand for our software
solutions in international markets and have established a global
infrastructure to target leading businesses worldwide. We provide
sales, service and support from locations in North America, Europe, the
Middle East, Asia and Australia. We intend to expand our global partner
channels. Our software is installed in over 35 countries and currently
operates in 23 languages, including English, Chinese, French, German,
Japanese and Spanish. We intend to leverage our infrastructure to meet
the needs of international organizations that have global supply chain
requirements.
|
| |  |  | Expand Our Strategic Alliances.We have established strategic
alliances with industry-leading consultants and software systems
implementers to supplement our direct sales force and professional
services organization. These alliances help extend our market coverage
and provide us with new business leads and access to trained
implementation personnel, which we believe are crucial to the
deployment of complex software solutions. We also have alliances with
complementary software vendors that allow us to offer a comprehensive
fulfillment and supply                                                                                                                                                             

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| |   |  | chain execution solution. We intend to continue to seek to expand the
number of companies with which we work to further penetrate our global
market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Enhance Our Solutions.We intend to focus on offering solutions
linking our customers operational results to financial improvements.
We also have enhanced our products by releasing upgrades and
introducing value-added modular components. We believe our customers
will continue to demand greater breadth and depth from our solutions,
and we intend to broaden our product offerings to integrate additional
functionality and new technologies such as voice data capture, radio
frequency identification and web services. Our ability to easily add
software modules allows us to rapidly introduce new product features
and functionality and to penetrate accounts that are in various stages
of developing and implementing their business strategies. Our
feature-rich products mean fewer customizations and simpler, less
costly implementations.
|
| |  |  | Expand Our Addressable Market Opportunity within Supply Chain
Execution.We intend to extend our product suite to address more of the
business processes related to supply chain execution outside the four
walls and yard operations of a distribution center. We plan to leverage
the EXceed AIM product, our adaptive inventory management solution, to
provide better inventory management along the entire supply chain from
the retail store to the distribution center to the factory warehouse.
Our SNx product, based on agent technology, offers a unique capability
in supply chain process execution that allows applications and systems
from different vendors throughout the complete supply chain to interact
and optimize performance.                                                                                                           
|
| |  |  | Provide Real-time Visibility of the entire Supply Chain.
Visibility by management into what is happening on a real-time
throughout their supply chain is key to future success for our
customers. Our EXceed SNx, Analyze, Portals and Data Exchange products
are the foundation for expanding
our ability to give customers management information that provides complete control over their supply
chains.                                                                                                                                                                                                                                                                                                                                                                                                                                                     

EXE Software

Our EXceed software allows companies to deploy integrated fulfillment
solutions across multiple distribution centers utilizing multiple computer
systems and the Internet. The software includes functionality for:



| |  |  | operating high-volume fulfillment centers;                                              
| | - |  | ----------------------------------------------------------------------------------------
|
| |  |  | creating customer-specific fulfillment services;                                        
|
| |  |  | integrating fulfillment centers to web sites and planning engines;                      
|
| |  |  | optimizing fulfillment center layouts;                                                  
|
| |  |  | connecting multiple centers with each other and other e-commerce and enterprise systems;
|
| |  |  | managing inventory including demand forecasting and replenishment planning; and         
|
| |  |  | controlling supply chain wide processes through software agents.                        

Our EXceed software is designed to run on the most widely used hardware,
operating system and database platforms, offering a unified architecture and
creating a consistent display of the data to all concurrent users. Depending on our customers specific needs, EXceed
software can be deployed on the

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UNIX environments, Windows NT/2000, IBM O/S 390
and AS 400 operating systems with Oracle, SQL Server, Informix or DB2 as the
database engine.



| |   |  | Our EXceed software products include:                                                                                                                                                                                                                                                                                                                    
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | EXceed Fulfill  provides the base functionality for managing and
controlling operations within the fulfillment center, including
receiving, stocking, picking, replenishment, product configuration,
packing, shipping, radio frequency support, quality assurance,
inventory control, reporting and tax management. Our EXceed Fulfill
modules include:



| |  |  | Value - Automates customer-specific marketing activities and
other more complex make-to-order operations.                                                                                                          
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Crossdock - Merges inbound products shipped directly from
suppliers with inventoried products in a high speed fashion.                                                                                             
|
| |  |  | Billing - Generates activity-based charges for storage and
labor to charge to customers or divisions.                                                                                                              
|
| |  |  | Optimize - Simulates and optimizes the attributes of a
fulfillment center.                                                                                                                                         
|
| |  |  | Appointment - Schedules and coordinates shipping and
receiving functions with transportation.                                                                                                                      
|
| |  |  | Labor - Enables labor management and control by time and
attendance measurement, assignment monitoring, reasonable
expectancies and engineered labor standards.                                                    
|
| |  |  | Yard - Automates and manages tasks associated with trailers
within the property boundaries of a distribution center.                                                                                               
|
| |  |  | Analyze - Provides industry and process specific key
performance indicators for analyzing foundation data repository.                                                                                              
|
| |  |  | Data Exchange - Highly configurable package that easily
enables integration requirements across a full suite of exchange
protocols and can be configured easily to exchange business data
with enterprise partners.
|
| |  |  | Warehouse Planner - Optimizes the fulfillment process for
outbound shipments to maximize the utilization of existing
resources.                                                                                    
|
| |  |  | Voice  Enables voice-directed order picking to enable
hands-free data and order collection.                                                                                                                       



| |  |  | EXceed Collaborate  allows users, suppliers and customers to
manage workflows and share information across our applications, third
party applications and networks of fulfillment centers. Our component
products include:
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sentinel - Automates quality processes, enables product
traceability, tracks and manages shelf life and expiration dates,
and facilitates product recall activities.                  
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Portals - Enables third-party software to link customers and
suppliers to fulfillment centers over the Internet, allowing them to
view, update and modify inventory levels and status.



| |  |  | EXceed AIM (Adaptive Inventory Manager)  is a decision support
tool for buyers and planners to forecast demand, generate purchase
orders, size orders, allocate product and perform other functions
necessary to support the inventory decision-making process.                                                                                                                                                                                                                                   
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | EXceed SNx (Supply Network Execution)  is a visibility and
business process management solution designed to continuously monitor
and coordinate execution in complex supply networks. The system
continuously monitors supply chain processes, analyzes supply chain
events and projects future events and requirements. The software
automatically adapts execution plans and coordinates the flow of goods
to resolve exceptions inherent in the real world execution within the
supply network.

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EXE Product Packaging and Pricing

We offer a variety of packaging options for our software. These options
allow us to market our technology to companies in various stages of executing
their fulfillment strategies. For example, customers seeking an enterprise
fulfillment solution may license our EXceed Fulfill and Collaborate products,
including all associated components. Companies pursuing less comprehensive
initiatives may license single components as stand alone applications, with
additional software components to be added later. Flexible packaging options
allow our customers to make investments in our technology without necessarily
committing to a larger enterprise platform.

We offer a variety of pricing options that allow our customers to purchase
our software for a defined number of users at a single site, a business unit or
an entire enterprise. License fees for our products typically range from
approximately fifty thousand dollars to several million dollars. We have
recently introduced additional pricing options that we believe will allow us to
expand our market presence with small to medium-sized companies.

Professional Services

We offer a range of professional services that help facilitate the
successful implementation and integration of our software with our customers
existing systems. Our professional services include implementation project
management, interfacing to existing systems, on-site software training,
operational engineering, industrial engineering, software modification and
supply chain consulting. Our professional services are billed on a time and
material basis or, when requested, on a fixed fee basis.

Our internally developed Global Execution Methodology, or GEM, is a nine
step uniform process for implementing our software. GEM is supported by a
globally deployed software application that aids in planning, change management
and quality control during the implementation process. The application allows
our professional services staff, customers and alliance companies to access
project information on a global basis. Our professional services group is ISO
9001 certified.

Our professional services personnel have extensive experience in the
deployment of fulfillment systems. We assist companies in the implementation of
our software and we help them determine how to use our technology in a way that
fits their individual fulfillment strategy. We can, if requested, adapt the
software to specific customer business practices.

We believe that the use of outside consulting and service providers is an
important component of our strategy to expand our professional services
business and support the growth in our software license revenue. We currently
intend to expand our relationships with, and reliance on, strategic alliance
companies and consultants. We also believe this will allow us to manage the
growth of our own professional services group without affecting other parts of
our business.

We provide a comprehensive upgrade and support program through which our
customers, should they choose to participate, can receive upgrades to our
licensed products and access to our support center. These services are
typically offered under annual upgrade and support contracts. Our support
center is open year round, seven days per week and twenty-four hours per day.
Our support center can remotely access the customers systems and provide
on-line assistance, diagnostics and software upgrades.

We also offer an intensive education and training program for our
customers, employees and third party service providers, either at our offices
or at the customers site, through our EXE University. Students who are
certified by EXE University are qualified to implement our software. EXE
University also offers an accreditation program for those wishing to train
others. We currently offer training in North America, Europe, Asia and
Australia.

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Sales and Marketing

We have multi-disciplined sales teams that consist of sales, technical,
and sales support professionals. Our senior management also takes an active
role in our sales efforts. We market and sell our software through our direct
sales force, which is located in North America, Europe, the Middle East, Asia
and Australia, and through our strategic alliances. In North America, our sales
organization is focused on targeted vertical markets and geographic regions,
with resources assigned to retail, manufacturing and third-party logistics. In
Europe and Asia, our sales organization is deployed by geographic region, but
targets the same vertical markets as in North America.

We have sales offices in the Dallas, London, Paris, Amsterdam, Munich,
Dubai, Tokyo, Seoul, Hong Kong, Singapore, Kuala Lumpur, Melbourne and Shanghai metropolitan areas. We also supplement our sales organization with our Alliance Sales Program. We
use this program to sell to companies around the world that we do not service
directly and to supplement our sales initiatives in certain overseas markets.

Our marketing organization uses a variety of programs to support our sales
efforts, including:



| |  |  | market and product research and analysis;            
| | - |  | -----------------------------------------------------
|
| |  |  | product and strategy updates with industry analysts; 
|
| |  |  | public relations activities and speaking engagements;
|
| |  |  | Internet-based and direct mail marketing programs;   
|
| |  |  | seminars and trade shows;                            
|
| |  |  | brochures, data sheets and white papers; and         
|
| |  |  | web site marketing.                                  

Financial information regarding our operating segments and foreign and
domestic operations is presented in Note 18 of the Notes to the Consolidated
Financial Statements included in Item 8. Financial Statements and Supplementary
Data.

Strategic Alliances and Relationships

Another key element of our growth strategy is the formation of strategic
relationships with industry leaders whose business offerings complement our
own. We believe that these relationships will allow us to scale our business
rapidly and effectively by enabling the expansion of our:



| |  |  | global brand;                                                                               
| | - |  | --------------------------------------------------------------------------------------------
|
| |  |  | qualified sales opportunities;                                                              
|
| |  |  | capacity to effectively implement our software offerings for new and existing customers; and
|
| |  |  | ability to deliver enhanced value to our customers.                                         

We have established relationships with large, international systems
integrators and consulting services companies, including Cap Gemini Ernst &
Young and IBM Global Services. Under these relationships, we provide referrals
for services work or subcontract work to these companies in connection with the
installation of our software. These companies may provide referrals of
potential licensees to us. In general, the relationships are governed by
short-term, non-exclusive, renewable written or oral contracts, with limited or
no up-front financial commitments. Some of the contracts provide for compensation to the referring party, typically in the form of a commission
or finders fee upon conclusion of a transaction.

11



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During 2002, we expanded our relationship with IBM. We
granted IBM warrants to purchase 142,857 shares of common stock of the Company.
Under the agreement, IBM warrants vest based on predetermined quarterly
software license revenue that we achieve over a three-year period from our
relationship with IBM.

We intend to expand these relationships and add new relationships to
increase our capacity to sell and implement our products on a global basis. Our
existing alliances have been aligned to coincide with our target vertical
markets. We intend to continue to pursue relationships that enhance our
strategy in industry-specific marketplaces.

We also have relationships with vendors of complementary software
including IBM, Microsoft and Oracle. In general, the relationships are
governed by short-term, non-exclusive, renewable contracts, with limited or no
up-front financial commitments. These relationships typically involve reseller
or marketing arrangements, or both, under which the vendor compensates the
reseller or marketer in the form of discounts or commissions. We intend to
pursue additional relationships with vendors of complementary software to
increase our ability to deliver enhanced value to our customers.

We also have alliance relationships with hardware vendors such as
Hewlett-Packard, IBM, Intermec, Sun Microsystems and Symbol Technologies. We
act as a marketer or reseller, or both, of their server and radio frequency
hardware. In general, the relationships are governed by short-term,
non-exclusive, renewable written or oral contracts, with limited or no up-front
financial commitments. We receive discounts or commissions as compensation for
sales under some of these relationships. We intend to pursue additional
technology relationships that we believe will increase our value to potential
customers, expand our ability to offer integrated enterprise solutions and
increase our market opportunities.

Customers

We have targeted and will continue to target selected vertical industries
characterized by large product selections, high transaction volumes and
increased demands for personalized fulfillment, including traditional and
direct-to-consumer retailers, manufacturers and outsourced direct-to-consumer
and third-party logistics providers.

Our top five customers, in the aggregate, accounted for 15.8%, 13.4% and
19.3% of total revenues excluding reimbursable expenses, in the years ended
December 31, 2000, 2001 and 2002, respectively. No single customer accounted
for 10% or more of our revenue during any of the three years ended December 31,
2002.

Our license agreements with our customers are typically perpetual in
duration. Our support and upgrade services contracts ordinarily are annual
contracts, subject to renewal. Our professional services agreements are
relatively short in duration, lasting anywhere from a few months to a year,
depending on the project requirements.

Research and Development

Our research and development team is responsible for product planning and
design, development of functionality within the EXceed Fulfill, Collaborate,
AIM and SNx products and general release and quality assurance functions. Our
research and development group is ISO 9001 certified.

In October 2002, we signed a contract with a company in India to provide
offshore development services at a significantly lower cost than in the United
States. The agreement is for three years and at the end of 2002 there were 30
contract engineers working full time on our development projects.

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We also use third-party resources to augment our own development efforts
for specific projects from time to time. We believe this provides us access to
a skilled labor pool, more rapid development cycles and a cost-effective
solution to our research and development needs. In addition, we complement our
product suite with certain specialized products developed by third parties
including Boomi, C3 Solutions, St. Onge and Intellicyber. We distribute these products
under the EXE name and pay a royalty to the vendor as these products are sold.

During the years ended December 31, 2000, 2001 and 2002 we invested
approximately $9.6 million, $14.6 million and $12.1 million, respectively, in
research and development.

Competition

The market for fulfillment solutions is intensely competitive, fragmented
and subject to rapid technological change. The principal competitive factors in
this market include:



| |  |  | adherence to emerging technology standards;                         
| | - |  | --------------------------------------------------------------------
|
| |  |  | comprehensiveness of applications;                                  
|
| |  |  | adaptability and flexibility;                                       
|
| |  |  | immediate, interactive capability with customer and partner systems;
|
| |  |  | financial viability;                                                
|
| |  |  | global capability;                                                  
|
| |  |  | references from existing customers;                                 
|
| |  |  | industry domain experience and expertise;                           
|
| |  |  | ability to support specific industry requirements;                  
|
| |  |  | ease of application use and deployment;                             
|
| |  |  | speed of implementation;                                            
|
| |  |  | customer service and support; and                                   
|
| |  |  | initial price and total cost of ownership.                          

We believe that we compete favorably with competitors in terms of our
technology, service and support, global presence, targeted vertical focus, and
comprehensiveness of our solutions.

Our competitors include companies or groups that:



| |  |  | focus on providing fulfillment applications, such as Catalyst
International, Inc., Highjump, Logility, LIS, Manhattan Associates,
Optum, Inc., Red Prairie and Provia;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | offer enterprise platforms for order management, fulfillment and
inventory management, such as Yantra, Oracle, JDA, Retek, and SAP; and                               
|
| |  |  | service internal customers, such as internal information technology
groups.                                                                                           

There are a substantial number of other companies focused on providing
Internet-enabled software applications for fulfillment or related supply chain
functions that may offer competitive products in the future.

13



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We expect competition to increase as a result of software industry
consolidation. For example, a number of enterprise software companies have
acquired point solution providers to expand their product offerings. Our
competitors may also package their products in ways that may discourage users
from purchasing our products. Current and potential competitors may establish
alliances among themselves or with third parties or adopt aggressive pricing
policies to gain market share. In addition, new competitors could emerge and
rapidly capture market share.

Intellectual Property

Our intellectual property rights are significant and are critical to our
success and our ability to compete. We rely on intellectual property laws,
including copyright, trademark, trade secret and other laws, confidentiality
procedures and contractual provisions to protect our proprietary rights in our
products and technology. Under the terms of our agreements with our customers,
we usually own all modifications to our software that are implemented for a
customer. We believe, however, that these steps to protect our intellectual
property afford only limited protection to us, particularly on an international
basis. We do not currently have any patents issued or patent applications
pending. We give some of our customers, alliance companies, resellers and
development partners access to our software program instructions, or source
code, and other intellectual property in certain limited circumstances when
necessary to facilitate a project. In addition, our source code is held in
escrow to be released to customers on specific events such as bankruptcy or
inability to provide contractually obligated support. Access to our source code
may create a risk of disclosure or other inappropriate use. Despite our
contractual protections, this access could enable a third party to use our
intellectual property, including our source code, to wrongfully develop and
manufacture competing products. In addition, policing unauthorized use of our
products is difficult.

We cannot be certain that others will not independently develop
substantially equivalent or better intellectual property, gain access to our
trade secrets or intellectual property, or disclose our intellectual property
or trade secrets. We also conduct a substantial amount of business abroad, and
the laws of many foreign countries do not protect our intellectual property to
the same degree as the laws of the United States.

Also, we may desire or be required to renew or to obtain licenses from
others to enable us to develop and market commercially viable products and to
run our internal software systems, including for financial reporting and other
purposes. We can give no assurances that any necessary licenses will be
available on reasonable terms in the future, if at all.

From time to time, third parties may assert claims or initiate litigation
against us or our alliance companies alleging that our products infringe their
proprietary rights. As the number of fulfillment and supply chain execution
applications in the industry increases and products overlap, we may become
increasingly subject to claims of infringement or misappropriation of the
intellectual property rights of others. In addition, we may in the future
initiate claims or litigation against third parties for infringement of our
proprietary rights to determine the scope and validity of our proprietary
rights. Litigation claims, with or without merit, could be time-consuming and
costly, divert managements attention, cause product shipment delays, and
require us to develop non-infringing technology or enter into royalty or
licensing agreements. Royalty or licensing agreements, if required, may not be
available on acceptable terms, if at all.

We have received notices from five customers requesting defense and
indemnification for patent claims in lawsuits brought or threatened against
them by a third party with respect to the use of bar code technology. We are currently investigating these claims. We have become
aware that several manufacturers of bar code scanning equipment are challenging
the underlying patents in a separate lawsuit, and we continue to monitor the
progress of this litigation. Based on our investigation to date, we do not
believe that we have an obligation to defend or that we ultimately will have
liability for the indemnification requests of customers. However, if the
various disputes are resolved unfavorably to us,

14



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then they could have a
material adverse effect on our business, operations and financial condition.
For example, we may be required to modify our software, obtain additional
licenses and defend and indemnify our customers. Furthermore, our future
customers may be required to obtain additional licenses in order to use our
software.

Employees

As of December 31, 2002, we had a total of 431 employees, of which 90 were
in research and development, 74 were in sales and marketing, 70 were in finance
and administration, and 197 were in professional services and support. None of
our employees are represented by a labor union. We have not experienced any
work stoppages and consider our relations with our employees to be good. In
January and February 2003, we reduced our headcount by approximately 50
additional employees as a part of our cost reduction activities discussed elsewhere
herein.

Foreign Operations

In 2000,
2001 and 2002 the revenues from our foreign operations were $47.0
million, $45.4 million, and $38.4 million, respectively. At December 31, 2000,
2001, and 2002, the assets, net of intercompany receivables and
payables, from our foreign operations were $23.5 million,
$22.5 million and $17.9 million, respectively. Financial information
regarding our operating segments and foreign and domestic operations is
presented in Note 18 of the Notes to the Consolidated Financial Statements
included in Item 8. Financial Statements and Supplementary Data.




ITEM 2. PROPERTIES

Our corporate headquarters occupy approximately 195,000 square feet in
Dallas, Texas. Our lease for this facility expires in January 2015. We
currently occupy approximately less than 50% of this leased facility. A
substantial portion of the remaining space has been abandoned and we are
currently attempting to sublease this space. In the last half of 2002, we
terminated our facility lease for 21,000 square feet in Philadelphia,
Pennsylvania and agreed to pay a termination fee of approximately $400,000.
This fee was included in special charges provided in the Statement of
Operations for 2002. We also lease offices in London, Paris, Amsterdam, Munich,
Dubai, Tokyo, Seoul, Hong Kong, Kuala Lumpur, Singapore, Melbourne and Shanghai. We believe these facilities will
be adequate to meet our needs for the next 12 months.




ITEM 3. LEGAL PROCEEDINGS

We are engaged in legal proceedings incidental to the normal course of
business. Although the ultimate outcome of our pending legal proceedings cannot
be determined, we believe that the final outcome of these matters will not
seriously harm our business. Information concerning asserted and potential
claims regarding our intellectual property is discussed above under Item 1.
Business - Intellectual Property.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

A Special Meeting of the stockholders was held on December 30, 2002. At
the Special Meeting the stockholders voted on the following matter:



| |  |  | To approve six alternative amendments to the Companys Second Amended
and Restated Certificate of Incorporation which will effect a reverse
split of the Companys outstanding common stock at rations of 1:5,
1:7, 1:9, 1:11, 1:13 and 1:15, and authorize the Board of
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15



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| |  |  | Directors to
choose among these ratios and to abandon some or all of such
amendments in its discretion.
| |  |  | -------------------------------------------------------------------------------------------------------

The stockholder-voting tally was as follows (all share data below reflects
the one for seven stock split of our common stock effective January 2, 2003):

|          |  |               
|--------- |  | --------------
|5,700,552 |  | Shares FOR    
|18,542    |  | Shares AGAINST
|7,880     |  | Shares ABSTAIN

A total of 5,726,974 shares were present in person or by proxy at the
Special Meeting, each with one vote, out of 6,651,395 shares of record
outstanding on December 4, 2002. On December 30, 2002, our Board of Directors
approved a one for seven stock split to be executed on January 2, 2003.

Executive Officers of the Registrant

The following table sets forth information regarding our current executive
officers:

|                 |  |     |    |          |  |                                                                        
|---------------- |  | --- | -- | -------- |  | -----------------------------------------------------------------------
|Name             |  | Age |    | Position
|                 |  |     |    |         
|Joseph L. Cowan  |  |     | 54 |          |  | President and Chief Executive Officer                                  
|                 |  |     |    |          |  |                                                                        
|Kenneth R. Vines |  |     | 58 |          |  | Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
|                 |  |     |    |          |  |                                                                        
|Mark R. Weaser   |  |     | 40 |          |  | President, Asian Operations                                            

Joseph L. Cowanhas served as our President and Chief Executive Officer
since November 2002. Prior to that Mr. Cowan was President and Chief Executive
Officer of Invensys Automation and Information systems from June 2001 to November
2002. From September 2000 to June 2001 he served as President and Chief Executive Officer for
Wonderware, a wholly owned subsidiary of Invensys. He had been with Wonderware
as Senior Vice President, Sales and Marketing from 1995 to 2000 prior to the
acquisition by Invensys in 1998.

Kenneth R. Vineshas served as our Senior Vice President, Chief Financial
Officer and Treasurer since May 2002 and as Secretary since February 2003.
From October 1998 until joining EXE, Mr. Vines was the Senior Vice President
and Chief Financial Officer of Triton Network Systems, Inc. (Triton) and
additionally, was appointed Chief Executive Officer and a member of the Board
of Directors beginning in August 2001. On August 17, 2001 the Board of
Directors of Triton approved, effective August 20, 2001, a complete plan of
liquidation and dissolution of Triton, which plan was ratified and approved by
the stockholders of Triton on October 29, 2001. Prior to joining Triton, Mr.
Vines was the Vice President of Finance of DSC Communications Corporation.

Mark R. Weaserhas served as our President, Asian Operations since January
2003 and from July 2001 to December 2002 he served as Senior Vice President and
Managing Director, Asia Pacific/Japan. From January 2000 to July 2001, Mr.
Weaser served as our Senior Vice President, International Operations. From
September 1997 to January 2000, Mr. Weaser served as our Managing Director of
Asia Pacific and served in the same position for Neptune since August 1996.
From July 1995 to July 1996, he was the Asia Vice President for Telxon
Corporation.

In November 2002, our Chief Executive officer resigned and was replaced by
Joseph L. Cowan. The former Chief Executive Officer, Raymond R. Hood, retained
his position as Chairman of the Board of Directors.

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PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock began trading on the NASDAQ National Market on August 4,
2000 under the symbol EXEE. Prior to that time, there had been no market for
our common stock. The following table sets forth the high and low sales price
range information per share of our common stock on the NASDAQ National Market
for the indicated periods. All share and per share data in this report reflect
the one for seven stock split of our common stock effective January 2, 2003.

|               |  |             |         |     |  |   |        | 
|-------------- |  | ----------- | ------- | --- |  | - | ------ | 
|               |  | PRICE RANGE
|               |  |            
|CALENDAR YEAR  |  | HIGH        |         | LOW
|               |  |             |         |    
|2001           |  |             |         |     |  |   |        | 
|First Quarter  |  | $           | 112.000 |     |  | $ | 35.420 | 
|Second Quarter |  | $           | 66.500  |     |  | $ | 24.500 | 
|Third Quarter  |  | $           | 41.370  |     |  | $ | 12.390 | 
|Fourth Quarter |  | $           | 35.910  |     |  | $ | 12.320 | 
|2002           |  |             |         |     |  |   |        | 
|First Quarter  |  | $           | 35.350  |     |  | $ | 10.570 | 
|Second Quarter |  | $           | 16.100  |     |  | $ | 6.720  | 
|Third Quarter  |  | $           | 10.150  |     |  | $ | 4.200  | 
|Fourth Quarter |  | $           | 5.530   |     |  | $ | 2.520  | 

The number of record holders of our common stock as of March 14, 2003 was
168. We believe that a larger number of beneficial owners hold shares of our
common stock in depository or nominee form.

We have never declared or paid cash dividends on our capital stock. We
currently intend to retain any earnings for use in our business and do not
anticipate paying any cash dividends in the foreseeable future. Our Board of
Directors will determine future dividends, if any.

Use of Proceeds

The Company completed its initial public offering of 1,142,857 shares of
its common stock pursuant to a Registration Statement on Form S-1 (Registration
No. 333-35106, effective August 3, 2000) on August 9, 2000. Total proceeds from
the offering, including the exercise of the over-allotment option with respect
to an additional 120,000 (as adjusted to reflect the one for seven stock split
effective January 2, 2003) shares of common stock, were approximately $63.9
million, net of underwriting discounts and commissions of approximately $5.0
million and other fees and expenses of approximately $1.8 million.

From the date of receipt through December 31, 2002, we have used the
proceeds as follows:

|                                         |  |               |  | 
|---------------------------------------- |  | ------------- |  | 
|Repayment of indebtedness                |  | $16.6 million
|Acquisition of businesses and technology |  | 3.9 million  
|Working capital                          |  | 15.2 million 
|                                         |  |              
|Total                                    |  | $35.7 million
|                                         |  |              

The remainder of the proceeds has been invested in investment grade
corporate and government securities and money market funds. We intend to use
the remaining proceeds for research and development activities; expenditures on
sales and marketing, consulting services and general and administrative
personnel; systems costs; and working capital and general corporate purposes,
including possible acquisitions of, or investments in, businesses and technologies
that are complementary to our

17



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business. None of the net proceeds of the
offering were paid by us, directly or indirectly, to any director, officer or
general partner of ours or any of their associates, or to any persons owning
ten percent or more of any class of our equity securities, or any affiliate of
ours.




ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and the related notes
and with Managements Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this document. The statement of
operations data for the years ended December 31, 2000, 2001 and 2002 and the
balance sheet data as of December 31, 2001 and 2002 are derived from our
audited consolidated financial statements included elsewhere in this document.
The statement of operations data for the years ended December 31, 1998 and 1999
and the balance sheet data as of December 31, 1998, 1999 and 2000 are derived
from our audited financial statements for the years then ended, which are not
included in this document. All share and per share data has been adjusted to
reflect a one for seven reverse stock split which was effective January 2, 2003
(see Note 15 of the Notes to the Consolidated Financial Statements included in
Item 8. Financial Statements and Supplementary Data).

|                                                                         |                                                         |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 
|------------------------------------------------------------------------ | ------------------------------------------------------- | - | ------------------------------------- | ------- | ---- | - | ------- | ------- | ---- | - | ------ | ------- |  | - | ------- | ------- |  | - | ------- | ------ | 
|                                                                         |                                                         |   | Years Ended December 31,             
|                                                                         |                                                         |   |                                      
|                                                                         |                                                         |   | 1998                                  |         | 1999 |   | 2000    |         | 2001 |   | 2002  
|                                                                         |                                                         |   |                                       |         |      |   |         |         |      |   |       
|                                                                         |                                                         |   | (In thousands, except per share data)
|Statement of Operations Data:                                            |                                                         |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |       
|                                                                         | Revenue:                                                |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 
|                                                                         | Software license                                        |   | $                                     | 22,418  |      |   | $       | 25,390  |      |   | $      | 38,274  |  |   | $       | 24,047  |  |   | $       | 12,587 | 
|                                                                         | Services and maintenance                                |   |                                       | 59,758  |      |   |         | 64,103  |      |   |        | 68,708  |  |   |         | 61,586  |  |   |         | 48,234 | 
|                                                                         | Resale of software and equipment                        |   |                                       | 9,114   |      |   |         | 7,307   |      |   |        | 8,215   |  |   |         | 9,343   |  |   |         | 11,009 | 
|                                                                         | Reimbursable expenses                                   |   |                                       | 4,857   |      |   |         | 5,560   |      |   |        | 3,629   |  |   |         | 2,548   |  |   |         | 1,826  | 
|                                                                         |                                                         |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 
|                                                                         | Total revenue                                           |   |                                       | 96,147  |      |   |         | 102,360 |      |   |        | 118,826 |  |   |         | 97,524  |  |   |         | 73,656 | 
|                                                                         | Costs and expenses:                                     |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 
|                                                                         | Cost of software licenses                               |   |                                       | 234     |      |   |         | 254     |      |   |        | 1,391   |  |   |         | 720     |  |   |         | 618    | 
|                                                                         | Cost of services and maintenance                        |   |                                       | 46,474  |      |   |         | 53,473  |      |   |        | 53,585  |  |   |         | 41,166  |  |   |         | 32,287 | 
|                                                                         | Cost of resale of software and equipment                |   |                                       | 7,206   |      |   |         | 5,851   |      |   |        | 6,607   |  |   |         | 7,613   |  |   |         | 9,389  | 
|                                                                         | Cost of reimbursable expenses                           |   |                                       | 4,857   |      |   |         | 5,560   |      |   |        | 3,629   |  |   |         | 2,548   |  |   |         | 1,826  | 
|                                                                         | Sales and marketing                                     |   |                                       | 23,664  |      |   |         | 24,464  |      |   |        | 25,105  |  |   |         | 27,212  |  |   |         | 19,017 | 
|                                                                         | Research and development                                |   |                                       | 15,473  |      |   |         | 11,544  |      |   |        | 9,578   |  |   |         | 14,605  |  |   |         | 12,103 | 
|                                                                         | General and administrative                              |   |                                       | 12,670  |      |   |         | 14,888  |      |   |        | 14,445  |  |   |         | 18,280  |  |   |         | 11,849 | 
|                                                                         | Amortization of goodwill and intangible assets          |   |                                       | 4,452   |      |   |         | 4,819   |      |   |        | 4,615   |  |   |         | 8,435   |  |   |         | 1,261  | 
|                                                                         | Warrant and stock compensation expense                  |   |                                       | 285     |      |   |         | 3,321   |      |   |        | 2,762   |  |   |         | 1,574   |  |   |         | 1,052  | 
|                                                                         | Impairment of intangibles (a)                           |   |                                       |        |      |   |         |        |      |   |        |        |  |   |         | 26,680  |  |   |         |       | 
|                                                                         | Provision for estimated loss on lease
abandonment (b)   |   |                                       | 1,000   |      |   |         | 288     |      |   |        |        |  |   |         | 10,184  |  |   |         | 3,999  | 
|                                                                         | Employee severance and other facility
closure costs (b) |   |                                       |        |      |   |         | 1,952   |      |   |        |        |  |   |         | 4,110   |  |   |         | 5,738  | 
|                                                                         |                                                         |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 
|                                                                         | Total costs and expenses                                |   |                                       | 116,315 |      |   |         | 126,414 |      |   |        | 121,717 |  |   |         | 163,127 |  |   |         | 99,139 | 
|                                                                         |                                                         |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 
|Operating loss                                                           |                                                         |   | (20,168                               | )       |      |   | (24,054 | )       |      |   | (2,891 | )       |  |   | (65,603 | )       |  |   | (25,483 | )     
|Other income (expense)                                                   |                                                         |   | (14                                   | )       |      |   | (2,030  | )       |      |   | (441   | )       |  |   | 1,891   |         |  |   | 2,207   |       
|                                                                         |                                                         |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 
|Loss before minority interest and taxes                                  |                                                         |   | (20,182                               | )       |      |   | (26,084 | )       |      |   | (3,332 | )       |  |   | (63,712 | )       |  |   | (23,276 | )     
|Minority interest in subsidiary income                                   |                                                         |   | (30                                   | )       |      |   |        |         |      |   |       |         |  |   | (161    | )       |  |   | (29     | )     
|                                                                         |                                                         |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 
|Loss before taxes                                                        |                                                         |   | (20,212                               | )       |      |   | (26,084 | )       |      |   | (3,332 | )       |  |   | (63,873 | )       |  |   | (23,305 | )     
|Income tax provision (benefit)                                           |                                                         |   | (578                                  | )       |      |   |        |         |      |   |       |         |  |   | 51      |         |  |   | 496     |       
|                                                                         |                                                         |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 
|Net loss                                                                 |                                                         | $ | (19,634                               | )       |      | $ | (26,084 | )       |      | $ | (3,332 | )       |  | $ | (63,924 | )       |  | $ | (23,801 | )     
|                                                                         |                                                         |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 
|Net loss per common share - basic and diluted                            |                                                         | $ | (8.65                                 | )       |      | $ | (11.34  | )       |      | $ | (0.87  | )       |  | $ | (9.86   | )       |  | $ | (3.61   | )     
|                                                                         |                                                         |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 
|Weighted average number of common shares
outstanding - basic and diluted |                                                         |   | 2,269                                 |         |      |   | 2,299   |         |      |   | 3,829  |         |  |   | 6,481   |         |  |   | 6,586   |       
|                                                                         |                                                         |   |                                       |         |      |   |         |         |      |   |        |         |  |   |         |         |  |   |         |        | 

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|                                                 |  |                    |        |      |  |      |                |      |  |      |         |  |  |   |        |  |  |   |        | 
|------------------------------------------------ |  | ------------------ | ------ | ---- |  | ---- | -------------- | ---- |  | ---- | ------- |  |  | - | ------ |  |  | - | ------ | 
|                                                 |  | As of December 31,
|                                                 |  |                   
|                                                 |  | 1998               |        | 1999 |  | 2000 |                | 2001 |  | 2002
|                                                 |  |                    |        |      |  |      |                |      |  |     
|                                                 |  |                    |        |      |  |      | (In thousands) |      |  |      |         | 
|Balance Sheet Data:                              |  |                    |        |      |  |      |                |      |  |      |         |  |  |   |        |  |  |   |        | 
|Cash, cash equivalents and marketable securities |  | $                  | 780    |      |  | $    | 8,932          |      |  | $    | 59,203  |  |  | $ | 45,297 |  |  | $ | 37,444 | 
|Working capital                                  |  |                    | 1,135  |      |  |      | 920            |      |  |      | 56,359  |  |  |   | 41,331 |  |  |   | 26,908 | 
|Total assets                                     |  |                    | 57,063 |      |  |      | 67,670         |      |  |      | 116,580 |  |  |   | 91,070 |  |  |   | 70,369 | 
|Long-term debt (less current portion)            |  |                    | 5,420  |      |  |      | 5,333          |      |  |      | 102     |  |  |   | 996    |  |  |   | 417    | 
|Stockholders equity                             |  |                    | 24,824 |      |  |      | 21,233         |      |  |      | 87,044  |  |  |   | 53,556 |  |  |   | 30,348 | 



|(a) |  | See Note 3 of the Notes to the Consolidated Financial Statements
included in Item 8. Financial Statements and Supplementary Data.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | See Note 7 of the Notes to the Consolidated Financial Statements
included in Item 8. Financial Statements and Supplementary Data.




ITEM 7. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We provide software that drives customers supply chain execution
processes, including fulfillment, warehousing, distribution and inventory
management. Our software solutions deliver the vital, frontline supply chain
intelligence necessary to drive customer execution decisions and processes. Our
products and services help customers worldwide to increase revenue, reduce
distribution costs, manage inventory across the supply chain, and improve
customer loyalty and satisfaction.

Our Formation

We began operations as a Delaware corporation under the name EXE
Technologies, Inc. following the acquisition of Dallas Systems Corporation
(Dallas Systems) by Neptune Systems, Inc. (Neptune) in September 1997. For
accounting purposes, the acquisition was accounted for as a purchase of Dallas
Systems by Neptune. Prior to the acquisition, Neptune was focused on
delivering packaged supply chain execution software solutions primarily for
manufacturing and third party logistics companies. Dallas Systems was focused
on the development and sale of supply chain execution software solutions,
primarily for retail companies, capable of operating in complex business
environments. Dallas Systems also provided implementation and consulting
services.

Our Revenue

Revenue has been primarily provided from our EXceed Fulfill products. Our
revenue has declined from $118.8 million in 2000 to $97.5 million in 2001 and
declined further to $73.7 million in 2002.

We derive our revenue from:



| |  |  | the sale of software licenses, which we recognize as software
license revenue;                                            
| | - |  | --------------------------------------------------------------------------------------------------------------------------
|
| |  |  | product related consulting, training, maintenance and support,
which we recognize as services and maintenance revenue; and
|
| |  |  | the resale of hardware and software, which we recognize as resale
of software and equipment revenue.                      

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In January 2000, we sold our mainframe services and maintenance practice
to an unrelated third-party consulting firm in exchange for royalties that will
be received on future revenue generated by customers using this product. The
royalties earned by us are based upon a declining percentage of the consulting
firms services and maintenance revenues generated from customers using our
mainframe product, subject to a maximum of $0.4 million per year. The
percentages of revenue are: 20% for the first two years, 15% for the third
year, 10% for the fourth and fifth years and 5% for each year after the fifth
year. The agreement is perpetual, but may be terminated at our option in the
event of default by the consulting firm. Royalties recognized in 2002, 2001 and
2000 totaled $0.2 million, $0.2 million and $0.4 million, respectively. We do
not expect these royalties to be a material portion of our future services and
maintenance revenues. The royalties are included as a component of services and
maintenance revenue.

Software Pricing and Professional Services

We offer a variety of pricing options that allow our customers to purchase
our software for a defined number of users at a single site, a business unit or
an entire enterprise. We market and sell our software and services through our
direct sales force which is located in North America, Europe, the Middle East,
Asia and Australia and through our strategic alliance relationships. In
addition, we intend to pursue additional relationships with vendors of
complementary software to increase our ability to deliver enhanced value to our
customers.

We offer a range of professional services that help facilitate the
successful implementation and integration of our software with our customers
existing systems. Our professional services offering include installation,
implementation project management, interfacing systems, on-site software
training, operational engineering, industrial engineering, software
modification and supply chain consulting. Our professional services are billed
on a time and material basis or, when requested, on a fixed fee basis. For the
years ended December 31, 2002 and 2001, approximately 20.0% and 14.6%,
respectively, of our total revenue was derived from fixed fee contracts.

Acquisitions

On January 25, 2001, we completed the acquisition of AllPoints Systems,
Inc. (AllPoints) of Norwood, Massachusetts. The transaction was completed in a
stock-for-stock merger in which we issued 227,194 shares of our common stock
and assumed options for an additional 58,515 shares of our common stock in
exchange for all of the outstanding securities of AllPoints. The transaction
was accounted for as a purchase. The goal of this acquisition was to strengthen
our product offerings in the high volume, piece pick and parcel environments
that were critical to the direct-to-consumer and e-commerce market segments.
Shortly after the acquisition was completed, the market for these products
declined significantly. During 2001, we were unable to sell new licenses for
the AllPoints products, and expenses associated with the AllPoints subsidiary,
excluding amortization, exceeded revenues by approximately $2.4 million.
Additionally, approximately $4.9 million of cash was used to acquire the
obligations and operate the AllPoints subsidiary during the twelve months ended
December 31, 2001. As a result, in November of 2001 we determined there would
be no further sales or marketing efforts regarding this product line, most of
the remaining AllPoints employees were terminated, and the remaining $26.7
million of intangibles associated with this acquisition were judged impaired
and written off.

Recent Developments

In response to our declining revenues over the past two years, we have
implemented several plans to reduce our costs. In 2001, we reduced our global
headcount by over 17% and abandoned certain excess leased facilities.
Additionally, during the last half of 2002, we took a number of actions to
further reduce our cost structure to more closely align with our current levels
of revenue. These actions included, among other things, the closure of our
Philadelphia office, consolidation of our North American professional services
and development operations in Dallas and expanding our lower-cost offshore
development activities. Our global headcount was lowered an additional 17% in
2002. Also, several

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changes to our executive management team were made during the year. Our
new Chief Financial Officer, Kenneth R. Vines, was hired in May, we eliminated
the Chief Operating Officer position in October and our new Chief Executive
Officer, Joseph L. Cowan, was hired in November 2002. The former Chief
Executive Officer, Raymond R. Hood, retained his position as Chairman of the Board of
Directors.

As a result of these actions, we made provisions for severance and related
employee costs, facility closure costs and estimated losses on abandoned
facilities totaling $9.7 million and $14.3 million in 2002 and 2001,
respectively. Should additional cost reduction actions be required in the
future or if managements estimates of the losses on the current abandoned
facility leases are inadequate, future provisions could be required.

Our current plans are to improve our execution by focusing on our core
product offerings and the markets where we have traditionally been most
successful, retail and third-party logistics customers. We expect our newest
products such as our adaptive inventory management solution (EXceed AIM) and
our visibility and business process management solution, Supply Network
Execution (EXceed SNx), will provide the opportunity for growth and an ability
to differentiate us from our competitors. We are hopeful that the cost
reduction actions we have taken, which will further lower operating costs in
2003, will allow us to return to profitability. If we are unable to improve our revenue levels, further cost reduction
actions may be necessary.

Critical Accounting Policies and Estimates

General

Our discussion and analysis of our financial condition and the results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. Management bases its estimates and judgments
on historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not apparent from other sources. On an on-going basis, management evaluates its
estimates and judgments. There can be no assurance that actual results will not
ultimately differ from those estimates.

Management believes the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements.

Revenue Recognition

We recognize software license revenue under Statement of Position, or SOP,
No. 97-2. Under SOP No. 97-2, software license revenue is recognized upon
execution of a contract and delivery of the software, provided that the license
fee is fixed and determinable, no significant production, modification or
customization of the software is required, vendor specific objective evidence
of fair value exists to allow for the allocation of the total fee to elements
of the arrangement, and collection of the license fee is considered probable by
management. Product related maintenance and support revenue is generally
recognized equally over the term of the contract, which is typically one year.
Revenue from product related consulting and training is recognized as these
services are performed, typically on a time and materials basis. A portion of
our product related consulting and training revenue is derived from engagements
that are performed for a fixed price. Fixed price engagements require us to
estimate the percentage of the contract that is complete to determine the
revenue and costs from these arrangements. Recognized revenue and profit from
fixed price engagements are subject to revisions as the contract progresses to
completion. Revenue from resale of software and equipment is recognized upon
receipt of a purchase order and shipment of the software and equipment to the
customer provided payment terms are

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fixed and determinable, no significant production, modification, or
customization is required, and collection is considered probable by management.

Allowance for Doubtful Accounts and Adjustments

Our ability to collect outstanding receivables from our customers is
critical to our operating performance and cash flows. A receivable can
deteriorate as a result of an impairment of the customers ability to make
payments and may result in changes in the required reserves. Additionally,
collection of a receivable may become doubtful due to a dispute with a customer
that arises subsequent to the delivery of our products and services. We are
required to estimate the collectibility of our trade receivables when we
initially record revenue from our customers and to continue assessing our
ability to collect until the ultimate realization of these receivables is
determined. If circumstances change, such as higher than expected defaults or
an unexpected material adverse change in a customers ability to meet their
financial obligations to us, our estimates of recoverability of amounts due us
could be reduced by a material amount.

Goodwill and Intangible Impairment

In assessing the recoverability of our goodwill and other intangibles,
assumptions are made regarding estimated future cash flows and other factors to
determine the fair value of the respective assets. During the year ended
December 31, 2001, an impairment charge of approximately $26.7 million was
recorded for the impairment of intangibles associated with the acquisition of

AllPoints.

In October 2001, The Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets, (SFAS 142) that is effective for our current year. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives are no
longer amortized but are to be subjected to annual impairment tests in
accordance with these statements. We made an evaluation of our existing
intangible assets in accordance with this standard during December 2002
utilizing various assumptions and factors to estimate future cash flows to
determine the fair value of the business. No impairment was recognized during
2002, however if our estimates for cash flows or other factors and assumptions
change, further impairment charges might be recorded in the future.

Accruals for Lease Abandonment and Employee Termination Costs

Included in our accruals are reserves for the losses on lease abandonment
and costs for employee severance and other costs associated with facility
closures. These reserves include estimates pertaining to sublease rates,
vacancy periods, employee separation costs and settlement of contractual
obligations. If market conditions worsen, additional charges could be incurred.
For example, during 2002, our estimates for the vacancy period on the
abandoned portion of our North American facility increased and approximately
$3.5 million was added to our lease abandonment reserve. Although we do not
anticipate significant changes, the actual costs may differ from these
estimates.

Related Party Transactions

The Company had full recourse notes receivable from various officers of
the Company totaling approximately $1.2 million and $1.0 million (including
accrued interest) at December 31, 2001 and 2002, respectively. These notes
receivable are secured by stock and options of the Company and are subject to
forgiveness in the event of termination of employment due to death or
disability, or if termination happens without cause or, in certain cases, for
good reason following a change in control.

In accordance with an amended employment agreement with the Companys
former Chief Financial Officer dated February 19, 2002, the Company forgave an
outstanding loan of approximately $0.3 million on July 1, 2002. Accordingly,
the outstanding balance was charged against operating results

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in 2002. In March 2003, the Companys former Chief Executive Officer
repaid his notes payable, including accrued interest, to the Company
totaling approximately $0.8
million.

Contingencies
          We are subject to proceedings, lawsuits and other claims related to labor,
product and other matters. We are required to assess the likelihood of any
adverse judgments or outcomes to these matters as well as potential ranges of
probable losses. A determination of the amount of reserves required, if any,
for these contingencies is made after careful analysis of each individual
issue. The required reserves may change in the future due to new developments
in each matter or changes in insurance coverage or approach such as change in
settlement strategy.

Income Taxes
          We recognize deferred tax assets or liabilities for the expected future
tax consequences of temporary differences between the book and tax bases of
assets and liabilities. We review our deferred tax assets for recoverability
and establish a valuation allowance based on historical taxable income,
projected future taxable income and the expected timing of the reversals of
existing temporary differences. As a result of our cumulative net losses we
have provided a full valuation allowance against our net deferred tax assets.
In addition, we expect to provide a full valuation allowance on any future tax
benefits until we can sustain a level of profitability that demonstrates our
ability to utilize these assets.

Results of Operations          The following table sets forth our statement of operations data as a
percentage of total revenue for the three years ended December 31, 2000, 2001
and 2002:

|                                        |                     |                                                     |               |                          |      |                          |       |      |      |       |       |    |      |       |       | 
|--------------------------------------- | ------------------- | --------------------------------------------------- | ------------- | ------------------------ | ---- | ------------------------ | ----- | ---- | ---- | ----- | ----- | -- | ---- | ----- | ----- | 
|                                        |                     |                                                     |               |                          |      | Years Ended December 31,
|                                        |                     |                                                     |               |                          |      |                         
|                                        |                     |                                                     |               |                          |      | 2000                     |       | 2001 |      | 2002 
|                                        |                     |                                                     |               |                          |      |                          |       |      |      |      
|As a Percentage of Total Revenue        |                     |                                                     |               |                          |      |                          |       |      |      |       |       |   
|                                        | Revenue:            |                                                     |               |                          |      |                          |       |      |      |       |       |    |     
|                                        |                     | Software license                                    |               |                          | 32.2 | %                        |       |      | 24.7 | %     |       |    | 17.1 | %    
|                                        |                     | Services and maintenance                            |               |                          | 57.8 |                          |       |      | 63.1 |       |       |    | 65.5 |      
|                                        |                     | Resale of software and equipment                    |               |                          | 6.9  |                          |       |      | 9.6  |       |       |    | 14.9 |      
|                                        |                     | Reimbursable expenses                               |               |                          | 3.1  |                          |       |      | 2.6  |       |       |    | 2.5  |      
|                                        |                     |                                                     |               |                          |      |                          |       |      |      |       |       |   
|                                        |                     |                                                     | Total revenue |                          |      | 100.0                    |       |      |      | 100.0 |       |    |      | 100.0 |      
|                                        | Costs and expenses: |                                                     |               |                          |      |                          |       |      |      |       |       |    |     
|                                        |                     | Cost of software licenses                           |               |                          | 1.2  |                          |       |      | 0.7  |       |       |    | 0.8  |      
|                                        |                     | Cost of services and maintenance                    |               |                          | 45.1 |                          |       |      | 42.2 |       |       |    | 43.8 |      
|                                        |                     | Cost of resale of software and equipment            |               |                          | 5.5  |                          |       |      | 7.8  |       |       |    | 12.8 |      
|                                        |                     | Cost of reimbursable expenses                       |               |                          | 3.1  |                          |       |      | 2.6  |       |       |    | 2.5  |      
|                                        |                     | Sales and marketing                                 |               |                          | 21.1 |                          |       |      | 27.9 |       |       |    | 25.8 |      
|                                        |                     | Research and development                            |               |                          | 8.0  |                          |       |      | 15.0 |       |       |    | 16.4 |      
|                                        |                     | General and administrative                          |               |                          | 12.2 |                          |       |      | 18.7 |       |       |    | 16.1 |      
|                                        |                     | Amortization of goodwill and intangible assets      |               |                          | 3.9  |                          |       |      | 8.6  |       |       |    | 1.8  |      
|                                        |                     | Warrant and stock compensation expense              |               |                          | 2.3  |                          |       |      | 1.6  |       |       |    | 1.4  |      
|                                        |                     | Impairment of intangibles                           |               |                          |     |                          |       |      | 27.4 |       |       |    |     |      
|                                        |                     | Provision for estimated loss on lease abandonment   |               |                          |     |                          |       |      | 10.4 |       |       |    | 5.4  |      
|                                        |                     | Employee severance and other facility closure costs |               |                          |     |                          |       |      | 4.3  |       |       |    | 7.8  |      
|                                        |                     |                                                     |               |                          |      |                          |       |      |      |       |       |   
|                                        |                     |                                                     |               | Total costs and expenses |      |                          | 102.4 |      |      |       | 167.2 |    |      |       | 134.6 | 
|                                        |                     |                                                     |               |                          |      |                          |       |      |      |       |       |   
|Operating loss                          |                     |                                                     | (2.4          | )                        |      |                          | (67.2 | )    |      |       | (34.6 | ) 
|Other income (expense):                 |                     |                                                     | (0.4          | )                        |      |                          | 1.9   |      |      |       | 3.0   |   
|                                        |                     |                                                     |               |                          |      |                          |       |      |      |       |       |   
|Loss before minority interest and taxes |                     |                                                     | (2.8          | )                        |      |                          | (65.3 | )    |      |       | (31.6 | ) 
|Minority interest in subsidiary income  |                     |                                                     |              |                          |      |                          | (0.1  | )    |      |       |      |   
|                                        |                     |                                                     |               |                          |      |                          |       |      |      |       |       |   
|Loss before taxes                       |                     |                                                     | (2.8          | )                        |      |                          | (65.4 | )    |      |       | (31.6 | ) 
|Income tax provision                    |                     |                                                     |              |                          |      |                          | 0.1   |      |      |       | 0.7   |   
|Net loss                                |                     |                                                     | (2.8          | )%                       |      |                          | (65.5 | )%   |      |       | (32.3 | )%
|                                        |                     |                                                     |               |                          |      |                          |       |      |      |       |       |   

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Year Ended December 31, 2002 Compared to the Year Ended December 31, 2001

Revenue

Total Revenue.Total revenue declined by $23.8 million, or 24.5%, to
$73.7 million for the year ended December 31, 2002, from $97.5 million for the
year ended December 31, 2001. International revenue accounted for 52.2% of
total revenue in 2002 and 46.6% of total revenue in 2001. No single customer
accounted for more than 10.0% of total revenue in 2002 or 2001.

Software License.Software license revenue declined $11.4 million, or
47.7%, to $12.6 million for the year ended December 31, 2002, from $24.0
million for the year ended December 31, 2001. Three major factors contributed
to the lower revenue level:



| |  |  | The global slowdown in customer spending for large-scale IT
projects, which began during 2001, continued to negatively impact
software license revenue. This global slowdown resulted in fewer
software license sales and significant price erosion.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Significantly lower software license sales in Japan where IT
spending has slowed due to the economic and currency concerns.                                                                                                                         
|
| |  |  | The substantial turnover of our North America sales team in early 2002
contributed to the loss of several potential sales opportunities.                                                                                                            

Services and Maintenance.Services and maintenance revenue declined $13.4
million, or 21.7%, to $48.2 million for the year ended December 31, 2002, from
$61.6 million for the year ended December 31, 2001. This decline is primarily
attributable to the lower software license revenue, particularly in North
America and Asia Pacific. The decline in consulting and training revenue for
the year ended December 31, 2002 was 31.8% when compared with the consulting
and training revenue in the prior year. This decline is largely attributable to
the continuing decline of service revenue from the EXceed Fulfill WMS
Unix-based products (formerly known as EXceed 2000 warehouse management system
product). Additionally, revenues from the AllPoints product line have declined
approximately $2.2 million as a result of our prior year decision to no longer
sell and market these products. These declines were partially offset by a 12.9%
improvement in maintenance revenue for the year ended December 31, 2002 that is
attributed to additional maintenance revenue from new sales and maintenance
renewals.

Resale of Software and Equipment.Resale software and equipment revenue
increased $1.7 million, or 17.8%, to $11.0 million for the year ended December
31, 2002, from $9.3 million for the year ended December 31, 2001. The increase
was largely attributed to a few large hardware resale transactions.

Costs and Expenses

Cost of Software Licenses.Cost of software licenses consists primarily of
royalties associated with software used to develop our software products, the
cost of reproduction, and the cost of complementary software applications that
we purchase to sell to our customers. Cost of software licenses represented
4.9% of software license revenue for the year ended December 31, 2002 and 3.0%
of software license revenue for the year ended December 31, 2001. This
increase is attributed to the increase in royalties for sales of complementary
software applications during the current year.

Cost of Services and Maintenance.Cost of services and maintenance
consists primarily of salaries of professional staff and costs associated with
implementation, interfacing, consulting and training services, hotline
telephone support, new releases of software and updating user documentation.
Cost of services and maintenance of $32.3 million for the year ended December
31, 2002 was $8.9 million, or 21.6%, lower than in 2001. The decrease was
caused by a reduction in the number of full time employees and contracted
services and maintenance staff in response to lower revenue levels. As a
percentage of services and maintenance revenue, cost of services and
maintenance remained fairly flat at 66.9% for the year ended December 31, 2002,
compared with 66.8% for the year ended December 31, 2001.

