<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   -----------

                                    FORM 10-Q

(Mark One)

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.

                  For the quarterly period ended June 30, 1998.

                                   -----------

                                       or

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934.

For the transition period from                      to                     .

                                     0-22601
                            (Commission file number)

                                   AXIOM INC.
             (Exact Name of Registrant as Specified in Its Charter)

            DELAWARE                                    51-0356153
(State or Other Jurisdiction of             (IRS Employer Identification Number)
Incorporation or Organization)
                              4000 Midlantic Drive
                           Mount Laurel, NJ 08054-5476

               (Address of Principal Executive Offices) (Zip Code)

                                 (609) 866-1000
              (Registrant's Telephone Number, Including Area Code)

         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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

         7,756,900 shares of Common Stock, par value $.01 per share, were
outstanding on August 14, 1998





<PAGE>




                           AXIOM INC. AND SUBSIDIARIES



                                      INDEX


<TABLE>
<CAPTION>

                                                                                                                          Page
<S>                                                                                                                       <C>
Part I-Financial Information:

  Item 1. Consolidated Financial Statements (unaudited)

      Consolidated Balance Sheets-June 30, 1998 (unaudited) and September 30, 1997.......................................  3
      Consolidated Statements of Operations-Three and Nine Months Ended June 30, 1998 and 1997 (unaudited)...............  4
      Consolidated Statements of Cash Flows-Nine Months Ended June 30, 1998 and 1997 (unaudited).........................  5
      Notes to Consolidated Financial Statements (unaudited).............................................................. 6

   Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 12

Part II-Other Information:

   Item 1. Legal Proceedings............................................................................................. 17

   Item 2. Changes in Securities......................................................................................... 17

   Item 3. Defaults Upon Senior Securities............................................................................... 17

   Item 4. Submission of Matters to a Vote of Security Holders........................................................... 17

   Item 5. Other Information............................................................................................. 17

   Item 6. Exhibits and Reports on Form 8-K.............................................................................. 17

</TABLE>


                  (a) Exhibits

                  (b) Reports on Form 8-K







<PAGE>




PART I. FINANCIAL INFORMATION



ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS


                           AXIOM INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                        (In thousands, except share data)

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                          June 30,               September 30,
                                                                                            1998                     1997
                                                                                            ----                     ----
                                      ASSETS
<S>                                                                                           <C>                   <C>
CURRENT ASSETS:
   Cash and cash equivalents......................................................            $2,238                $7,206
   Accounts receivable............................................................            13,083                14,241
   Inventories....................................................................             6,851                 7,374
   Deferred tax assets............................................................               833                   630
   Income tax receivable..........................................................               772                   968
   Other..........................................................................               653                   473
                                                                                                 ---                   ---
      Total current assets........................................................            24,430                30,892
                                                                                              ------                ------
PROPERTY AND EQUIPMENT:
   Computer hardware and software.................................................             4,603                 3,229
   Production and test equipment..................................................             2,719                 1,995
   Furniture, fixtures and leasehold improvements.................................             1,424                   553
                                                                                               -----                   ---
                                                                                               8,746                 5,777
   Less-Accumulated depreciation and amortization.................................            (4,078)               (2,785)
                                                                                               ------                ------
      Net property and equipment..................................................             4,668                 2,992
DEFERRED TAX ASSETS...............................................................             4,732                 2,704
RESTRICTED CASH...................................................................               548                     -
OTHER ASSETS......................................................................               539                   267
INTANGIBLE ASSETS, net............................................................             1,326                   168
                                                                                               -----                   ---
                                                                                             $36,243               $37,023
                                                                                             -------               -------
                       LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Current portion of long-term debt..............................................              $366                  $147
   Obligations to affiliates......................................................                24                   183
   Accounts payable...............................................................             3,898                 3,057
   Accrued compensation and related benefits......................................             1,232                 1,066
   Accrued agent commissions......................................................               321                   638
   Other accrued expenses.........................................................             2,629                   613
   Deferred tax liabilities.......................................................                29                    33
   Deferred revenues..............................................................             2,273                 1,413
                                                                                               -----                 -----
      Total current liabilities...................................................            10,772                 7,150
                                                                                              ------                 -----
LONG-TERM LIABILITIES:
   Deferred tax liabilities.......................................................               238                   186
   Long-term debt.................................................................               556                     -
                                                                                                 ---                 -----
      Total long-term liabilities.................................................               794                   186
                                                                                                 ---                   ---
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY:
   Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares
      issued and outstanding......................................................                 -                     -
   Common stock, $0.01 par value, 25,000,000 shares authorized, 7,756,900 and 
      6,466,900 shares issued and outstanding.....................................                78                    65
   Additional paid-in capital.....................................................            37,113                32,340
   Accumulated deficit............................................................           (12,514)               (2,718)
                                                                                             -------                ------
                                                                                             -------                ------
      Total stockholders' equity..................................................            24,677                29,687
                                                                                              ------                ------
                                                                                             $36,243               $37,023
                                                                                             -------               -------
                                                                                             -------               -------

</TABLE>

       The accompanying notes are an integral part of these statements.



<PAGE>


                           AXIOM INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                            For The Three Months            For The Nine Months
                                                                               Ended June 30,                  Ended June 30,
                                                                               --------------                  --------------
                                                                              1998          1997          1998              1997
                                                                              ----          ----          ----              ----
<S>                                                                              <C>          <C>            <C>          <C>
REVENUES:
   Equipment............................................................         $7,349       $7,892         $16,131      $16,739
   Services.............................................................          3,317        1,657           7,759        4,860
                                                                                  -----        -----           -----        -----
      Total revenues....................................................         10,666        9,549          23,890       21,599
                                                                                 ------        -----          ------       ------
COST OF REVENUES:
   Equipment............................................................          3,214        3,662           8,024        8,716
   Services.............................................................          2,904          492           6,424        3,272
                                                                                  -----          ---           -----        -----
      Total cost of revenues............................................          6,118        4,154          14,448       11,988
                                                                                  -----        -----          ------       ------
      Gross profit......................................................          4,548        5,395           9,442        9,611
                                                                                  -----        -----           -----        -----
OPERATING EXPENSES:
   Research, development and engineering................................          1,891        1,810           5,763        5,600
   Selling, general and administrative..................................          6,339        2,119          13,273        6,542
   Charge for purchased research and development........................          2,387            -           2,387            -
                                                                                  -----        -----           -----        -----
      Total operating expenses..........................................         10,617        3,929          21,423       12,142
                                                                                 ------        -----          ------       ------
      Operating income (loss)...........................................         (6,069)       1,466         (11,981)      (2,531)
INTEREST EXPENSE (INCOME), net (including related party interest).......            (46)         147            (241)         426
OTHER INCOME (EXPENSE)..................................................             (9)         (55)              5           (1)
                                                                                 ------        -----          ------       ------
      Income (loss) before income taxes.................................         (6,032)       1,264         (11,735)      (2,958)
INCOME TAX (EXPENSE) BENEFIT............................................              -         (510)          1,939        1,250
                                                                                    ---         ----           -----        -----
NET INCOME (LOSS).......................................................       $ (6,032)        $754        $ (9,796)     $(1,708)
                                                                               --------         ----          -------      ------- 
BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE....................         $(0.85)       $0.22         $ (1.46)      $(0.49)
                                                                                 ------        -----          ------       ------
                                                                                 ------        -----          ------       ------

