<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


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


FOR THE QUARTER ENDED MARCH 31, 2002         COMMISSION FILE NUMBER      1-13591


                                  AXS-ONE INC.
             (Exact name of registrant as specified in its charter)

                   DELAWARE                             13-2966911
        (State or other jurisdiction of    (I.R.S. Employer Identification No.)
        incorporation or organization)


               301 ROUTE 17 NORTH
             RUTHERFORD, NEW JERSEY                        07070
    (Address of principal executive offices)            (Zip Code)

                                 (201) 935-3400
              (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
                          -----------     -----------



   Number of shares outstanding of the issuer's common stock as of May 3, 2002


               Class                             Number of Shares Outstanding
 ---------------------------------------        ------------------------------
 Common Stock, par value $0.01 per share                 24,803,742



<PAGE>


                                  AXS-ONE INC.

                                      INDEX


                                                                           PAGE
PART I   FINANCIAL INFORMATION                                            NUMBER
                                                                          ------

         Item 1.  Financial Statements

                  Consolidated Balance Sheets
                    December 31, 2001 and March 31, 2002 (unaudited)......    3
                  Consolidated Statements of Operations (unaudited)
                    Three months ended March 31, 2001 and 2002............    4
                  Consolidated Statements of Comprehensive Income
                    (Loss) (unaudited) Three months ended
                    March 31, 2001 and 2002...............................    5
                  Consolidated Statements of Cash Flows (unaudited)
                    Three months ended March 31, 2001 and 2002............    6
                  Notes to Consolidated Interim Financial Statements......    7

         Item 2.  Management's Discussion and Analysis of Financial
                    Condition and Results of Operations ..................   14

         Item 3.  Quantitative and Qualitative Disclosures About
                    Market Risk...........................................   23

PART II  OTHER INFORMATION

         Item 1.  Legal Proceedings ......................................   24

         Item 6.  Exhibits and Reports on Form 8-K........................   24

SIGNATURES

         Signatures ......................................................   25



                                       2
<PAGE>

                          AXS-ONE INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                     DECEMBER 31,  MARCH 31,
                                                                                                         2001         2002
                                                                                                     -----------   ---------
                                     ASSETS
<S>                                                                                                    <C>         <C>
Current assets:
  Cash and cash equivalents ........................................................................   $  1,048    $  1,027
  Restricted cash ..................................................................................         44          71
  Note receivable - net of deferred gain on sale of subsidiary of $253 and $234 at December 31, 2001
      and March 31, 2002, respectively .............................................................         83        --
  Accounts receivable, net of allowance for doubtful accounts of
      $657 and $478 at December 31, 2001 and March 31, 2002,  respectively .........................      4,544       5,139
  Prepaid expenses and other current assets ........................................................        469         929
                                                                                                       --------    --------
      Total current assets .........................................................................      6,188       7,166
                                                                                                       --------    --------
Equipment and leasehold improvements, at cost:
  Computer and office equipment ....................................................................     10,392      10,402
  Furniture and fixtures ...........................................................................        952         954
  Leasehold improvements ...........................................................................      1,030       1,027
                                                                                                       --------    --------
                                                                                                         12,374      12,383
  Less--accumulated depreciation and amortization ..................................................     11,645      11,839
                                                                                                       --------    --------
                                                                                                            729         544
                                                                                                       --------    --------
Capitalized software development costs, net of accumulated
  amortization of $6,815 and $7,140 at December 31, 2001 and March 31, 2002, respectively ..........      2,908       2,792
Investment in and loans to joint ventures ..........................................................        184         108
Other assets .......................................................................................         51         102
                                                                                                       --------    --------
                                                                                                       $ 10,060    $ 10,712
                                                                                                       ========    ========

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Current portion of long-term debt ................................................................   $  1,800    $  1,800
  Accounts payable .................................................................................      2,202       1,820
  Accrued expenses .................................................................................      4,109       3,821
  Deferred revenue .................................................................................      8,782      10,139
                                                                                                       --------    --------
      Total current liabilities ....................................................................     16,893      17,580
                                                                                                       --------    --------
Long-term liabilities:
  Long-term debt, net of current portion ...........................................................      1,347         897
                                                                                                       --------    --------
Commitments and contingencies
Stockholders' deficit:
    Preferred stock, $.01 par value, authorized 5,000 shares, no shares issued and outstanding .....       --          --
    Common stock, $.01 par value, authorized 50,000 shares; 24,785 and 24,804 shares
       issued and outstanding at December 31, 2001 and March 31, 2002, respectively ................        248         248
    Additional paid-in capital .....................................................................     72,032      72,038
    Accumulated deficit ............................................................................    (80,693)    (80,296)
    Accumulated other comprehensive income .........................................................        233         245
                                                                                                       --------    --------
      Total stockholders' deficit ..................................................................     (8,180)     (7,765)
                                                                                                       --------    --------
                                                                                                       $ 10,060    $ 10,712
                                                                                                       ========    ========
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.

                                       3
<PAGE>



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

<TABLE>
<CAPTION>

                                                   THREE MONTHS ENDED MARCH 31,
                                                   ----------------------------
                                                           2001        2002
                                                       --------    --------
<S>                                                    <C>         <C>
Revenues:
    License fees                                        $  2,323    $  1,184
    Services                                               9,546       7,824
    Other-related parties                                     30          88
                                                        --------    --------
       Total revenues                                     11,899       9,096
                                                        --------    --------

Operating expenses:
    Cost of license fees                                     335         365
    Cost of services                                       5,430       3,807
    Sales and marketing                                    3,164       1,516
    Research and development                               1,899       1,716
    General and administrative                             2,049       1,065
                                                        --------    --------
       Total operating expenses                           12,877       8,469
                                                        --------    --------
Operating income (loss)                                     (978)        627
                                                        --------    --------
Other income (expense):
    Interest income                                           21          13
    Interest expense                                        (104)        (87)
    Gain on sale of subsidiary                              --            19
    Equity in losses in joint ventures                       (40)        (97)
    Other income (expense), net                              (71)        (78)
                                                        --------    --------
       Other expense, net                                   (194)       (230)
                                                        --------    --------
Net income (loss)                                       $ (1,172)   $    397
                                                        ========    ========

Basic and diluted net income (loss)
    per common share                                    $  (0.05)   $   0.02
                                                        ========    ========

Weighted average basic
       common shares outstanding                          24,785      24,793
                                                        ========    ========

Weighted average diluted
    common shares outstanding                             24,785      25,854
                                                        ========    ========
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                       4
<PAGE>

                          AXS-ONE INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                 (In thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                          THREE MONTHS ENDED
                                                         --------------------
                                                                MARCH 31,
                                                         --------------------
                                                           2001       2002
                                                         ---------    -------
<S>                                                      <C>          <C>
Net income (loss)                                        $ (1,172)    $   397
Foreign currency translation adjustment                       (52)         12
                                                         ---------    -------
    Comprehensive income (loss)                          $ (1,224)    $   409
                                                         =========    =======
</TABLE>




























The accompanying notes are an integral part of these consolidated financial
statements.