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Cost of Resale of Software and Equipment.Cost of resale of software and
equipment consists primarily of the costs of the database software tools and
hardware we purchase to resell to our customers. Cost of resale software and
equipment increased $1.8 million, or 23.3%, to $9.4 million for the year ended
December 31, 2002, from $7.6 million for the year ended December 31, 2001. The
increase was due to a higher sales volume of resale software and equipment,
which resulted in higher purchase costs. As a percentage of resale of software
and equipment revenue, cost of resale of software and equipment was 85.3% for
the year ended December 31, 2002 and 81.5% for the year ended December 31,
2001. The increase in cost as a percentage of resale software and equipment
revenue was largely attributed to a few large low margin resale transactions
that occurred during the final quarter of the year ended December 31, 2002.

Sales and Marketing.Sales and marketing expenses consist primarily of
salaries, commissions, bonuses, recruiting costs, travel, marketing materials
and trade shows. Sales and marketing expenses decreased $8.2 million, or 30.1%,
to $19.0 million for the year ended December 31, 2002, from $27.2 million for
the year ended December 31, 2001. The decrease in sales and marketing expense
was largely attributable to reductions in the number of sales and marketing
employees and to lower commission expenses for sales staff and partners as a
result of lower software license revenues. Sales and marketing expenses
represented 26.5% of revenue, excluding reimbursable expenses, in 2002 compared
to 28.7% in 2001. During 2002, we expanded our relationship
with IBM. We granted IBM warrants to purchase 142,857 shares of common stock
of the Company. Under the agreement, IBM warrants vest based on predetermined
quarterly software license revenue that we achieve over a three-year period
from our relationship with IBM. Should the warrants vest in the future, sales
and marketing expense would increase for the value attributable to the vested
warrants.

Research and Development.Research and development expenses consist
primarily of salaries and other personnel-related costs for our product
development activities. Research and development expenses in 2002 of $12.1
million were $2.5 million, or 17.1%, lower than the $14.6 million recorded in
2001. The decrease in research and development expenses was due primarily to a
reduction in the number of research and development employees and contractors.
Research and development expenses represented 16.8% of revenue, excluding
reimbursable expenses compared to 15.4% in 2001. In June, we made the decision
to close our Philadelphia development and services operation and expand our
offshore development activities. As a result, we reduced our development
personnel by 30 employees. In October 2002, we signed a contract with a company
in India to provide offshore development services at a significantly lower cost
than in the United States. The agreement is for three years and at the end of
2002 there were 30 contract engineers working full time on our development
projects.

General and Administrative.General and administrative expenses consist
primarily of salaries and other personnel-related costs of our finance, human
resources, information systems, administrative, legal and executive
departments, insurance costs and the costs associated with legal, accounting
and other administrative services. General and administrative costs declined
$6.5 million, or 35.2%, to $11.8 million for the year ended December 31, 2002,
from $18.3 million for the year ended December 31, 2001. The decrease in
general and administrative expenses was due primarily to a reduction in the
number of general and administrative employees and contractors and reduced
facility costs. As a percentage of total revenue excluding reimbursable
expenses, general and administrative expenses decreased to 16.5% for the year
ended December 31, 2002, from 19.2% for the year ended December 31, 2001.

Amortization
of Intangibles.Amortization of goodwill and intangible assets
decreased $7.1 million to $1.3 million for the year ended December 31, 2002,
from $8.4 million for the year ended December 31, 2001. Of the decline from the
prior year, $4.4 million of the decline is attributed to the goodwill and
intangible impairment write-off of AllPoints during the fourth quarter of the
prior year and approximately $3.1 million is attributed to the implementation
in the current year of Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets,(SFAS 142) which directs that goodwill
and intangible assets which are deemed to have indefinite lives are no longer
amortized but are subject to annual impairment tests.

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In November 2001 and July 2002, we acquired a total of $2.0 million of
developed software technology that resulted in $0.4 million of incremental
amortization during the year ended December 31, 2002.

Non-Cash Warrant and Stock Compensation.Non-cash warrant and stock
compensation expense decreased $0.5 million to $1.1 million for the year ended
December 31, 2002, from $1.6 million for the year ended December 31, 2001. The
deferred compensation expense represents the difference between the exercise
price and the deemed fair value of our common stock on the date of grant of
these options that has been expensed as the options vest. The decline in stock
compensation expense primarily was attributed to employee reductions and the
associated cancellation of the remaining non-vested options offset by a $0.1
million compensation expense attributed to restricted shares granted to our CEO
during the year ended December 31, 2002.

Impairment
of Intangibles.Impairment of intangibles was $26.7 million for
the year ended December 31, 2001. This write-off relates to intangibles
acquired in connection with the acquisition of AllPoints that are impaired due
to decisions to no longer sell and market AllPoints products or utilize its
technology in future product offerings.

Loss on Lease Abandonment and Employee Severance and Other Facility
Closure Costs. During 2001 and 2002, the Company has taken various cost
reduction actions to lower the Companys cost structure, including the
reduction of 233 employees in 2001 and 110 employees in 2002, the write off of
equipment and the abandonment of certain leased facilities. As a result,
employee severance and related costs totaling approximately $3.6 million and
$3.5 million were charged against operating results in 2002 and 2001,
respectively. The 2002 severance charge includes approximately $1.4 million
paid to the Companys former Chief Executive Officer in early 2003, in
accordance with his employment agreement. Additionally, facility closure costs
of $2.1 million and $0.6 million were charged against operating results in 2002
and 2001, respectively, for the write down or disposal of certain property and
equipment and purchase commitments.

The Company also abandoned certain leased facilities in North America and
Europe in 2001 and its Philadelphia facility in 2002. As a result, the Company
provided approximately $4.0 million and $10.2 million in 2002 and 2001,
respectively for the estimated loss for abandonment of the leased facilities,
net of estimated sublease rentals. The 2002 provision includes $3.5 million
for additional estimated losses associated with facilities previously
abandoned.

The Company has made cash payments of approximately $8.9 million and has
written-off approximately $1.6 million in non-cash charges against the reserves
established for these various cost reduction actions. The remaining liability
at December 31, 2002 is approximately $13.5 million, of which $8.2 million is
long-term and is expected to be paid through 2009.

Other Income (Expense) Items

Other
Income (Expense).Other income increased $0.3 million to an income of
$2.2 million for the year ended December 31, 2002, from an income of $1.9
million for the year ended December 31, 2001. The improvement in other income
is due to a $1.7 improvement in foreign currency exchange transactions offset
by lower interest income of $1.4 million caused by lower interest rates and a
decrease in funds held in marketable securities. Although we periodically buy
forward contracts to hedge against foreign currency fluctuations, we may have
foreign currency gains or losses that can vary from period to period.

Income Tax.Tax provisions of $0.5 million and $0.1 million were
recognized during the years ended December 31, 2002 and 2001, respectively.
The income tax provisions were primarily due to taxes on income earned by
foreign subsidiaries while corresponding domestic tax benefits generated by
foreign tax credits was not recognized due to the uncertainty of the timing and
the amount of future taxable income. No tax benefit has been recognized on
losses incurred in our North American operations and

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foreign operations.

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000

Revenue

Total
Revenue.Total revenue declined by $21.3 million, or 17.9%, to $97.5
million for the year ended December 31, 2001, from $118.8 million for the year
ended December 31, 2000. International revenue accounted for 46.6% of total
revenue in 2001 and 39.5% of total revenue in 2000. No single customer
accounted for more than 10.0% of total revenue in 2001 or 2000.

Software
License.Software license revenue declined $14.3 million, or
37.2%, to $24.0 million for the year ended December 31,
2001, from $38.3
million for the year ended December 31, 2000. This decline was primarily
attributable to the global slowdown in customer spending for large-scale IT
projects during 2001. The decline was most significant during the third and
fourth quarters of 2001 that were further adversely impacted by the terrorist
attacks upon the United States on September 11, 2001. North America and Europe
both experienced declines in license sales, while license sales in Asia Pacific
improved slightly as a result of improved revenues from alliance and industry
partners and from the sale of new EXceed Collaborate products. During the final
months of 2001, we made significant changes to our U.S. sales operations,
including new sales executive leadership and sales personnel with the goal of
improving our lead generation activity and future sales results. This transition also
contributed to lower than expected license revenues.

Services
and Maintenance.Services and maintenance revenue declined $7.1
million, or 10.4%, to $61.6 million for the year ended December 31, 2001, from
$68.7 million for the year ended December 31, 2000. The decline was attributed
to lower software sales caused by the global slowdown in customer spending for
large-scale IT projects during 2001, which reduced our services and maintenance
revenue opportunities. Most of the declines were in North America and Europe
and were consistent with the declines in software license revenues. The decline
in consulting and training revenue for the year ended December 31, 2001 was
15.3% when compared with the consulting and training revenue in the prior year.
This decline is largely attributable to the continuing decline of service
revenue from the EXceed Fulfill WMS Unix-based products (formerly known as
EXceed 2000 warehouse management system product). These products have been
largely replaced by our newer EXceed Fulfill WMS products that feature flexible
data handling for complex distribution environments and provide a more easily
deployed solution. These declines were partially offset by a 12.0% improvement
in maintenance revenue for the year ended December 31, 2001 that is attributed
to additional maintenance revenue from new sales and maintenance renewals.

Resale
of Software and Equipment.Resale software and equipment revenue
increased $1.1 million, or 13.7%, to $9.3 million for the year ended December
31, 2001, from $8.2 million for the year ended December 31, 2000. The increase
was largely due to significant sales to a single customer that provided 25.5%
of the resale revenue during 2001.

Costs and Expenses

Cost
of Software Licenses.Cost of software licenses declined $0.7 million,
or 48.3%, to $0.7 million for the year ended December 31, 2001, from $1.4
million for the year ended December 31, 2000. The decrease was due to a decline
in license revenues during the year ended December 31, 2001 and the inclusion
in the prior year of the cost of purchasing a partners transportation
management software that was sold to our customer to operate in concert with
our EXceed Fulfill products. Cost of software licenses

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represented 3.0% of software license revenue for the year ended December 31,
2001 and 3.6% of software license revenue for the year ended December 31, 2000.

Cost
of Services and Maintenance.Cost of services and maintenance declined
$12.4 million, or 23.2%, to $41.2 million for the year ended December 31, 2001,
from $53.6 million for the year ended December 31, 2000. The decline was caused
by a reduction in the number of full time employees and contracted services and
maintenance staff in response to the decline in the market for global IT
spending during the current year. As a percentage of services and maintenance
revenue, cost of services and maintenance decreased to 66.8% for the year ended
December 31, 2001, from 78.0% for the year ended December 31, 2000. The
decrease in cost as a percentage of services and maintenance revenue was due to
efforts to improve productivity (i.e., higher revenue generated per employee).

Cost
of Resale of Software and Equipment.Cost of resale software and
equipment increased $1.0 million, or 15.2%, to $7.6 million for the year ended
December 31, 2001, from $6.6 million for the year ended December 31, 2000. The
increase was due to a higher sales volume of resale software and equipment,
which resulted in higher purchase costs. As a percentage of resale of software
and equipment revenue, cost of resale of software and equipment was 81.5% for
the year ended December 31, 2001 and 80.4% for the year ended December 31,
2000.

Sales
and Marketing.Sales and marketing expenses increased $2.1 million,
or 8.4%, to $27.2 million for the year ended December 31,
2001, from $25.1
million for the year ended December 31, 2000. The increase in sales and
marketing expense was largely attributable to the additional sales and
marketing expense associated with the acquisition of the AllPoints operations
and bad debt expenses associated with bankrupt direct-to-consumer and
e-commerce companies and write-offs of license sales receivables in Japan
caused by the severe recession conditions. As a percentage of total revenue
excluding reimbursable expenses, sales and marketing expenses increased to
28.7% for the year ended December 31, 2001, from 21.8% for the year ended
December 31, 2000. The increase in sales and marketing expense as a percentage
of total revenue was the result of lower-than-anticipated revenue due to the
economic environment.

Research
and Development.Research and development expenses increased $5.0
million, or 52.5%, to $14.6 million for the year ended December 31, 2001, from
$9.6 million for the year ended December 31, 2000. The increase in research and
development expenses was due primarily to an increase in the number of
employees obtained through the AllPoints acquisition and hired to develop and
enhance our EXceed Collaborate Suite of products. As a percentage of total
revenue excluding reimbursable expenses, research and development expenses
increased to 15.4% for the year ended December 31, 2001, from 8.3% for the year
ended December 31, 2000. This increase in the level of spending as a percentage
of total revenue for the year ended December 31, 2001 was due to the
lower-than-anticipated revenues caused by the economic environment.

General
and Administrative.General and administrative costs increased $3.8
million, or 26.6%, to $18.3 million for the year ended December 31, 2001, from
$14.4 million for the year ended December 31, 2000. The increase in general and
administrative expenses was due to higher personnel-related expenses associated
with the acquisition of AllPoints, opening and staffing new offices in Benelux,
France, and Germany, and increased consulting and contract services costs
associated with outsourcing and upgrading internal information systems. As a
percentage of total revenue excluding reimbursable expenses, general and administrative expenses increased to
19.2% for the year ended December 31, 2001, from 12.5% for the year ended
December 31, 2000. This increase in the level of spending as a percentage of
total revenue for the year ended December 31, 2001 was due to the
lower-than-anticipated revenues caused by the current economic environment.

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Amortization
of Intangibles.Amortization of intangibles increased $3.8
million to $8.4 million for the year ended December 31, 2001, from $4.6 million
for the year ended December 31, 2000. The increase in amortization primarily
relates to intangibles acquired in connection with the acquisition of
AllPoints, all of which were written off in November 2001.

Non-Cash Warrant and Stock Compensation.Non-cash warrant and stock
compensation expense decreased $1.2 million to $1.6 million for the year ended
December 31, 2001, from $2.8 million for the year ended December 31, 2000.
Warrant expense decreased $1.0 million for the year ended December 31, 2001
versus 2000 due primarily to stock warrants that were issued in 1999 in
connection with a consulting agreement with an independent third party.
Additionally, stock compensation expense decreased $0.7 million for the year
ended December 31, 2001 due to terminations prior to full vesting that reduced
the amount of amortization for deferred compensation recorded in connection
with stock options granted to employees between October 1999 and June 2000.
This was offset by $0.5 million of new amortization on deferred compensation
recorded in the current year associated with the acquisition of AllPoints and
the employment of an executive officer. The deferred compensation recorded
represented the difference between the exercise price and the deemed fair value
of our common stock on the date of grant of these options.

Impairment
of Intangibles.Impairment of intangibles was $26.7 million for
the year ended December 31, 2001. This write-off relates to intangibles
acquired in connection with the acquisition of AllPoints that are impaired due
to decisions to no longer sell and market AllPoints products or utilize its
technology in future product offerings.

Loss on Lease Abandonment and Employee Severance and Other Facility
Closure Costs. During the year ended December 31, 2001, we announced and
implemented plans to reduce costs. Loss on lease abandonment and employee
severance and other facility closure costs was $14.3 million for the year ended
December 31, 2001. These charges included $10.2 million in abandonment of
certain leased office space less estimated sublease rentals at facilities in
North America and in Europe, $3.5 million for severance and other employee
related costs for the termination of 233 employees, $0.3 million for disposal
of fixed assets, and $0.3 million for abandonment of leased equipment and other
facility closure costs.

Other Income (Expense) Items

Other
Income (Expense).Other income increased $2.3 million to an income of
$1.9 million for the year ended December 31, 2001, from a loss of $0.4 million
for the year ended December 31, 2000. The improvement in other income was due
to higher interest income of $0.7 million and lower interest expense of $1.1
million, and a reduction in other losses of $0.5 million that is largely
attributed to a reduction in foreign exchange losses due to the implementation
of a foreign currency-hedging program in 2001.

Income Tax.A tax provision of $0.1 million was recognized during the year
ended December 31, 2001 for foreign income taxes. No income tax benefit was
recorded during the years ended December 31, 2001 and 2000 due to the
uncertainty of the timing and amount of future taxable income.

Liquidity and Capital Resources

We have funded our operations through the issuance of our preferred and
common stock, bank borrowings and cash flow from operations. As of December 31,
2002 we had approximately $37.4 million in cash and marketable securities, a
decline of approximately $7.9 million during the twelve months ended December
31, 2002.

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Net cash used by operating activities was $6.1 million for the year ended
December 31, 2002. The net loss before non-cash adjustments (depreciation and
amortization, provision for losses on receivables, amortization of deferred
compensation, write-down of property and equipment, and minority interest) was
approximately $12.2 million, while operating assets and liabilities generated
approximately $6.1 million of cash. Accounts receivable declined approximately
$3.4 million, resulting from an improvement in our receivable days outstanding
from approximately 121 days at the end of 2001 to approximately 80 days at the end of 2002. Additionally,
accounts payable were $2.5 million higher than at the end of 2001, accrued
liabilities grew by approximately $1.8 million, and deferred revenues declined
by approximately $1.3 million. Net cash used in operating activities was $9.7
million for the comparable year ended December 31, 2001.

Net cash used by investing activities was $3.2 million for the year ended December 31, 2002. Investing activities for 2002 included $1.0 million for the purchase of
the rights to certain developed software technology (see Note 7 of the Notes to
the Consolidated Financial Statements included in Item 8. Financial Statements
and Supplementary Data) and $0.7 million for property and equipment. Net cash
used in investing activities was $0.3 million for the comparable twelve months
ended December 31, 2001. We expect that capital expenditures will not exceed
$1.0 million in 2003.

Net cash used by financing activities was $0.1 million for the year ended December 31, 2002. We generated cash of $0.4 million from the
issuance of common stock and reduced long-term debt by approximately $0.5
million. Net cash provided by financing activities was $0.5 million for the
comparable twelve months ended December 31, 2001.

In October 2002, the Company entered into a revolving line of credit agreement
with a financial institution under which the Company can borrow up to $10.0
million over a two-year period. The agreement contains certain financial
covenants, including a minimum $10.0 million cash and marketable securities
balance, restrictions on dividends and the facility is secured with all of the
Companys tangible assets. Borrowings for half of the revolving credit line
will be based on a defined borrowing base, while the balance does not contain
this restriction. Interest on any borrowings will be at the prime rate, and the
Company will pay a fee on the unused portion of the line of credit of 0.375%
per annum. There were no borrowings under this agreement during 2002.

We currently have operating lease obligations of approximately $42.7
million. Approximately $38.8 million of the total lease obligations relate to
our Dallas facility lease for approximately 195,000 square feet, which expires
in 2015. Currently, we occupy less than 50% of the space and we are attempting
to sublease the unoccupied leased space. Provisions have been made for
estimated losses on certain leases which are abandoned (see Note 17 of the
Notes to the Consolidated Financial Statements included in Item 8. Financial
Statements and Supplementary Data), but cash payments will be required for the
remainder of the existing lease obligations. In October 2002, we agreed to pay
the landlord of our abandoned Philadelphia facility $0.4 million in early 2003
to terminate the facility lease. If we are able to reach a settlement with the
lessors of our abandoned Dallas facility on terms favorable to the Company
within the next twelve months, additional settlement payments might be required
which could be considerably higher than the scheduled operating lease payments
shown on the table below during that period.

Although we expect to continue to use some cash over the next six months
due to operating losses, severance and facility related costs associated with
the cost reduction actions taken during 2002 and certain other expenditures
previously discussed, we believe that our existing working capital and the
availability of cash under the new revolving credit line will be sufficient to
fund our operations for at least the next year. However, there can be no
assurance that we will not require additional financing in the future. We
cannot be sure that we will be able to obtain any additional required financing
or that, if we can, the terms will be acceptable to us.

We do not engage in any activities involving special purpose entities or
off-balance sheet financing, other than the operating leases previously
discussed.

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The following table summarizes our contractual obligations as of December
31, 2002 and the effect these obligations are expected to have on our liquidity
and cash flow in future periods (in millions).

|                                   |  |                        |      |        |  |       |     |       |  |       |     |         |  |   |     |  |  |   |      | 
|---------------------------------- |  | ---------------------- | ---- | ------ |  | ----- | --- | ----- |  | ----- | --- | ------- |  | - | --- |  |  | - | ---- | 
|                                   |  | Payments Due by Period
|                                   |  |                       
|                                   |  |                        |      |        |  | Less  |     |       |  |       |     |         |  |   |     |  |  |  
|                                   |  |                        |      |        |  | than  |     | 1 - 3 |  | 3 - 5 |     | After 5
|Contractual Obligations            |  | Total                  |      | 1 Year |  | Years |     | Years |  | Years
|                                   |  |                        |      |        |  |       |     |       |  |      
|Capital lease obligations          |  | $                      | 1.0  |        |  | $     | 0.6 |       |  | $     | 0.4 |         |  | $ |    |  |  | $ |     | 
|Operating leases                   |  |                        | 42.7 | (a)    |  |       | 4.9 |       |  |       | 7.4 |         |  |   | 6.3 |  |  |   | 24.1 | 
|Unconditional purchase obligations |  |                        | 4.0  | (b)    |  |       | 1.5 |       |  |       | 1.4 |         |  |   | 1.1 |  |  |   |     | 
|                                   |  |                        |      |        |  |       |     |       |  |       |     |         |  |   |     |  |  |   |      | 
|Total contractual cash obligations |  | $                      | 47.7 |        |  | $     | 7.0 |       |  | $     | 9.2 |         |  | $ | 7.4 |  |  | $ | 24.1 | 
|                                   |  |                        |      |        |  |       |     |       |  |       |     |         |  |   |     |  |  |   |      | 



|(a) |  | Includes $10.6 million which is included as current and long-term
liabilities on the Consolidated Balance Sheet at December 31, 2002.                                                   
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Certain purchase commitments include minimum annual purchase
obligations. The amounts included above are an estimate of the cash
payments we will expect to make under these agreements.

Recently Issued Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 146, Accounting for Costs
Associated with Exit or Disposal Activities(SFAS 146). SFAS 146 provides
guidance on the accounting for recognizing, measuring and reporting of costs
associated with exit and disposal activities, including restructuring
activities. SFAS 146 adjusts the timing of when a liability for termination
benefits is to be recognized based on whether the employee is required to
render future service. A liability for costs to terminate an operating lease or
other contract before the end of its term is to be recognized when the entity
terminates the contract or ceases using the rights conveyed by the contract.
All other costs associated with an exit or disposal activity are to be expensed
as incurred. SFAS 146 requires the liability to be measured at its fair value
with subsequent changes in fair value to be recognized each reporting period
utilizing an interest allocation approach. The provisions of SFAS 146
are required to be applied prospectively after the adoption date to
newly initiated exit activities, and may affect the timing of
recognizing future restructuring costs, as well as the amounts
recognized. This Statement is effective for exit or disposal
activities initiated after December 31, 2002.

In November 2002, the Emerging Issues Task Force (EITF) reached a
consensus regarding EITF Issue 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables.The consensus provides guidance on how to account for
certain arrangements that involve the delivery or performance of multiple
products, services and/or rights to use assets. The provisions of EITF Issue
No. 00-21 will apply to revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. While the Company will continue to evaluate the
requirements of EITF Issue No. 00-21, management does not currently believe
adoption will have a significant impact on its accounting for multiple element
arrangements as such accounting will generally continue to be accounted for
pursuant to the American Institute of Certified Public Accountants Statement
of Position 97-2, Software Revenue Recognition, and related pronouncements.

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Certain Factors That May Affect Future Results

Risks Relating to Our Business

Our customers may continue to delay or cancel spending on software and services
because of the current economic climate.

Since the beginning of 2001, some companies have experienced financial
difficulties or uncertainty and, as a result, have delayed or canceled spending
on information technology projects such as fulfillment software and services.
If companies continue to delay, or cancel, their information technology
initiatives because of the current economic climate, or for other reasons, our
business, financial condition and results of operations could be materially
adversely affected.

We can give you no assurance that we will be able to maintain or grow our level
of revenue or achieve profitability in the future.

Our future operating results may be affected by any of the following
factors:



| |  | a continued decline in general economic conditions;                                                 
|- |  | ----------------------------------------------------------------------------------------------------
| 
| |  | the level of market acceptance of, and demand for, our software;                                    
| 
| |  | the overall growth rate of the markets in which we compete;                                         
| 
| |  | our competitors products and prices;                                                               
| 
| |  | our ability to establish strategic marketing relationships;                                         
| 
| |  | our ability to develop and market new and enhanced products;                                        
| 
| |  | our ability to successfully train alliance companies and consulting organizations;                  
| 
| |  | our ability to control costs;                                                                       
| 
| |  | changes in our products and services mix; and                                                       
| 
| |  | our ability to train and expand our direct sales force and indirect distribution channels worldwide.

We may not be profitable in the future.

With the exception of the third and fourth quarters of the year ended
December 31, 2000, we have experienced quarterly and annual losses since the
formation of EXE in September 1997. We experienced net losses of $3.3 million
in 2000, $63.9 million in 2001 and $23.8 million in 2002. We may continue to
incur losses on both a quarterly and an annual basis. Moreover, we expect to
continue to incur significant sales and marketing, research and development and
general and administrative expenses and, as a result, we will need to generate
significant revenue to report net income in future periods. We may not achieve
our planned growth or generate sufficient revenue to report net income in
future periods.

Our revenue could decline if our customers do not continue to accept our
existing products, including fulfillment and collaboration products.

We expect to derive a majority of our product license revenue in the
future from our fulfillment and collaboration products and their components.
Our business depends on continued customer acceptance of these products and the
release, introduction and customer acceptance of new products. We expect that
we will continue to depend on revenue from new and enhanced versions of our
fulfillment and collaboration products, and our revenue could decline if our
target customers do not continue to adopt and expand their use of these
products and their components.

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Our quarterly operating results depend heavily on software license revenue,
which is difficult to forecast and may fluctuate.

Our quarterly software license revenue is difficult to forecast because
our sales cycles, from initial evaluation to delivery of software, vary
substantially from customer to customer. Revenue in any quarter is dependent on
orders received, contracts signed and products shipped in that quarter. We
typically recognize the majority of our revenue in the last month of the
quarter, frequently in the last week or even days of the quarter. In addition,
the timing of large individual license sales is difficult for us to predict,
and, in some cases, transactions are concluded later than anticipated. Since
our operating expenses are based on anticipated revenue levels and most of our
operating expenses, particularly personnel and facilities costs, are relatively
fixed in advance of any particular quarter, any revenue shortfall may cause
fluctuations in operating results in any particular quarter. We can give you no
assurance that revenue will grow in future periods, that revenue will grow at
historical rates, or that we will achieve and maintain positive operating
margins in future quarters. If revenue falls below our expectations in a
particular quarter, our operating results could be harmed.

Because our sales cycles are lengthy and subject to uncertainties, it is
difficult to forecast our sales, and the delay or failure of a significant
software license transaction or our inability to anticipate a delay could harm
our operating results.

Our software is used for mission critical division- or enterprise-wide
purposes and involves a significant commitment of resources by customers. A
customers decision to license our software usually involves the evaluation of
the available alternatives by a number of personnel in multiple functional and
geographic areas, each often having specific and conflicting requirements.
Accordingly, we typically must expend substantial resources educating
prospective customers about the value of our solutions. For these and other
reasons, the length of time between the date of initial contact with the
potential customer and the execution of a software license agreement typically
ranges from three to nine months, and is subject to delays over which we may
have little or no control. As a result of the length and variability of the
sales cycle for our software products, our ability to forecast the timing and
amount of specific sales is limited, and the delay or failure to complete one
or more anticipated large license transactions could harm our operating
results.

We depend on the services of a number of key personnel, some of whom have
recently joined us. A failure to integrate these personnel into the Company or
a loss of any of these personnel could disrupt our operations and result in
reduced revenue.

Our success depends on the continued services and performance of our
senior management staff. The loss of the services of any of our senior
management staff or key employees could seriously impair our ability to operate
and achieve our objectives, which could reduce our revenue. We have employment
agreements with all of our executive officers. However, these employment
agreements do not prevent key employees, from voluntarily terminating their
employment with us.

Joseph L. Cowan, our President and Chief Executive Officer, and Kenneth R.
Vines, our Senior Vice President, Chief Financial Officer, Secretary and
Treasurer, joined us in November 2002 and May 2002, respectively. Additionally,
Mark Weaser, President, Asian Operations has been an employee of the Company
for several years. Failure to integrate Mr. Cowan or Mr. Vines into the Company
or with the senior management team, or should one of the executives leave the
Company it could disrupt our operations and harm our business and financial
results.