SHARES USED IN COMPUTING BASIC AND DILUTED NET INCOME (LOSS) INCOME PER
   COMMON SHARE.........................................................          7,133        3,477           6,689        3,477
                                                                                 ------        -----          ------       ------
                                                                                 ------        -----          ------       ------



</TABLE>



        The accompanying notes are an integral part of these statements.



<PAGE>


                           AXIOM INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                                                          For the Nine Months Ended
                                                                                                                   June 30,
                                                                                                              1998          1997
                                                                                                              ----          ----
<S>                                                                                                        <C>          <C>
OPERATING ACTIVITIES:
Net loss...............................................................................................    $ (9,796)    $ (1,708)
Adjustments to reconcile net loss to net cash used in operating activities -
   Depreciation and amortization.......................................................................       1,398        1,088
   Provision for doubtful accounts.....................................................................       4,018            -
   Charge for purchased research and development.......................................................       2,387            -
  Changes in assets and liabilities, net-
     Decrease (increase) in-
        Accounts receivable............................................................................         367        3,486
        Inventories....................................................................................       1,459       (3,430)
        Other current assets...........................................................................         (81)        (429)
        Other assets...................................................................................        (369)       1,122
        Deferred taxes.................................................................................         196          128
        Income tax receivable..........................................................................      (2,183)           -
     Increase (decrease) in-
        Accounts payable...............................................................................         675        2,087
        Accrued compensation and related benefits......................................................         166          (65)
        Accrued agent commissions......................................................................        (317)        (335)
        Accrued tax payable............................................................................         ---       (3,277)
        Other accrued expenses.........................................................................         889         (764)
        Deferred revenues..............................................................................         611          956
                                                                                                                ---          ---
           Net cash used in operating activities.......................................................        (580)      (1,141)
                                                                                                               ----       ------ 
INVESTING ACTIVITIES:
Purchases of property and equipment....................................................................      (1,767)      (1,158)
Cash paid for acquisitions, net........................................................................      (1,855)           -
                                                                                                               ----       ------ 
           Net cash used in investing activities.......................................................      (3,622)      (1,158)
                                                                                                             ------       ------ 
FINANCING ACTIVITIES:
Payments on long-term debt.............................................................................         (59)        (170)
Advances on obligations to parent and affiliates.......................................................         470        5,112
Repayment on obligations to parent and affiliates......................................................        (629)      (5,118)
                                                                                                               ----       ------ 
           Net cash used in financing activities.......................................................        (218)        (176)
                                                                                                              -----         ---- 
NET DECREASE IN CASH AND CASH EQUIVALENTS..............................................................      (4,420)      (2,475)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.........................................................       7,206        3,326
                                                                                                              -----        -----
CASH AND CASH EQUIVALENTS, END OF PERIOD...............................................................      $2,786         $851
                                                                                                             ------         ----
                                                                                                             ------         ----

</TABLE>




        The accompanying notes are an integral part of these statements.



<PAGE>


                           AXIOM INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)



1. BACKGROUND:



The Company

         Axiom Inc. (the "Company"), a Delaware corporation, changed its name
from Securicor Communications Inc. in May 1997. Through May 23, 1997, the
Company's business was conducted through its wholly-owned subsidiary, Securicor
Telesciences Inc. ("STI"). On that date, STI merged into the Company. Prior 
to May 15, 1998, the Company was a majority-owned subsidiary of Securicor 
Communications Limited ("SCL"), an entity organized under the laws of the 
United Kingdom and a wholly-owned subsidiary of Securicor plc ("Securicor"), 
a company organized under the laws of the United Kingdom. As the merger 
represented a transaction between entities under common control, the net 
assets of STI were transferred at net book value. Prior to the completion of 
the Company's initial public offering, Securicor provided the financing 
requirements for the Company through advances (See Note 6). SCL currently 
owns 44.8% of the Company's outstanding Common Stock.

Initial Public Offering



         On July 8, 1997, the Company completed its initial public offering of
2,600,000 shares of Common Stock at a price of $12.00 per share. The Company
received net cash proceeds of approximately $28,053,000 from the public
offering. In addition, on August 6, 1997, the underwriters exercised their
over-allotment option of 390,000 shares of Common Stock at a price of $12.00 per
share. The Company received net cash proceeds of $4,352,400. Collectively, both
transactions are herein referred to as the "Offering."

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:



Interim Financial Information and Summary Financial Information

         The financial statements as of June 30, 1998 and for the three and nine
months ended June 30, 1998 and 1997 are unaudited and, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for the fair presentation of results for these interim
periods. The results for the three and nine months ended June 30, 1998 are not
necessarily indicative of the results to be expected for the entire year. While
the Company believes that the disclosures presented are adequate to make the
information not misleading, these Consolidated Financial Statements should be
read in conjunction with the Consolidated Financial Statements and the notes
included in the Company's Form 10-K for the fiscal year ended September 30,
1997.

Principles of Consolidation

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

Cash and Cash Equivalents

         For the purposes of the Statements of Cash Flows, the Company considers
all highly liquid investment instruments purchased with an original maturity of
three months or less to be cash equivalents. Cash and cash equivalents are
comprised of investments in various money market funds.

