##### Table of Contents



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, DC 20549
  FORM 10-Q
  QUARTERLY REPORT PURSUANT
    TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
   For the
    quarterly period ended June 30,
    2008          Commission
    File Number  0-26358
  AXS-ONE INC. (Exact name of
    registrant as specified in its charter)
   Delaware(State or other jurisdiction
    of
    incorporation or organization)

13-2966911(I.R.S. Employer
    Identification No.)301 Route 17 North
    Rutherford, New Jersey(Address of principal executive
    offices)

07070(Zip Code)   (201) 935-3400
 (Registrants telephone
    number, including area code)
    x o
  12b-2
  Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company x(Do not check if a smaller reporting
    company)   Rule 12b-2
  o x
    Class

Number of Shares OutstandingCommon Stock, par value $0.01 per share


40,533,925




---



##### 



AXS-ONE
    INC.
  INDEX
   
 PageNumberPART I

FINANCIAL INFORMATIONItem 1.

Financial StatementsConsolidated Balance Sheets
    June 30, 2008 (unaudited) and December 31, 2007


3Consolidated Statements of Operations (unaudited)
    
    Three and six months ended June 30, 2008 and 2007


4Consolidated Statements of Comprehensive Loss
    (unaudited)
    Three and six months ended June 30, 2008 and 2007


5Consolidated Statements of Cash Flows
    (unaudited)
    Six months ended June 30, 2008 and 2007


6Notes to Consolidated Interim Financial
    Statements


7Item 2.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


18Item 3.

Quantitative and Qualitative Disclosures About
    Market Risk


29Item 4.

Controls and Procedures


29PART II

OTHER INFORMATIONItem 4.

Submission of Matters to a Vote of Security
    Holders


30Item 5.

Other Information


30Item 6.

Exhibits


31SIGNATURESSignatures


32EX-10.1: FIRST AMENDMENT TO EMPLOYMENT AGREEMENTEX-10.2: FIRST AMENDMENT TO EMPLOYMENT AGREEMENTEX-10.3: AMENDMENT TO OFFER TO EMPLOYMENT LETTEREX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION   2




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##### Table of Contents



PART I.  FINANCIAL
    INFORMATION  Item 1.
    Financial
    Statements  AXS-ONE
    INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
    (In thousands, except per share data)
  June 30,


December 31,2008


2007(unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
831


$
3,362Restricted cash






7Accounts receivable, net of allowance for doubtful accounts of
    $245 and $116 at June 30, 2008 and December 31, 2007,
    respectively


1,638



2,208Prepaid expenses and other current assets


624



831Total current assets


3,093



6,408Equipment and leasehold improvements, at cost:Computer and office equipment


2,011



2,039Furniture and fixtures


603



599Leasehold improvements


675



6723,289



3,310Less  accumulated depreciation and amortization


3,097



3,057192



253Other assets


276



283$
3,561


$
6,944LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Line of credit

$
585


$
Convertible debt, net of discount of $1,303 at June 30,
    2008 (principally to related parties)


7,922



Accounts payable


842



1,138Accrued expenses


3,348



3,796Deferred revenue


3,397



3,233Total current liabilities


16,094



8,167Long-term liabilities:Long-term convertible debt, net of discount of $1,918 at
    December 31, 2007 (principally to related parties)






7,037Long-term deferred revenue


168



120Other long-term liabilities


51



212Total liabilities


16,313



15,536Commitments and contingenciesStockholders deficit:Preferred stock, $.01 par value, authorized
    5,000 shares, no shares issued and outstanding






Common stock, $.01 par value, authorized
    125,000 shares; 40,534 and 39,686 shares issued and
    outstanding at June 30, 2008 and December 31, 2007,
    respectively


405



397Additional paid-in capital


91,956



91,311Accumulated deficit


(104,838
)


(100,108
)Accumulated other comprehensive loss


(275
)


(192
)Total stockholders deficit


(12,752
)