                                       5
<PAGE>


                          AXS-ONE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                   THREE MONTHS ENDED MARCH 31,
                                                                   ----------------------------
                                                                           2001       2002
                                                                         --------   --------
<S>                                                                      <C>        <C>
Cash flows from operating activities:
Net income (loss)                                                        $(1,172)   $   397
Adjustments to reconcile net income (loss) to net cash flows
  provided by operating activities:
          Increase in cash surrender value of officer's life insurance      --          (46)
          Depreciation and amortization                                      524        522
          Recovery of doubtful accounts, net of provisions                  (195)      (118)
          Gain on sale of subsidiary                                        --          (19)
          Loss on disposal of equipment and leasehold improvements            17       --
          Loss on equity method investments                                   40         97
Changes in current assets and liabilities:
          Restricted cash                                                   --          (25)
          Accounts receivable                                                 (4)      (468)
          Prepaid expenses and other current assets                         (230)      (455)
          Accounts payable and accrued expenses                           (1,512)      (782)
          Deferred revenue                                                 2,681      1,402
                                                                         -------    -------

Net cash flows provided by operating activities                              149        505
                                                                         -------    -------

Cash flows from investing activities:
          Change in other assets                                              27         (5)
          Proceeds from sale of subsidiary                                  --          102
          Loan to joint venture                                             --          (20)
          Capitalized software development costs                            (300)      (209)
          Purchase of equipment and leasehold improvements                  (287)       (14)
                                                                         -------    -------
Net cash flows used in investing activities                                 (560)      (146)
                                                                         -------    -------

Cash flows from financing activities:
          Proceeds from exercise of stock options                           --            6
          Proceeds from issuance of long-term debt                           250       --
          Payments of long-term debt                                        (425)      (450)
                                                                         -------    -------
Net cash flows used in financing activities                                 (175)      (444)
                                                                         -------    -------
Foreign currency exchange rate effects on cash and cash equivalents         (136)        64
                                                                         -------    -------
Net decrease in cash and cash equivalents                                   (722)       (21)
Cash and cash equivalents, beginning of period                             2,207      1,048
                                                                         -------    -------
Cash and cash equivalents, end of period                                 $ 1,485    $ 1,027
                                                                         =======    =======

Supplemental disclosures of cash flow information:
          Cash paid during the period for -
               Interest                                                  $    95    $    92
                                                                         =======    =======
               Income taxes                                              $     2    $     2
                                                                         =======    =======
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                       6
<PAGE>


                          AXS-ONE INC. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

(1) OPERATIONS, BUSINESS CONDITIONS AND SIGNIFICANT ACCOUNTING POLICIES

The Company designs, markets and supports n-tier, Internet-enabled,
client/server, e-commerce, financial, workflow, and desktop data access and
storage software solutions for global 2000 businesses, and scheduling and time
and expenses solutions for professional services organizations. The Company also
offers consulting, installation, training and maintenance services in support of
its customers' use of its software products.

(a) BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
AXS-One Inc. (formerly known as Computron Software, Inc.) and its wholly owned
subsidiaries located in Australia, Canada, Central and Eastern Europe (through
August 31, 2001 - see Note 7), Singapore, South Africa, and the United Kingdom
(collectively, the "COMPANY"). During the first quarter of 2001, the Company's
South Africa operations entered into two joint ventures. Ownership is 50% or
less in both entities. All significant intercompany transactions and balances
have been eliminated. The Company uses the equity method of accounting for its
joint ventures that it owns between 20 and 50 percent. Under the equity method,
investments are stated at cost plus or minus the Company's equity in
undistributed earnings or losses.

The unaudited consolidated financial statements have been prepared by the
Company in accordance with accounting principles generally accepted in the
United States of America and, in the opinion of management, contain all
adjustments, consisting only of those of a normal recurring nature, necessary
for a fair presentation of these consolidated financial statements.

These consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes included in the Company's
2001 Annual Report on Form 10-K filed with the Securities and Exchange
Commission.

The results of operations for the three month period ended March 31, 2002 are
not necessarily indicative of results to be expected for any future periods.

(b) REVENUE RECOGNITION

The Company recognizes revenue in accordance with Statement of Position 97-2,
"Software Revenue Recognition" ("SOP 97-2"), and Statement of Position 98-9,
"Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions." Revenue from non-cancelable software licenses is recognized when
the license agreement has been signed, delivery has occurred, the fee is fixed
or determinable and collectibility is probable. In multiple element
arrangements, the Company defers the vendor-specific objective evidence of fair
value ("VSOE") related to the undelivered elements and recognizes revenue on the
delivered elements using the residual method. The most commonly deferred element
is initial maintenance, which is recognized on a straight-line basis over the
initial maintenance term. The VSOE of maintenance is determined by using a
consistent percentage of maintenance fee to license fee. Maintenance fees in
subsequent years are recognized on a straight-line basis over the life of the
applicable agreement. Delivery of software generally occurs when the product (on
CDs) is delivered to a common carrier.

The majority of the Company's training and consulting services are billed based
on hourly rates. The Company generally recognizes revenue as these services are
performed. However, when the Company enters into an arrangement that requires it
to perform significant work either to alter the underlying software or to build
additional complex interfaces so that the software performs as the customer
requests, the Company recognizes the entire fee using contract accounting. This
would apply to the Company's custom programming services which are generally
contracted on a fixed fee basis.


                                       7
<PAGE>


                          AXS-ONE INC. AND SUBSIDIARIES
          NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenues from joint ventures (included in Revenues: Other-Related Parties in the
Company's Consolidated Statements of Operations) includes consulting revenue for
the joint ventures' use of the Company's South African subsidiary's consultants
and for management fees for the Company's subsidiary providing managerial,
technical and other related services to the joint ventures in accordance with
the joint venture agreements. Revenue is recognized upon performance of the
services.

For all the Company's revenue transactions, the Company assesses whether the fee
is fixed and determinable and whether or not collection is reasonably assured.
The Company assesses whether the fee is fixed and determinable based on the
payment terms associated with the transaction. If a significant portion of a fee
is due after the Company's normal payment terms, which are 30 to 90 days from
invoice date, it accounts for the fee as not being fixed and determinable. In
these cases, the Company recognizes revenue as the fees become due.

The Company assesses assuredness of collection based on a number of factors,
including past transaction history with the customer and the credit-worthiness
of the customer. The Company does not request collateral from its customers. If
the Company determines that collection of a fee is not reasonably assured, it
defers the fee and recognizes revenue at the time collection becomes reasonably
assured, which is generally upon receipt of cash. Anticipated losses, if any,
are charged to operations in the period such losses are determined.