Failure to expand our alliance relationships with consulting firms and
complementary software vendors and to establish new strategic alliances may
slow acceptance of our software and delay the growth of our revenue.

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To supplement our direct sales force and our implementation capabilities,
we have established strategic marketing alliances with consulting firms and
complementary software vendors, and we rely on them to recommend our software
to their customers and to periodically install and support our software. To
increase our sales and implementation capabilities, one of our key strategies
is to expand our existing relationships and establish new strategic alliances
with consulting firms and complementary software vendors. The loss of, or
failure to expand, existing relationships or our failure to establish new
strategic alliances could limit the number of transactions we may complete, may
result in our inability to recognize revenue and may harm our operating
results.

If our new or enhanced products do not gain market acceptance, our business and
results of operations would be harmed.

The growth of our business will depend on the successful development,
introduction and acceptance of new and enhanced versions of our products. The
introduction of new or enhanced products requires that we manage the transition
from existing products to these new or enhanced products. We have recently
introduced our EXceed AIM and EXceed SNx software solutions to work in
conjunction with our existing fulfillment software suite in order to extend our
product reach into complementary markets. We expect to derive a
portion of our revenues in the future from new and enhanced products
currently being developed, including EXceed AIM and EXceed SNx. If EXceed AIM and EXceed SNx and our other new and
enhanced products do not gain market acceptance, our revenues may decline.
Factors that may affect the market acceptance of EXceed AIM and EXceed SNx and
our other new and enhanced products, some of which are beyond our control, may
include:



| |  | the changing requirements of our industry;                                              
|- |  | ----------------------------------------------------------------------------------------
| 
| |  | the performance, quality and price of our new and enhanced products; and                
| 
| |  | the availability, performance, quality and price of competing products and technologies.

We may experience delays in the scheduled introduction of new or upgraded
software, and our software may contain undetected errors or bugs, resulting
in loss of revenue and harm to our reputation.

Historically, we have issued significant new software products or new
releases of our software periodically, with interim releases issued more
frequently. Our software is particularly complex, because it must perform in
environments operating multiple computer systems and respond to customer demand
for high performance fulfillment, warehousing and distribution applications and
major new product enhancements. Our software requires long development and
testing periods before it is commercially released. For example, the
development cycle for the introduction of our EXceed Crossdock component took
approximately nine months. If we experience delays in the scheduled
introduction of new software or software upgrades, our customers may become
dissatisfied and our reputation and operating results could be harmed.

Also, despite testing by us, our software may contain undetected errors or
bugs. In the past, we have discovered software bugs in new versions of our
software after its release. We may experience software bugs in the future.
These bugs could result in a delay or loss of revenue, diversion of development
resources, damage to our reputation, increased service and warranty costs, or
impaired market acceptance and sales of this software, any of which could harm
our operating results.

If we are unable to timely collect our accounts receivable, our cash flow will
be harmed.

Although we have recently improved on the time required to collect
accounts receivable from our customers, there is no assurance that this trend
will continue. Historically, we have experienced longer receivable collection
periods that have largely been attributed to the deterioration of certain of
our customers financial condition due to the negative economic climate in the
United States and the

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international markets we serve. The failure of any significant customer to
pay for our products on a timely basis could adversely affect our results of
operations and our operating cash flow.

If we do not expand our customer base, our business may not grow.

Our growth is dependent in part on our ability to attract new customers
for our products. We derive a substantial portion of our revenue from the sale
of additional products and services to our existing customers. If we are unable
to expand our customer base by attracting new customers for our products, our
business will suffer. In addition, a material reduction in the demand for our
products and services from our existing customers would have a material adverse
effect on our business, financial condition and results of operations.

Our international operations are subject to heightened risks. If any of these
risks actually occur, our earnings could decline.

International revenue accounted for approximately 52.2% of our total
revenue during the year ended December 31, 2002, 46.6% of our total revenue
during the year ended December 31, 2001, and 39.5% of our total revenue during
the year ended December 31, 2000.

Our international operations are subject to risks inherent in
international business activities, including:



| |  | difficulty in staffing and managing geographically diverse operations;                
|- |  | --------------------------------------------------------------------------------------
| 
| |  | longer accounts receivable payment cycles in certain countries;                       
| 
| |  | compliance with a variety of foreign laws and regulations;                            
| 
| |  | unexpected changes in regulatory requirements and overlap of different tax structures;
| 
| |  | greater difficulty in safeguarding intellectual property;                             
| 
| |  | trade restrictions;                                                                   
| 
| |  | changes in tariff rates and import and export licensing requirements; and             
| 
| |  | general economic conditions in international markets.                                 

In addition, we have expanded our offshore research and development
activities. In the instance of a political upheaval in certain regions, our
development process could be severely disrupted. Our operating results could
be negatively impacted if these or other factors affect international
operations.

Because many of our customers pay us in foreign currencies, we may be exposed
to exchange rate risks and our profitability may suffer due to currency
fluctuations.

A majority of the revenue and expenses incurred by our international
operations are denominated in currencies other than the United States dollar.
In particular, our revenue and costs of operations in Japan and Singapore are
denominated in Japanese Yen and Singapore Dollars and in Europe some of our
contracts are denominated in the Euro. Exchange rate fluctuations have caused
and will continue to cause currency transaction gains and losses. We
experienced currency transaction gains (losses) of $1.2 million, $(0.5)
million, and $(0.8) million for the years ended December 31, 2002, 2001 and
2000, respectively. We can give you no assurance that currency transaction
losses will not adversely affect our results in future periods.

Our success depends on our ability to attract and retain key personnel, in
particular knowledgeable and experienced sales and marketing personnel and
professional services personnel. If we are unable to attract these personnel
and use them efficiently, our ability to sell and implement our software could
be harmed.

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We believe our success will depend significantly on our ability to
attract, motivate and retain highly skilled technical, managerial, consulting,
sales and marketing personnel and professional services personnel. We compete
intensely for these personnel, and we may be unable to achieve our personnel
goals. Our failure to attract, motivate and retain such highly skilled
personnel could seriously limit our ability to expand our business.

Our operating performance, personnel reductions and lower stock price over
the last two years has made it difficult to retain key personnel. There is no
assurance we will be able to retain our key personnel in the future.

Also, we believe our success will depend on our ability to productively
manage our personnel. Any significant growth in software license revenue will
likely generate the need for more professional services personnel to deploy and
implement software and to train customers. A shortage in the number of trained
personnel, either within our Company or available from outside consulting
firms, could limit our ability to implement our software on a timely and
cost-effective basis. Our operating performance will suffer if we generate
insufficient revenue to cover growth-related expenses, significantly strain
management resources with additional responsibilities, fail to successfully
expand our relationships and develop additional relationships with third-party
implementers and complementary software vendors or fail to have sufficiently
trained sales and marketing personnel and professional services personnel.

The length and complexity of our implementation cycle may result in
implementation delays, which may cause customer dissatisfaction.

The introduction of new products and the size and complexity of some of
our software implementations can result in lengthy implementation cycles and
may result in delays. These delays could result in customer dissatisfaction,
which could adversely affect our reputation. Additional delays could result if
we fail to attract, train and retain services personnel, or if our alliance
companies fail to commit sufficient resources towards implementing our
software. These delays and resulting customer dissatisfaction could harm our
reputation and cause our revenue to decline.

The use of fixed-price service contracts subjects us to the risk that we may
not successfully complete these contracts on budget.

We offer software implementation and related consulting services to our
customers. Although we typically provide services on a time and material
basis, we have from time to time entered into fixed-price service contracts,
and we expect that some customers will demand these contracts in the future.
These contracts specify certain milestones to be met by us regardless of actual
costs incurred in meeting those obligations. If we are unable to successfully
complete these contracts on budget, our earnings could suffer.

We rely on software licenses that may be terminated or unavailable to us on
commercially reasonable terms.

We market and resell, under license, third party software, including:



| |  | software embedded in our products;                                                          
|- |  | --------------------------------------------------------------------------------------------
| 
| |  | software that enables our software to interact with other software systems or databases; and
| 
| |  | software in conjunction with which our software operates.                                   

We also license software tools used to develop our software and software
for internal systems. We cannot assure you that the third party software or
software tools will continue to be available to us on commercially reasonable
terms. The loss or inability to maintain any of these software licenses could

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result in delays or reductions in product shipments until equivalent
software could be identified and licensed or compiled, which could harm our
business.

We could be subject to legal actions by former personnel, which could be
costly, divert management time and attention and harm our operating results.

During 2001 and 2002, we terminated approximately 343 of our services,
sales, development and administrative personnel. It is possible that some of
these employees could bring legal actions against us under applicable federal,
state or local laws. Any such claims, whether with or without merit, could
subject us to costly litigation and the diversion of management time and
attention, and successful claims could result in awards of damages to or
reinstatement of former employees, any of which could harm our operating
results.

Our non-cancelable, long-term lease of office space in Dallas, Texas is
substantially in excess of our expected facility requirements resulting in
significant future cash obligations for unused office space, which could
negatively impact our financial condition in the future.

We lease approximately 195,000 square feet of office space in Dallas,
Texas under a lease that extends to 2015. Amounts due the landlord over the
remaining term of the lease are in excess of $38.8 million. Currently, we
occupy less than 50% of the office space.Approximately half of the office
space has been abandoned and a reserve for the estimated loss has been provided
in the Consolidated Financial Statements. Although we have attempted to
renegotiate the lease terms, the landlord has been unwilling to modify the
lease or reduce the lease cost. We have also been unable to sublease the excess
office space. As a result, we will be required to continue to make significant
lease payments in the future for the unused space.

Product liability and other claims related to our customers business
operations could result in substantial costs.

Many of our installations involve projects that are critical to the
operations of our clients businesses and provide benefits that may be
difficult to quantify. Any failure in a clients system or any intellectual
property infringement claims by third parties could result in a claim for
substantial damages against us, regardless of our responsibility for the
failure or for the alleged intellectual property infringement. We cannot assure
you that our customer contracts will protect us in the event of any such claim.
In addition, although we maintain general liability insurance coverage,
including coverage for errors or omissions, we cannot assure you that this
coverage will continue to be available on reasonable terms or will be available
in sufficient amounts to cover one or more large claims, or that the insurer
will not disclaim coverage.

The successful assertion of one or more large claims against us that
exceeds available insurance coverage or changes in our insurance policies,
including premium increases or the imposition of large deductible or
co-insurance requirements, could result in substantial costs.

Five customers have requested defense and indemnification from us for
threatened patent claims against them by a third party relating to bar code
technology. For additional information about these requests, see Item 1.
BusinessIntellectual Property herein.

Should our stock price fall below $1 per share for a period of time our common
stock could be de-listed from the NASDAQ National market.

During the last half of 2002 our common stock price was subject to
de-listing on the NASDAQ National Market due to our stock price being below $1
per share for a specified period of time. Our shareholders approved a one for
seven reverse stock split which was effective in January 2003. As a result

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of the reverse stock split, our stock price increased substantially above
$1 per share. Should our stock price fall below $1 per share again, we could be
subject to de-listing again.

If our common stock is de-listed by NASDAQ and our securities begin to
trade on the OTC Bulletin Board maintained by NASDAQ, another over-the-counter
quotation system, or on the pink sheets, investors may find it more difficult
to dispose of or obtain accurate quotations as to the market value of the
securities. In addition, we would be subject to a rule promulgated by the
Securities and Exchange Commission that, if we fail to meet criteria set forth
in such rule, imposes various practice requirements on broker-dealers who sell
securities governed by the rule to persons other than established customers and
accredited investors. For these types of transactions, the broker-dealer must
make a special suitability determination for the purchaser and have received
the purchasers written consent to the transactions prior to sale.
Consequently, the rule may deter broker-dealers from recommending or selling
our common stock, which may further affect the liquidity of our common stock.
De-listing from NASDAQ will make trading our shares more difficult for
investors, potentially leading to further declines in our share price. It would
also make it more difficult for us to raise additional capital. Further, if we
are de-listed we could also incur additional costs under state blue-sky laws in
connection with any sales of our securities.

Additionally, because brokers commissions on low-priced stocks generally
represent a higher percentage of the stock price than commissions on higher
priced stocks, the low share price of the common stock can result in an
individual stockholder paying transaction costs that represent a higher
percentage of total share value than would be the case if the share price were
higher. This factor may also limit the willingness of institutions to purchase
our common stock.

We expect our results of operations to fluctuate, and the price of our common
stock could fall if quarterly results differ from the expectations of
securities analysts.

Our operating results historically have fluctuated on a quarterly basis
and may continue to do so in the future. If our quarterly results differ from
the expectations of securities analysts, the price of our common stock could
fall. Some of the factors that could cause our operating results to fluctuate
include:



| |  | general economic conditions;                                                                                                      
|- |  | ----------------------------------------------------------------------------------------------------------------------------------
| 
| |  | demand for our products and services;                                                                                             
| 
| |  | our competitors products and prices;                                                                                             
| 
| |  | the timing and market acceptance of new product introductions and upgrades by us or our competitors;                              
| 
| |  | our success in expanding our services, customer support and marketing and sales organizations, and the timing of these
activities;
| 
| |  | the mix of products and services sold;                                                                                            
| 
| |  | delays in, or cancellations of, customer implementations;                                                                         
| 
| |  | customers budget constraints;                                                                                                    
| 
| |  | the level of research and development expenditures;                                                                               
| 
| |  | the size of recurring compensation charges;                                                                                       
| 
| |  | changes in foreign currency exchange rates;                                                                                       
| 
| |  | our ability to control costs; and                                                                                                 
| 
| |  | the timing of acquisitions and of the amortization or impairment of intangible assets.                                            

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A large portion of our expenses, including expenses for facilities,
equipment and personnel, is relatively fixed. Accordingly, if our revenue
declines or does not grow as anticipated, we may not be able to correspondingly
reduce our operating expenses in a timely manner. Failure to achieve
anticipated levels of revenue could therefore significantly harm our operating
results for a particular fiscal period.

Our stock price could be extremely volatile and may result in litigation
against us.

The stock market has experienced significant price and volume
fluctuations, and the market price for our common stock has been in the past
and could continue to be volatile. In the past, following periods of volatility
in the market price of a companys securities, securities class action
litigation has often been instituted. Litigation could result in substantial
costs and a diversion of managements attention and resources.

The concentration of ownership of our common stock may have the effect of
delaying or preventing a change of control of us.

Our directors, executive officers and their affiliated companies
beneficially own more than 40% of our outstanding common stock. As a result,
these stockholders will have the ability to significantly influence the
election of our directors and the outcome of corporate actions requiring
stockholder approval. This concentration of ownership may have the effect of
delaying or preventing a change of control of us. As a result, if these
stockholders voted as a group, they would have the ability to significantly
influence the outcome of corporate actions requiring stockholder approval.

We have implemented anti-takeover provisions that may discourage a change of
control.

Our certificate of incorporation authorizes the issuance of 20,000,000
shares of preferred stock. Our board of directors has the power to determine
the price and terms of any preferred stock. The ability of our board of
directors to issue one or more series of preferred stock without stockholder
approval could deter or delay unsolicited changes of control by discouraging
open market purchases of our common stock or a non-negotiated tender or
exchange offer for our common stock. Discouraging open market purchases may be
disadvantageous to our stockholders who may otherwise desire to participate in
a transaction in which they would receive a premium for their shares.

In addition, some provisions of our certificate of incorporation and
by-laws may also discourage a change of control by means of a tender offer,
open market purchase, proxy contest or otherwise. These provisions include:



| |  | a board that is divided into three classes, each of which is elected
to serve staggered three year terms;                                           
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | provisions under which only the board of directors or our chief
executive officer or secretary may call a special meeting of the
stockholders;      
| 
| |  | provisions which permit the board of directors to increase the number
of directors and to fill these positions without a vote of the
stockholders;  
| 
| |  | provisions under which no director may be removed at any time except
for cause and by a majority vote of the outstanding shares of voting
stock; and
| 
| |  | provisions under which stockholder action may be taken only at a
stockholders meeting and not by written consent of the stockholders.               

These provisions may have the effect of discouraging takeovers and encouraging
persons seeking to acquire control first to negotiate with us.

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Risks Relating to Our Industry

We face intense competition from numerous competitors, some of whom have a
significant competitive advantage over us. If we lose our competitive position,
our revenue could decline.

The market for fulfillment, collaboration and inventory management
solutions is intensely competitive, fragmented and subject to rapid
technological change. The principal competitive factors in our market include:



| |  | adherence to emerging Internet-based technology standards;          
|- |  | --------------------------------------------------------------------
| 
| |  | comprehensiveness of applications;                                  
| 
| |  | adaptability and flexibility;                                       
| 
| |  | immediate, interactive capability with customer and partner systems;
| 
| |  | financial viability;                                                
| 
| |  | global capability;                                                  
| 
| |  | references from existing customers;                                 
| 
| |  | industry domain experience and expertise;                           
| 
| |  | ability to support specific industry requirements;                  
| 
| |  | ease of application use and deployment;                             
| 
| |  | speed of implementation;                                            
| 
| |  | customer service and support; and                                   
| 
| |  | initial price and total cost of ownership.                          

Because we offer fulfillment, traditional supply chain, collaboration,
inventory management and supply network execution software, we consider a
number of companies in different market categories to be our competitors. Our
competitors include companies and groups that:



| |  | focus on providing fulfillment applications;                                              
|- |  | ------------------------------------------------------------------------------------------
| 
| |  | offer enterprise platforms for order management, fulfillment and inventory management; and
| 
| |  | service internal customers, such as internal information technology groups.               

We believe that the market for integrated fulfillment, collaboration,
inventory management and supply network execution solutions is still in its
formative stage, and that no currently identified competitor represents a
dominant presence in this market.

We expect competition to increase as a result of software industry
consolidation. New competitors could emerge and rapidly capture market share.
We can give you no assurance that we can maintain our competitive position
against current and potential competitors, especially those with greater name
recognition, comparable or superior products, significant installed customer
bases, long-standing customer relationships or the ability to price products as
incremental add-ons to existing systems. If we lose our competitive position,
our revenue could decline.

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The market for our software is characterized by rapid technological change. If
we fail to respond promptly and effectively to technological change and
competitors innovations, our growth and operating results could be harmed.

The market for fulfillment, warehousing, distribution, inventory
management and supply network execution systems experiences rapid technological
change, changing customer needs, frequent new product introductions and
evolving industry standards that may render existing products and services
obsolete. Our growth and future operating results will depend in part on our
ability to enhance existing applications and develop and introduce new
applications or components. These new applications must:



| |  | meet or exceed technological advances in the marketplace;
|- |  | ---------------------------------------------------------
| 
| |  | meet changing customer requirements;                     
| 
| |  | respond to competitive products; and                     
| 
| |  | achieve market acceptance.                               

Our product development and testing efforts have required, and are
expected to continue to require, substantial investments. Also, we may be
unable to successfully identify new software opportunities and develop and
bring new software to market quickly and efficiently. Our software may not
achieve market acceptance and current or future products may not conform to
industry standards in the markets served. If we are unable to develop and
introduce new and enhanced software in a timely manner, our growth and
operating results could be harmed.

We depend on intellectual property laws, which may not fully protect us from
unauthorized use or misappropriation of our proprietary technologies.

We rely on intellectual property laws, confidentiality procedures and
contractual provisions to protect our proprietary rights in our products and
technology. These measures afford only limited protection to us, particularly
on an international basis. We may be unable to avoid infringement or
misappropriation claims regarding current or future technology, or unable to
adequately deter misappropriation or independent third-party development of our
technology. In addition, policing unauthorized use of our products is
difficult.

We are unable to determine the extent to which piracy of our software
products exists and software piracy could become a problem. Litigation to
defend and enforce our intellectual property rights could result in substantial
costs and diversion of resources, regardless of the final outcome of such
litigation.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We develop products in the United States and market our products in North
America, Europe, the Middle East, Asia and Australia. Revenues outside the
United States were 39.5%, 46.6% and 52.2% of our total revenues in 2000, 2001
and 2002, respectively. Most of our foreign subsidiaries sales and expenses
are made in local currencies. International sales denominated in currencies
other than the U.S. dollar are primarily in the Japanese Yen, Singapore dollar
and the Euro. Accordingly, we are exposed to fluctuations in currency exchange
rates. Foreign currency transaction gains (losses) were approximately $(0.8)
million, $(0.5) million and $1.2 million for the years ended December 31, 2000,
2001 and 2002, respectively. Because most of our sales are currently made in
U.S. dollars, a strengthening of the dollar could make our profits less
competitive in foreign markets.

Our net assets denominated in currencies other than U.S. dollars as of
December 31, 2002 were approximately $8.0 million. A potential loss in the
value of these net assets resulting from a hypothetical 10% adverse change in
foreign exchange rates would be approximately $0.8 million.

In January 2001, we began a foreign currency-hedging program to hedge
certain nonfunctional currency exposure. Forward currency exchange contracts
are utilized by us to reduce foreign currency exchange risks with the goal of
offsetting foreign currency transaction gains and losses recorded for
accounting purposes with gains and losses realized on the forward contracts.
We do not hold derivative financial instruments for trading or speculative
purposes.

As of December 31, 2002, the Company had outstanding forward currency
exchange contracts of $3.0 million to sell Japanese Yen and $2.0 million to
sell Euro which hedge certain foreign currency exposures. Gains and losses
arising from the changes in the fair value of forward currency exchange
contracts are recognized as a component of other income (expense). At December
31, 2002, the current market settlement values of the forward contracts would
result in a loss of approximately $0.2 million.

We used a portion of the proceeds obtained from our August 2000 initial
public offering to repay all outstanding amounts under our revolving credit
facility and term loan, which we subsequently terminated. To the extent that we
enter into a new credit facility in the future, future interest expense could
be subject to fluctuations based on the general level of U.S. interest rates.

We have invested the remaining proceeds from our initial public offering
in investment grade corporate and government securities and money market funds.
The primary objective of our investment activities is to preserve capital while
at the same time maximizing the income we receive from our investments without
significantly increasing risk. Some of the securities that we invest in may
have market risk. This means that a change in prevailing interest rates may
cause the principal amount of the investment to fluctuate. For example, if we
hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the
principal amount of our investment will probably decline. As of December 31,
2002, we had $17.6 million of securities that mature in 90 days or less and
$16.6 million of securities that mature between 90 days and one year. We do not
believe that we have any material exposure to interest rate risk.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                            |  |      |    | 
|------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                            |  | PAGE
|                                                                                            |  |     
|Report of Ernst & Young LLP, Independent Auditors                                           |  |      | 44 | 
|Consolidated Balance Sheets at December 31, 2001 and 2002                                   |  |      | 45 | 
|Consolidated Statements of Operations for the three years ended December 31, 2002           |  |      | 46 | 
|Consolidated Statements of Stockholders Equity for the three years ended December 31, 2002 |  |      | 47 | 
|Consolidated Statements of Cash Flows for the three years ended December 31, 2002           |  |      | 48 | 
|Notes to Consolidated Financial Statements                                                  |  |      | 50 | 

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REPORT OF INDEPENDENT AUDITORS

Stockholders and
Board of Directors
EXE Technologies, Inc.

We have audited the accompanying consolidated balance sheets of EXE
Technologies, Inc. and subsidiaries as of December 31, 2001 and 2002, and the
related consolidated statements of operations, stockholders equity, and cash
flows for each of the three years in the period ended December 31, 2002. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of EXE
Technologies, Inc. and subsidiaries at December 31, 2001 and 2002, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States.

|                     
|---------------------
|/s/ ERNST & YOUNG LLP

Dallas, Texas
March 28, 2003

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                                 |                                                                        |                                                                  |                                            |                                      |            |                    |           |              |            |            |  | 
|-------------------------------- | ---------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------------ | ------------------------------------ | ---------- | ------------------ | --------- | ------------ | ---------- | ---------- |  | 
|                                 |                                                                        |                                                                  |                                            |                                      |            | As of December 31,
|                                 |                                                                        |                                                                  |                                            |                                      |            |                   
|                                 |                                                                        |                                                                  |                                            |                                      |            | 2001               |           | 2002        
|                                 |                                                                        |                                                                  |                                            |                                      |            |                    |           |             
|                                 |                                                                        |                                                                  |                                            | Assets                               |            |                    |           |              |            |            |  | 
|Current assets:                  |                                                                        |                                                                  |                                            |                                      |            |                    |           |             
|                                 | Cash and cash equivalents                                              |                                                                  | $                                          | 30,250,156                           |            |                    | $         | 20,815,464   |           
|                                 | Marketable securities, short-term                                      |                                                                  |                                            | 12,842,683                           |            |                    |           | 16,628,465   |           
|                                 | Accounts receivable, net of allowance for doubtful accounts and        |                                                                  |                                            |                                      |            |                    |           |              |           
|                                 |                                                                        | adjustments of approximately $3,721,000 and $4,161,000 at        |                                            |                                      |            |                    |           |              |            |           
|                                 |                                                                        | December 31, 2001 and 2002, respectively                         |                                            |                                      | 25,029,162 |                    |           |              | 16,904,889 |           
|                                 | Other receivables and advances                                         |                                                                  |                                            | 572,438                              |            |                    |           | 329,568      |           
|                                 | Prepaid and other current assets                                       |                                                                  |                                            | 2,171,409                            |            |                    |           | 2,747,074    |           
|                                 |                                                                        |                                                                  |                                            |                                      |            |                    |           |             
|                                 |                                                                        |                                                                  | Total current assets                       |                                      |            | 70,865,848         |           |              |            | 57,425,460 | 
|Marketable securities, long-term |                                                                        |                                                                  | 2,203,891                                  |                                      |            |                    |          |             
|Property and equipment, net      |                                                                        |                                                                  | 8,424,584                                  |                                      |            |                    | 4,432,882 |             
|Goodwill, net                    |                                                                        |                                                                  | 5,265,685                                  |                                      |            |                    | 5,265,685 |             
|Intangible assets, net           |                                                                        |                                                                  | 1,760,666                                  |                                      |            |                    | 1,499,891 |             
|Other assets                     |                                                                        |                                                                  | 2,549,794                                  |                                      |            |                    | 1,745,532 |             
|                                 |                                                                        |                                                                  |                                            |                                      |            |                    |           |             
|                                 |                                                                        |                                                                  | Total assets                               |                                      | $          | 91,070,468         |           |              | $          | 70,369,450 | 
|                                 |                                                                        |                                                                  |                                            |                                      |            |                    |           |             
|                                 |                                                                        |                                                                  |                                            | Liabilities and Stockholders Equity |            |                    |           |              |            |            |  | 
|Current liabilities:             |                                                                        |                                                                  |                                            |                                      |            |                    |           |             
|                                 | Accounts payable                                                       |                                                                  | $                                          | 6,585,936                            |            |                    | $         | 9,094,823    |           
|                                 | Accrued expenses                                                       |                                                                  |                                            | 11,557,606                           |            |                    |           | 11,326,722   |           
|                                 | Accrued payroll and benefits                                           |                                                                  |                                            | 1,749,046                            |            |                    |           | 1,688,815    |           
|                                 | Deferred revenue                                                       |                                                                  |                                            | 9,206,736                            |            |                    |           | 7,885,223    |           
|                                 | Current portion of long-term debt and capital lease obligations        |                                                                  |                                            | 435,167                              |            |                    |           | 521,458      |           
|                                 |                                                                        |                                                                  |                                            |                                      |            |                    |           |             
|                                 |                                                                        |                                                                  | Total current liabilities                  |                                      |            | 29,534,491         |           |              |            | 30,517,041 | 
|                                 | Long-term debt and capital lease obligations, net of current portion   |                                                                  |                                            | 995,973                              |            |                    |           | 416,598      |           
|                                 | Long-term accrued expenses, net of current portion                     |                                                                  |                                            | 6,814,018                            |            |                    |           | 8,888,841    |           
|                                 | Minority interest                                                      |                                                                  |                                            | 169,623                              |            |                    |           | 198,779      |           
|                                 | Commitments and contingencies                                          |                                                                  |                                            |                                      |            |                    |           |              |           
|Stockholders equity:            |                                                                        |                                                                  |                                            |                                      |            |                    |           |             
|                                 | Preferred stock, $.01 par value: shares authorized - 20,000,000; none  |                                                                  |                                            |                                      |            |                    |           |              |           
|                                 |                                                                        | issued or outstanding                                            |                                            |                                      |           |                    |           |              |           |           
|                                 | Common stock, voting, $.01 par value: shares authorized - 150,000,000; |                                                                  |                                            |                                      |            |                    |           |              |           
|                                 |                                                                        | shares issued - 6,684,129 and 6,807,813 at December 31, 2001 and |                                            |                                      |            |                    |           |              |            |           
|                                 |                                                                        | 2002, respectively                                               |                                            |                                      | 66,841     |                    |           |              | 68,078     |           
|                                 | Additional paid-in capital                                             |                                                                  |                                            | 179,142,344                          |            |                    |           | 178,871,117  |           
|                                 | Note receivable from stockholder                                       |                                                                  |                                            | (211,750                             | )          |                    |           |             |           
|                                 | Treasury stock, at cost, 142,783 and 156,418 shares of common stock    |                                                                  |                                            |                                      |            |                    |           |              |           
|                                 |                                                                        | at December 31, 2001 and 2002, respectively                      |                                            |                                      | (3,431,464 | )                  |           |              | (3,645,859 | )         
|                                 | Accumulated deficit                                                    |                                                                  |                                            | (119,601,384                         | )          |                    |           | (143,402,453 | )         
|                                 | Deferred compensation                                                  |                                                                  |                                            | (2,515,440                           | )          |                    |           | (809,338     | )         
|                                 | Other comprehensive income (loss)                                      |                                                                  |                                            | 107,216                              |            |                    |           | (733,354     | )         
|                                 |                                                                        |                                                                  |                                            |                                      |            |                    |           |             
|                                 |                                                                        |                                                                  | Total stockholders equity                 |                                      |            | 53,556,363         |           |              |            | 30,348,191 | 
|                                 |                                                                        |                                                                  |                                            |                                      |            |                    |           |             
|                                 |                                                                        |                                                                  | Total liabilities and stockholders equity |                                      | $          | 91,070,468         |           |              | $          | 70,369,450 | 
|                                 |                                                                        |                                                                  |                                            |                                      |            |                    |           |             

See accompanying notes.