(8,592
)$
3,561


$
6,944    3




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##### Table of Contents



AXS-ONE
    INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
    (In thousands, except per share data)
    (unaudited)
  Six Months EndedThree Months Ended June 30,


June 30,2008


2007


2008


2007Revenues:License fees

$
1,058


$
505


$
2,543


$
2,301Services


2,343



2,013



4,752



3,911Total revenues


3,401



2,518



7,295



6,212Operating expenses:Cost of license fees


76



124



186



245Cost of services


1,120



1,460



2,359



2,831Sales and marketing


1,798



1,937



3,480



4,059Research and development


1,442



1,518



2,932



3,180General and administrative


1,072



1,067



2,197



2,261Total operating expenses


5,508



6,106



11,154



12,576Operating loss


(2,107
)


(3,588
)


(3,859
)


(6,364
)Other income (expense):Interest income


3



45



20



114Interest expense


(502
)


(89
)


(948
)


(120
)Other income (expense), net


34



(25
)


10



52Total other income (expense), net


(465
)


(69
)


(918
)


46Loss before income taxes


(2,572
)


(3,657
)


(4,777
)


(6,318
)Income tax benefit


(47
)






(47
)


Net loss

$
(2,525
)

$
(3,657
)

$
(4,730
)

$
(6,318
)Basic & diluted net loss per common share:

$
(0.07
)

$
(0.10
)

$
(0.12
)

$
(0.18
)Weighted average basic & diluted common shares
    outstanding


37,923



34,874



37,874



34,805    4




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##### Table of Contents



AXS-ONE
    INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
    (In thousands)
    (Unaudited)
  Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Net loss

$
(2,525
)

$
(3,657
)

$
(4,730
)

$
(6,318
)Foreign currency translation adjustment


(67
)


(15
)


(83
)


(27
)Comprehensive loss

$
(2,592
)

$
(3,672
)

$
(4,813
)

$
(6,345
)    5




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##### Table of Contents



AXS-ONE
    INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
    (in thousands)
    (unaudited)
  Six Months Ended,June 30,2008


2007Cash flows from operating activities:Net loss

$
(4,730
)

$
(6,318
)Adjustments to reconcile net loss to net cash flows used in
    continuing operating activities:Depreciation and amortization


63



117Provision for doubtful accounts, net


127



6Stock based compensation expense


613



306Gain on sale of assets, AXS-One South Africa


(38
)


Non-cash interest expense


889



64Changes in assets and liabilities:Accounts receivable


415



494Prepaid expenses and other current assets


279



387Change in other assets


12



(178
)Accounts payable and accrued expenses


(931
)


(556
)Deferred revenue


226



347Net cash flows used in continuing operating activities


(3,075
)


(5,331
)Cash flows from continuing investing activities:Purchase of equipment and leasehold improvements


(23
)


(94
)Net cash flows used in continuing investing activities


(23
)


(94
)Cash flows from continuing financing activities:Proceeds from exercise of stock options and warrants


1



128Issuance of convertible debt






5,000Payment of debt issuance costs






(92
)Borrowing under revolving line-of-credit


953



1,000Repayment of revolving line-of-credit


(368
)


(1,000
)Net cash flows provided by continuing financing activities


586



5,036Cash flows from discontinued operations:Net cash used in operating activities






(982
)Net cash flows used in discontinued operations






(982
)Foreign currency exchange rate effects on cash and cash
    equivalents


(19
)


(8
)Net decrease in cash and cash equivalents


(2,531
)


(1,379
)Cash and cash equivalents, beginning of period


3,362



7,492Cash and cash equivalents, end of period

$
831


$
6,113Supplemental disclosures of cash flow information:Cash paid during the year for:Interest

$
62


$
57Income taxes

$



$
    6




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##### Table of Contents



(1)
    OPERATIONS,
    BUSINESS CONDITIONS AND SIGNIFICANT ACCOUNTING
    POLICIES  E-Discovery,
  (a)
    Basis of
    Presentation  Company
    Form 10-K
   7