Restricted Cash

         Restricted cash consists of funds to support a standby letter of 
credit required under a contractual arrangement with one of the Company's 
major customers.

Inventories

         Inventories are valued at the lower of cost, determined on the
first-in, first-out method, or market.



<PAGE>



Agent Commissions

         In certain contracts, particularly large international contracts, the
Company may utilize an agent, who will work directly with the customer. The
Company is typically charged a commission based on the total revenues of the
contract. These charges are recorded when the revenues are recognized and
included in cost of revenues. Any earned but unpaid commissions are recorded in
accrued agent commissions.

Concentration of Credit Risk

         Financial instruments that potentially subject the Company to 
concentration of credit risk are accounts receivable. The Company's customer 
base principally comprises the Regional Bell Operating Companies ("RBOCs"), as 
well as international telephone companies (See "Management's Discussion and 
Analysis of Financial Condition and Results of Operations"). The Company 
typically does not require collateral from its customers. In addition, the 
Company has begun to sell its products to system integrators and resellers.

         The Company has significant activity with international customers, 
particularly in Asia. The current economic and currency situation affecting 
certain Asian countries, which includes currency devaluation, external support 
and economic reorganization programs to reduce growth and credit demand could 
have a material adverse effect on the Company's operating results.

Revenue Recognition

         Revenues are generally recognized upon shipment of the equipment. In
"bill and hold" transactions, the Company recognizes revenues when the following
conditions are met: the equipment is complete, ready for shipment and segregated
from other inventory; the Company has no further significant performance
obligations in connection with the completion of the transaction; the commitment
and delivery schedule is fixed; the customer requested the transaction be
completed on this basis; and the risks of ownership have passed to the customer.
Revenues from installation and engineering activities are recognized as services
are provided.

         Depending on contract terms and conditions, software license fees are
recognized upon delivery of the product if no significant vendor obligations
remain and collection of the resulting receivable is deemed probable. The
Company had $1,184,000 and $0 of separate software license fee revenues for the
nine months ended June 30, 1998 and 1997, respectively, and these amounts are
included in equipment revenues. If significant vendor obligations exist at
delivery and/or the product is subject to customer acceptance, revenue is
deferred until no significant obligations remain and/or acceptance has occurred.
If the payment of the license fee is coincident to services which are deemed to
be essential to the transaction, the license fee is deferred and recognized
using contract accounting over the period during which the services are
performed. The Company's software licensing agreements provide for customer
support (typically 90 days). The portion of the license fee associated with
customer support is unbundled from the license fee and is recognized ratably
over the warranty period as services revenue.

         The Company offers support agreements to its customers. Revenues from
customer support are recognized as services are provided. Services are generally
provided ratably over the term of the customer support agreement and are
included in services revenue in the accompanying statements of operations.

Research, Development and Engineering Expenses

         Research, development and engineering expenses are charged to expense
as incurred. Engineering expenses consist of costs related to the development of
new products, enhancements to existing products and the integration of existing
products into application specific systems.

Software Development Costs

         The Company accounts for software development costs in accordance 
with Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting 
for the Costs of Computer Software to Be Sold, Leased, or Otherwise 
Marketed". Under SFAS No. 86, costs incurred to create a computer software 
product are charged to research and development expense as incurred until 
technological feasibility has been established. The Company establishes 
technological feasibility upon completion of a detailed program design. At 
that point, computer software costs are capitalized until the product is 
available for general release to customers. The establishment of 
technological feasibility and the ongoing assessment of recoverability of 
capitalized software development costs require considerable judgment by 
management with respect to certain external factors, including, but not 
limited to, anticipated future revenues, estimated economic life, and changes 
in technology.

         Amortization will begin when the product is released. Capitalized 
software development costs are amortized on a product-by-product basis using 
the straight-line method over the estimated life of the product enhancement.

         Capitalized software development costs consist primarily of salary, 
consulting, and computer costs incurred to develop new products. During the 
three and nine months ended June 30, 1998, software development costs of 
$112,000 were capitalized. No costs were capitalized in 1997. Amortization 
has not yet begun.

Charge for Purchased Research and Development

         The charge for purchased research and development of $2,387,000 for 
the quarter ended June 30, 1998 represents a one-time charge related to 
purchased research and development in connection with the acquisition of 
Innovative Data Technology. This charge relates to incomplete development 
projects which had not yet reached technological feasibility as of the 
acquisition date and had no alternate future uses.

<PAGE>


Income Taxes

         The Company accounts for income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." SFAS No.
109 requires the liability method of accounting for deferred income taxes.
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities.
Deferred tax assets or liabilities at the end of each period are determined
using the enacted tax rates.

Net Loss Per Common Share

         In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share," which superseded Accounting Principles Board
Opinion No. 15, "Earnings per Share." SFAS No. 128 requires dual presentation of
basic and diluted earnings per share for complex capital structures on the face
of the statements of operations. According to SFAS No. 128, basic earnings per
share, which replaced primary earnings per share, is calculated by dividing net
income available to Common shareholders by the weighted average number of Common
shares outstanding for the period. Diluted earnings per share, which replaced
fully diluted earnings per share, reflects the potential dilution from the
exercise or conversion of securities into Common stock, such as stock options.

         The Company was required to and did adopt SFAS No. 128 during the
period ended December 31, 1997, as earlier application was not permitted. As
required by SFAS No. 128, all prior-period loss per Common share data has been
restated to conform with the provisions of this statement.

         The following is a reconciliation of the numerators and denominators of
the basic and diluted loss per Common share computations:

<TABLE>
<CAPTION>
                                                              For the Three Months Ended June 30
                                                        1998                                        1997
                                                        ----                                        ----
                                       Loss            Shares      Per Share      Income            Shares       Per Share
                                    (Numerator)     (Denominator)    Amount     (Numerator)     (Denominator)     Amount
<S>                                <C>               <C>            <C>        <C>              <C>             <C>      

Basic income (loss) per Common
  share..........................   $(6,032,000)       7,133,164     $(0.85)      $754,000      3,476,900        $.22
    Net income (loss)............                                                               

Effect of dilutive securities.... 