45



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##### Table of Contents



EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |            |           |  |            | 
|--------------------------------------------- | ------------------------------------------------- | ------------- | ------------- | -------------------------------- | - | ------------------------ | ----------- | ---------- | --------- | ---- | ----------- | ---------- | --------- |  | ---------- | 
|                                              |                                                   |               |               |                                  |   | Years Ended December 31,
|                                              |                                                   |               |               |                                  |   |                         
|                                              |                                                   |               |               |                                  |   | 2000                     |             | 2001       |           | 2002
|Revenue:                                      |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|                                              | Software license                                  |               | $             | 38,273,898                       |   |                          | $           | 24,046,976 |           |      | $           | 12,587,127 |          
|                                              | Services and maintenance                          |               |               | 68,708,446                       |   |                          |             | 61,586,322 |           |      |             | 48,234,335 |          
|                                              | Resale of software and equipment                  |               |               | 8,214,867                        |   |                          |             | 9,342,639  |           |      |             | 11,008,843 |          
|                                              | Reimbursable expenses                             |               |               | 3,629,348                        |   |                          |             | 2,547,865  |           |      |             | 1,825,796  |          
|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|                                              |                                                   |               |               | Total revenue                    |   |                          | 118,826,559 |            |           |      | 97,523,802  |            |           |  | 73,656,101 | 
|Costs and expenses:                           |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|                                              | Cost of software licenses                         |               |               | 1,391,435                        |   |                          |             | 719,558    |           |      |             | 618,576    |          
|                                              | Cost of services and maintenance                  |               |               | 53,584,519                       |   |                          |             | 41,166,000 |           |      |             | 32,287,549 |          
|                                              | Cost of resale of software and equipment          |               |               | 6,607,214                        |   |                          |             | 7,613,530  |           |      |             | 9,389,235  |          
|                                              | Cost of reimbursable expenses                     |               |               | 3,629,348                        |   |                          |             | 2,547,865  |           |      |             | 1,825,796  |          
|                                              | Sales and marketing                               |               |               | 25,104,507                       |   |                          |             | 27,211,690 |           |      |             | 19,017,315 |          
|                                              | Research and development                          |               |               | 9,577,655                        |   |                          |             | 14,604,931 |           |      |             | 12,102,835 |          
|                                              | General and administrative                        |               |               | 14,444,617                       |   |                          |             | 18,280,084 |           |      |             | 11,848,568 |          
|                                              | Amortization of goodwill and intangible assets    |               |               | 4,615,507                        |   |                          |             | 8,434,796  |           |      |             | 1,260,775  |          
|                                              | Warrant and stock compensation expense            |               |               |                                  |   |                          |             |            |           |      |             |            |          
|                                              |                                                   |               | allocated to: |                                  |   |                          |             |            |           |      |             |            |           |  |           
|                                              |                                                   |               |               | Cost of services and maintenance |   |                          | 842,695     |            |           |      | 500,413     |            |           |  | 269,073    | 
|                                              |                                                   |               |               | Sales and marketing              |   |                          | 1,305,674   |            |           |      | 316,243     |            |           |  | 173,048    | 
|                                              |                                                   |               |               | Research and development         |   |                          | 17,032      |            |           |      | 166,228     |            |           |  | 173,048    | 
|                                              |                                                   |               |               | General and administrative       |   |                          | 597,037     |            |           |      | 591,603     |            |           |  | 436,549    | 
|                                              | Impairment of intangibles                         |               |               |                                 |   |                          |             | 26,679,798 |           |      |             |           |          
|                                              | Provision for estimated loss on lease abandonment |               |               |                                 |   |                          |             | 10,183,992 |           |      |             | 3,998,862  |          
|                                              | Employee severance and other facility             |               |               |                                  |   |                          |             |            |           |      |             |            |          
|                                              |                                                   | closure costs |               |                                  |  |                          |             |            | 4,109,630 |      |             |            | 5,737,769 | 
|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|                                              |                                                   |               |               | Total costs and expenses         |   |                          | 121,717,240 |            |           |      | 163,126,361 |            |           |  | 99,138,998 | 
|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|Operating loss                                |                                                   |               | (2,890,681    | )                                |   |                          | (65,602,559 | )          |           |      | (25,482,897 | )         
|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|Other income (expense):                       |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|                                              | Interest income                                   |               |               | 1,810,108                        |   |                          |             | 2,468,445  |           |      |             | 1,087,135  |          
|                                              | Interest expense                                  |               |               | (1,210,237                       | ) |                          |             | (62,521    | )         |      |             | (93,668    | )        
|                                              | Other                                             |               |               | (1,040,796                       | ) |                          |             | (514,953   | )         |      |             | 1,213,438  |          
|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|                                              |                                                   |               |               | Total other income (expense)     |   |                          | (440,925    | )          |           |      | 1,890,971   |            |           |  | 2,206,905  | 
|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|Loss before minority interest and taxes       |                                                   |               | (3,331,606    | )                                |   |                          | (63,711,588 | )          |           |      | (23,275,992 | )         
|Minority interest in subsidiary income        |                                                   |               |              |                                  |   |                          | (161,192    | )          |           |      | (29,156     | )         
|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|Loss before taxes                             |                                                   |               | (3,331,606    | )                                |   |                          | (63,872,780 | )          |           |      | (23,305,148 | )         
|Income tax provision                          |                                                   |               |              |                                  |   |                          | 51,337      |            |           |      | 495,921     |           
|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|Net loss                                      |                                                   | $             | (3,331,606    | )                                |   | $                        | (63,924,117 | )          |           | $    | (23,801,069 | )         
|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|Net loss per common share - basic and diluted |                                                   | $             | (0.87         | )                                |   | $                        | (9.86       | )          |           | $    | (3.61       | )         
|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|Weighted average number of common shares      |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           
|                                              | outstanding - basic and diluted                   |               |               | 3,828,508                        |   |                          |             | 6,481,378  |           |      |             | 6,586,263  |          
|                                              |                                                   |               |               |                                  |   |                          |             |            |           |      |             |           

See accompanying notes.

46



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##### Table of Contents



EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



|                                |                                                                               |  |              |           |              |   |                 |        |        |  |        |         |        |   |       |        |   |  |           |            |   |   |            |             |  
|------------------------------- | ----------------------------------------------------------------------------- |  | ------------ | --------- | ------------ | - | --------------- | ------ | ------ |  | ------ | ------- | ------ | - | ----- | ------ | - |  | --------- | ---------- | - | - | ---------- | ----------- | -
|                                |                                                                               |  | Class A      |           | Class B      |   |                 |        |        |  |        |         |       
|                                |                                                                               |  | Common Stock |           | Common Stock |   | Preferred Stock
|                                |                                                                               |  |              |           |              |   |                
|                                |                                                                               |  | Shares       |           | Amount       |   | Shares          |        | Amount |  | Shares |         | Amount
|                                |                                                                               |  |              |           |              |   |                 |        |        |  |        |         |       
|Balance as of December 31, 1999 |                                                                               |  | 2,395,218    |           |              | $ | 23,952          |        |        |  | 54,289 |         |        | $ | 5,429 |        |   |  | 2,526,795 |            |   | $ | 52,000,000 |            
|                                | Net loss                                                                      |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Net proceeds from initial public offering                                     |  |              | 1,262,857 |              |   |                 | 12,629 |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Conversion of Class B common and
convertible preferred shares to common
stock |  |              | 2,581,083 |              |   |                 | 25,811 |        |  |        | (54,289 | )      |   |       | (5,429 | ) |  |           | (2,526,795 | ) |   |            | (52,000,000 | )
|                                | Purchase of treasury stock                                                    |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Exercise of stock options                                                     |  |              | 26,555    |              |   |                 | 266    |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Exercise of warrants                                                          |  |              | 89,643    |              |   |                 | 896    |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Deferred compensation related to stock
options                                |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Amortization of deferred compensation                                         |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Expense associated with warrants issued
for services                          |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Foreign currency translation adjustment                                       |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Unrealized gain (loss) on securities
available for sale                       |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                |                                                                               |  |              |           |              |   |                 |        |        |  |        |         |        |   |       |        |   |  |           |            |   |   |            |            
|Balance as of December 31, 2000 |                                                                               |  | 6,355,356    |           |              |   | 63,554          |        |        |  |       |         |        |   |      |        |   |  |          |            |   |   |           |            
|                                | Net loss                                                                      |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Issuance of common stock for AllPoints
acquisition                            |  |              | 227,194   |              |   |                 | 2,272  |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Deferred compensation related to
AllPoints acquisition                        |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Exercise of stock options                                                     |  |              | 98,401    |              |   |                 | 984    |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Exercise of warrants                                                          |  |              | 3,178     |              |   |                 | 31     |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Deferred compensation related to stock
options                                |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Amortization of deferred compensation                                         |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Expense associated with warrants issued
for services                          |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Foreign currency translation adjustment                                       |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Unrealized gain (loss) on securities
available for sale                       |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                |                                                                               |  |              |           |              |   |                 |        |        |  |        |         |        |   |       |        |   |  |           |            |   |   |            |            
|Balance as of December 31, 2001 |                                                                               |  | 6,684,129    |           |              |   | 66,841          |        |        |  |       |         |        |   |      |        |   |  |          |            |   |   |           |            
|                                | Net loss                                                                      |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Exercise of stock options                                                     |  |              | 52,256    |              |   |                 | 523    |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Purchase of treasury stock for
shareholder note receivable                    |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Issuance of restricted stock                                                  |  |              | 71,428    |              |   |                 | 714    |        |  |        |         |        |   |       |        |   |  |           |            |   |   |            |             |  
|                                | Amortization of deferred compensation                                         |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Foreign currency translation adjustment                                       |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                | Unrealized gain (loss) on securities
available for sale                       |  |              |          |              |   |                 |       |        |  |        |        |        |   |       |       |   |  |           |           |   |   |            |            |  
|                                |                                                                               |  |              |           |              |   |                 |        |        |  |        |         |        |   |       |        |   |  |           |            |   |   |            |            
|Balance as of December 31, 2002 |                                                                               |  | 6,807,813    |           |              | $ | 68,078          |        |        |  |       |         |        | $ |      |        |   |  |          |            |   | $ |           |            
|                                |                                                                               |  |              |           |              |   |                 |        |        |  |        |         |        |   |       |        |   |  |           |            |   |   |            |            

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                |                                                                               |   |             |            |             |   |                |          |        |  |         |        |  |   |            |          |  
|------------------------------- | ----------------------------------------------------------------------------- | - | ----------- | ---------- | ----------- | - | -------------- | -------- | ------ |  | ------- | ------ |  | - | ---------- | -------- | -
|                                |                                                                               |   |             |            | Note        |   |                |          |        |  |         |        | 
|                                |                                                                               |   | Additional  |            | Receivable  |   | Treasury Stock
|                                |                                                                               |   | Paid-In     |            | from        |   |               
|                                |                                                                               |   | Capital     |            | Stockholder |   | Shares         |          | Amount
|                                |                                                                               |   |             |            |             |   |                |          |       
|Balance as of December 31, 1999 |                                                                               | $ | 26,497,500  |            |             | $ |               |          |        |  | 132,010 |        |  | $ | (3,208,912 | )       
|                                | Net loss                                                                      |   |             |           |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Net proceeds from initial public offering                                     |   |             | 63,930,300 |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Conversion of Class B common and
convertible preferred shares to common
stock |   |             | 51,979,618 |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Purchase of treasury stock                                                    |   |             |           |             |   |                |         |        |  |         | 10,773 |  |   |            | (222,552 | )
|                                | Exercise of stock options                                                     |   |             | 428,898    |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Exercise of warrants                                                          |   |             | 1,759,104  |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Deferred compensation related to stock
options                                |   |             | 4,601,125  |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Amortization of deferred compensation                                         |   |             | (300,000   | )           |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Expense associated with warrants issued
for services                          |   |             | 1,176,112  |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Foreign currency translation adjustment                                       |   |             |           |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Unrealized gain (loss) on securities
available for sale                       |   |             |           |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                |                                                                               |   |             |            |             |   |                |          |        |  |         |        |  |   |            |         
|Balance as of December 31, 2000 |                                                                               |   | 150,072,657 |            |             |   |               |          |        |  | 142,783 |        |  |   | (3,431,464 | )       
|                                | Net loss                                                                      |   |             |           |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Issuance of common stock for AllPoints
acquisition                            |   |             | 28,921,667 |             |   |                | (211,750 | )      |  |         |       |  |   |            |         |  
|                                | Deferred compensation related to
AllPoints acquisition                        |   |             |           |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Exercise of stock options                                                     |   |             | 1,669,743  |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Exercise of warrants                                                          |   |             | (31        | )           |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Deferred compensation related to stock
options                                |   |             | 666,000    |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Amortization of deferred compensation                                         |   |             | (2,362,042 | )           |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Expense associated with warrants issued
for services                          |   |             | 174,350    |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Foreign currency translation adjustment                                       |   |             |           |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Unrealized gain (loss) on securities
available for sale                       |   |             |           |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                |                                                                               |   |             |            |             |   |                |          |        |  |         |        |  |   |            |         
|Balance as of December 31, 2001 |                                                                               |   | 179,142,344 |            |             |   | (211,750       | )        |        |  | 142,783 |        |  |   | (3,431,464 | )       
|                                | Net loss                                                                      |   |             |           |             |   |                |          |        |  |         |        |  |   |            |          |  
|                                | Exercise of stock options                                                     |   |             | 383,871    |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Purchase of treasury stock for
shareholder note receivable                    |   |             |           |             |   |                | 211,750  |        |  |         | 13,635 |  |   |            | (214,395 | )
|                                | Issuance of restricted stock                                                  |   |             | (275,714   | )           |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Amortization of deferred compensation                                         |   |             | (379,384   | )           |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Foreign currency translation adjustment                                       |   |             |           |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                | Unrealized gain (loss) on securities
available for sale                       |   |             |           |             |   |                |         |        |  |         |       |  |   |            |         |  
|                                |                                                                               |   |             |            |             |   |                |          |        |  |         |        |  |   |            |         
|Balance as of December 31, 2002 |                                                                               | $ | 178,871,117 |            |             | $ |               |          |        |  | 156,418 |        |  | $ | (3,645,859 | )       
|                                |                                                                               |   |             |            |             |   |                |          |        |  |         |        |  |   |            |         

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                |                                                                               |   |              |             |              |   |               |            |       |   |          |          |   |   |            |             |  
|------------------------------- | ----------------------------------------------------------------------------- | - | ------------ | ----------- | ------------ | - | ------------- | ---------- | ----- | - | -------- | -------- | - | - | ---------- | ----------- | -
|                                |                                                                               |   |              |             |              |   |               |            |       |   | Other    |          |   |   |           
|                                |                                                                               |   | Accumulated  |             | Deferred     |   | Comprehensive |            |       |   |         
|                                |                                                                               |   | Deficit      |             | Compensation |   | Income(Loss)  |            | Total
|                                |                                                                               |   |              |             |              |   |               |            |      
|Balance as of December 31, 1999 |                                                                               | $ | (52,345,661  | )           |              | $ | (973,260      | )          |       | $ | (766,442 | )        |   | $ | 21,232,606 |            
|                                | Net loss                                                                      |   |              | (3,331,606  | )            |   |               |           |       |   |          |         |   |   |            | (3,331,606  | )
|                                | Net proceeds from initial public offering                                     |   |              |            |              |   |               |           |       |   |          |         |   |   |            | 63,942,929  |  
|                                | Conversion of Class B common and
convertible preferred shares to common
stock |   |              |            |              |   |               |           |       |   |          |         |   |   |            |            |  
|                                | Purchase of treasury stock                                                    |   |              |            |              |   |               |           |       |   |          |         |   |   |            | (222,552    | )
|                                | Exercise of stock options                                                     |   |              |            |              |   |               |           |       |   |          |         |   |   |            | 429,164     |  
|                                | Exercise of warrants                                                          |   |              |            |              |   |               |           |       |   |          |         |   |   |            | 1,760,000   |  
|                                | Deferred compensation related to stock
options                                |   |              |            |              |   |               | (4,601,125 | )     |   |          |         |   |   |            |            |  
|                                | Amortization of deferred compensation                                         |   |              |            |              |   |               | 1,886,326  |       |   |          |         |   |   |            | 1,586,326   |  
|                                | Expense associated with warrants issued
for services                          |   |              |            |              |   |               |           |       |   |          |         |   |   |            | 1,176,112   |  
|                                | Foreign currency translation adjustment                                       |   |              |            |              |   |               |           |       |   |          | 432,652  |   |   |            | 432,652     |  
|                                | Unrealized gain (loss) on securities
available for sale                       |   |              |            |              |   |               |           |       |   |          | 38,328   |   |   |            | 38,328      |  
|                                |                                                                               |   |              |             |              |   |               |            |       |   |          |          |   |   |            |            
|Balance as of December 31, 2000 |                                                                               |   | (55,677,267  | )           |              |   | (3,688,059    | )          |       |   | (295,462 | )        |   |   | 87,043,959 |            
|                                | Net loss                                                                      |   |              | (63,924,117 | )            |   |               |           |       |   |          |         |   |   |            | (63,924,117 | )
|                                | Issuance of common stock for AllPoints
acquisition                            |   |              |            |              |   |               |           |       |   |          |         |   |   |            | 28,712,189  |  
|                                | Deferred compensation related to
AllPoints acquisition                        |   |              |            |              |   |               | (1,923,560 | )     |   |          |         |   |   |            | (1,923,560  | )
|                                | Exercise of stock options                                                     |   |              |            |              |   |               |           |       |   |          |         |   |   |            | 1,670,727   |  
|                                | Exercise of warrants                                                          |   |              |            |              |   |               |           |       |   |          |         |   |   |            |            |  
|                                | Deferred compensation related to stock
options                                |   |              |            |              |   |               | (666,000   | )     |   |          |         |   |   |            |            |  
|                                | Amortization of deferred compensation                                         |   |              |            |              |   |               | 3,762,179  |       |   |          |         |   |   |            | 1,400,137   |  
|                                | Expense associated with warrants issued
for services                          |   |              |            |              |   |               |           |       |   |          |         |   |   |            | 174,350     |  
|                                | Foreign currency translation adjustment                                       |   |              |            |              |   |               |            |       |   |          | 265,816  |   |   |            | 265,816     |  
|                                | Unrealized gain (loss) on securities
available for sale                       |   |              |            |              |   |               |            |       |   |          | 136,862  |   |   |            | 136,862     |  
|                                |                                                                               |   |              |             |              |   |               |            |       |   |          |          |   |   |            |            
|Balance as of December 31, 2001 |                                                                               |   | (119,601,384 | )           |              |   | (2,515,440    | )          |       |   | 107,216  |          |   |   | 53,556,363 |            
|                                | Net loss                                                                      |   |              | (23,801,069 | )            |   |               |           |       |   |          |         |   |   |            | (23,801,069 | )
|                                | Exercise of stock options                                                     |   |              |            |              |   |               |           |       |   |          |         |   |   |            | 384,394     |  
|                                | Purchase of treasury stock for
shareholder note receivable                    |   |              |            |              |   |               |           |       |   |          |         |   |   |            | (2,645      | )
|                                | Issuance of restricted stock                                                  |   |              |            |              |   |               | 275,000    |       |   |          |         |   |   |            |            |  
|                                | Amortization of deferred compensation                                         |   |              |            |              |   |               | 1,431,102  |       |   |          |         |   |   |            | 1,051,718   |  
|                                | Foreign currency translation adjustment                                       |   |              |            |              |   |               |           |       |   |          | (721,160 | ) |   |            | (721,160    | )
|                                | Unrealized gain (loss) on securities
available for sale                       |   |              |            |              |   |               |           |       |   |          | (119,410 | ) |   |            | (119,410    | )
|                                |                                                                               |   |              |             |              |   |               |            |       |   |          |          |   |   |            |            
|Balance as of December 31, 2002 |                                                                               | $ | (143,402,453 | )           |              | $ | (809,338      | )          |       | $ | (733,354 | )        |   | $ | 30,348,191 |            
|                                |                                                                               |   |              |             |              |   |               |            |       |   |          |          |   |   |            |            

See accompanying notes

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                           |                                                                     |                                                                            |                                   |                                                     |           |                          |             |      |            |            |             |   |           |            |            |  
|---------------------------------------------------------- | ------------------------------------------------------------------- | -------------------------------------------------------------------------- | --------------------------------- | --------------------------------------------------- | --------- | ------------------------ | ----------- | ---- | ---------- | ---------- | ----------- | - | --------- | ---------- | ---------- | -
|                                                           |                                                                     |                                                                            |                                   |                                                     |           | Years Ended December 31,
|                                                           |                                                                     |                                                                            |                                   |                                                     |           |                         
|                                                           |                                                                     |                                                                            |                                   |                                                     |           | 2000                     |             | 2001 |            | 2002      
|                                                           |                                                                     |                                                                            |                                   |                                                     |           |                          |             |      |            |           
|Cash Flow from Operating Activities:                       |                                                                     |                                                                            |                                   |                                                     |           |                          |             |      |            |            |             |  
|Net loss                                                   |                                                                     | $                                                                          | (3,331,606                        | )                                                   |           | $                        | (63,924,117 | )    |            | $          | (23,801,069 | )
|                                                           | Adjustments to reconcile net loss to net cash provided by (used in) |                                                                            |                                   |                                                     |           |                          |             |      |            |            |             |   |          
|                                                           |                                                                     | operating activities:                                                      |                                   |                                                     |           |                          |             |      |            |            |             |   |           |           
|                                                           |                                                                     | Depreciation and amortization                                              |                                   |                                                     | 8,790,904 |                          |             |      | 12,284,829 |            |             |   | 4,380,407 |           
|                                                           |                                                                     | Impairment of intangibles                                                  |                                   |                                                     |          |                          |             |      | 26,679,798 |            |             |   |          |           
|                                                           |                                                                     | Provision for losses on receivables                                        |                                   |                                                     | 6,141,903 |                          |             |      | 6,876,424  |            |             |   | 4,681,307 |           
|                                                           |                                                                     | Amortization of deferred compensation                                      |                                   |                                                     | 1,586,326 |                          |             |      | 1,400,137  |            |             |   | 1,051,718 |           
|                                                           |                                                                     | Write-down of property and equipment                                       |                                   |                                                     |          |                          |             |      | 267,135    |            |             |   | 1,448,326 |           
|                                                           |                                                                     | Issuance of warrants for services                                          |                                   |                                                     | 1,176,112 |                          |             |      | 174,350    |            |             |   |          |           
|                                                           |                                                                     | Minority interest                                                          |                                   |                                                     |          |                          |             |      | 161,192    |            |             |   | 29,156    |           
|                                                           |                                                                     | Changes in operating assets and liabilities, net of effect of acquisition: |                                   |                                                     |           |                          |             |      |            |            |             |   |           |           
|                                                           |                                                                     |                                                                            | Accounts receivable               |                                                     |           | (8,554,054               | )           |      |            | 1,485,869  |             |   |           | 3,442,966  |           
|                                                           |                                                                     |                                                                            | Other receivables and advances    |                                                     |           | 142,359                  |             |      |            | 42,343     |             |   |           | 242,870    |           
|                                                           |                                                                     |                                                                            | Prepaids and other current assets |                                                     |           | (1,462,366               | )           |      |            | 1,072,130  |             |   |           | (575,665   | )         
|                                                           |                                                                     |                                                                            | Other long-term assets            |                                                     |           | (1,172,811               | )           |      |            | (345,535   | )           |   |           | 804,262    |           
|                                                           |                                                                     |                                                                            | Accounts payable                  |                                                     |           | 804,781                  |             |      |            | (282,378   | )           |   |           | 2,508,887  |           
|                                                           |                                                                     |                                                                            | Accrued payroll and benefits      |                                                     |           | (647,460                 | )           |      |            | (1,495,399 | )           |   |           | (60,231    | )         
|                                                           |                                                                     |                                                                            | Deferred revenue                  |                                                     |           | (3,684,185               | )           |      |            | (2,178,870 | )           |   |           | (1,321,513 | )         
|                                                           |                                                                     |                                                                            | Accrued expenses                  |                                                     |           | 1,257,831                |             |      |            | 8,329,064  |             |   |           | 1,843,939  |           
|                                                           |                                                                     |                                                                            | Other                             |                                                     |           | (506,335                 | )           |      |            | (296,653   | )           |   |           | (761,472   | )         
|                                                           |                                                                     |                                                                            |                                   |                                                     |           |                          |             |      |            |            |             |  
|                                                           |                                                                     |                                                                            |                                   | Net cash provided by (used in) operating activities |           |                          | 541,399     |      |            |            | (9,749,681  | ) |           |            | (6,086,112 | )
|Cash Flow from Investing Activities:                       |                                                                     |                                                                            |                                   |                                                     |           |                          |             |      |            |            |             |  
|Purchases of property and equipment                        |                                                                     |                                                                            | (1,556,386                        | )                                                   |           |                          | (2,004,180  | )    |            |            | (657,999    | )
|Net proceeds from sale of fixed assets                     |                                                                     |                                                                            | 9,369                             |                                                     |           |                          |            |      |            |            |            |  
|Purchase of marketable securities                          |                                                                     |                                                                            | (19,382,963                       | )                                                   |           |                          | (16,500,000 | )    |            |            | (21,585,000 | )
|Proceeds from sale and maturities of marketable securities |                                                                     |                                                                            |                                  |                                                     |           |                          | 20,836,389  |      |            |            | 20,003,109  |  
|Purchase of intellectual property                          |                                                                     |                                                                            |                                  |                                                     |           |                          | (1,000,000  | )    |            |            | (1,000,000  | )
|Cash paid for AllPoints acquisition                        |                                                                     |                                                                            |                                  |                                                     |           |                          | (1,618,109  | )    |            |            |            |  
|                                                           |                                                                     |                                                                            |                                   |                                                     |           |                          |             |      |            |            |             |  
|                                                           |                                                                     |                                                                            |                                   | Net cash used in investing activities               |           |                          | (20,929,980 | )    |            |            | (285,900    | ) |           |            | (3,239,890 | )
|Cash Flow from Financing Activities:                       |                                                                     |                                                                            |                                   |                                                     |           |                          |             |      |            |            |             |  
|Issuance of common stock for options and warrants          |                                                                     |                                                                            | 2,189,164                         |                                                     |           |                          | 1,670,727   |      |            |            | 384,394     |  
|Proceeds from minority interest                            |                                                                     |                                                                            |                                  |                                                     |           |                          | 8,431       |      |            |            |            |  
|Proceeds from initial public offering, net                 |                                                                     |                                                                            | 63,942,929                        |                                                     |           |                          |            |      |            |            |            |  
|Payments on long-term debt and capital lease obligations   |                                                                     |                                                                            | (5,227,064                        | )                                                   |           |                          | (463,477    | )    |            |            | (493,084    | )
|Proceeds from revolving line of credit                     |                                                                     |                                                                            | 2,220,946                         |                                                     |           |                          |            |      |            |            |            |  
|Retirement of revolving line of credit                     |                                                                     |                                                                            | (11,626,859                       | )                                                   |           |                          |            |      |            |            |            |  
|Purchase of treasury stock                                 |                                                                     |                                                                            | (222,552                          | )                                                   |           |                          |            |      |            |            |            |  
|Retirement of AllPoints line of credit                     |                                                                     |                                                                            |                                  |                                                     |           |                          | (750,000    | )    |            |            |            |  
|                                                           |                                                                     |                                                                            |                                   |                                                     |           |                          |             |      |            |            |             |  
|                                                           |                                                                     |                                                                            |                                   | Net cash provided by (used in) financing activities |           |                          | 51,276,564  |      |            |            | 465,681     |   |           |            | (108,690   | )
|                                                           |                                                                     |                                                                            |                                   |                                                     |           |                          |             |      |            |            |             |  
|Net increase (decrease) in cash and cash equivalents       |                                                                     |                                                                            | 30,887,983                        |                                                     |           |                          | (9,569,900  | )    |            |            | (9,434,692  | )
|Cash and cash equivalents at beginning of year             |                                                                     |                                                                            | 8,932,073                         |                                                     |           |                          | 39,820,056  |      |            |            | 30,250,156  |  
|                                                           |                                                                     |                                                                            |                                   |                                                     |           |                          |             |      |            |            |             |  
|Cash and cash equivalents at end of year                   |                                                                     | $                                                                          | 39,820,056                        |                                                     |           | $                        | 30,250,156  |      |            | $          | 20,815,464  |  
|                                                           |                                                                     |                                                                            |                                   |                                                     |           |                          |             |      |            |            |             |  

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|                                    |  |                          |           |      |  |      |           |  |  |   |         | 
|----------------------------------- |  | ------------------------ | --------- | ---- |  | ---- | --------- |  |  | - | ------- | 
|                                    |  | Years Ended December 31,
|                                    |  |                         
|                                    |  | 2000                     |           | 2001 |  | 2002
|                                    |  |                          |           |      |  |     
|Supplemental Cash Flow Information: |  |                          |           |      |  |      |           |  |  |   |         | 
|Cash paid for interest              |  | $                        | 1,036,091 |      |  | $    | 100,281   |  |  | $ | 88,434  | 
|                                    |  |                          |           |      |  |      |           |  |  |   |         | 
|Cash paid for income taxes          |  | $                        | 213,009   |      |  | $    | 225,931   |  |  | $ | 191,204 | 
|                                    |  |                          |           |      |  |      |           |  |  |   |         | 
|Non-Cash Activities:                |  |                          |           |      |  |      |           |  |  |   |         | 
|Capital lease obligations           |  | $                        |          |      |  | $    | 1,404,431 |  |  | $ |        | 
|                                    |  |                          |           |      |  |      |           |  |  |   |         | 

See accompanying notes.