In November 2001, the FASB EITF reached a consensus to issue a FASB Staff
Announcement Topic No. D-103 (re-characterized in January 2002 as EITF Issue No.
01-14), "Income Statement Characterization of Reimbursement Received for
`Out-of-Pocket' Expenses Incurred" which clarifies that reimbursements received
for out-of-pocket expenses incurred should be characterized as revenue in the
statement of operations. This consensus should be applied in financial reporting
periods beginning after December 15, 2001. Upon application of this consensus,
comparative financial statements for prior periods should be reclassified to
comply with the guidance in this consensus. The adoption of this consensus on
January 1, 2002 resulted in an increase to services revenue and cost of services
of $0.3 million for each of the three month periods ended March 31, 2001 and
2002.

(2) REVOLVING LINE OF CREDIT AND LONG-TERM DEBT

On March 31, 1998, the Company entered into a Loan and Security Agreement
("Agreement") which contained a revolving line of credit and a term loan (the
"Initial Term Loan").

Borrowings under the revolving line of credit bear annual interest at prime rate
plus 1.25% subject to a minimum interest rate of 8.0% per annum. The Agreement
provides for yearly fees as follows: (i) $111 in year one, $86 in years two and
three, $77 in year four, $74 in years five and six and (ii) an unused revolving
line of credit fee of .375% per annum. The Agreement is secured by substantially
all domestic assets of the Company together with a pledge of 65% of the stock of
its foreign subsidiaries, and contains certain restrictive financial covenants.
Under the revolving line of credit the Company currently has available the
lesser of $5 million or 85% of eligible receivables, as defined. The net
available amount under the revolving line of credit at March 31, 2002 was
approximately $1.4 million of which no amounts were outstanding.

The Initial Term Loan provided for $5 million available in one drawdown which
the Company borrowed on the closing date in 1998. The Initial Term Loan bears
interest at the prime rate as defined (4.75% per annum at March 31, 2002) plus
1.5% subject to a minimum interest rate of 8.0% per annum.

Effective December 22, 1999, in connection with the sale of its subsidiary in
France, the Company amended the Agreement (Amendment No. 7) in order to make
available to the Company a second term loan in the original principal amount of
$1.3 million, which the Company borrowed on that date and together with the
Initial Term Loan, collectively the "A Term Loan," and a third term loan (the "B
Term Loan") in the original principal amount of $750,


                                       8
<PAGE>


                          AXS-ONE INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


of which the Company borrowed $500 on November 3, 2000 and requested the
remaining $250 on December 31, 2000 which was subsequently remitted and recorded
on the Company's books on January 2, 2001.

The A Term Loan bears interest at the rate of prime as defined (4.75% per annum
at March 31, 2002) plus 1.5% subject to a minimum interest rate of 8.0% per
annum. The B Term Loan bears interest at the fixed rate of 12.0% per annum.

Effective March 16, 2001, the Company further amended the Agreement (Amendment
No. 9) in order to make available an additional term loan (the "Additional B
Term Loan") in the original principal amount of up to $2.0 million, of which the
Company borrowed $750 on April 30, 2001, $500 on May 30, 2001 and $500 on July
31, 2001, to extend the termination date of the credit facility to March 31,
2004 and to establish restrictive financial covenants for 2001. The availability
of the Additional B Term Loan was subject to the Company's compliance with the
2001 financial covenants.

On June 29, 2001, the Company further amended the Agreement (Amendment No. 10)
to eliminate the financial covenant requirement for June 30, 2001, and set two
new monthly covenants for the remainder of 2001 based on EBITDA (earnings before
interest, taxes and depreciation and amortization) and minimum revenue
requirements. The Company was in compliance with these new monthly covenants
through December 31, 2001.

On March 13, 2002, the Company further amended the Agreement (Amendment No. 11)
to set new quarterly financial covenants for the year 2002 based on EBITDA. The
Company was in compliance with these new covenants for the three months ended
March 31, 2002.

The aggregate outstanding principal amount of the Term Loans is repayable in
monthly installments of $150 beginning April 1, 2001 over the remaining term of
the Loan and Security Agreement, in accordance with Amendment No. 10.

Amendment No. 10 provides a limitation that if the total outstanding balance of
the Term Loans exceeds at any time the lesser of (i) 45% of eligible maintenance
revenues through December 31, 2001, 40% of eligible maintenance revenues from
January 1, 2002 through December 31, 2002, 25% of eligible maintenance revenues
from January 1, 2003 through March 31, 2004 and (ii) $4.5 million, then the
Company is required to prepay the principal amount in an amount sufficient to
cause the aggregate principal amount of the Term Loans to be less than or equal
to the relevant limits set forth above. As of March 31, 2002, eligible
maintenance revenues as defined, totaled approximately $11.5 million.

(3) CONTINGENCIES

The Securities and Exchange Commission (SEC) performed an investigation of the
Company and of certain former employees and officers of the Company relating to
activities performed through 1996 while they were employees of the Company. The
Company filed a Form 8-K with the SEC on February 15, 2001 disclosing the SEC
investigation and its disposition with respect to the Company. In mid August
2001, the Company was informed by counsel for its former employees and officers,
whom the Company knew to be the subject of the SEC investigation, that such
counsel had been informed by the SEC that the SEC was no longer pursuing its
investigation of their clients. Under the Company's certificate of
incorporation, and Delaware law, the Company has an indemnification obligation
to reimburse legal fees to former employees and officers relating to actions
taken against them for work performed while they were employed by the Company.
Approximately $0.8 million in such legal fees were recorded during the year
ended December 31, 2001. The Company does not anticipate any more costs relating
to this matter.


                                       9
<PAGE>


                          AXS-ONE INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


Historically, the Company has been involved in other disputes and/or litigation
encountered in its normal course of business. The Company believes that the
ultimate outcome of these proceedings will not have a material adverse effect on
the Company's business, consolidated financial condition, results of operations
or cash flows.

(4) BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE

Basic and diluted net income (loss) per common share is presented in accordance
with SFAS No. 128, "Earnings per Share" ("SFAS No. 128").

Basic net income (loss) per common share is based on the weighted average number
of shares of common stock outstanding during the period. Diluted net loss per
common share is the same as basic net loss per common share for the three months
ended March 31, 2001 since the effect of stock options and warrants is
anti-dilutive. Diluted net income (loss) per common share for the three months
ended March 31, 2001 and 2002 does not include the effects of outstanding
options to purchase 5,229 and 3,481 shares of common stock, respectively, and
outstanding warrants to purchase 476 and 476 shares of common stock,
respectively, as the effect of their inclusion is anti-dilutive for the periods.

The following represents the calculations of the basic and diluted net income
(loss) per common share for the three months ended March 31, 2001 and 2002.