    Stock Options                       _                  _            _            _             _              _
                                    -----------        ---------     -------      --------      ---------        ---- 
Diluted income (loss) per Common
  share..........................   $(6,032,000)       7,133,164     $(0.85)      $754,000      3,476,900        $.22
    Net income (loss) and 
      assumed conversions........   -----------        ---------     -------      --------      ---------        ---- 
</TABLE>

<TABLE>
<CAPTION>

                                                           For the Nine Months Ended June 30
                                                     1998                                      1997
                                                     ----                                      ----
                                    Loss            Shares       Per Share     Loss           Shares        Per Share
                                (Numerator)     (Denominator)     Amount     (Numerator)    (Denominator)     Amount
<S>                             <C>               <C>             <C>        <C>              <C>            <C>
Basic loss per Common
   share.................
      Net loss...........       $(9,796,000)      6,688,988       $(1.46)    $(1,708,000)     3,476,900      $(0.49)

Effect of dilutive
   securities............        
      Stock Options......            _                _                           _               _
                                 ----------       ---------                   -----------     ---------
Diluted loss per Common
   share.................
      Net loss and              $(9,796,000)      6,688,988       $(1.46)    $(1,708,000)     3,476,900      $(0.49)
        assumed
        conversions......        ----------       ---------        ------     -----------     ---------       ------


</TABLE>




         Diluted loss per Common share is the same as basic loss per Common
share as no additional shares for the potential dilution from the exercise or
conversion of securities into Common stock are included in the denominator as
the result is anti-dilutive due to the Company's losses. Options to purchase
359,915 shares of Common stock at $5.50 per share and 563,000 shares of Common
stock at $3.375 per share were outstanding during the nine months ended June 30,
1998, but were not included in the computation of diluted loss per Common share.
No options were outstanding during the nine months ended June 30, 1997. As a 
result of the July 30, 1998 Company work force reduction, 114,000 options 
were cancelled.

Supplemental Disclosures of Cash Flow Information

         For the nine months ended June 30, 1998 and 1997, the Company paid
interest of $18,000 and $513,000, respectively. For the nine months ended June
30, 1998 and 1997, the Company paid income taxes, net of refunds, of $31,000 and
$2,054,000, respectively.

         The Company has entered into three capital lease obligations during
the nine months ended June 30, 1998 totaling $961,000. No capital leases were 
entered into during the nine months ended June 30, 1997.


<PAGE>




Supplemental Information regarding Non-cash Investing and Financing Activities

                  On May 15, 1998, the Company acquired Innovative Data 
Technology ("IDT") in a business combination accounted for as a purchase. IDT 
is primarily engaged in the manufacture and sale of telecommunications switch 
interface technology. The Company (i) issued 1,290,000 shares of its Common 
stock valued at $4,434,000, (ii) cash of $2,707,000 and (iii) options to 
purchase 132,000 shares of Common stock (issued in connection with certain 
employment agreements) valued at $352,000 using the Black-Scholes option 
pricing model. The results of the operations of IDT have been included in the 
accompanying financial statements from the date of acquisition. The total 
purchase price of $8,272,000 (subject to adjustment), including transaction 
costs of $779,000, was allocated to the assets acquired and liabilities 
assumed based on their respective fair values. The Company recorded 
$2,387,000 of the purchase price as a charge to the consolidated statement of 
operations on the acquisition date as it was related to the fair value of 
incomplete research and development projects. The remaining amount by which 
the purchase price exceeded the net assets purchased was allocated to the 
following intangible assets and each is being amortized on a straight-line 
basis over the period indicated:

<TABLE>
<CAPTION>

                                                          Amortization
                                             Amount       Period (yrs.)
--------------------------------------------------------------------------------
<S>                                         <C>               <C>
Non-compete covenant                        $500,000          2
Acquired technology                          432,000          4
Goodwill                                      31,000          7
--------------------------------------------------------------------------------
Total                                       $963,000

</TABLE>

         The following table presents the non-cash assets and liabilities that
were consolidated as a result of the acquisition of IDT. Note that these 
amounts are preliminary and subject to change:

<TABLE>
<CAPTION>

                                                                                                                     1998
<S>                                                                                                                  <C>
  Non-cash assets (liabilities):
      Accounts receivable.........................................................................................   $3,147,000
      Inventories.................................................................................................      936,000
      Other current assets........................................................................................       99,000
      Property and equipment......................................................................................      341,000
      Other assets................................................................................................       15,000
      Charge for purchased research and development...............................................................    2,387,000
      Intangible assets...........................................................................................    1,006,000
      Accounts payable............................................................................................     (123,000)
      Other accrued expenses......................................................................................   (1,074,000)
      Deferred revenues...........................................................................................     (184,000)
                                                                                                                       -------- 
      Non cash assets acquired....................................................................................    6,550,000
      Less - Common Stock and options issued......................................................................   (4,786,000)
                                                                                                                     ----------
      Cash paid, net of cash acquired.............................................................................   $1,764,000
                                                                                                                     ----------
                                                                                                                     ----------

</TABLE>


         If the acquisition of IDT had occurred on October 1, 1996, the 
unaudited pro forma information, after giving effect to the pro forma 
adjustments described below, would have been as follows:

<TABLE>
<CAPTION>
                                                  Nine Months Ended
                                                June 30,     June 30,
                                                 1998          1997
<S>                                            <C>          <C>

     Unaudited pro forma revenues........      $  31,611    $   28,823
                                                --------     ---------
     Unaudited pro forma net loss........      $ (7,606)    $  (2,112)
                                                --------     ---------
     Unaudited pro forma net loss
       per Common Share..................      $  (0.98)    $   (0.44)
                                                --------     ---------
</TABLE>

         The unaudited pro forma information does not purport to be 
indicative of the results that would have been attained if the operations had 
actually been combined for the periods presented and is not necessarily 
indicative of the operating results to be expected in the future.

         The pro forma adjustments consist of compensation adjustments for 
certain executive officers of IDT who are now employed by the Company under 
specified employment contracts, interest income adjustments for the aggregate 
net cash used to acquire IDT, interest expense adjustments relating to 
repayment of an IDT note payable to a shareholder and the amortization of the 
intangible assets. The amount of the compensation pro forma adjustment was 
$121,000 and $34,000 for the nine months ended June 30, 1998 and 1997, 
respectively. The amount of the interest income pro forma adjustment was $85,000
and $101,000 for the nine months ended June 30, 1998 and 1997, respectively. The
amount of the interest expense pro forma adjustment was $50,000 and $0 for the
nine months ended June 30, 1998 and 1997, respectively. The amount of the 
intangible amortization pro forma adjustment was $71,000 and $84,000 for nine 
months ended June 30, 1998 and 1997, respectively. Additionally, the above 
unaudited pro forma information excludes the one-time charge of $2,387,000
associated with the write-off of purchased research and development costs in 
connection with the IDT acquisition.