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##### Table of Contents



EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business and Basis of Presentation

EXE Technologies, Inc. (the Company or EXE) provides software that drives
customers supply chain execution processes, including fulfillment,
warehousing, distribution, and inventory management. The Company operates from
its headquarters located in Dallas, Texas, and through its various subsidiary
and sales offices serving North America, Europe, the Middle East, Asia, and
Australia.

The consolidated financial statements of the Company include the accounts
of the Company and its majority owned subsidiaries. All significant
intercompany transactions and balances have been eliminated.

Certain amounts in prior year financial statements have been reclassified
to conform to the current year presentation.

All share and per share amounts in the accompanying financial statements
and footnotes have been adjusted to reflect the Companys one for seven reverse
stock split that was effective January 2, 2003.

2. Summary of Significant Accounting Policies

Revenue Recognition

The Companys revenues consist of software license revenues, consulting
service revenues, maintenance revenues, and revenues from the resale of
software and equipment. Software license revenues are recognized in accordance
with the American Institute of Certified Public Accountants Statement of
Position, Software Revenue Recognition (SOP 97-2). Under SOP 97-2, software
license revenues are recognized upon execution of a contract and delivery of
software, provided that the license fee is fixed and determinable; no
significant production, modification, or customization of the software is
required; vendor-specific objective evidence of fair value exists to allow the
allocation of the total fee to elements of the arrangement; and collection is
considered probable by management.

Revenue from services is recognized as the services are provided. The
Companys standard service arrangement limits the customers remedy and the
Companys liability to the underlying service fees specified in the separate
service arrangement. If disputes arise with a customer, a provision is recorded
based on the specific customer situation and the Companys assessment of the
potential outcome of that situation. Maintenance revenue is recognized on a
straight-line basis over the period of the obligation. Revenues from resale of
software and equipment are recognized upon receipt of a purchase order and
shipment of the software and equipment to the customer provided the following
criteria are met: payment terms are fixed and determinable; no significant
production, modification, or customization is required; and collection is
considered probable by management.

The Companys standard license arrangements specify that the customer
accepts the software under the arrangement when the software is shipped and
that the license fees under the arrangement are not refundable. The Company
periodically enters into arrangements that do not have standard acceptance and
warranty provisions. Such contracts are analyzed and timing of revenue
recognition is determined based upon specific facts and circumstances. If
warranty and acceptance criteria differs from the Companys standard criteria,
revenue recognition is deferred until acceptance is obtained or the warranty
period lapses. The Companys standard license arrangement warrants that its
products will function substantially in accordance with the documentation
provided to customers for periods ranging from three to twelve months. As of
December 31, 2002, the Company has not incurred significant expenses related to
warranty claims.

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2. Summary of Significant Accounting Policies (continued)

No single customer represented greater than 10.0% of total revenues during
the years ended December 31, 2000, 2001 and 2002.

In January 2000, the Company sold its mainframe services and maintenance
practice to an unrelated third-party consulting firm in exchange for royalties
that will be received on future revenue generated by customers using this
product. The royalties are a declining percentage of the consulting firms
services and maintenance revenues generated from customers using our mainframe
product, subject to a maximum of $0.4 million per year. The percentages of
revenue are: 20.0% for the first two years, 15.0% for the third year, 10.0% for
the fourth and fifth years and 5.0% for each year after the fifth year. The
agreement is perpetual, but may be terminated at EXEs option in the event of
default by the consulting firm. Royalties recognized in the years ended
December 31, 2000, 2001 and 2002 totaled approximately $0.4 million, $0.2
million and $0.2 million, respectively, and are included as a component of
services and maintenance revenue.

Software Development

In accordance with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed,(SFAS 86) software development costs are expensed as incurred until
technological feasibility has been established, at which time such costs are
capitalized until the product is available for general release to customers.
The establishment of technological feasibility of the Companys products and
general release of such software has substantially coincided. As a result,
software development costs qualifying for capitalization have been
insignificant and, therefore, the Company has expensed all software development
costs.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

Foreign Currency

Financial statements of foreign operations, where the local currency is
the functional currency, are translated using exchange rates in effect at
period end for assets and liabilities and average exchange rates during the
period for results of operations. Foreign currency transaction gains (losses),
which are included in other income (expense) in the consolidated statement of
operations, were approximately $(0.8) million, $(0.5) million and $1.2 million
for the years ended December 31, 2000, 2001 and 2002, respectively.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of bank deposits and
investment grade corporate and government debt securities and money market
funds. The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. The carrying value
of cash equivalents approximates fair market value.

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2. Summary of Significant Accounting Policies (continued)

Marketable Securities

The Companys investments in debt securities are comprised of investment
grade debt securities in accordance with the Companys investment policy.
Management determines the appropriate classification of investments in debt
securities at the time of purchase and reevaluates such determinations at each
balance sheet date. At December 31, 2001 and 2002, the Companys debt
securities are classified as available for sale. Securities available for sale
are carried at fair value, with the unrealized gains and losses, net of tax,
reported as a separate component of stockholders equity. Fair value is
determined based on quoted market rates. The amortized cost of debt securities
in this category is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization is included as a component of interest
income. Realized gains and losses and declines in value judged to be
other-than-temporary on securities available for sale are included as a
component of interest income. The cost of securities sold is based on the
specific identification method. Interest and dividends on securities classified
as available for sale are included as a component of interest income.
Securities available for sale with remaining maturities in excess of one year
have been classified as long-term securities.

Accounts Receivable and Concentration of Credit Risk

Financial instruments, which potentially subject the Company to
concentration of credit risk consist principally of temporary cash investments
and accounts receivable, including receivables from license contracts. The
Company places temporary cash investments with financial institutions and
limits its exposure with any one financial institution. At December 31, 2000,
2001 and 2002, no single customer represented greater than 10.0% of the total
receivable balance. The Companys billings are due upon receipt with
collections generally occurring within 30 to 60 days, and the Company does not
require collateral on accounts. As of December 31, 2001 and 2002 a large
portion of the Companys accounts receivable is composed of Fortune1000
companies or foreign equivalents, which the Company believes mitigates its
credit risk.

The Company maintains an allowance for losses on receivables which was
approximately $3.7 million and $4.2 million as of December 31, 2001 and 2002,
respectively, based upon the amount of accounts receivable that is estimated to
prove uncollectible. We provide an allowance for losses on accounts receivable
based on managements estimate of the ultimate collectibility of the accounts
receivable. Our evaluation is based on a combination of factors, including
specific identification and past write off experience. The estimated allowance
for specific customer accounts is established when a receivable is more than 60
days past due or we become aware of a customers potential inability to pay
amounts due to the Company. For all other accounts receivable, we recognize
reserves for bad debts based upon our past write off experience. Write-offs of
receivables during the three years ended December 31, 2000, 2001 and 2002 were
approximately $6.5 million, $8.3 million and $4.2 million, respectively.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.
All property and equipment is depreciated using the straight-line method.

The estimated useful lives of property and equipment are as follows (in
years):

|                        |  |     
|----------------------- |  | ----
|Computer equipment      |  | 3-5 
|Furniture and equipment |  | 5-7 
|Leasehold improvements  |  | 9-15
|Other                   |  | 3-7 

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2. Summary of Significant Accounting Policies (continued)

LongLived Assets

Prior to January 1, 2002, the Company evaluated the carrying value of its
long-lived assets under Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of,(SFAS 121) which requires impairment losses to be
recognized for long-lived assets used in operations when indicators of
impairment are present and when the future estimated undiscounted cash flows
generated by those assets are not sufficient to recover the assets carrying
amount.

On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets(SFAS 142). Under
the provisions of SFAS 142, an annual assessment of goodwill impairment is
performed. This assessment involves the use of estimates related to fair
market values of the Companys reporting units with which the goodwill is
associated. The assessment of goodwill impairment in the future will be
impacted if future operating cash flows of the Companys reporting units
decline, which would result in decreases in the related estimate of fair market
value. The Company performs its annual impairment analysis in December of each
year or on an earlier date if changes in facts and circumstances indicate
impairment may exist. Fair value is determined using the discounted future net
cash flows of the reporting units to which goodwill has been assigned.

The
Company adopted Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets(SFAS 144) on
January 1, 2002. In accordance with SFAS 144, long-lived assets, such as
property, plant and equipment and purchased intangibles subject to
amortization, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. Intangible assets not subject to amortization are
tested annually for impairment, and are tested for impairment more frequently
if events and circumstances indicate that the asset might be impaired. An
impairment loss is recognized to the extent that the carrying amount exceeds
the assets fair value. The adoption of this accounting standard had no
material impact on the Companys financial statements.

Deferred Revenue

Deferred revenue primarily represents amounts collected prior to complete
performance of maintenance services. Deferred revenue also consists of amounts
billed or received in advance of satisfying revenue recognition criteria.

Financial Instruments

The Companys financial instruments, including accounts receivable and
accounts payable, approximate fair value due to their short-term nature. The
fair value of long-term debt approximates book value at December 31, 2001 and
2002.

Stock-Based Compensation Plans

The Company accounts for its stock-based compensation plans (which are
described more fully in Note 10) utilizing the provisions of Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees(APB 25). Under APB 25, if the exercise price of an employees stock option
equals or exceeds the fair market value of the underlying stock on the date of
grant, no compensation

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2. Summary of Significant Accounting Policies (continued)

expense is recognized. The Company accounts for stock-based compensation for
non-employees under the fair value method prescribed by Statement of Financial
Accounting Standards No. 123 , Accounting for Stock-Based Compensation(SFAS
123). Any compensation expense associated with employee stock options is
recognized ratably over the vesting period of the underlying option.

Although SFAS 123 allows the APB 25 guidelines to be applied to accounting
for stock options, SFAS 123 requires the disclosure of pro forma net income
(loss) and earnings (loss) per share information as if the Company had
accounted for its employee stock options under the fair value method. The following table sets forth the pro forma information as if
the provisions of SFAS 123 had been applied to account for stock-based employee
compensation :

|                                                                                          |  |                          |            |      |  |      |             |   |  |   |             |  
|----------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ---- |  | ---- | ----------- | - |  | - | ----------- | -
|                                                                                          |  | Years Ended December 31,
|                                                                                          |  |                         
|                                                                                          |  | 2000                     |            | 2001 |  | 2002
|                                                                                          |  |                          |            |      |  |     
|Reported net loss                                                                         |  | $                        | (3,331,606 | )    |  | $    | (63,924,117 | ) |  | $ | (23,801,069 | )
|Stock compensation expense recorded under
the intrinsic value method prescribed by
APB 25 |  |                          | 1,586,324  |      |  |      | 1,400,137   |   |  |   | 1,051,718   |  
|Stock-based employee compensation determined
under the fair value method                  |  |                          | (1,948,073 | )    |  |      | (5,137,093  | ) |  |   | (5,958,708  | )
|                                                                                          |  |                          |            |      |  |      |             |   |  |   |             |  
|Pro forma net loss                                                                        |  | $                        | (3,693,355 | )    |  | $    | (67,661,073 | ) |  | $ | (28,708,059 | )
|                                                                                          |  |                          |            |      |  |      |             |   |  |   |             |  
|Reported net loss per common share - basic
and diluted                                    |  | $                        | (0.87      | )    |  | $    | (9.86       | ) |  | $ | (3.61       | )
|                                                                                          |  |                          |            |      |  |      |             |   |  |   |             |  
|Pro forma net loss per common share - basic
and diluted                                   |  | $                        | (0.96      | )    |  | $    | (10.44      | ) |  | $ | (4.36       | )
|                                                                                          |  |                          |            |      |  |      |             |   |  |   |             |  

The fair value for options was estimated at the date of grant using a
Black-Scholes options pricing model and the following weighted-average
assumptions for 2000, 2001 and 2002: a risk-free interest rate of 6.41% in
2000, 4.07% in 2001 and 4.47% in 2002, no dividend, an expected life of three
to four years, and a volatility of zero for grants prior to the Companys
initial public offering and 1.24 for grants subsequent to the Companys initial
public offering in 2000, 1.18 for grants in 2001 and 0.93 for grants in 2002.

Advertising Costs

Advertising costs are expensed as incurred and were approximately $4.0
million, $3.7 million and $2.3 million for the years ended December 31, 2000,
2001 and 2002, respectively.

Net Loss Per Share

The Company computes net income (loss) per share in accordance with the
provisions of Statement of Financial Accounting Standards No. 128,
Earnings per Share (SFAS 128). Basic net income (loss) per
common share is computed using the weighted average number of shares of common
stock outstanding during each period.

Diluted net income (loss) per common share is computed using the weighted
average number of shares of common stock outstanding during each period and
common equivalent shares consisting of preferred stock, warrants and stock
options (using the treasury stock method), if dilutive. Diluted loss per common
share is the same as basic loss per common share for all periods presented
because all potentially

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2. Summary of Significant Accounting Policies (continued)

dilutive securities were anti-dilutive. The following table sets forth
anti-dilutive securities that have been excluded from diluted earnings per
share for the periods presented:

|                                        |  |                    |         |      |  |      |           |  |  |  |           | 
|--------------------------------------- |  | ------------------ | ------- | ---- |  | ---- | --------- |  |  |  | --------- | 
|                                        |  | As of December 31,
|                                        |  |                   
|                                        |  | 2000               |         | 2001 |  | 2002
|                                        |  |                    |         |      |  |     
|Common stock options                    |  |                    | 895,187 |      |  |      | 1,402,146 |  |  |  | 1,358,777 | 
|Warrants                                |  |                    | 7,143   |      |  |      |          |  |  |  | 145,000   | 
|                                        |  |                    |         |      |  |      |           |  |  |  |           | 
|Total anti-dilutive securities excluded |  |                    | 902,330 |      |  |      | 1,402,146 |  |  |  | 1,503,777 | 
|                                        |  |                    |         |      |  |      |           |  |  |  |           | 

Comprehensive Loss

Comprehensive loss includes foreign currency translation gains (losses)
and unrealized gains (losses) on securities available for sale. The following
table sets forth the calculation of comprehensive loss for the periods
presented:

|                                                        |  |                          |            |      |  |      |             |   |  |   |             |  
|------------------------------------------------------- |  | ------------------------ | ---------- | ---- |  | ---- | ----------- | - |  | - | ----------- | -
|                                                        |  | Years Ended December 31,
|                                                        |  |                         
|                                                        |  | 2000                     |            | 2001 |  | 2002
|                                                        |  |                          |            |      |  |     
|Net loss                                                |  | $                        | (3,331,606 | )    |  | $    | (63,924,117 | ) |  | $ | (23,801,069 | )
|Foreign currency translation gains
(losses)             |  |                          | 432,652    |      |  |      | 265,816     |   |  |   | (721,160    | )
|Unrealized gain (loss) on securities
available for sale |  |                          | 38,328     |      |  |      | 136,862     |   |  |   | (119,410    | )
|                                                        |  |                          |            |      |  |      |             |   |  |   |             |  
|Total comprehensive loss                                |  | $                        | (2,860,626 | )    |  | $    | (63,521,439 | ) |  | $ | (24,641,639 | )
|                                                        |  |                          |            |      |  |      |             |   |  |   |             |  

Recent Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 146, Accounting for Costs
Associated with Exit or Disposal Activities(SFAS 146). SFAS 146 provides
guidance on the accounting for recognizing, measuring and reporting of costs
associated with exit and disposal activities, including restructuring
activities. SFAS 146 adjusts the timing of when a liability for termination
benefits is to be recognized based on whether the employee is required to
render future service. A liability for costs to terminate an operating lease or
other contract before the end of its term is to be recognized when the entity
terminates the contract or ceases using the rights conveyed by the contract.
All other costs associated with an exit or disposal activity are to be expensed
as incurred. SFAS 146 requires the liability to be measured at its fair value
with subsequent changes in fair value to be recognized each reporting period
utilizing an interest allocation approach. The provisions of SFAS 146 are
required to be applied prospectively after the adoption date to newly initiated
exit activities, and may affect the timing of recognizing future restructuring
costs, as well as the amounts recognized. This Statement is effective for exit
or disposal activities initiated after December 31, 2002.

In November 2002, the Emerging Issues Task Force (EITF) reached a
consensus regarding EITF Issue 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables.The consensus provides guidance on how to account for
certain arrangements that involve the delivery or performance of multiple
products, services and/or rights to use assets. The provisions of EITF Issue
No. 00-21 will apply to revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. While the Company will continue to evaluate the
requirements of EITF Issue No. 00-21, management does not currently believe
adoption will have a significant impact on its accounting for multiple element
arrangements as

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2. Summary of Significant Accounting Policies (continued)

such accounting will generally continue to be accounted for pursuant to the
American Institute Certified Public Accountants Statement of Position 97-2,
Software Revenue Recognition,and related pronouncements.

3. Acquisition of AllPoints Systems, Inc.

On January 25, 2001, the Company completed the acquisition of AllPoints
Systems, Inc. (AllPoints). AllPoints provides warehouse and distribution
management computer software systems and installs these systems. The goal of
the acquisition was to strengthen EXEs position as a leading provider of
fulfillment, warehousing and distribution software by extending EXEs presence
in high volume, piece pick and parcel environments for the direct-to-consumer
and e-commerce markets. The transaction was completed in a stock-for-stock
merger in which EXE issued 227,194 shares of EXE common stock and assumed
options for an additional 58,515 shares of EXE common stock in exchange for all
of the outstanding securities of AllPoints. The transaction was accounted for
as a purchase and therefore, the results of operations of AllPoints are
included in the results of the Company from the date of acquisition.

The breakdown of the consideration, including transaction costs, exchanged
for the outstanding securities of AllPoints was as follows:

|                                                                                                   |  |   |            |  
|-------------------------------------------------------------------------------------------------- |  | - | ---------- | -
|Fair market value of 227,194 shares of common stock                                                |  | $ | 23,420,492 |  
|Fair market value of options to purchase 58,515 shares of common
stock                             |  |   | 5,503,447  |  
|Estimated intrinsic value of unvested stock options at consummation
date related to future service |  |   | (1,923,560 | )
|Transaction costs                                                                                  |  |   | 1,618,109  |  
|                                                                                                   |  |   |            |  
|Total combination cost                                                                             |  | $ | 28,618,488 |  
|                                                                                                   |  |   |            |  

The aggregate purchase price was allocated to the net assets acquired as
follows:

|                         |  |   |            |  
|------------------------ |  | - | ---------- | -
|Goodwill                 |  | $ | 26,682,991 |  
|Developed technology     |  |   | 3,000,000  |  
|Assembled workforce      |  |   | 1,300,000  |  
|Liabilities assumed      |  |   | (3,206,136 | )
|Tangible assets acquired |  |   | 841,633    |  
|                         |  |   |            |  
|                         |  | $ | 28,618,488 |  
|                         |  |   |            |  

The estimated life of the intangibles acquired was six years. Upon
completion of the transaction, EXE paid off and terminated AllPoints $0.8
million line of credit.

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3. Acquisition of AllPoints Systems, Inc. (continued)

The following summary, prepared on an unaudited pro forma basis, reflects
the condensed consolidated results of operations for the year ended December
31, 2000 and 2001 assuming AllPoints had been acquired at the beginning of the
periods presented:

|                                              |  |                         |             |      |  |   |             |  
|--------------------------------------------- |  | ----------------------- | ----------- | ---- |  | - | ----------- | -
|                                              |  | Pro Forma (Unaudited)  
|                                              |  | Year Ended December 31,
|                                              |  |                        
|                                              |  | 2000                    |             | 2001
|                                              |  |                         |             |     
|Revenue                                       |  | $                       | 122,581,448 |      |  | $ | 98,314,020  |  
|                                              |  |                         |             |      |  |   |             |  
|Net loss                                      |  | $                       | (11,381,576 | )    |  | $ | (64,704,574 | )
|                                              |  |                         |             |      |  |   |             |  
|Net loss per common share - basic and diluted |  | $                       | (2.97       | )    |  | $ | (9.98       | )
|                                              |  |                         |             |      |  |   |             |  

The pro forma results are not indicative of what would have occurred if
the acquisition had been in effect for the periods presented or for any future
periods.

Shortly after the acquisition was completed, the e-commerce market
declined significantly. During 2001, EXE was unable to sell new licenses for
the AllPoints products, and expenses associated with the AllPoints subsidiary,
excluding amortization, exceeded revenues by approximately $2.4 million.
Additionally, approximately $4.9 million of cash was used to acquire the
obligations and operate the AllPoints subsidiary during the twelve months ended
December 31, 2001. As a result, in November of 2001, EXE determined there would
be no further sales or marketing efforts regarding this product line, most of
the remaining AllPoints employees were terminated, and the remaining $26.7
million of intangibles associated with this acquisition were judged impaired
and written off.

4. Marketable Securities

There were approximately $0.1 million in realized losses on the sale of
marketable securities during the year ended December 31, 2002. During the
years ended December 31, 2000 and 2001, the net gains and losses on the sale of
marketable securities were not material. The net unrealized holding gain on
marketable securities included as a separate component of stockholders equity
totaled approximately $0.2 million and $0.1 million as of December 31, 2001 and
2002, respectively.

The amortized cost and estimated fair value of debt securities at December
31, 2002, by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because the issuers of the securities may
have the right to prepay obligations without prepayment penalties.

|                                        |  |                         |            |                         |  |           |            |             |  |   |            |  |  |   |            | 
|--------------------------------------- |  | ----------------------- | ---------- | ----------------------- |  | --------- | ---------- | ----------- |  | - | ---------- |  |  | - | ---------- | 
|                                        |  | As of December 31, 2001 |            | As of December 31, 2002
|                                        |  |                         |            |                        
|                                        |  | Amortized               |            | Fair Market             |  | Amortized |            | Fair Market
|                                        |  | Cost                    |            | Value                   |  | Cost      |            | Value      
|                                        |  |                         |            |                         |  |           |            |            
|Securities available for sale maturing: |  |                         |            |                         |  |           |            |             |  |   |            |  |  |   |            | 
|Within one year                         |  | $                       | 12,692,070 |                         |  | $         | 12,842,683 |             |  | $ | 16,572,684 |  |  | $ | 16,628,465 | 
|One to two years                        |  | $                       | 2,179,314  |                         |  | $         | 2,203,891  |             |  | $ |           |  |  | $ |           | 

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5. Derivative Financial Instruments

Effective January 1, 2001, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities,(SFAS 133). The adoption of SFAS 133 had
no material impact on the Companys financial position or operating results for
the year ended December 31, 2002.

In January 2001, the Company began a foreign currency-hedging program to
hedge certain nonfunctional currency exposure. Forward currency exchange
contracts are utilized by the Company to reduce foreign currency exchange risks
with the goal of offsetting foreign currency transaction gains and losses
recorded for accounting purposes with gains and losses realized on the forward
contracts. The Company does not hold derivative financial instruments for
trading or speculative purposes.

As of December 31, 2002, the Company had outstanding forward currency
exchange contracts of $3.0 million to sell Japanese Yen and $2.0 million to
sell Euro Dollars which hedge certain foreign currency exposures. Gains and
losses arising from the changes in the fair value of forward currency exchange
contracts are recognized as a component of other income (expense). At December
31, 2002, the current market settlement values of the forward contracts would
result in a loss of approximately $0.2 million.

6. Property and Equipment

Property and equipment, stated at cost, consist of the following:

|                              |  |                    |             |      |  |   |             |  
|----------------------------- |  | ------------------ | ----------- | ---- |  | - | ----------- | -
|                              |  | As of December 31,
|                              |  |                   
|                              |  | 2001               |             | 2002
|                              |  |                    |             |     
|Computer Equipment            |  | $                  | 13,587,061  |      |  | $ | 13,755,905  |  
|Furniture and equipment       |  |                    | 5,268,485   |      |  |   | 4,064,120   |  
|Leasehold improvements        |  |                    | 3,044,935   |      |  |   | 2,160,710   |  
|Other                         |  |                    | 517,225     |      |  |   | 75,059      |  
|                              |  |                    |             |      |  |   |             |  
|                              |  |                    | 22,417,706  |      |  |   | 20,055,794  |  
|Less accumulated depreciation |  |                    | (13,993,122 | )    |  |   | (15,622,912 | )
|                              |  |                    |             |      |  |   |             |  
|                              |  | $                  | 8,424,584   |      |  | $ | 4,432,882   |  
|                              |  |                    |             |      |  |   |             |  

Depreciation expense for the years ended December 31, 2000, 2001 and 2002,
was approximately $4.2 million, $3.9 million and $3.1 million, respectively.

7. Intangible Assets and Goodwill

The
Company adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
(SFAS 142) effective January 1, 2002. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to annual impairment tests in accordance with these
statements. Other intangible assets will continue to be amortized over their
useful lives.