<TABLE>
<CAPTION>

                                                       THREE MONTHS ENDED MARCH 31,
                                                            2001          2002
                                                            ----          ----
<S>                                                      <C>             <C>
Net income (loss) ..................................     $    (1,172)    $   397
                                                         ===========     =======

Weighted average basic common shares
  outstanding during the periods ...................          24,785      24,793

Effect of dilutive securities:
  Stock options and warrants .......................            --         1,061
                                                         -----------     -------

Weighted average diluted common shares
  outstanding during the period ....................          24,785      25,854
                                                         ===========     =======

Basic net income (loss) per common share ...........     $     (0.05)    $  0.02
                                                         ===========     =======

Diluted net income (loss) per common share .........     $     (0.05)    $  0.02
                                                         ===========     =======
</TABLE>

(5) RESTRUCTURING AND OTHER COSTS

During June 2001, based on weakening economies, especially in the United States
and to a lesser degree in certain foreign locations, the Company eliminated 45
positions in the United States. In addition, in certain foreign locations, the
Company eliminated eight positions, wrote-off certain non-performing assets and
cumulative foreign currency translation adjustment and recorded a charge for
remaining leases. The Company recorded a charge to operations in the second
quarter of 2001 totaling approximately $1.1 million for these items, reflecting
approximately $0.6 million in termination costs of those personnel as well as
$0.3 million in asset and cumulative foreign currency translation adjustment
write-offs and $0.2 million in lease costs. During the third and fourth quarters
of 2001, the Company adjusted downward the charge to operations by approximately
$(0.2) million and $(0.1) million respectively, reflecting revised termination
and lease costs. These revisions resulted from the Company's decision to retain
certain


                                       10
<PAGE>


                          AXS-ONE INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


employees in one of the foreign locations to develop software enhancements for
the Tivity Solutions segment. The activity related to this restructuring is as
follows:


<TABLE>
<CAPTION>

(in thousands)                                                                    Asset and
                                                                                  Cumulative
                                                                                  Foreign
                                                                 Employee         Currency
                                                                 Termination      Translation     Lease     Total
                                                                 Costs            Adjustment      Costs     Costs
                                                                                  Write-offs
                                                                 --------------------------------------------------
<S>                                                              <C>              <C>           <C>        <C>
Restructuring and other costs recorded in June 2001              $      603       $     300     $  200     $ 1,103
Write-off of assets and cumulative foreign currency
  translation adjustment                                                 --            (300)        --        (300)
Revision of the restructuring costs in September 2001                  (138)             --        (28)       (166)
Revision of the restructuring costs in December 2001                     --              --       (140)       (140)
Cash payments through March  31, 2002                                  (465)             --        (32)       (497)
                                                                 --------------------------------------------------
Restructuring liability at March 31, 2002                        $       --       $      --     $   --      $   --
                                                                 ==================================================

</TABLE>

(6) OPERATING SEGMENTS

As of December 31, 1999 the Company's operations were conducted in one business
segment which was the licensing of software and related services. Beginning on
January 1, 2000, the Company was reorganized into three separate business
segments based on products it offers to specific markets as part of its strategy
to focus on market opportunities. The three business segments are as follows:

a)   The AXS-One Enterprise Solutions segment is focused on marketing Enterprise
     Solutions to global 2000 companies. AXS-One Enterprise Solutions is also
     responsible for servicing and managing the Company's extensive installed
     base of customers. Enterprise Solutions enable organizations to achieve
     process transparency throughout their value chain.

b)   The AXSPoint Solutions segment is focused on identifying markets that need
     to rapidly leverage the Internet in communicating, exchanging or
     reconciling large volumes of knowledge with their customers, suppliers and
     partners. The AXSPoint Solutions segment targets large information-centric
     organizations that can utilize self-service information systems to improve
     communications with their customers and improve access to business
     intelligence.

c)   The Tivity Solutions segment has been chartered with delivering a full
     suite of business solutions and services to organizations that primarily
     sell professionals' time.

The significant accounting policies of the reportable segments are the same as
those described in Note 1 of Notes to Consolidated Interim Financial Statements.
The Company evaluates the performance of its operating segments based on
revenues and operating income (loss). Inter-segment sales and transfers are not
significant.

Summarized financial information concerning the Company's reportable segments is
shown in the following table. The Chief Executive Officer uses the information
below in this format while making decisions about allocating resources to each
segment and assessing its performance.


                                       11
<PAGE>


                          AXS-ONE INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                         AXS-ONE
                                       ENTERPRISE   AXSPOINT    TIVITY
                                        SOLUTIONS  SOLUTIONS  SOLUTIONS   TOTAL
                                        ---------  ---------  ---------   -----
<S>                                       <C>       <C>       <C>        <C>
THREE MONTHS ENDED MARCH 31, 2001
Revenues:
     License fees .....................   $ 2,014   $   258   $    51    $ 2,323
     Services .........................     7,448     1,023     1,075      9,546
                                          -------   -------   -------    -------
Total Revenues ........................     9,462     1,281     1,126     11,869
Operating income (loss) ...............     1,239       187      (233)     1,193
Total assets ..........................    12,988       876       816     14,680
Capital expenditures ..................       247        20        20        287
Depreciation and amortization .........       475        18        31        524

THREE MONTHS ENDED MARCH 31, 2002
Revenues:
     License fees .....................   $   536   $   394   $   254    $ 1,184
     Services .........................     6,115     1,105       604      7,824
                                          -------   -------   -------    -------
Total Revenues ........................     6,651     1,499       858      9,008
Operating income ......................       824       821        83      1,728
Total assets ..........................     7,524     1,822     1,066     10,712
Capital expenditures ..................        11         2         1         14
Depreciation and amortization .........       480        23        19        522

<CAPTION>

Reconciliation of total segment operating income to consolidated operating
income (loss):

                                                                Three Months Ended
                                                       -----------------------------------
                                                       March 31, 2001        March 31, 2002
                                                       --------------        --------------
<S>                                                        <C>                   <C>
Operating income from reportable segments                  $ 1,193               $ 1,728
Unallocated revenue, other-related parties                      30                    88
Unallocated general and administrative expense              (1,973)               (1,013)
Other corporate unallocated expenses                          (228)                 (176)
                                                           -------               -------
Total consolidated operating income (loss)                 $  (978)              $   627
                                                           =======               =======
</TABLE>

(7) DIVESTITURES

On September 20, 2001, the Company sold its wholly-owned subsidiary located in
Central and Eastern Europe (C.E.E.), including offices in Poland, Estonia and
Bulgaria, to Porterfield International Ltd., ("Buyer") a company wholly-owned by
the former managing director of C.E.E. and his wife. The Company received
consideration in the form of a promissory note of Buyer in the face amount of
$430. The note is payable in 15 monthly installments ending on December 1, 2002
and bears interest at the fixed rate of 6.75% per year. A net asset deficiency
of the C.E.E. operations of $(3), at the time of the sale, offset by accrued
expenses of $180, directly related to the sale,


                                       12
<PAGE>


                          AXS-ONE INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


resulted in a deferred gain of approximately $253, which the Company recorded in
accordance with the Securities and Exchange Commission's Staff Accounting
Bulletin No. 81 (SAB 81), "Gain Recognition on the Sale of a Business or
Operating Assets to a Highly Leveraged Entity." In accordance with SAB 81, the
Company presented, in the accompanying consolidated balance sheet, the deferred
gain as an offset to the note receivable. The Company will recognize such gain
when the note receivable is paid, but only after $177 in payments have been made
on the note receivable. As of March 31, 2002, the Company has received $196 in
payments and recognized $19 of such gain.