<PAGE>






Management's Use of Estimates

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.


3. ACCOUNTS RECEIVABLE:


<TABLE>
<CAPTION>

                                                               June 30, 1998          September 30, 1997
                                                               -------------          ------------------

<S>                                                             <C>                      <C>
Billed.....................................................     $14,714,000              $12,265,000
Unbilled...................................................       2,276,000                2,076,000
                                                                  ---------                ---------
                                                                 16,990,000               14,341,000
Less-allowance for doubtful accounts.......................      (3,907,000)                (100,000)
                                                                 ----------                 -------- 
                                                                $13,083,000              $14,241,000
                                                                -----------              -----------


</TABLE>




         Unbilled accounts receivable includes costs and estimated earnings on
contracts in progress which have been recognized as revenues but not yet billed
to customers under the provisions of specified contracts. The increase in the 
allowance for doubtful accounts relates to the uncertainty surrounding the 
Company's Asian and other international customer base.


4. INVENTORIES:


<TABLE>
<CAPTION>

                                                                 June 30, 1998         September 30, 1997

<S>                                                                  <C>                   <C>
Raw materials..............................................     $3,302,000                 $4,718,000
Work-in-process............................................      1,176,000                    538,000
Finished goods.............................................      2,373,000                  2,118,000
                                                                ----------                 ----------
                                                                $6,851,000                 $7,374,000
                                                                ----------                 ----------


</TABLE>


<PAGE>




5. LINE OF CREDIT:

         The Company had a $2,500,000 line of credit with a local bank with 
interest at the bank's prime rate which expired on March 31, 1998. No funds 
were advanced against this line of credit. Currently, the Company does not 
have a line of credit and is seeking to obtain a new bank credit facility.

6. OBLIGATIONS TO AFFILIATES:

         Information relative to the Company's obligations to affiliates is as 
follows:

<TABLE>
<CAPTION>

                                                                                         June 30, 1998        September 30, 1997

<S>                                                                                        <C>                       <C>     
Obligations to Securicor...........................................................        $17,000                   $289,000
Obligations to affiliates:
      Receivables from affiliates..................................................        (10,000)                  (119,000)
      Payables to affiliates.......................................................         17,000                     13,000
                                                                                            ------                     ------
           Total obligations to affiliates, net....................................          7,000                   (106,000)
                                                                                             -----                   -------- 
Total obligations to affiliates....................................................        $24,000                   $183,000
                                                                                           -------                   --------


</TABLE>




         Prior to the completion of the Offering, the Company was funded 
through advances from Securicor, which was previously its parent. Certain 
advances were interest bearing and were loaned to the Company at a base rate 
plus 1%. There were no interest bearing advances for the nine months ended 
June 30, 1998. For the nine months ended June 30, 1997, the interest rate 
charged on these obligations ranged from 6.75% to 7.50% and interest expense 
for the nine months ended June 30, 1998 and 1997, was $0 and $491,000, 
respectively. As these obligations to Securicor and affiliates are due on 
demand, this net amount is included in current liabilities.

7. RELATED PARTY TRANSACTIONS:

         Prior to the Offering, certain amounts were allocated to the Company 
from Securicor and consisted of charges for certain support and services. 
These charges were based on Securicor's estimate of its total relevant costs 
for the applicable fiscal year, allocated pro rata based on estimated 
revenues of each applicable business unit. Management believed the method of 
allocation was reasonable. These charges were $102,000 and $295,000 for the 
three and nine months ended June 30, 1997 and are included in selling, 
general and administrative expense. There were no such charges for the three 
and nine months ended June 30, 1998. The Company has not incurred nor will 
incur any parent charges subsequent to the Offering.

         In May 1997, the Company and Securicor entered into an agreement 
pursuant to which Securicor provides international sales and marketing 
services to the Company. Total charges from Securicor for these services were 
$61,000 for the nine months ended June 30, 1998. In addition, the Company 
pays each of its directors an annual directors fee of $20,000 each. For the 
nine months ended June 30, 1998, the Company expensed $15,000 related to such 
fees. The directors fees paid to an employee of Securicor are remitted to 
Securicor.

         In July 1997, the Company made a loan to an officer of the Company 
in the amount of $20,000 which was to be repaid in January 1998 with accrued 
interest at a rate of 7% per annum. The officer is no longer with the Company 
and arrangements are being made for the repayment of the loan. Also, in July 
1997, the Company advanced $20,400 to a member of the Company's Board of 
Directors which was repayable in monthly principal installments of $1,666. At 
June 30, 1998 and September 30, 1997, $0 and $15,402 remained outstanding on 
this loan, respectively. Both of these receivables are included in other 
current assets.

         The Company obtains its Directors and Officers insurance through
Securicor. Total Director and Officer insurance expense for the nine months
ended June 30, 1998 was $49,000. This insurance was not maintained by the 
Company prior to its Offering in July 1997.

         During the nine months ended June 30, 1997, the Company's results
included the business activities related to an Integrated Services Digital
Network ("ISDN") product. The Company's business activities related to the ISDN
product were performed through its wholly-owned subsidiary, Securicor 3Net, Inc.
During the nine months ended June 30, 1997, the Company sold certain products
related to this technology and recognized certain costs and realized all of the
revenue related to such activities. For the nine months ended June 30, 1997, the
Company recognized revenues of $1,167,000 and cost of revenues of $794,000
relating to such activities. Cost of revenues includes $386,000 of amortization
of acquired development costs related to the development of the ISDN product.
These amounts are included in revenues and cost of revenues. In May 1997, the
Company transferred all of its stock in Securicor 3Net, Inc. to an affiliate of
Securicor at net book value due to the related party nature of the transaction.

         From time to time, the Company and Securicor process miscellaneous
transactions on behalf of each other which are payable the month following the
month incurred. These transactions have been immaterial to date.