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##### Table of Contents



and/or
  (b)
    Revenue
    Recognition  97-2, (SOP 97-2), 98-9, SOP 97-2,
       8




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##### Table of Contents



No. 01-14,
  (c)
    Foreign
    Currency Translation    (d)
    Stock-Based
    Compensation       9




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##### Table of Contents



5-year
    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007Risk-free interest rate


2.84
%


n/a



2.80
%


n/aExpected dividend yield


n/a



n/a



n/a



n/aExpected lives


5 years



n/a



5 years



n/aExpected volatility


66.10
%


n/a



64.57
%


n/aForfeiture rate


13.90
%


n/a



13.90
%


n/aWeighted-average grant date fair value of options granted during
    the period

$
0.20



n/a


$
0.20



n/a     Stock
    Option Plans
  Form 10-K Form S-8
   10




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##### Table of Contents



AggregateWeighted


IntrinsicNumber of


Weighted


Average


Value as ofShares


Average


Remaining


6/30/08(in thousands)


Exercise Price


Contractual Life


(in thousands)Balance, December 31, 2007


3,806


$
2.52Granted


1,389


$
0.38Exercised






Forfeited


(167
)

$
0.84Cancelled


(1,431
)

$
2.87Balance, June 30, 2008


3,597


$
1.63



6.66


$
102Vested and expected to vest at June 30, 2008


3,334


$
1.73






$
84Exercisable at June 30, 2008


2,218


$
2.34



4.88


$
18       Options Outstanding


Options ExercisableNumber


Weighted average





NumberRange of

outstanding


remaining life


Weighted average


exercisable in


Weighted averageexercise prices

(in thousands)


(years)


exercise price


thousands


exercise price$0.21  $0.35


795



9.21


$
0.33



115


$
0.29$0.38  $0.53


879



7.64


$
0.46



302


$
0.51$0.63  $1.75


738



3.93


$
1.02



658


$
0.95$1.80  $3.78


281



6.30


$
2.26



239


$
2.31$4.21  $6.00


904



5.81


$
4.22



904


$
4.223,597











2,218   Restricted
    Stock
   11




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##### Table of Contents



Number of


Weightedshares


average price(in thousands)


per shareBalance, December 31, 2007


1,996


$
0.89Granted


800


$
0.35Vested


(155
)

$
1.67Forfeited


(53
)

$
1.20Balance, June 30, 2008


2,588


$
0.67       Warrants
      Number of


Weightedshares


average price(in thousands)


per shareBalance, December 31, 2007


4,307


$
0.43Granted


100


$
0.01Exercised


(100
)

$
0.01Expired


(907
)

$
2.03Balance, June 30, 2008


3,400


$
0.01   (d)
    Income
    Taxes  non-U.S. income
 12




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##### Table of Contents



(2)
    REVOLVING
    LINES OF CREDIT  Silicon
    Valley Bank
             13




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##### Table of Contents



Sand Hill
    Finance
      (3)
    CONVERTIBLE
    NOTES           14




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##### Table of Contents



Face


Original


Accrued interest


Carrying amount


Carrying amount(in thousands)

amount


discount


thru 6/30/08


as of 6/30/08


as of 12/31/07May 29, 2007 agreement

$
5,000


$
(1,047
)

$
870


$
4,823


$
4,410November 13, 2007 agreement


3,750



(1,238
)


587



3,099



2,627$
8,750


$
(2,285
)

$
1,457


$
7,922


$
7,037   (4)
    BASIC AND
    DILUTED NET INCOME (LOSS) PER COMMON SHARE      Three Months Ended


Six Months EndedJune 30,


June 30,(in thousands)

2008


2007


2008


2007Weighted-average basic common shares outstanding during the
    periods


37,923



34,874



37,874



34,805Dilutive effect of stock options and warrants














Weighted-average diluted common shares outstanding during the
    periods


37,923



34,874



37,874



34,805   (5)
    CONTINGENCIES  and/or
 15




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##### Table of Contents



(6)
    RESTRUCTURING
    AND OTHER COSTS      (in thousands)