The following table sets forth significant financial data of the Central and
Eastern Europe subsidiary prior to its disposition included in the consolidated
results of operations for the three months ended March 31, 2001:


<TABLE>
<CAPTION>

                                                               Three Months Ended
                                                                  March 31, 2001
                                                                  --------------
<S>                                                                    <C>
Revenues:
  License fees                                                         $ 102
  Services                                                               459
                                                                       -----
  Total revenues                                                         561

Total operating expenses                                                 565
                                                                       -----
Operating loss                                                            (4)
  Other income (expense), net                                            (17)
                                                                       -----
Net loss                                                               $ (21)
                                                                       =====
</TABLE>



















                                       13
<PAGE>


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

The following discussion should be read in conjunction with the Consolidated
Interim Financial Statements and Notes thereto and is qualified in its entirety
by reference thereto.

This Report contains statements of a forward-looking nature within the meaning
of the safe harbor provisions of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
relating to future events or the future financial performance of AXS-One.
Investors are cautioned that such statements are only predictions and that
actual events or results may differ materially. In evaluating such statements,
investors should specifically consider the various factors identified in this
Report which could cause actual results to differ materially from those
indicated by such forward-looking statements, including the matters set forth in
"Business--Risk Factors" in our 2001 Annual Report on Form 10K.

OVERVIEW

We are a provider of e-Business solutions for global 2000 companies,
professional service organizations (PSOs) and financial managers who have
implemented high-volume, scalable and secure business solutions for hundreds of
customers across the globe.

We supply a suite of e-commerce solutions based upon our next generation n-tier
Internet-architecture. This family of products, e-Cellerator(TM) products, is
designed to meet the needs of organizations that wish to conduct business across
the Internet. e-Cellerator products are used to build two families of solutions,
AXS-One(TM) Enterprise solutions and AXSPoint(R) solutions. AXS-One Enterprise
solutions are designed to enable businesses to conduct business transactions
across the Internet. AXSPoint solutions are designed to enable organizations to
exchange information and knowledge across the Internet. These two families of
solutions were announced in the fourth quarter of 1999, and AXS-One Enterprise
solutions and AXSPoint solutions modules were made available throughout 2000 and
2001. See "Item 1. Business" in our 2001 Annual Report on Form 10K.

We have experienced, and may in the future experience, significant fluctuations
in our quarterly and annual revenues, results of operations and cash flows. We
believe that domestic and international operating results and cash flows will
continue to fluctuate significantly in the future as a result of a variety of
factors, including the timing of revenue recognition related to significant
license agreements, the lengthy sales cycle for our products, the proportion of
revenues attributable to license fees versus services, the utilization of third
parties to perform services, the amount of revenue generated by resales of third
party software, changes in product mix, demand for our products, the size and
timing of individual license transactions, the introduction of new products and
product enhancements by us or our competitors, changes in customers' budgets,
competitive conditions in the industry and general economic conditions. For a
description of certain factors that may affect our operating results, see
"Business--Risk Factors" in our 2001 Annual Report on Form 10K.

We incurred net losses of $3.7 million, $0.3 million and $4.7 million in 1999,
2000 and 2001, respectively, and operating losses of $1.2 million, $0.2 million
and $4.1 million in 1999, 2000 and 2001, respectively. Operating losses incurred
by our French and German subsidiaries, which were sold in 1999, totaled $2.4
million for 1999. The 1999 net loss includes a $2.2 million loss on sales of
subsidiaries. Operating losses incurred by the Central and Eastern Europe
subsidiary, which was sold in 2001 totaled $1.0 million, $0.6 million and $0.3
million for 1999, 2000 and 2001, respectively. We reported net income of $0.4
million for the three months ended March 31, 2002 and operating income of $0.6
million for the same period.


                                       14
<PAGE>

NEW ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS Nos.
141 and 142 (SFAS 141 and SFAS 142), "Business Combinations" and "Goodwill and
Other Intangible Assets." SFAS 141 replaces APB 16 and requires the purchase
method of accounting prospectively. It also provides guidance on the recognition
of intangible assets apart from goodwill. SFAS 142 changes the accounting for
goodwill from an amortization method to an impairment-only approach. Under SFAS
142, goodwill will be tested annually and whenever events or circumstances occur
indicating that goodwill might be impaired. SFAS 141 and SFAS 142 are effective
for all business combinations completed after June 30, 2001. Upon adoption of
SFAS 142, amortization of goodwill recorded for business combinations
consummated prior to July 1, 2001 will cease, and intangible assets acquired
prior to July 1, 2001 that do not meet the criteria for recognition under SFAS
141 will be reclassified to goodwill. Companies are required to adopt SFAS 142
for fiscal years beginning after December 15, 2001. In connection with the
adoption of SFAS 142, companies will be required to perform a transitional
goodwill impairment assessment. The adoption of SFAS 141 on July 1, 2001 had no
effect on our consolidated financial position or results of operations. The
adoption of SFAS 142 on January 1, 2002 had no effect on our consolidated
financial position or results of operations.

In August 2001, the FASB issued Statement No. 144 (SFAS 144) "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement supersedes Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." The adoption of
SFAS 144 was required beginning January 1, 2002. We do not believe the adoption
of SFAS No. 144 will have a material effect on our consolidated financial
position or results of operations.


In November 2001, the FASB EITF reached a consensus to issue a FASB Staff
Announcement Topic No. D-103 (re-characterized in January 2002 as EITF Issue No.
01-14), "Income Statement Characterization of Reimbursement Received for
`Out-of-Pocket' Expenses Incurred" which clarifies that reimbursements received
for out-of-pocket expenses incurred should be characterized as revenue in the
statement of operations. This consensus should be applied in financial reporting
periods beginning after December 15, 2001. Upon application of this consensus,
comparative financial statements for prior periods should be reclassified to
comply with the guidance in this consensus. The adoption of this consensus on
January 1, 2002 resulted in an increase to services revenue and cost of services
of $0.3 million for each of the three month periods ended March 31, 2001 and
2002. There was no effect on either our consolidated operating income (loss) or
net income (loss).