<PAGE>


8. COMMITMENTS AND CONTINGENCIES:

         The Company is obligated to make certain payments, as defined, to
certain key Company employees if these employees are terminated. In addition,
certain key employees have performance incentives in the form of cash and equity
(in the parent or an affiliate) related compensation. On July 30, 1998, the 
Company instituted a reorganization and cost reduction program that included 
immediate work force reductions across all departments by 14%. A charge for 
severance costs of approximately $400,000 will be taken in the fourth quarter 
ending September 30, 1998.

         The Company is party to various claims arising in the ordinary course
of business. Although the ultimate outcome of these matters is presently not
determinable, management believes that the resolution of these matters will not
have a material adverse effect on the Company's financial position or results of
operations.

         The Company received a letter dated June 19, 1997 from Acxiom
Corporation ("Acxiom") requesting that the Company cease using the name "Axiom".
Acxiom filed suit against the Company in the United States District Court for
the District of Delaware on August 1, 1997 alleging trademark infringement and
dilution under the Lanham Act, as well as related state law causes of action.
Acxiom seeks a judgment against the Company enjoining any future use of the
Axiom name and Axiom tradenames, future acts of unfair competition in the United
States, and destruction of all advertising and promotional material and awarding
treble damages in an unspecified amount because of the alleged willfulness of
the Company's infringement. The Company has vigorously defended against these
claims and believes that the claim is without merit because of the lack of
correspondence between the products, services and customers of the two
companies. There is no assurance, however, that these claims will be resolved on
terms favorable to the Company. In February 1998, these claims were tried in a
bench trial. The court has not yet issued a ruling.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS


Overview

         The Company develops, markets and supports integrated hardware and 
software systems that are able to collect and process transaction information 
from a wide variety of wireline switches and transmit the information to the 
customer's information management networks. The Company is developing systems 
that process transaction information from wireless, Asynchronous Transfer 
Mode (ATM) and other specialized telecommunications switches. The Company's 
customers use this information to bill their subscribers, to implement 
customized marketing programs and to perform other data management functions. 
The Company also provides traffic management solutions to telecommunications 
companies. The Company recently introduced its first applications software 
product, a fraud detection and management system. The Company provides 
installation, ongoing maintenance, support and training, as well as 
customized engineering services, related to the Company's systems.

         A significant portion of the Company's revenues has been, and is 
expected to continue to be, derived from substantial orders placed by large 
organizations, and in particular three RBOCs. Aggregate revenues from U S 
West, Inc., Southwestern Bell Telephone Company and Ameritech Corporation 
accounted for 61.4% and 67.5% of the Company's total revenues for the nine 
months ended June 30, 1998 and 1997, respectively. The Company has significant 
international sales, particularly in Asia. IDT, acquired by the Company in May 
1998, generates a significant portion of sales from international customers. 
The current economic and currency situation affecting certain Asian countries, 
which includes currency devaluation, external support and economic 
reorganization programs to reduce growth and credit demand, could have a 
material adverse effect on the Company's operating results. Due to this 
situation, the Company's international sales may be negatively impacted.

         Domestic revenues are typically generated under cancelable general 
purchase agreements which provide for the continuing supply of products and 
services over future years. Pricing is based upon the volume of products 
ordered. Internationally, the Company typically enters into long-term 
contracts for the delivery of turn-key systems which include products and 
services. All sales arrangements with international customers are denominated 
in US dollars. The Company's revenues are difficult to forecast because the 
purchase of its systems generally involves a significant commitment of 
capital and management time, which generally results in lengthy sales cycles.

         Quarterly revenues are subject to substantial fluctuations primarily
resulting from the Company's concentration of customers and the timing of orders
received. The timing of orders is dependent, to a large extent, on the timing of
the Company's customers' annual budget process. Historically, the Company's
first and second fiscal quarters have generated a lower level of revenues
compared to the Company's third and fourth fiscal quarters, by which time the
Company's customers have typically approved their budgets. Historically, product
and service backlog has been a relatively small amount and most orders are
fulfilled within three months. Because of its close links to, and ongoing
communications with, its customers, the Company generally is able to plan for
product demand and, when the order is received, ship its products within a
relatively short time period thereafter.


<PAGE>


         Cost of revenues includes the direct cost of hardware and software
modules, other manufacturing costs related to the assembly and testing of
products, customer service costs, agent commissions where applicable, and other
variable costs such as freight, scrap and installation materials. The Company
has a relatively high fixed cost base which is included in cost of revenues. As
a result, any significant decline in revenues would likely have a significant
adverse effect on margins.

         Research, development and engineering expenses consist of payroll and
related expenses and other costs associated with the design and development of
the Company's products. These costs are charged to expense as incurred.

         Selling, general and administrative expenses consist of costs to
support the Company's sales, marketing and administrative functions. Included
within these costs are payroll and related expenses, supplies, travel, outside
services, as well as the cost of the Company's participation in trade shows,
industry conferences and related travel and promotional costs.

         The Company is currently in the process of evaluating its 
information technology infrastructure for Year 2000 compliance. The Company 
does not expect that the cost to modify such infrastructure to Year 2000 
compliance will be material to its financial condition or results of 
operations. The Company does not anticipate any material disruption in its 
operations as a result of any failure by the Company to be in compliance. The 
Company is currently evaluating information concerning the Year 2000 
compliance status of its suppliers and customers. In the event that any of 
the Company's significant suppliers or customers does not successfully and 
timely achieve Year 2000 compliance, the Company's business or operations 
could be adversely affected.

Safe Harbor for Forward-Looking Statements

         From time to time, the Company may publish statements that are not
historical facts but are forward-looking statements relating to such matters as
anticipated financial performance, business prospects, technological
developments, new products, research and development activities and similar
matters. The Private Litigation Reform Act of 1995 provided a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause the Company's
actual results and experience to differ materially from the anticipated results
or other expectations expressed in the Company's forward-looking statements. The
risks and uncertainties that may affect the operations, performance, development
and results of the Company's business include, but are not limited to the
following important factors: (i) reliance on a limited number of significant
customers and dependence on Sterling Series products; (ii) difficulty in
predicting quarterly revenues because of long sales cycles and customer
budgetary constraints; (iii) competition in the market for billing data
collection and traffic management systems; (iv) rapid and unexpected changes in
the telecommunications markets and technologies; (v) the success of the
Company's sales and marketing strategies; (vi) the ability of the Company to
manage its growth; (vii) the ability of the Company to motivate, and retain the
services of, its key management and technical personnel and continue to hire
additional qualified personnel to meet the Company's evolving staffing needs;
and (viii) risks related to sales to international customers, including, but not
limited to, currency fluctuations, instability in financial markets and
unanticipated shifts in economic policies of foreign governments, 
particularly as it relates to Asia.