The Company made an evaluation of its existing goodwill and intangible
assets during December 2002 utilizing various assumptions and factors to
estimate future cash flows to determine the fair value of the business. No
impairment was recognized during 2002, however, if estimates for cash flows or
other factors and assumptions change, impairment charges might be recorded in
the future.

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7. Intangible Assets and Goodwill (continued)

The Companys remaining goodwill arose from the initial formation of EXE
in September 1997 and from the AllPoints acquisition. Prior to the adoption of
SFAS 142, goodwill was being amortized over a six year period.

The following table presents the results of the Company on a comparative
basis assuming the nonamortization provisions of SFAS 142 were effective
January 1, 2000:

|                                                            |  |   |                          |   |      |   |             |   |  |   |             |   | 
|----------------------------------------------------------- |  | - | ------------------------ | - | ---- | - | ----------- | - |  | - | ----------- | - | 
|                                                            |  |   | Years Ended December 31,
|                                                            |  |   |                         
|                                                            |  |   | 2000                     |   | 2001 |   | 2002       
|                                                            |  |   |                          |   |      |   |            
|Reported net loss                                           |  | $ | (3,331,606               | ) |      | $ | (63,924,117 | ) |  | $ | (23,801,069 | )
|Goodwill amortization                                       |  |   | 3,095,210                |   |      |   | 6,801,182   |   |  |   |            |  
|                                                            |  |   |                          |   |      |   |             |   |  |   |             |  
|Adjusted net loss                                           |  | $ | (236,396                 | ) |      | $ | (57,122,935 | ) |  | $ | (23,801,069 | )
|                                                            |  |   |                          |   |      |   |             |   |  |   |             |  
|Reported net loss per common share - basic and dilutive     |  | $ | (0.87                    | ) |      | $ | (9.86       | ) |  | $ | (3.61       | )
|Goodwill amortization per common share - basic and
dilutive |  |   | 0.81                     |   |      |   | 1.05        |   |  |   |            |  
|                                                            |  |   |                          |   |      |   |             |   |  |   |             |  
|Adjusted net loss per common share - basic and dilutive     |  | $ | (0.06                    | ) |      | $ | (8.81       | ) |  | $ | (3.61       | )
|                                                            |  |   |                          |   |      |   |             |   |  |   |             |  

Intangible assets were comprised of the following:

|                                  |  |                    |            |      |  |   |           |  
|--------------------------------- |  | ------------------ | ---------- | ---- |  | - | --------- | -
|                                  |  | As of December 31,
|                                  |  |                   
|                                  |  | 2001               |            | 2002
|                                  |  |                    |            |     
|Developed and acquired technology |  | $                  | 4,700,000  |      |  | $ | 2,000,000 |  
|Customer base                     |  |                    | 1,800,000  |      |  |   |          |  
|Less accumulated amortization     |  |                    | (4,739,334 | )    |  |   | (500,109  | )
|                                  |  |                    |            |      |  |   |           |  
|Net intangible assets             |  | $                  | 1,760,666  |      |  | $ | 1,499,891 |  
|                                  |  |                    |            |      |  |   |           |  

Intangible assets associated with the initial formation of EXE were
amortized over six years based upon associated estimated revenue streams and
were fully amortized as of December 31, 2002. In November 2001, EXE acquired
intellectual property assets for a forecasting and replenishment application
for $1.0 million. The intangible associated with this acquisition will be
amortized over three years.
In July 2002, the Company acquired developed software technology assets
for an order analysis and planning system for $1.0 million. The acquisition
price is paid quarterly in four consecutive equal installments beginning in the
third quarter of 2002, and the intangible assets associated with this
acquisition are being amortized over a three year period.

Amortization expense related to intangible assets totaled approximately
$1.5 million, $1.6 million and $1.3 million during the years ended December 31,
2000, 2001 and 2002, respectively. Intangible assets with definite useful lives
are amortized on a straight-line basis. The estimated aggregate future

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7. Intangible Assets and Goodwill (continued)

amortization expense for intangible assets subject to amortization as of
December 31, 2002 is as follows:

|      |  |   |           | 
|----- |  | - | --------- | 
|2003  |  | $ | 666,665   | 
|2004  |  |   | 638,890   | 
|2005  |  |   | 194,336   | 
|      |  |   |           | 
|Total |  | $ | 1,499,891 | 
|      |  |   |           | 

8. Debt

The Companys debt consists of the following:

|                                                                     |  |                         |           |      |  |   |          |  
|-------------------------------------------------------------------- |  | ----------------------- | --------- | ---- |  | - | -------- | -
|                                                                     |  | Year Ended December 31,
|                                                                     |  |                        
|                                                                     |  | 2001                    |           | 2002
|                                                                     |  |                         |           |     
|Capital lease obligations                                            |  | $                       | 1,431,140 |      |  | $ | 938,056  |  
|Less current portion of long-term debt and capital lease obligations |  |                         | (435,167  | )    |  |   | (521,458 | )
|                                                                     |  |                         |           |      |  |   |          |  
|Long-term debt, net of current portion                               |  | $                       | 995,973   |      |  | $ | 416,598  |  
|                                                                     |  |                         |           |      |  |   |          |  

The Company has entered into various capital lease arrangements to
primarily obtain computer and network equipment for its operations. These
agreements are typically for a three-year term, with implied interest rates
ranging from 5% to 8% and have no residual values. The minimum lease payments
are as follows:

|                       |  |   |         | 
|---------------------- |  | - | ------- | 
|2003                   |  | $ | 553,546 | 
|2004                   |  |   | 379,726 | 
|2005                   |  |   | 4,784   | 
|                       |  |   |         | 
|Total minimum payments |  | $ | 938,056 | 
|                       |  |   |         | 

On May 10, 1999, the Company finalized a Loan and Security Agreement (the
Loan Agreement) with a bank. In connection with finalizing the Loan Agreement,
all previous borrowings were paid off and all other financing agreements were
terminated. The Loan Agreement provided for a revolving credit line and a $5
million term loan. Borrowings under the revolving credit line and term loan
could not exceed $25 million in the aggregate. Advances under the revolving
credit line were subject to a specified advance rate as defined in the Loan
Agreement and were secured by all of the Companys assets. The interest rate on
borrowings under the Loan Agreement was adjusted monthly and was computed as
the highest LIBOR rate in effect during each month plus 4.87% per annum,
subject to certain limitations and adjustments. Interest on borrowings under
the Loan Agreement were payable on the last day of each month. In conjunction
with the initial public offering, the Company used $16.6 million of the
offering proceeds to payoff and terminate the Loan Agreement.

In October 2002, the Company entered into a revolving line of credit agreement
with a financial institution under which the Company can borrow up to $10.0
million over a two-year period. The agreement contains certain financial
covenants, including a minimum $10.0 million cash and marketable securities
balance, restrictions on dividends and the facility is secured with all of the
Companys tangible assets. Borrowings for half of the revolving credit line
will be based on a defined borrowing base, while the balance does not contain
this restriction. Interest on any borrowings will be at the prime rate, and the
Company will pay a fee on the unused portion of the line of credit of 0.375%
per annum.

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8. Debt (continued)

There were no borrowings under this agreement during 2002.

9. Income Taxes

The income tax provision for 2001 and 2002 of $0.1 million and $0.5
million, respectively was for foreign income taxes.

The provision for income taxes is reconciled with the federal statutory
rate as follows:

|                                                  |  |                          |            |      |  |      |             |   |  |   |            |  
|------------------------------------------------- |  | ------------------------ | ---------- | ---- |  | ---- | ----------- | - |  | - | ---------- | -
|                                                  |  | Years Ended December 31,
|                                                  |  |                         
|                                                  |  | 2000                     |            | 2001 |  | 2002
|                                                  |  |                          |            |      |  |     
|Benefit computed at federal statutory rate        |  | $                        | (1,132,746 | )    |  | $    | (21,716,745 | ) |  | $ | (7,923,750 | )
|Non-deductible expenses and goodwill
amortization |  |                          | 1,055,439  |      |  |      | 1,109,505   |   |  |   | 54,224     |  
|State income taxes, net of federal benefit        |  |                          | (39,691    | )    |  |      | (241,013    | ) |  |   | (118,481   | )
|Foreign taxes                                     |  |                          |           |      |  |      | 51,337      |   |  |   | 495,921    |  
|Increase (decrease) in valuation allowance        |  |                          | (276,516   | )    |  |      | 11,323,644  |   |  |   | 8,256,539  |  
|Write-down of intangible assets                   |  |                          |           |      |  |      | 10,576,389  |   |  |   |           |  
|Other, net                                        |  |                          | 393,514    |      |  |      | (1,051,780  | ) |  |   | (268,532   | )
|                                                  |  |                          |            |      |  |      |             |   |  |   |            |  
|Income tax provision                              |  | $                        |           |      |  | $    | 51,337      |   |  | $ | 495,921    |  
|                                                  |  |                          |            |      |  |      |             |   |  |   |            |  

The significant components of the Companys deferred tax liabilities and
assets are as follows:

|                          |                                  |                                                                    |             |                    |            |      |             |            |            |  
|------------------------- | -------------------------------- | ------------------------------------------------------------------ | ----------- | ------------------ | ---------- | ---- | ----------- | ---------- | ---------- | -
|                          |                                  |                                                                    |             | As of December 31,
|                          |                                  |                                                                    |             |                   
|                          |                                  |                                                                    |             | 2001               |            | 2002
|                          |                                  |                                                                    |             |                    |            |     
|Deferred tax liabilities: |                                  |                                                                    |             |                    |            |      |             |           
|                          | Unrealized foreign exchange loss |                                                                    | $           |                   |            |      | $           | (107,534   | )         
|                          | Identifiable intangible assets   |                                                                    |             | (249,536           | )          |      |             | (554,549   | )         
|                          |                                  |                                                                    |             |                    |            |      |             |           
|                          |                                  | Total deferred tax liabilities                                     |             |                    | (249,536   | )    |             |            | (662,083   | )
|Deferred tax assets:      |                                  |                                                                    |             |                    |            |      |             |           
|                          | Bad debt reserves                |                                                                    |             | 995,344            |            |      |             | 795,057    |           
|                          | Fixed assets                     |                                                                    |             | 234,217            |            |      |             | 215,010    |           
|                          | Net operating losses             |                                                                    |             | 18,006,164         |            |      |             | 24,689,725 |           
|                          | Stock compensation               |                                                                    |             | 297,242            |            |      |             | 1,407,436  |           
|                          | Accrued contract obligations     |                                                                    |             | 3,846,208          |            |      |             | 4,933,633  |           
|                          | Accrued expenses                 |                                                                    |             | 104,144            |            |      |             | 135,294    |           
|                          | Foreign tax credits              |                                                                    |             | 636,472            |            |      |             | 636,472    |           
|                          | Research and development credits |                                                                    |             | 555,341            |            |      |             | 720,066    |           
|                          | Other, net                       |                                                                    |             | (1,350             | )          |      |             | (123,246   | )         
|                          |                                  |                                                                    |             |                    |            |      |             |           
|                          |                                  | Total deferred tax assets                                          |             |                    | 24,673,782 |      |             |            | 33,409,447 |  
|Valuation allowance       |                                  |                                                                    | (24,424,246 | )                  |            |      | (32,747,364 | )         
|                          |                                  |                                                                    |             |                    |            |      |             |            |           
|                          |                                  | Total deferred tax assets, net                                     |             |                    | 249,536    |      |             |            | 662,083    |  
|                          |                                  |                                                                    |             |                    |            |      |             |           
|                          |                                  | Deferred income tax liabilities, net of deferred income tax assets |             | $                  |           |      |             | $          |           |  
|                          |                                  |                                                                    |             |                    |            |      |             |           

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9. Income Taxes (continued)

At December 31, 2002, the Company had a federal net operating loss
carryforward and research and development credits of approximately $58.7
million and $0.6 million, respectively, both of which will begin to expire in
the year 2013. The Company also had net operating loss carryforwards of
approximately $13.9 million in foreign jurisdictions. The Company has
established a valuation allowance to reserve its net deferred tax assets at
December 31, 2001 and 2002 due to the uncertainty of the timing and amount of
future taxable income. Management is not certain our deferred tax assets will
be realized.

10. Stock Options

In October 1997, the Company adopted the 1997 Incentive and Nonqualified
Stock Option Plan (the 1997 Plan), which replaced all previous plans of Neptune
and Dallas Systems. Under the 1997 Plan, an aggregate of 2,142,857 shares of
common stock are authorized for issuance. The 1997 Plan provides for the grant
of incentive stock options (ISOs) to employees of the Company and nonqualified
stock options (NQSOs) to employees or consultants. Exercise prices for ISOs may
not be less than fair market value as determined by the Board of Directors in
the absence of a public market and exercise prices for NQSOs may be greater or
less than fair market on the date of grant. The options generally vest and
become exercisable ratably over a four-year period and expire after ten years
unless determined otherwise by the Board of Directors.

Under the 1997 Plan, in the event of a change of control, the Board shall
have the right, in its sole discretion, to accelerate the vesting of all
options that have not vested as of the date of the change of control and/or
establish an earlier date for the expiration of the exercise of an option. In
addition, in the event of a change of control of the Company, the Board shall
have the right, in its sole discretion, subject to and conditioned upon a sale
of the Company: (a) to arrange for the successor company (or other entity) to
assume all of the rights and obligations of the Company under the 1997 Plan or
(b) to terminate the 1997 Plan and (i) pay to all optionees cash with respect
to those options that are vested as of the date of the sale of the Company in
an amount equal to the difference between the option price and the fair market
value of a share of common stock (determined as of the date the 1997 Plan is
terminated) multiplied by the number of options that are vested as of the date
of the sale of the Company which are held by the optionee as of the date of the
sale of the Company, (ii) arrange for the exchange of all options for options
to purchase common stock in the successor corporation, or (iii) distribute to
each optionee other property in an amount equal to and in the same form as the
optionee would have received from the successor corporation if the optionee had
owned the shares subject to options that are vested as of the date of the sale
of Company rather than the option at the time of the sale of the Company. The
form of payment or distribution to the optionee pursuant to this section shall
be by the Board in its sole discretion.

In October 1997, the Company adopted the Non-Employee Directors Plan (the
Directors Plan). Under the Directors Plan, an aggregate of 85,714 shares of
common stock are authorized for issuance. The Directors Plan provides for the
grant of a specified number of NQSOs to non-employee directors of the Company
as defined in the Directors Plan at exercise prices equal to the fair market
value of the Companys stock on the date of grant. The options vest over four
years. At December 31, 2001 and 2002, 28,571 and 42,854, respectively, options
were outstanding under the Directors Plan. Options outstanding under the
Directors Plan had weighted average exercise prices of $75.25 and $40.82 per
share at December 31, 2001 and 2002, respectively. As of December 31, 2001 and
2002, 10,714 and 16,072 of these options were exercisable at a weighted average
price of $63.00 and $66.11 per share, respectively.

In January 2001, in connection with the AllPoints acquisition (see Note 3), the
Company assumed the former AllPoints Systems 1996 Stock Option Plan (the
AllPoints Plan). Under the AllPoints Plan, grants were in the form of incentive
stock options or nonqualified options. The Board of Directors determines
vesting periods on the date of grant. In conjunction with the acquisition, a
portion of these

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10. Stock Options (continued)

options became fully vested and the remaining options vest ratably over the
original four to five year vesting periods. The Company does not intend to
grant any additional options under the AllPoints Plan.

Stock option transactions under the 1997 Plan for the years ended December
31, 2000, 2001 and 2002, including the assumption of the AllPoints Plan in
2001, are summarized as follows:

|                             |  |           |          |           |  |                     |           |         |  |          |       | 
|---------------------------- |  | --------- | -------- | --------- |  | ------------------- | --------- | ------- |  | -------- | ----- | 
|                             |  |           |          |           |  | Options Outstanding
|                             |  |           |          |           |  |                    
|                             |  |           |          |           |  |                     |           |         |  | Weighted
|                             |  | Shares    |          |           |  |                     |           | Average
|                             |  | Available |          | Number of |  | Exercise           
|                             |  | For Grant |          | Shares    |  | Price              
|                             |  |           |          |           |  |                    
|Balance at December 31, 1999 |  |           | 557,237  |           |  |                     | 617,425   |         |  | $        | 31.92 | 
|Authorized                   |  |           | 500,000  |           |  |                     |          |         |  |          |      | 
|Grants                       |  |           | (394,932 | )         |  |                     | 394,932   |         |  |          | 59.92 | 
|Exercised                    |  |           |         |           |  |                     | (26,555   | )       |  |          | 16.17 | 
|Forfeitures                  |  |           | 112,044  |           |  |                     | (112,044  | )       |  |          | 33.32 | 
|                             |  |           |          |           |  |                     |           |         |  |          |       | 
|Balance at December 31, 2000 |  |           | 774,349  |           |  |                     | 873,758   |         |  |          | 44.52 | 
|AllPoints Options Assumed    |  |           |         |           |  |                     | 58,515    |         |  |          | 18.62 | 
|Grants                       |  |           | (890,500 | )         |  |                     | 890,500   |         |  |          | 46.06 | 
|Exercised                    |  |           |         |           |  |                     | (98,401   | )       |  |          | 17.01 | 
|Forfeitures                  |  |           | 350,797  |           |  |                     | (350,797  | )       |  |          | 63.63 | 
|                             |  |           |          |           |  |                     |           |         |  |          |       | 
|Balance at December 31, 2001 |  |           | 234,646  |           |  |                     | 1,373,575 |         |  |          | 41.51 | 
|Authorized                   |  |           | 428,571  |           |  |                     |          |         |  |          |      | 
|Grants                       |  |           | (409,573 | )         |  |                     | 409,573   |         |  |          | 8.12  | 
|Exercised                    |  |           |         |           |  |                     | (52,256   | )       |  |          | 7.36  | 
|Forfeitures                  |  |           | 414,969  |           |  |                     | (414,969  | )       |  |          | 42.12 | 
|                             |  |           |          |           |  |                     |           |         |  |          |       | 
|Balance at December 31, 2002 |  |           | 668,613  |           |  |                     | 1,315,923 |         |  | $        | 32.15 | 
|                             |  |           |          |           |  |                     |           |         |  |          |       | 

The weighted average grant-date fair value of options granted under the
1997 Plan during the year ended December 31, 1999 and prior to the completion
of the Companys initial public offering in 2000 using a minimum value option
pricing model was $4.97 and $31.15 per option, respectively. For options
granted after the completion of the Companys initial public offering through
December 31, 2000, the weighted average grant-date fair value was $58.66. For
options granted during 2001 and 2002, respectively, the weighted average
grant-date fair value was $38.29 and $5.53.

At December 31, 2000, 2001 and 2002, respectively, 312,523, 414,385 and
648,482 options were exercisable. The weighted average exercise price of
options exercisable was $27.58, $35.91 and $41.37 at
December 31, 2000, 2001 and
2002, respectively. Other information regarding options outstanding
and options exercisable as of December 31, 2002 is as follows:

|          |          |         |        |          |       |               |           |                     |         |                     |        |           |      |         |      |           |      |  |         |          |        |   |        |       |      | 
|--------- | -------- | ------- | ------ | -------- | ----- | ------------- | --------- | ------------------- | ------- | ------------------- | ------ | --------- | ---- | ------- | ---- | --------- | ---- |  | ------- | -------- | ------ | - | ------ | ----- | ---- | 
|          |          |         |        |          |       |               |           | Options Outstanding |         | Options Exercisable
|          |          |         |        |          |       |               |           |                     |         |                    
|          |          |         |        |          |       |               |           |                     |         |                     |        |           |      |         |      | Weighted- |      |  |         |          |        |   |        |      
|          |          |         |        |          |       |               |           |                     |         |                     |        | Weighted- |      | Average |      |           |      |  |         | Weighted
|Range of  |          | Number  |        | Average  |       | Remaining     |           | Number              |         | Average            
|Excercise |          | of      |        | Exercise |       | Contractual   |           | of                  |         | Exercise           
|Prices    |          | Shares  |        | Price    |       | Life In Years |           | Shares              |         | Price              
|          |          |         |        |          |       |               |           |                     |         |                    
|          |          | $0.00 - |        | $        | 5.00  |               |           |                     | 220,427 |                     |        | $         | 4.24 |         |      |           | 9.85 |  |         |          | 0      |   |        | $     | 0.00 | 
|          |          | $5.01 - |        | $        | 10.00 |               |           |                     | 86,645  |                     |        |           | 7.68 |         |      |           | 8.51 |  |         |          | 18,861 |   |        |       | 5.55 | 
|          | $10.01 - |         | $      | 15.00    |       |               |           | 194,388             |         |                     |        | 13.68     |      |         |      | 7.49      |      |  |         | 98,477   |        |   |        | 14.18 |     
|          | $15.01 - |         | $      | 20.00    |       |               |           | 203,083             |         |                     |        | 16.84     |      |         |      | 8.66      |      |  |         | 92,659   |        |   |        | 16.80 |     
|          | $20.01 - |         | $      | 30.00    |       |               |           | 170,576             |         |                     |        | 23.08     |      |         |      | 7.37      |      |  |         | 137,547  |        |   |        | 22.50 |     
|          | $30.01 - |         | $      | 40.00    |       |               |           | 114,886             |         |                     |        | 36.47     |      |         |      | 7.89      |      |  |         | 91,797   |        |   |        | 36.95 |     
|          | $40.01 - |         | $      | 60.00    |       |               |           | 106,705             |         |                     |        | 53.86     |      |         |      | 7.73      |      |  |         | 59,034   |        |   |        | 54.12 |     
|          | $60.01 - |         | $      | 100.00   |       |               |           | 178,265             |         |                     |        | 88.99     |      |         |      | 6.93      |      |  |         | 128,376  |        |   |        | 89.52 |     
|$100.01 - |          | $       | 126.00 |          |       |               | 40,948    |                     |         |                     | 119.44 |           |      |         | 7.81 |           |      |  | 21,731  |          |        |   | 119.44 |      
|          |          |         |        |          |       |               |           |                     |         |                     |        |           |      |         |      |           |      |  |         |          |        |   |        |      
|          |          |         |        |          |       |               | 1,315,923 |                     |         | $                   | 32.15  |           |      |         | 8.11 |           |      |  | 648,482 |          |        | $ | 41.37  |      
|          |          |         |        |          |       |               |           |                     |         |                     |        |           |      |         |      |           |      |  |         |          |        |   |        |      

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11. Deferred Compensation

The Company recorded deferred compensation of approximately $4.6 million
in 2000 for differences between the exercise price and the deemed fair value of
the Companys common stock on the grant date for certain options granted during
2000. The Company granted options to purchase 209,032 shares of common stock,
with exercise prices ranging from $21.00 to $56.00. Such exercise price was
less than the deemed fair value of the Companys common stock on the date of grant.
The deemed fair value of the Companys common stock on the individual grant
dates ranged from $54.25 to $59.50.

The Company assumed an additional 58,515 options for shares of the
Companys common stock in the AllPoints acquisition (see Note 3) and recorded
additional deferred compensation of approximately $1.9 million for the
estimated intrinsic value of unvested stock options related to future services.
Additionally, the Company recorded additional deferred compensation of
approximately $0.7 million in 2001 for the difference between the exercise
price and the deemed fair value of the Companys common stock on the grant
date. This deferred compensation resulted from the grants of options to
purchase 142,857 shares of common stock to an executive officer with an
exercise price of $38.50.

The Company recorded additional deferred compensation of approximately
$0.3 million in 2002 for the fair value of 71,428 shares of restricted common
stock granted to an executive officer of the Company.

The deferred compensation is being amortized ratably over the vesting
period of the individual options and restricted stock, generally three to four
years. Compensation expense recognized in 2000, 2001 and 2002 totaled
approximately $1.6 million, $1.4 million and $1.1 million respectively.

12. Related Party Transactions

The Company had full recourse notes receivable from various officers of
the Company totaling approximately $1.2 million and $1.0 million (including
accrued interest) at December 31, 2001 and 2002, respectively. These notes
receivable are secured by stock and options of the Company and are subject to
forgiveness in the event of termination of employment due to death or
disability, or if termination happens without cause or, in certain cases, for
good reason following a change in control. The notes bear interest of 8.5% per
annum. Additionally, the Company had outstanding advances to an officer of
$31,642 at the end of 2001 and 2002.

In accordance with an amended employment agreement with the Companys
former Chief Financial Officer dated February 19, 2002, the Company forgave an
outstanding loan of approximately $0.3 million on July 1, 2002. Accordingly,
the outstanding balance was charged against operating results in 2002. In
March 2003, the Companys former Chief Executive Officer repaid his notes
payable, including accrued interest, to the Company totaling approximately $0.8
million.

The Company leased office space from a stockholder under a lease that was
to expire in August 2002, with monthly rental payments of $0.1 million. In
1999, the Company finalized an agreement with the stockholder to vacate this
office space in connection with the move to new office space for the North
American operations. The total paid to the stockholder during the year ended
December 31, 2000 for lease abandonment was approximately $0.4 million.

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13. Commitments

The Company leases certain facilities and property and equipment for use
in operations. In May 1998, the Company entered into a lease for office space
for the North American operations. The lease was subsequently amended in
November 2001 and includes initial rental free periods for the first eight
months, a lease term for approximately seventeen years, and rate escalation
clauses in November 2006 and November 2011. The Company recognizes the total
minimum lease payments as an expense on the straight-line basis over the lease
term. The lease has two five-year renewal options that are at a rate not less
than 95% of the then-prevailing market rate for comparable premises.

The minimum rental commitments under operating leases are as follows:

|           |  |   |            | 
|---------- |  | - | ---------- | 
|2003       |  | $ | 4,922,759  | 
|2004       |  |   | 3,939,989  | 
|2005       |  |   | 3,419,926  | 
|2006       |  |   | 3,213,867  | 
|2007       |  |   | 3,134,166  | 
|Thereafter |  |   | 24,101,536 | 
|           |  |   |            | 
|           |  | $ | 42,732,243 | 
|           |  |   |            | 

However, as of December 31, 2002 the Company has established lease
abandonment reserves of approximately $10.6 million, which are primarily for
the Companys North American office space.

Total
rent expense was approximately $4.0 million, $4.4 million and $4.6
million (net of sublease income of approximately $1.4 million, $1.2 million and
$0.0 million) for the years ended December 31, 2000, 2001 and 2002,
respectively. In October 2002, we signed a contract with a company in India to
provide offshore development services. The agreement is for three years and the
minimum obligation over the remaining term of this agreement is approximately
$2.3 million.

14. Employee Benefit Plans

The Company sponsors a defined contribution plan for eligible employees.
The plan covers all employees located in the United States who have completed
one month of service and have attained the age of 21. The Companys
contribution to the plan matches the first 5% of the employees contributions
of eligible earnings. Additionally, discretionary contributions may also be
made. The Company recognized expenses of approximately $0.7 million, $0.8
million and $0.6 million for the defined contribution plan during the years
ended December 31, 2000, 2001 and 2002, respectively.

The Company also sponsors a defined contribution plan for its employees in
the United Kingdom. The plan covers all employees located in the United Kingdom
who have completed six months of service. The Companys contribution to the
plan matches the first 5% of the employees contributions of eligible earnings.
The Company recognized expenses of approximately $0.3 million, $0.2 million and
$0.2 million for the defined contribution plan during the years ended December
31, 2000, 2001 and 2002, respectively.

The Company also sponsors a defined contribution plan for its employees in
Japan. The plan covers all full time employees in Japan who have completed two
years of service. The Companys contribution to the plan is based on the
employees job level and years of service. The Company recognized expenses of
approximately $0.1 million for the defined contribution plan during the years
ended December 31, 2000, 2001 and 2002.

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15. Stockholders Equity

Common Stock and Preferred Stock

The Company is authorized to issue 150,000,000 shares of common stock and
20,000,000 shares of preferred stock.

The Company completed its initial public offering of 1,142,857 shares of
its common stock pursuant to a Registration Statement on Form S-1 on August 9,
2000. Additionally, the underwriters exercised a portion of their
over-allotment option to purchase an additional 120,000 shares of the Companys
common stock, at $56.00 per share, on August 16, 2000. Total proceeds from this
offering, including the exercise of the over-allotment option, were
approximately $63.9 million, net of underwriting fee and offering expenses of
approximately $6.8 million. In conjunction with the IPO, all Class B and Series
A-D preferred stock were converted to common stock on a one to one basis.