EURO CURRENCY

On January 1, 1999, certain countries of the European Union established fixed
conversion rates between their existing currencies and one common currency, the
euro. The euro then began to trade on currency exchanges and to be used in
business transactions. Beginning in January 2002, new euro-denominated
currencies were issued. The existing local currencies will be withdrawn from
circulation by July 1, 2002. We derived approximately 34.5% of our total
revenues outside the United States for 2001, a significant portion of which was
in Europe. Excluding our subsidiary in Central and Eastern Europe which was sold
in 2001 (See Note 7 to the Consolidated Interim Financial Statements), we
derived approximately 31.9% of our total revenues outside the United States for
2001. We derived approximately 29.1% of our total revenues outside the United
States for the three months ended March 31, 2002. We believe the euro conversion
will not have a material effect on our consolidated financial position or
results of operations.


                                       15
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated, certain operating
data, and data as a percentage of total revenues both including and excluding
the Central and Eastern Europe (C.E.E.) subsidiary (including offices in Poland,
Bulgaria and Estonia) sold in 2001:

<TABLE>
<CAPTION>
                                                                                                     Three Months Ended
                                                  Three Months Ended March 31, 2001                    March 31, 2002
                                            -----------------------------------------------   --------------------------------
                                                                               Data as a                       Data as a
                                                As                 Excluding   percent of             As       percent of
(in thousands)                               Reported    C.E.E.     C.E.E.       revenue           Reported      revenue
                                            -----------------------------------------------       -------------------------
                                                             (Unaudited)                                (Unaudited)
<S>                                             <C>         <C>       <C>            <C>              <C>            <C>
Revenues:
      License fees                              $ 2,323     $ 102     $ 2,221         19.6 %          $ 1,184         13.0 %
      Services                                    9,546       459       9,087         80.1              7,824         86.0
      Other-related parties                          30         -          30          0.3                 88          1.0
                                            -----------------------------------------------       -------------------------
          Total revenues                         11,899       561      11,338        100.0              9,096        100.0
                                            -----------------------------------------------       -------------------------

Operating expenses:
      Cost of license fees                          335        48         287          2.5                365          4.0
      Cost of services                            5,430       287       5,143         45.4              3,807         41.9
      Sales and marketing                         3,164       236       2,928         25.8              1,516         16.7
      Research and development                    1,899         -       1,899         16.7              1,716         18.9
      General and administrative                  2,049        (6)      2,055         18.1              1,065         11.7
                                            -----------------------------------------------       -------------------------
          Total operating expenses               12,877       565      12,312        108.6              8,469         93.1
                                            -----------------------------------------------       -------------------------
Operating income (loss)                            (978)       (4)       (974)        (8.6)               627          6.9
                                            -----------------------------------------------       -------------------------
Other income (expense):
      Interest income                                21         -          21          0.2                 13          0.1
      Interest expense                             (104)      (17)        (87)        (0.8)               (87)        (1.0)
      Gain on sale of subsidiary                      -         -           -            -                 19          0.2
      Equity in losses in joint ventures            (40)        -         (40)        (0.4)               (97)        (1.1)
      Other income (expense), net                   (71)        -         (71)        (0.6)               (78)        (0.9)
                                            -----------------------------------------------       -------------------------
          Other expense, net                       (194)      (17)       (177)        (1.6)              (230)        (2.5)
                                            -----------------------------------------------       -------------------------
Net income (loss)                              $ (1,172)    $ (21)   $ (1,151)       (10.2)%            $ 397          4.4 %
                                            ===============================================       =========================
</TABLE>



NOTE: The following discussions relate to changes in the results of operations
      excluding C.E.E. for the periods presented.

TOTAL REVENUES

Total revenues decreased $2.2 million or 19.8% for the three months ended March
31, 2002, as compared to the three months ended March 31, 2001. The decrease in
2002 was mainly attributable to a decrease of $0.8 million in license revenue
and $0.8 million in services revenue in the US operations, and a decrease of
$0.6 million in revenues from our foreign subsidiaries. This was primarily the
result of a slow down in the economy in the United States, the effects of



                                       16
<PAGE>

which are being felt throughout the software industry, increased competition in
the services industry, and to a lesser degree, a decline in certain foreign
markets.

We derived approximately $3.2 million and $2.6 million or 28.9% and 29.1%,
respectively, of our total revenues from customers outside of the United States
for the three months ended March 31, 2001 and 2002, respectively. We expect that
such revenues will continue to represent a significant percentage of our total
revenues in the future. Most of our international license fees and service
revenues are denominated in foreign currencies. Fluctuations in the value of
foreign currencies relative to the US dollar in the future could result in
fluctuations in our revenue.

LICENSE FEES

License fees include revenues from software license agreements we entered into
with our customers with respect to both our products and, to a lesser degree,
third party products resold by us. Total license fees decreased approximately
$1.0 million or 46.7% for the three months ended March 31, 2002, as compared to
the three months ended March 31, 2001. The decrease is mainly as a result of the
absence of a large license deal from one customer as noted below. License fees
for the March 31, 2002 period included $0.6 million or 52.8% of total license
fees for three customers. License fees for the March 31, 2001 period included
$1.2 million or 52.3% of total license fees for one customer.

SERVICE REVENUES

Service revenues include fees from software maintenance agreements, training,
consulting services including installation and custom programming. Maintenance
fees, including first year maintenance, which is allocated from the total
license arrangements based on VSOE, are recognized ratably over the period of
the maintenance agreement. Training, consulting, and custom programming revenues
are recognized as the services are performed.

Service revenues decreased $1.3 million or 13.9% for the three months ended
March 31, 2002, as compared to the three months ended March 31, 2001. The
majority of the decrease relates to a $0.8 million decrease in consulting
revenue resulting from fewer demands for upgrades in the installed base, thus
less implementation services. The decrease is also a result of a $0.4 million
decrease in maintenance revenues. Maintenance revenues for the three months
ended March 31, 2001 was higher than the first quarter of 2002 because it
included revenues from customers related to prior year negotiated settlements
and from incremental maintenance for continued support of older versions of our
software no longer supported under current maintenance agreements.

The following table sets forth for the periods indicated each major category of
our service revenues as a percent of total service revenues:

<TABLE>
<CAPTION>
                                      Three Months Ended March 31,
                            ----------------------------------------------
(in thousands)                    2001(a)                    2002
                            ----------------------------------------------
                            Amount    % of Total       Amount    % of Total
                            ----------------------------------------------
<S>                         <C>          <C>           <C>          <C>
Maintenance                 $4,290       47.2%         $3,879       49.6%
Consulting                   4,649       51.2%          3,863       49.3%
Training                        47        0.5%             29        0.4%
Custom programming             101        1.1%             53        0.7%
                            ----------------------------------------------
Total services revenue      $9,087      100.0%         $7,824      100.0%
                            ==============================================
</TABLE>

(a) Excluding C.E.E.