Results of Operations

Quarter ended June 30, 1998 Compared to Quarter ended June 30, 1997



         Revenues

         Revenues increased 11.7% to $10.7 million for the quarter ended June 
30, 1998 from $9.5 million for the quarter ended June 30, 1997. Equipment 
revenues were $7.3 million for the quarter ended June 30, 1998, a decrease of 
6.9% from the $7.9 million of equipment revenues for the quarter ended June 
30, 1997. A significant portion of the decrease in equipment revenues 
resulted from a delay in orders, primarily related to the Company's 
international business. Services revenues increased 100.0% to $3.3 million 
for the quarter ended June 30, 1998 from $1.7 million for the quarter ended 
June 30, 1997 primarily due to certain engineering services provided to one 
of the RBOCs.

<PAGE>


         Gross Profit

         Gross profit decreased to 42.6% of revenues for the quarter ended 
June 30, 1998 from 56.5% for the quarter ended June 30, 1997. Gross profit 
related to equipment revenues increased to 56.3% for the quarter ended June 
30, 1998 from 53.6% for the quarter ended June 30, 1997. The Company has a 
relatively high fixed cost base which is included in cost of revenues. As a 
result, fluctuations in revenues have a significant effect on margins. Gross 
profit from services revenues was 12.5% for the quarter ended June 30, 1998, 
a decrease from gross profit of 70.3% for the quarter ended June 30, 1997. 
This decrease is due primarily to a large engineering services project for 
one of the RBOCs with low margins.

         Research, Development and Engineering

         Research, development and engineering expenses were $1.9 million and 
$1.8 million for the quarter ended June 30, 1998 and 1997, respectively. As a 
percentage of revenues, research, development and engineering expenses 
decreased during the quarter ended June 30, 1998 to 17.7% from 19.0% for the 
quarter ended June 30, 1997 due to increased revenues.

         Selling, General and Administrative

         Selling, general and administrative expenses were $6.3 million for 
the quarter ended June 30, 1998, an increase of 199.2% compared to $2.1 
million for the same period in 1997. As a percentage of revenues, selling, 
general and administrative expenses increased during the quarter ended June 
30, 1998 to 59.4% from 22.2% for the same period in 1997. This increase is 
primarily due to an increase in the Company's accounts receivable reserve of 
$3.2 million as a result of the continued uncertainty surrounding the 
Company's Asian and other international customer base. The increase is also 
attributable to additional personnel, the costs associated with being a public 
company and increased sales and marketing efforts.

Charge for Purchased Research and Development

         The charge for purchased research and development of $2.4 million 
for the quarter ended June 30, 1998 represents a one-time charge related to 
purchased research and development in connection with the acquisition of 
Innovative Data Technology. This charge relates to incomplete development 
projects which had not yet reached technological feasibility as of the 
acquisition date and had no alternate future uses.

         Interest Expense (Income)

         Net interest income was $46,000 for the quarter ended June 30, 1998.
Interest expense was $147,000 for the quarter ended June 30, 1997. Upon the
consummation of the Offering, a significant portion of the borrowings from
Securicor was repaid. As a result, the Company's interest expense has decreased.
Additionally, the Company has invested a portion of the proceeds of the Offering
which has resulted in interest income.

         Income Taxes

         The Company's effective tax rate was 40.3% for the quarter ended 
June 30, 1997. No provision was recorded for the quarter ended June 30, 1998 
given the Company's net loss.

Nine Months Ended June 30, 1998 compared to June 30, 1997


         Revenues

         Revenues increased 10.6% to $23.9 million for the nine months ended 
June 30, 1998 from $21.6 million for the nine months ended June 30, 1997. 
Equipment revenues were $16.1 million and $16.7 million for the nine months 
ended June 30, 1998 and 1997, respectively. A significant portion of the 
decrease in equipment revenues resulted from a delay in orders, primarily 
related to the Company's international business. Services revenues increased 
59.7% to $7.8 million for the nine months ended June 30, 1998 from $4.9 
million for the nine months ended June 30, 1997. This increase is mainly due 
to engineering services provided to one of the RBOCs and increased hardware 
and software maintenance contracts received during the nine months ended June 
30, 1998.

<PAGE>


         Gross Profit

         Gross profit decreased to 39.5% of revenues for the nine months 
ended June 30, 1998 from 44.5% for the nine months ended June 30, 1997. Gross 
profit related to equipment revenues increased to 50.3% for the nine months 
ended June 30, 1998 from 47.9% for the nine months ended June 30, 1997. The 
Company has a relatively high fixed cost base which is included in cost of 
revenues. As a result, fluctuations in revenues have a significant effect on 
margins. Gross profit from services revenues decreased to 17.2% for the nine 
months ended June 30, 1998 from 32.7% for the nine months ended June 30, 
1997. This decrease is due primarily to a large engineering services project 
for one of the RBOCs with low margins.

         Research, Development and Engineering

         Research, development and engineering expenses were $5.8 million and 
$5.6 million for the nine months ended June 30, 1998 and 1997, respectively. 
As a percentage of revenues, research, development and engineering expenses 
decreased during the nine months ended June 30, 1998 to 24.1% from 25.9% for 
the nine months ended June 30, 1997 due to increased revenues. Research, 
development and engineering expenditures have remained relatively consistent 
between periods as the Company continues the development and enhancement of 
its products.

         Selling, General and Administrative

         Selling, general and administrative expenses were $13.3 million for 
the nine months ended June 30, 1998, an increase of 102.9% compared to $6.5 
million for the same period in 1997. As a percentage of revenues, selling, 
general and administrative expenses increased during the nine months ended 
June 30, 1998 to 55.6% from 30.3% for the same period in 1997. This increase 
is attributable to an increase in the Company's accounts receivable reserve 
of $3.9 million as a result of the continued uncertainty surrounding the 
Company's Asian and other international customer base. In addition, the 
increase is attributable to additional legal costs of $600,000 related to the 
law suit filed by Acxiom Corporation (See Part II Item 1). The increase is 
also the result of additional personnel, the costs associated with being a 
public company and increased sales and marketing efforts.