2008Restructuring liability at January 1, 2008

$
86Involuntary termination costs


Cash payments


(86
)Restructuring liability at June 30, 2008

$
     (7)
    FINANCIAL
    INFORMATION BY GEOGRAPHIC AREA      Three Months Ended


Six Months Ended(in thousands)

June 30,


June 30,Revenues:(1)

2008


2007


2008


2007United States

$
2,478


$
1,298


$
5,517


$
3,502United Kingdom


434



798



849



1,679Australia and Asia


462



288



836



701South Africa


27



134



93



330Total Consolidated

$
3,401


$
2,518


$
7,295


$
6,212   (1)
    
    Revenues are attributed to geographic area based on location of
    sales office.  June 30,


December 31,Long-Lived Assets:

2008


2007United States

$
85


$
124United Kingdom






Australia and Asia


107



102South Africa






27Total Consolidated

$
192


$
253  16




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##### Table of Contents



(8)
    SALE OF
    SOUTH AFRICAN SUBSIDIARIES      (9)
    SUBSEQUENT
    EVENT       17




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Form 10-K
  Overview
  tm e-mail e-discovery,
      e-mail e-mail
 18




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##### Table of Contents



e-mail e-mail e-mail
    (e-delivery), E-Delivery
  Form 10-K.
 19




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##### Table of Contents



Results
    of Operations
    Three Months Ended


Three Months EndedJune 30, 2008


June 30, 2007Data as a





Data as aAs


% of total


As


% of total(in thousands)

Reported


revenue


Reported


revenue(Unaudited)


(Unaudited)Revenues:License fees

$
1,058



31.1
%

$
505



20.1
%Services


2,343



68.9



2,013



79.9Total revenues


3,401



100.0



2,518



100.0Operating expenses:Cost of license fees


76



2.2



124



4.9Cost of services


1,120



32.9



1,460



58.0Sales and marketing


1,798



52.9



1,937



76.9Research and development


1,442



42.4



1,518



60.3General and administrative


1,072



31.5



1,067



42.4Total operating expenses


5,508



161.9



6,106



242.5Operating loss


(2,107
)


(61.9
)


(3,588
)


(142.5
)Other income (expense), net


(465
)


(13.7
)


(69
)


(2.7
)Loss before income taxes


(2,572
)


(75.6
)


(3,657
)


(145.2
)Income tax provision


(47
)


(1.3
)






Net loss

$
(2,525
)


(74.3
)%

$
(3,657
)


(145.2
)%   Six Months Ended


Six Months EndedJune 30, 2008


June 30, 2007Data as a





Data as aAs


% of total


As


% of total(in thousands)

Reported


revenue


Reported


revenue(Unaudited)


(Unaudited)Revenues:License fees

$
2,543



34.9
%

$
2,301



37.0
%Services


4,752



65.1



3,911



63.0Total revenues


7,295



100.0



6,212



100.0Operating expenses:Cost of license fees


186



2.5



245



3.9Cost of services


2,359



32.3



2,831



45.6Sales and marketing


3,480



47.7



4,059



65.3Research and development


2,932



40.2



3,180



51.2General and administrative


2,197



30.1



2,261



36.4Total operating expenses


11,154



152.8



12,576



202.4Operating loss


(3,859
)


(52.8
)


(6,364
)


(102.4
)Other income (expense), net


(918
)


(12.6
)


46



0.7Loss before income taxes


(4,777
)


(65.4
)


(6,318
)


(101.7
)Income tax provision


(47
)


(0.6
)






Net loss

$
(4,730
)


(64.8
)%

$
(6,318
)


(101.7
)%  20




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##### Table of Contents



Comparison
    of Three Months Ended June 30, 2008 to 2007
  Revenues
        Three Months Ended June 30,(dollars in thousands)