                                       17
<PAGE>

OTHER -RELATED PARTIES

During January 2001, we entered into two South African joint ventures: AXS-One
African Solutions (Pty) Ltd ("African Solutions") and Hospitality Warehouse
(Pty) Ltd ("Hospitality Warehouse"). African Solutions sells and services our
suite of products. Hospitality Warehouse uses our procurement software and
generates fees for purchases made by member companies in the hospitality
industry. Ownership is 50% or less in each joint venture. We use the equity
method of accounting for our investments in 20 to 50-percent-owned companies.
Under the equity method, investments are stated at cost plus or minus our equity
in undistributed earnings or losses. Revenues for the three months ended March
31, 2002 from these joint ventures include management fee revenue of $87
thousand and consulting related revenue of $1 thousand.

COST OF LICENSE FEES

Cost of license fees consist primarily of amortization of capitalized software
development costs and amounts paid to third parties with respect to products we
resold in conjunction with the licensing of our products. The elements can vary
substantially from period to period as a percentage of license fees.

Cost of license fees increased $78 thousand or 27.2% during the three months
ended March 31, 2002 as compared to the three months ended March 31, 2001
primarily due to an increase of $72 thousand in amortization of capitalized
software development costs.

COST OF SERVICES

Cost of services consists primarily of personnel and third party costs for
product quality assurances, training, installation, consulting and customer
support.

Cost of services decreased $1.3 million or 26.0% for the three months ended
March 31, 2002 as compared to the three months ended March 31, 2001. The
decrease is primarily due to a decrease of $0.9 million in personnel related
costs and $0.1 million in variable compensation expense due to a decrease in
headcount. The decrease is also related to a decrease of $0.2 million in cost of
third party services in the United States. As a percentage of service revenues,
cost of services was materially the same for both periods.

SALES AND MARKETING

Sales and marketing expenses consist primarily of salaries, commission and
bonuses related to sales and marketing personnel, as well as travel and
promotional expenses.

Sales and marketing expenses decreased $1.4 million or 48.2% for the three
months ended March 31, 2002 as compared to the three months ended March 31,
2001. The decrease is primarily a result of a decrease in both personnel costs
and variable compensation expense of $1.0 million and $0.2 million,
respectively, due to lower headcount and a decrease of $0.1 million in marketing
program expenses due primarily to a decrease in market research and public
relations expenses.

RESEARCH AND DEVELOPMENT

Research and development expenses consist primarily of personnel costs, costs of
equipment, facilities and third party software development costs. Research and
development expenses are generally charged to operations as incurred. However,
certain software development costs are capitalized in accordance with Statement
of Financial Accounting Standards No. 86 (SFAS 86), "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed." Such capitalized
software development costs are generally amortized to cost of license fees on a
straight-line basis over periods not exceeding three years.

                                       18
<PAGE>

Research and development expenses decreased $0.2 million or 9.6% for the three
months ended March 31, 2002 as compared the three months ended March 31, 2001.
We capitalized $0.2 million in software development costs in the first quarter
of 2002 as compared to $0.3 million in the first quarter of 2001. The rate of
capitalization of software development costs may fluctuate depending on the mix
and stage of development of our product development and engineering projects.
The decrease in research and development costs for the three months ended March
31, 2002 is primarily the result of a decrease of $0.1 million in capitalized
software development costs and $0.1 million in variable compensation expense.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of salaries for
administrative, executive and financial personnel, and outside professional
fees. General and administrative expenses decreased $1.0 million or 48.2% for
the three months ended March 31, 2002, as compared to the three months ended
March 31, 2001. The decrease is primarily as a result of a decrease of $0.4
million in personnel costs and $0.1 million in variable compensation expense as
a result of decreased headcount. The decrease is also attributable to a $0.1
million decrease in professional fees resulting from lower legal costs, a $0.1
million decrease in rent expense due to office closings and downsizing of rental
space, and an adjustment to bad debt expense of $0.1 million resulting from a
payment settlement with one customer.

OTHER INCOME (EXPENSE)

Other income (expense), net increased $(53) thousand for the three months ended
March 31, 2002 as compared to the three months ended March 31, 2001. The
increased expense is primarily due to an increase of $57 thousand of equity in
losses related to two joint ventures entered into during the first quarter of
2001 by our South Africa operations partially offset by the gain on the sale of
our C.E.E. subsidiary of $19 thousand. Interest expense relates to the interest
on the revolving line of credit and term loan. (See Note 2 to the Consolidated
Interim Financial Statements.)

RESTRUCTURING AND OTHER COSTS

During June 2001, based on weakening economies, especially in the United States
and to a lesser degree in certain foreign locations, we eliminated 45 positions
in the United States. In addition, in certain foreign locations, we eliminated
eight positions, wrote-off certain non-performing assets and cumulative foreign
currency translation adjustment and recorded a charge for remaining leases. We
recorded a charge to operations in the second quarter of 2001 totaling
approximately $1.1 million for these items, reflecting approximately $0.6
million in termination costs of those personnel as well as $0.3 million in asset
and cumulative foreign currency translation adjustment write-offs and $0.2
million in lease costs. During the third and fourth quarters of 2001, we
adjusted downward the charge to operations by approximately $(0.2) million and
$(0.1) million respectively, reflecting revised termination and lease costs.
These revisions resulted from management's decision to retain certain employees
in one of the foreign locations to develop software enhancements for the Tivity
Solutions segment. The activity related to this restructuring is as follows:


                                       19
<PAGE>

<TABLE>
<CAPTION>

(in thousands)                                                                 Asset and
                                                                               Cumulative
                                                                               Foreign
                                                                               Currency
                                                                 Employee      Translation
                                                                 Termination   Adjustment      Lease     Total
                                                                 Costs         Write-offs      Costs     Costs
                                                                 ---------------------------------------------
<S>                                                              <C>           <C>             <C>      <C>
Restructuring and other costs recorded in June 2001              $   603       $     300       $ 200    $1,103
Write-off of assets and cumulative foreign currency
  Translation adjustment                                              --            (300)         --      (300)
Revision of the restructuring costs in September 2001               (138)             --         (28)     (166)
Revision of the restructuring costs in December 2001                  --              --        (140)     (140)
Cash payments through March  31, 2002                               (465)             --         (32)     (497)
                                                                 ---------------------------------------------
Restructuring liability at March 31, 2002                        $    --       $      --       $  --    $   --
                                                                 =============================================
</TABLE>