         Charge for Purchased Research and Development

         The charge for purchased research and development of $2.4 million 
for the quarter ended June 30, 1998 represents a one-time charge related to 
purchased research and development in connection with the acquisition of 
Innovative Data Technology. This charge relates to incomplete development 
projects which had not yet reached technological feasibility as of the 
acquisition date and had no alternate future uses.

         Interest Expense (Income)

         Net interest income was $241,000 for the nine months ended June 30,
1998. Net interest expense was $426,000 for the nine months ended June 30, 1997.
Upon the consummation of the Offering, a significant portion of the borrowings
from Securicor was repaid. As a result, the Company's interest expense has
decreased. Additionally, the Company has invested a portion of the proceeds of
the Offering which has resulted in interest income.

         Income Taxes

         The Company's effective tax rate was 16.4% and 42.2% for the nine 
months ended June 30, 1998 and 1997, respectively. The effective tax rate is 
lower in 1998 due to the 1998 net loss.

<PAGE>

Liquidity and Capital Resources

         Prior to the Offering, the Company had financed its operations
primarily with cash generated from operations and borrowings from Securicor. In
July 1997, the Company received net proceeds from the Offering of approximately
$32.4 million (after deducting underwriters discounts and commissions and other
offering expenses). In July 1997, the Company repaid $22.9 million in Company
borrowings from Securicor. As of June 30, 1998, the Company had $2.2 million of
cash and cash equivalents, $13.1 million in net trade accounts receivable, and
$13.7 million of working capital.

         Net cash used in operating activities was $580,000 and $1.1 million 
for the nine months ended June 30, 1998 and 1997, respectively. For the nine 
months ended June 30, 1998, the major contributors to the net cash used in 
operating activities were the net loss of $9.8 million and the increase in 
income tax receivable of $2.2 million partially offset by amortization and 
depreciation of $1.4 million, provision for doubtful accounts of $4.0 
million, charge for purchased research and development relating to the IDT 
acquisition of $2.4 million and the decrease in inventories of $1.5 million. 
In the nine months ended June 30, 1997, the net loss of $1.7 million, 
increase in inventory of $3.4 million and the decrease in accrued tax payable 
of $3.3 million were partially offset by amortization and depreciation of 
$1.1 million, a decrease in accounts receivable of $3.5 million, a decrease 
of other assets of $1.1 million and an increase to accounts payable of $2.0 
million.

         Net cash used in investing activities relating to purchases of 
property and equipment was $1.8 million and $1.2 million for the nine months 
ended June 30, 1998 and 1997, respectively. During the nine months ended June 
30, 1998, the Company acquired Innovative Data Technology for a net cash 
outlay (net of cash acquired) of $1,764,000 and Greendown Software Limited 
for a net cash outlay of $91,000.

         Net cash used in financing activities was $218,000 and $176,000 for 
the nine months ended June 30, 1998 and 1997, respectively.

         The Company had a $2.5 million credit facility with a bank which 
expired March 31, 1998. Currently, the Company does not have a line of credit 
and is seeking to obtain a new bank credit facility. In December 1997, the 
Company entered into a $1.5 million leasing arrangement to finance its 
purchases of capital equipment. The arrangement requires that the Company 
qualify for each lease based on its financial position. At August 14, 1998, 
approximately $1.2 million was available under this facility. Not all of the 
Company's capital lease obligations are financed through this arrangement.

         The Company believes that its existing cash balances and cash 
generated from operations will be sufficient to meet the Company's cash 
requirements during the next twelve months. However, depending upon 
profitability, the timing of its collections and other operating factors, 
the Company may require additional equity or debt financing to meet its 
working capital requirements or capital expenditure needs. There can be no 
assurance that additional financing, if needed, will be available when 
required or on terms satisfactory to the Company.

Inflation

         To date, inflation has not had a material impact on the Company's 
financial condition and results of operations.

PART II. OTHER INFORMATION



<PAGE>

ITEM 1. LEGAL PROCEEDINGS

         The Company received a letter dated June 19, 1997 from Acxiom
Corporation ("Acxiom") requesting that the Company cease using the name "Axiom."
Acxiom filed suit against the Company in the United States District Court for
the District of Delaware on August 1, 1997 alleging trademark infringement and
dilution under the Lanham Act, as well as related state law causes of action.
Acxiom seeks a judgment against the Company enjoining any future use of the
Axiom name and Axiom tradenames, future acts of unfair competition in the United
States, destruction of all advertising and promotional material, and awarding
treble damages in an unspecified amount because of the alleged willfulness of
the Company's infringement. The Company has vigorously defended against these
claims and believes that the claim is without merit because of the lack of
correspondence between the products, services and customers of the two
companies. There is no assurance, however, that these claims will be resolved on
terms favorable to the Company. In February 1998, these claims were tried in a
bench trial. The court has not yet issued a ruling.

ITEM 2. CHANGES IN SECURITIES

         None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         None

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

         The Company did not submit any matter to a vote of its security 
holders during the third quarter of fiscal 1998.

ITEM 5. OTHER INFORMATION

         On July 27, 1998, the Company announced the appointment of C. Thomas 
Faulders, III as Chairman.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



         (a)      Exhibits

                  10       Consultant agreement between Axiom Inc. and C. 
                           Thomas Faulders III

                  27       Financial Data Schedule

         (b)      Reports on Form 8-K

                  On May 27, 1998, the Company filed a Current Report on Form
                  8-K and an amendment thereto on Form 8-K/A on July 29, 1998
                  announcing under Item 2 (Acquisition or Disposition of Assets)
                  that the Company had acquired all of the outstanding stock of
                  Innovative Data Technology pursuant to the Agreement of Merger
                  and Plan of Reorganization dated as of May 15, 1998.



<PAGE>


                                   SIGNATURES

         Pursuant to the requirements 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.

                                           AXIOM INC.
Dated: August 14, 1998                     By:    /s/ Andrew P. Maunder
                                                -----------------------------
                                                      Andrew P. Maunder
                                                        President and
                                                   Chief Executive Officer
                                                (Principal Executive Officer)
Dated: August 14, 1998                     By:    /s/ Mark J. Kadish
                                                -----------------------------
                                                       Mark J. Kadish
                                                   Chief Financial Officer
                                                  (Principal Financial and
                                                     Accounting Officer)