2008


2007% of





% ofAmount


Total


Amount


TotalMaintenance

$
1,540



65.7
%

$
1,330



66.1
%Consulting


774



33.1
%


479



23.8
%Subscription revenue


29



1.2
%


204



10.1
%Total services revenue

$
2,343



100.0
%

$
2,013



100.0
%   E-Delivery
  Operating
    Expenses
       21




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##### Table of Contents



Operating
    Loss
    Other
    Income (Expense), Net
    Net
    loss
    Comparison
    of Six Months Ended June 30, 2008 to 2007
  Revenues
        Six Months Ended June 30,(dollars in thousands)

2008


2007% of





% ofAmount


Total


Amount


TotalMaintenance

$
3,026



63.7
%

$
2,644



67.6
%Consulting


1,667



35.1
%


951



24.3
%Subscription revenue


59



1.2
%


316



8.1
%Total services revenue

$
4,752



100.0
%

$
3,911



100.0
%  22




---



##### Table of Contents



E-Delivery
  Operating
    Expenses
            Operating
    Loss
    Other
    Income (Expense), Net
   23




---



##### Table of Contents



Net
    loss
    Liquidity
    and Capital Resources
  Liquidity
    and Cash Flow
            (in thousands)Year

Amount2008


$
752009



502010



2011



2012



Total


$
125    24




---



##### Table of Contents



Silicon
    Valley Bank Financing
       25




---



##### Table of Contents



Sand Hill
    Finance
      Secured
    Convertible Note Financing
     26




---



##### Table of Contents



Critical
    Accounting Estimates
    Revenue
    Recognition
  97-2, (SOP 97-2), 98-9, SOP 97-2,
 27




---



##### Table of Contents



No. 01-14,
  Recently
    Issued Accounting Standards
   28




---



##### Table of Contents



Certain
    Factors That May Affect Future Results and Financial Condition
    and the Market Price of Securities
    Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk    Item 4.
    Controls
    and Procedures  Evaluation
    of disclosure controls and procedures
  Rule 13a-15(e).
    Internal
    controls over financial reporting
   29




---



##### Table of Contents



PART II.  OTHER
    INFORMATION  Item 4.
    Submission
    of Matters to a Vote of Security Holders    Proposal 1: Election of
    Directors.
  Votes For


Votes WithheldWilliam P. Lyons


33,353,334



1,143,213Timothy P. Bacci


33,475,511



1,021,036Anthony H. Bloom


33,472,169



1,024,378Harold D. Copperman


33,472,169



1,024,378Robert Migliorino


33,469,169



1,027,378Allan Weingarten


33,467,269



1,029,278   Proposal 2: Approval of the 2008 Equity
    Incentive Plan.
  Votes For

Votes Against

Abstentions

Broker Non-Votes18,375,099


438,899



66,954



15,615,595   Proposal 3: Ratification of Appointment of
    Independent Registered Public Accounting
    Firm.
  Votes For

Votes Against

Abstentions34,308,900


149,904



37,742     Item 5.
    Other
    Information.  Compensation
    Matters Related to Internal Revenue Code
    Section 409A
     30




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##### Table of Contents



Item 6.  Exhibits  Exhibit 10
.1

First Amendment to Employment Agreement  William LyonsExhibit 10
.2

First Amendment to Employment Agreement  Joseph P.
    DwyerExhibit 10
.3

Amendment to Offer of Employment Letter  Philip RuganiExhibit 31
.1

Rule 13a-14(a)/15d-14(a)
    Certification  William P. LyonsExhibit 31
.2

Rule 13a-14(a)/15d-14(a)
    Certification  Joseph P. DwyerExhibit 32


Officer Certifications under 18 USC 1350  31




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##### Table of Contents



SIGNATURES    AXS-ONE INC.
  Date:August 14, 2008

By:

/s/  William
    P. LyonsWilliam P. LyonsChief Executive Officer andChairman of the BoardBy:

/s/  Joseph
    P. DwyerJoseph P. DwyerExecutive Vice President,Chief Financial Officer and Treasurer(Principal Financial Officer)  32