Warrants

In March 1999, the Company entered into a two year sales and marketing
agreement with an independent third party. The Company and the third party each
have a non-exclusive right to market and resell the other partys products. As
part of the agreement, the Company issued warrants to purchase the Companys
common stock with an exercise price of $28.00 per share, of which, 47,143 of
the warrants were immediately vested, exercisable and nonforfeitable. The
remaining 47,143 of the warrants were to vest at a rate of 15,714 warrants for
each $2,000,000 of net license revenue the Company recognizes on sales of the
Companys products sold by the third party. The fair value of $0.6 million for
the 47,143 warrants, which vested immediately, was amortized to operating
expense over the term of the agreement. Through June 2000, the 47,143 warrants
which vested over time were marked to fair value at the end of each accounting
period, and the re-measured value was amortized to operating expense on a
straight-line basis over the term of the agreement. Prior to June 30, 2000,
warrants to purchase 15,714 shares of the Companys common stock had vested as
a result of the Company recognizing $2.0 million of net license revenue from
sales of the Companys products sold by the third party. In June 2000, the
Company and the third party amended the sales and marketing agreement such that
the unvested warrants to purchase 31,429 shares of the Companys common stock
were canceled. The Company recorded expense of approximately $1.2 million for
the warrants during 2000. The fair value of the warrants was calculated using a
Black-Scholes option pricing model with the following assumptions for 1999 and
2000 respectively: risk-free interest rate of 4.60% and 5.16%; dividend yield
of zero; volatility of 85%; and a warrant life of five years. The warrants were
exercised in December 2000.

In October 1999, the Company entered into a consulting agreement with an
independent third party. The Company issued 53,571 warrants to purchase the
Companys common stock to the third party for consulting services rendered. The
warrants were immediately vested, exercisable and non-forfeitable with an
exercise price of $28.00 per share. The fair value of the warrants of
approximately $2.0 million was recorded as expense in 1999. The fair value of
the warrants was calculated using a Black-Scholes option-pricing model with the
following assumptions: risk-free interest rate of 5.11%; dividend yield of
zero; volatility of 85%; and a warrant life of three years. The warrants were
exercised in August 2000.

In September 2002, the Company expanded its strategic relationship with
IBM. One of the key elements of the expanded relationship was the grant of
142,857 warrants to IBM to purchase the Companys common stock at an exercise
price of $0.07 per share. The warrants are exercisable over a five-year period
and will vest over a three-year period based on IBMs generation of
pre-established amounts of incremental software license revenue for the
Company. At December 31, 2002, none of the warrants were vested or exercisable.

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15. Stockholders Equity (continued)

Note Receivable from Stockholder

In connection with the acquisition of AllPoints in January 2001 (see Note
3), the Company received a full recourse note receivable of approximately $0.2
million from a former stockholder of AllPoints that bears interest at 5.87% per
annum. Under the terms of the note, the note was secured by the Companys stock and unpaid principal and interest was due on December 28,
2005, or an earlier date upon the occurrence of certain events, including
termination of employment. In January 2002, the stockholder surrendered 13,635
shares of common stock, which had a fair value approximately equal to the
carrying values of the note on the settlement date, and the note was cancelled.

16. Contingencies

The Company is involved in various legal actions and claims which arise in
the normal course of business. In the opinion of management, the final
disposition of these matters will not have a material adverse effect on the
Companys business, financial condition, cash flows or results of operations.
The Company establishes accruals for losses related to such matters that are
probable and reasonably estimable. However, an unfavorable outcome of some or
all of these matters could have a material effect on the Companys business,
financial condition, cash flows and results of operations.

17. Employee Severance and Lease Abandonment

During the years ended December 31, 2001 and 2002, the Company implemented
various cost reduction actions to lower the Companys cost structure, including
the reduction of 233 employees in 2001 and 110 employees in 2002 , the write
off of equipment and the abandonment of certain leased facilities. As a result,
employee severance and related costs totaling approximately $3.5 million and
$3.6 million were charged against operating results in 2001 and 2002,
respectively. The 2002 severance charge includes approximately $1.4 million
paid to the Companys former Chief Executive Officer in early 2003, in
accordance with his employment agreement. Additionally, facility closure costs
of approximately $0.6 million and $2.1 million were charged against operating
results in 2001 and 2002, respectively, for the write down or disposal of
certain property and equipment and purchase commitments.

The Company also abandoned certain leased facilities in North America and
Europe in 2001 and its Philadelphia facility in 2002. As a result, the Company
provided approximately $10.2 million and $4.0 million during the years ended
December 31, 2001 and 2002, respectively for the estimated loss for abandonment
of the leased facilities, net of estimated sublease rentals. The 2002
provision includes approximately $3.5 million for additional estimated losses
associated with facilities previously abandoned.

The Company has made cash payments of approximately $8.9 million and has
written-off approximately $1.6 million in non-cash charges against the reserves
established for these various cost reduction actions. The remaining liability
at December 31, 2002 is approximately $13.5 million, of which $8.2 million is
long-term and is expected to be paid through 2009. The reserves include
estimates pertaining to sublease rates, vacancy periods, employee separation
costs and settlement of contractual obligations. Although the Company does not
anticipate significant changes, the actual costs may differ from these
estimates.

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18. Segment Information

The Company provides software that drives customers supply chain
execution processes, including fulfillment, warehousing, distribution, and
inventory management. All financial information is reviewed on a consolidated
basis with additional information by geographic region used to make operating
decisions and assess the results of the Company. Total assets are presented net
of intercompany receivables and payables. The Companys geographic information
as of and for the years ended December 31, 2000, 2001 and 2002 is as follows:

|                  |                                                               |  |         |             |        |  |             |            |              |  |              |            |   |  |   |            |   |  |   |             |  
|----------------- | ------------------------------------------------------------- |  | ------- | ----------- | ------ |  | ----------- | ---------- | ------------ |  | ------------ | ---------- | - |  | - | ---------- | - |  | - | ----------- | -
|                  |                                                               |  |         |             |        |  |             |            |              |  | Asia Pacific |            |   |  |   |            |   |  |  
|                  |                                                               |  | North   |             |        |  |             |            | and the      |  |              |            |   |  |   |            |  
|                  |                                                               |  | America |             | Europe |  | Middle East |            | Eliminations |  | Total       
|                  |                                                               |  |         |             |        |  |             |            |              |  |             
|December 31, 2000 |                                                               |  |         |             |        |  |             |            |              |  |              |            |   |  |   |            |   |  |   |            
|                  | Revenue                                                       |  | $       | 71,856,946  |        |  | $           | 20,216,510 |              |  | $            | 26,753,103 |   |  | $ |           |   |  | $ | 118,826,559 |  
|                  | Amortization of goodwill and
intangible assets                |  |         | (4,598,067  | )      |  |             | (13,008    | )            |  |              | (4,432     | ) |  |   |           |   |  |   | (4,615,507  | )
|                  | Warrant and stock compensation
expense                        |  |         | (2,361,430  | )      |  |             | (77,183    | )            |  |              | (323,825   | ) |  |   |           |   |  |   | (2,762,438  | )
|                  | Operating income (loss)                                       |  |         | (3,795,750  | )      |  |             | (642,641   | )            |  |              | 1,547,710  |   |  |   |           |   |  |   | (2,890,681  | )
|                  | Property and equipment, net                                   |  |         | 5,949,734   |        |  |             | 1,426,761  |              |  |              | 857,396    |   |  |   |           |   |  |   | 8,233,891   |  
|                  | Total assets                                                  |  | $       | 96,170,484  |        |  | $           | 8,931,411  |              |  | $            | 14,570,151 |   |  | $ | (3,092,403 | ) |  | $ | 116,579,643 |  
|December 31, 2001 |                                                               |  |         |             |        |  |             |            |              |  |              |            |   |  |   |            |   |  |   |            
|                  | Revenue                                                       |  | $       | 52,123,238  |        |  | $           | 17,526,118 |              |  | $            | 27,874,446 |   |  |   |           |   |  | $ | 97,523,802  |  
|                  | Amortization and impairment of
goodwill and intangible assets |  |         | (35,044,352 | )      |  |             | (54,399    | )            |  |              | (15,843    | ) |  |   |           |   |  |   | (35,114,594 | )
|                  | Warrant and stock compensation
expense                        |  |         | (809,998    | )      |  |             | (303,369   | )            |  |              | (461,120   | ) |  |   |           |   |  |   | (1,574,487  | )
|                  | Provision for estimated loss on
lease abandonment             |  |         | 9,789,784   |        |  |             | 382,311    |              |  |              | 11,897     |   |  |   |           |   |  |   | 10,183,992  |  
|                  | Employee severance and other
facility closure costs           |  |         | 2,180,569   |        |  |             | 1,169,341  |              |  |              | 759,720    |   |  |   |           |   |  |   | 4,109,630   |  
|                  | Operating income (loss)                                       |  |         | (59,091,229 | )      |  |             | (3,959,384 | )            |  |              | (2,551,946 | ) |  |   |           |   |  |   | (65,602,559 | )
|                  | Property and equipment, net                                   |  |         | 6,135,837   |        |  |             | 1,377,799  |              |  |              | 910,948    |   |  |   |           |   |  |   | 8,424,584   |  
|                  | Total assets                                                  |  | $       | 72,711,166  |        |  | $           | 10,433,408 |              |  | $            | 12,033,928 |   |  | $ | (4,108,034 | ) |  | $ | 91,070,468  |  
|December 31, 2002 |                                                               |  |         |             |        |  |             |            |              |  |              |            |   |  |   |            |   |  |   |            
|                  | Revenue                                                       |  | $       | 35,234,884  |        |  | $           | 20,276,128 |              |  | $            | 18,145,089 |   |  | $ |           |   |  | $ | 73,656,101  |  
|                  | Amortization of goodwill and
intangible assets                |  |         | (1,260,061  | )      |  |             | (714       | )            |  |              |           |   |  |   |           |   |  |   | (1,260,775  | )
|                  | Warrant and stock compensation
expense                        |  |         | (509,998    | )      |  |             | (234,258   | )            |  |              | (307,462   | ) |  |   |           |   |  |   | (1,051,718  | )
|                  | Provision for estimated loss on
lease abandonment             |  |         | (3,900,000  | )      |  |             | (98,862    | )            |  |              |           |   |  |   |           |   |  |   | (3,998,862  | )
|                  | Employee severance and other
facility closure costs           |  |         | (5,275,956  | )      |  |             | (289,374   | )            |  |              | (172,439   | ) |  |   |           |   |  |   | (5,737,769  | )
|                  | Operating income (loss)                                       |  |         | (23,072,132 | )      |  |             | (556,236   | )            |  |              | (1,854,529 | ) |  |   |           |   |  |   | (25,482,897 | )
|                  | Property and equipment, net                                   |  |         | 2,889,220   |        |  |             | 906,710    |              |  |              | 636,952    |   |  |   |           |   |  |   | 4,432,882   |  
|                  | Total assets                                                  |  | $       | 56,611,288  |        |  | $           | 9,704,938  |              |  | $            | 8,161,258  |   |  | $ | (4,108,034 | ) |  | $ | 70,369,450  |  

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19. Selected Consolidated Quarterly Results of Operations (Unaudited)

The following tables set forth certain unaudited quarterly data for each
of the eight quarters in the years ended December 31, 2001 and 2002. The data
has been derived from the Companys unaudited consolidated financial statements
that, in managements opinion, include all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of such information
when read in conjunction with the Consolidated Financial Statements and Notes
thereto. The results of operations for any quarter are not necessarily
indicative of the results of operations for any future period.

|                                                     |  |                    |            |   |  |  |    |          |  |   |             |   |  |               |    |              |  |   |            |   |  |   |             |   |  |  |    |  
|---------------------------------------------------- |  | ------------------ | ---------- | - |  |  | -- | -------- |  | - | ----------- | - |  | ------------- | -- | ------------ |  | - | ---------- | - |  | - | ----------- | - |  |  | -- | -
|                                                     |  | Three Months Ended
|                                                     |  |                   
|                                                     |  | March 31,          |            |   |  |  |    | June 30, |  |   |             |   |  | September 30, |    | December 31, |  |   |            |  
|                                                     |  | 2001               |            |   |  |  |    | 2001     |  |   |             |   |  | 2001          |    | 2001         |  |   |            |  
|                                                     |  |                    |            |   |  |  |    |          |  |   |             |   |  |               |    |              |  |   |            |  
|Total revenue                                        |  | $                  | 30,214,434 |   |  |  |    |          |  | $ | 25,372,483  |   |  |               |    |              |  | $ | 22,899,033 |   |  | $ | 19,037,852  |   |  |  |    |  
|Total costs and expenses                             |  |                    | 32,321,950 |   |  |  | (a | )        |  |   | 42,833,089  |   |  |               | (b | )            |  |   | 29,115,641 |   |  |   | 58,855,681  |   |  |  | (c | )
|Operating income (loss)                              |  |                    | (2,107,516 | ) |  |  |    |          |  |   | (17,460,606 | ) |  |               |    |              |  |   | (6,216,608 | ) |  |   | (39,817,829 | ) |  |  |    |  
|Net income (loss)                                    |  |                    | (1,787,429 | ) |  |  |    |          |  |   | (16,944,455 | ) |  |               |    |              |  |   | (5,600,454 | ) |  |   | (39,591,779 | ) |  |  |    |  
|Net income (loss) per
common share - basic & diluted |  | $                  | (0.28      | ) |  |  |    |          |  | $ | (2.61       | ) |  |               |    |              |  | $ | (0.86      | ) |  | $ | (6.07       | ) |  |  |    |  

|                                                     |  |                    |            |          |  |   |            |   |  |               |    |              |  |   |            |   |  |   |            |   |  |  |    |  
|---------------------------------------------------- |  | ------------------ | ---------- | -------- |  | - | ---------- | - |  | ------------- | -- | ------------ |  | - | ---------- | - |  | - | ---------- | - |  |  | -- | -
|                                                     |  | Three Months Ended |            |          |  |  
|                                                     |  |                    |            |          |  |  
|                                                     |  | March 31,          |            | June 30, |  |   |            |   |  | September 30, |    | December 31, |  |   |            |  
|                                                     |  | 2002               |            | 2002     |  |   |            |   |  | 2002          |    | 2002         |  |   |            |  
|                                                     |  |                    |            |          |  |   |            |   |  |               |    |              |  |   |            |  
|Total revenue                                        |  | $                  | 19,635,972 |          |  | $ | 18,431,110 |   |  |               |    |              |  | $ | 16,733,856 |   |  | $ | 18,855,163 |   |  |  |    |  
|Total costs and expenses                             |  |                    | 23,225,287 |          |  |   | 28,137,342 |   |  |               | (d | )            |  |   | 20,303,895 |   |  |   | 27,472,474 |   |  |  | (e | )
|Operating income (loss)                              |  |                    | (3,589,315 | )        |  |   | (9,706,232 | ) |  |               |    |              |  |   | (3,570,039 | ) |  |   | (8,617,311 | ) |  |  |    |  
|Net income (loss)                                    |  |                    | (3,346,752 | )        |  |   | (8,800,577 | ) |  |               |    |              |  |   | (3,532,387 | ) |  |   | (8,121,353 | ) |  |  |    |  
|Net income (loss) per
common share - basic & diluted |  | $                  | (0.51      | )        |  | $ | (1.34      | ) |  |               |    |              |  | $ | (0.54      | ) |  | $ | (1.23      | ) |  |  |    |  



|(a) |  | Includes approximately $0.4 million for provision for employee
severance and other facility closure costs. See Note 17.                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Includes approximately $2.1 million for provision for employee
severance and other facility closure costs and $7.4 million for
provision for estimated loss on lease abandonment. See Note 17.                                            
|   
|(c) |  | Includes approximately $1.6 million for provision for employee
severance and other facility closure costs, $2.7 million for provision
for estimated loss on lease abandonment and $26.7 for impairment of
intangibles. See Notes 3 and 17.
|   
|(d) |  | Includes approximately $2.5 million for provision for employee
severance and other facility closure costs and $4.0 million for
provision for estimated loss on lease abandonment. See Note 17.                                            
|   
|(e) |  | Includes approximately $3.3 million for provision for employee
severance and other facility closure costs. See Note 17.                                                                                                                   

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The
information required by this Item concerning directors of the Company
is incorporated herein by reference from the section entitled Election of
DirectorsDirectors of the Company included in the Companys definitive Proxy
Statement for the 2003 Annual Meeting of Stockholders, which will be filed with
the Securities and Exchange Commission within 120 days of the Companys fiscal
year end (the 2003 Proxy Statement). The information required by this Item
concerning executive officers of the Company is included in Part I of this
Annual Report on Form 10-K under the section captioned Executive Officers of
the Registrant. The information required by this Item concerning compliance
with Section 16(a) of the Securities Exchange Act of 1934, as amended, is
incorporated herein by reference from the section entitled Section 16(a)
Beneficial Ownership Reporting Compliance included in the 2003 Proxy
Statement.




ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference
from the sections entitled Election of DirectorsCompensation Committee
Interlocks and Insider Participation, Election of DirectorsCompensation of
Directors, Executive Compensation, and Executive CompensationEmployment
Agreements included in the 2003 Proxy Statement.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required with respect to security ownership of certain
beneficial owners and management by this Item is incorporated herein by reference
from the section entitled Beneficial Ownership of Voting Stock included in
the 2003 Proxy Statement.

The information required with respect to the securities authorized for
issuance under equity compensation plans is set forth in the table below.

|                                                           |  |                                      |           |                  |  |                 |       |  |  |  |         | 
|---------------------------------------------------------- |  | ------------------------------------ | --------- | ---------------- |  | --------------- | ----- |  |  |  | ------- | 
|                                                           |  | Equity Compensation Plan Information
|                                                           |  | Number of                            |           | Weighted         |  |                 |       | 
|                                                           |  | securities to be                     |           | average exercise |  |                 |       | 
|                                                           |  | issued upon                          |           | price of         |  | Number of      
|                                                           |  | exercise of                          |           | outstanding      |  | securities     
|                                                           |  | outstanding                          |           | options,         |  | remaining      
|                                                           |  | options, warrants                    |           | warrants and     |  | available for  
|Plan Category                                              |  | and rights.                          |           | rights           |  | future issuance
|Equity compensation
plans approved by
security holders     |  |                                      | 1,352,298 |                  |  | $               | 32.58 |  |  |  | 710,046 | 
|Equity compensation
plans not approved
by security holders |  |                                      |          |                  |  |                 |      |  |  |  |        | 
|                                                           |  |                                      |           |                  |  |                 |       |  |  |  |         | 
|Total                                                      |  |                                      | 1,352,298 |                  |  | $               | 32.58 |  |  |  | 710,046 | 
|                                                           |  |                                      |           |                  |  |                 |       |  |  |  |         | 




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated herein
by reference from the section entitled Executive Compensation  Employment
Agreements and Certain Transactions in the 2003 Proxy Statement.

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ITEM 14. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures. The Companys disclosure
controls and procedures are designed to ensure that information required to be
disclosed by the Company in its periodic SEC filings is recorded, processed and
reported within the time periods specified in the SECs rules and forms. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective
in timely alerting them to material information relating to the Company
(including its consolidated subsidiaries) required to be included in the
Companys periodic SEC filings.

There were no significant changes in the Companys internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.

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PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K



|(a)(1) |  | FINANCIAL STATEMENTS
|------ |  | --------------------

The consolidated financial statements filed as part of this Annual Report
on Form 10-K are listed on the Index to Consolidated Financial Statements under
Item 8, which Index to Consolidated Financial Statements is incorporated herein
by reference.



|(a)(2) |  | FINANCIAL STATEMENT SCHEDULES
|------ |  | -----------------------------

All schedules to the Consolidated Financial Statements are omitted because
they are not applicable, not required, or the information required is included
in the financial statements or notes thereto.



|(a)(3) |  | EXHIBITS
|------ |  | --------

The Exhibits that are filed with this Annual Report on Form 10-K or
incorporated by reference herein are set forth in the Index to Exhibits hereto.



|(b) |  | REPORTS ON FORM 8-K
|--- |  | -------------------

The Company did not file a Current Report of Form 8-K during the fourth
quarter of the fiscal year ended December 31, 2002.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 31, 2003.

| |                        |                                                                                        
| | ---------------------- | ---------------------------------------------------------------------------------------
| | EXE TECHNOLOGIES, INC.
| |                        |                                                                                        
| | By:                    | /s/ KENNETH R.VINES                                                                    
| |                        |                                                                                        
| |                        | Kenneth R. VinesSenior Vice President, Chief Financial
Officer, Secretary and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons on behalf of the registrant and in the capacities and on the
dates indicated have signed this report below.

|                                     |  |                                                                                                                      |  |                
|------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------- |  | ---------------
|Signature                            |  | Title                                                                                                                |  | Date           
|                                     |  |                                                                                                                      |  |                
|/s/ JOSEPH L. COWANJoseph L. Cowan   |  | President, Chief Executive Officer
(Principal Executive Officer)
and Director                                        |  | March  31, 2003
|                                    
|/s/ KENNETH R. VINESKenneth R. Vines |  | Senior Vice President,
Chief Financial Officer, Secretary and
Treasurer (Principal Financial and
Accounting Officer) |  | March  31, 2003
|                                    
|/s/ RAYMOND R. HOODRaymond R. Hood   |  | Chairman of the Board of Directors                                                                                   |  | March  31, 2003
|                                    
|/s/ HENRY FEINBURGHenry Feinburg     |  | Director                                                                                                             |  | March  31, 2003
|                                    
|/s/ WILL LANSINGWill Lansing         |  | Director                                                                                                             |  | March  31, 2003
|                                    
|/s/ MARC MCMORRISMarc McMorris       |  | Director                                                                                                             |  | March  31, 2003
|                                    
|/s/ JEFFREY R. RODEKJeffrey R. Rodek |  | Director                                                                                                             |  | March  31, 2003

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CERTIFICATION

I, Joseph L. Cowan, certify that:
1. I have reviewed this annual report on Form 10-K of EXE Technologies, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and

6. The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|                      |  |                                                      
|--------------------- |  | -----------------------------------------------------
|Date:
March  31, 2003
|                      |  |                                                      
|                      |  | /s/ Joseph L. Cowan                                  
|                      |  |                                                      
|                      |  | Joseph L. Cowan
President and
Chief Executive Officer

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.

74



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##### Table of Contents






CERTIFICATION

I, Kenneth R. Vines, certify that:
1. I have reviewed this annual report on Form 10-K of EXE Technologies, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and

6. The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|                      |  |                                                                                         
|--------------------- |  | ----------------------------------------------------------------------------------------
|Date:
March  31, 2003
|                      |  |                                                                                         
|                      |  | /s/ Kenneth R. Vines                                                                    
|                      |  |                                                                                         
|                      |  | Kenneth R. Vines
Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.

75



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##### Table of Contents






INDEX TO EXHIBITS

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2.1(1)      |  | Agreement and Plan of Merger, dated as of January 18, 2001, by and among
the Company, Almond Acquisition Corp. and AllPoints Systems, Inc.                                                                                                                                                                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.1(2)      |  | Second Amended and Restated Certificate of Incorporation of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.2(3)      |  | Second Amended and Restated By-laws of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.1(5)    |  | Amended and Restated Employment Agreement, dated as of October 18,
2000, by and between the Company and Mark R. Weaser.                                                                                                                                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.2(6)    |  | Promissory Note dated June 25, 2001 between Mark R. Weaser and the
Company.                                                                                                                                                                                                                                                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.3(6)    |  | Pledge Agreement dated June 25, 2001 between Mark R. Weaser and the
Company.                                                                                                                                                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.4(6)    |  | First Amendment to Amended and Restated Employment Agreement dated
June 25, 2001 between Mark R. Weaser and the Company.                                                                                                                                                                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.5(4)    |  | Employment Agreement, dated July 1, 2000, by and between the Company
and Raymond R. Hood.                                                                                                                                                                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.6(5)    |  | Promissory Note, issued by Raymond R. Hood in favor of the Company,
dated November 16, 2000.                                                                                                                                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.7(5)    |  | Pledge Agreement, dated November 16, 2000, by and between the Company
and Raymond R. Hood.                                                                                                                                                                                                                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.8(9)     |  | Office Lease, dated November 1, 2001, by and between BLI-8787, Ltd. and
EXE Technologies, Inc. and Letter Agreement, dated November 19, 2001,
by and between BLI-8787, Ltd. and EXE Technologies, Inc.                                                                                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.9(4)     |  | Second Amended and Restated Registration Rights Agreement, dated as of
September 29, 1999, by and among the Company, General Atlantic Partners
57, L.P., General Atlantic Partners 41, L.P., GAP Coinvestment Partners,
L.P., GAP Coinvestment Partners II, L.P., MSD 1998 GRAT #6, Triple Marlin
Investments, LLC, Rothko Investments, LLC, MSD Portfolio L.P.-Investments,
TCV III (Q), L.P., TCV III Strategic Partners, L.P., TCV III, L.P., TCV
III (GP) and the stockholders named therein.
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.10(5)    |  | Form of Indemnification Agreement, by and between the Company and
certain directors of the Company.                                                                                                                                                                                                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.11(5)    |  | Form of Indemnification Agreement, by and between the Company and
certain executive officers of the Company.                                                                                                                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.12(7)   |  | Employment Agreement dated as of May 13, 2002 between the Company
and Kenneth R. Vines.                                                                                                                                                                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.13(7)    |  | EXE Technologies, Inc. Amended and Restated Stock Option Plan for
Non-Employee Directors, as amended.                                                                                                                                                                                                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.14(3)    |  | Amended and Restated EXE Technologies, Inc. 1997 Incentive and
Non-Qualified Stock Option Plan, as amended.                                                                                                                                                                                                                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.15(10)  |  | Employment Agreement dated as of November 1, 2002 between the
Company and Joseph L. Cowan.                                                                                                                                                                                                                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.16(10)  |  | Separation Agreement between the Company and Kenneth Powell dated as
of October 17, 2002.                                                                                                                                                                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.17(10)   |  | Loan and Security Agreement between Company and Silicon Valley Bank
dated as of October 18, 2002.                                                                                                                                                                                                                                                                                                                                                                                                



76



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##### Table of Contents



|            |  |                                                                                                
|----------- |  | -----------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                    
|            |  |                                                                                                
|10.18(10)   |  | Negative Pledge Agreement between Company and Silicon Valley Bank
dated as of October 18, 2002.
|            |  |                                                                                                
|21.1(5)     |  | Schedule of Subsidiaries of the Company.                                                       
|            |  |                                                                                                
|23.1(10)    |  | Consent of Ernst & Young LLP, independent auditors of the Company.                             
|            |  |                                                                                                
|99.1(10)    |  | Certification pursuant to 18 U.S.C. Section 1350.                                              
|            |  |                                                                                                



---

|(1)  |  | Incorporated herein by reference to the Companys Current Report on Form
8-K, filed on February 9, 2001.                                  
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|    
|(2)  |  | Incorporated herein by reference to the Companys quarterly report on
Form 10-Q for the quarter ended June 30, 2000.                      
|    
|(3)  |  | Incorporated herein by reference to the Companys quarterly report on
Form 10-Q for the quarter ended September 30, 2001.                 
|    
|(4)  |  | Incorporated herein by reference to the Companys registration statement
on Form S-1 (File No. 333-35106).                                
|    
|(5)  |  | Incorporated herein by reference to the Companys annual report on Form
10-K for the year ended December 31, 2000.                        
|    
|(6)  |  | Incorporated herein by
reference to the Companys Current Report on Form 10-Q, for the quarter
ended March 31, 2002.                      
|    
|(7)  |  | Incorporated herein by reference to the Companys quarterly report on
Form 10-Q for the quarter ended June 30, 2002.                      
|    
|(8)  |  | Incorporated herein by reference to the Companys quarterly report on
Form 10-Q for the quarter ended September 30, 2002.                 
|    
|(9)  |  | Incorporated herein by reference to the Companys annual report on
Form 10-K for the year ended December 31, 2001.                        
|    
|(10) |  | Filed herewith.                                                                                                                           
|    
|    |  | Management contract or compensation plan or arrangement required to be filed
as an exhibit pursuant to Items 14(a) and 14(c) of Form 10-K.



77