SEGMENT INFORMATION

Beginning on January 1, 2000, we reorganized into three separate business
segments. (See Note 6 to the Consolidated Interim Financial Statements). For the
three months ended March 31, 2002, the AXS-One Enterprise solutions segment had
license fee revenues, services revenue and operating income of $0.5 million,
$6.1 million and $0.8 million, respectively, as compared to $2.0 million, $7.4
million and $1.2 million, respectively, for the three months ended March 31,
2001, relating mainly to revenues earned from the installed base. License fees
were higher for the three months ended March 31, 2001 due to a $1.2 million sale
to one customer. Service revenues decreased due to fewer demands for upgrades in
the installed base in the first quarter of 2002 as well as the sale of our
subsidiary located in C.E.E which had approximately $0.5 million in services
revenue for the three month ended March 31, 2001. The AXSPoint solutions segment
had license fee revenues, services revenue and operating income of $0.4 million,
$1.1 million and $0.8 million, respectively, for the three months ended March
31, 2002, as compared to $0.3 million, $1.0 million and $0.2 million,
respectively, for the three months ended March 31, 2001. The increase in license
revenues was due to sales to two existing customers. The Tivity solutions
segment had license fee revenues and services revenue of $0.3 million and $0.6
million, respectively, for the three months ended March 31, 2002, as compared to
no license fee revenue and $1.1 million of services revenue for the comparable
prior year period. The increase in license fee revenue for the three months
ended March 31, 2002 from the comparable prior year period was primarily due to
a license sale to one customer in the U.S. operation. The decrease in services
revenue for the three months ended March 31, 2002 as compared to the comparable
prior year period was the result of a decrease in consulting revenue due to
decreased demand for upgrades in the installed base. Tivity had operating income
of $0.1 million for the three months ended March 31, 2002 as compared to an
operating loss of $(0.2) million for the comparable prior year period primarily
as a result of a decrease in cost of services and sales and marketing expense,
partially offset by a decrease in services revenue.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are as follows:

    o Revenue recognition and

    o Capitalized software development costs.


REVENUE RECOGNITION

We derive our revenue from primarily two sources: (i) software licenses and (ii)
services and support revenue, which includes software maintenance, training,
consulting and custom programming revenue. We also derive a limited amount of
management fee revenue from joint ventures (approximately 1% of total revenue in
2001) entered into


                                       20
<PAGE>

during 2001 by our South Africa operations. As described below, significant
management judgments and estimates must be made and used in connection with the
revenue recognized in any accounting period. Material differences may result in
the amount and timing of our revenue for any period if our management made
different judgments or utilized different estimates.

We license our software products on a perpetual basis. Each license agreement
generally includes a provision for initial post-contract support (maintenance).
For all license sales we use a signed license agreement as evidence of an
arrangement. For maintenance fees, we use a maintenance agreement as evidence of
the arrangement. We use a professional services agreement as evidence of an
arrangement for our training, custom programming and consulting revenues.
Management fee revenues from our joint ventures are evidenced by master
agreements governing the relationship.


We recognize revenue in accordance with Statement of Position 97-2, "Software
Revenue Recognition" ("SOP 97-2"), and Statement of Position 98-9, "Modification
of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions." Revenue from non-cancelable software licenses is recognized when
the license agreement has been signed, delivery has occurred, the fee is fixed
or determinable and collectibility is probable. In multiple element
arrangements, we defer the VSOE related to the undelivered elements and
recognize revenue on the delivered elements using the residual method. The most
commonly deferred element is initial maintenance, which is recognized on a
straight-line basis over the initial maintenance term. The VSOE of maintenance
is determined by using a consistent percentage of maintenance fee to license
fee. Maintenance fees in subsequent years are recognized on a straight-line
basis over the life of the applicable agreement. Delivery of software generally
occurs when the product (on CDs) is delivered to a common carrier.

The majority of our training and consulting services are billed based on hourly
rates. We generally recognize revenue as these services are performed. However,
when we enter into an arrangement that requires us to perform significant work
either to alter the underlying software or to build additional complex
interfaces so that the software performs as the customer requests, we recognize
the entire fee using contract accounting. This would apply to our custom
programming services, which are generally contracted on a fixed fee basis.
Anticipated losses, if any, are charged to operations in the period such losses
are determined.

Revenues from joint ventures (included in Revenues: Other-Related Parties in the
our Consolidated Statements of Operations) includes consulting revenue for the
joint ventures' use of AXS-One's South African subsidiary's consultants and for
management fees from AXS-One's subsidiary providing managerial, technical and
other related services to the joint ventures in accordance with the joint
venture agreements. Revenue is recognized upon performance of the services. For
all our revenue transactions, we assess whether the fee is fixed and
determinable and whether or not collection is reasonably assured. We assess
whether the fee is fixed and determinable based on the payment terms associated
with the transaction. If a significant portion of a fee is due after our normal
payment terms, which are 30 to 90 days from invoice date, we account for the fee
as not being fixed and determinable. In these cases, we recognize revenue as the
fees become due.

We assess assuredness of collection based on a number of factors, including past
transaction history with the customer and the credit-worthiness of the customer.
We do not request collateral from our customers. If we determine that collection
of a fee is not reasonably assured, we defer the fee and recognize revenue at
the time collection becomes reasonably assured, which is generally upon receipt
of cash.

Our arrangements do not generally include acceptance clauses. However, if an
arrangement includes an acceptance provision, acceptance occurs upon the earlier
of receipt of a written customer acceptance or expiration of the acceptance
period.

                                       21
<PAGE>

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Our policy is to capitalize certain software development costs in accordance
with Statement of Financial Accounting Standards No. 86, "Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed" ("SFAS
86"). Under SFAS 86, costs incurred to develop a computer software product are
charged to research and development expense as incurred until technological
feasibility has been established. We establish technological feasibility upon
completion of a detailed program design at which point all research and
development costs for that project 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. It is reasonably
possible that estimates of anticipated future revenues, the remaining estimated
economic life of the products, or both will be reduced in the future due to
competitive pressures. As a result, the carrying amount of the capitalized
software costs may be reduced in the near term. Upon the general release of the
software product to customers, capitalization ceases and such costs are
amortized (using the straight-line method) on a product-by-product basis over
the estimated life, which is generally three years.

LIQUIDITY AND CAPITAL RESOURCES

The available amount under the revolving line of credit at March 31, 2002 was
approximately $1.4 million. There was no available amount under the term loans
at March 31, 2002. (See Note 2 to the Consolidated Interim Financial
Statements).

We are required to comply with quarterly and annual financial statement
reporting requirements, as well as certain restrictive financial covenants. The
ability to continue to borrow under the Agreement is dependent upon future
compliance with such covenants and available collateral. Management believes
that our projected operating results throughout 2002 will result in compliance
under the Agreement, although there can be no assurances that such operating
results will be achieved.

Our operating activities provided cash of $0.1 million and $0.5 million for the
three months ended March 31, 2001 and 2002, respectively. Net cash provided by
operating activities during the three months ended March 31, 2001 was comprised
primarily of an increase in deferred revenue offset by the net loss and a
decrease in accounts payable and accrued expenses. Net cash provided by
operating activities during the three months ended March 31, 2002 was comprised
of the net income and an increase in deferred revenue partially offset by a
decrease in accounts payable and accrued expenses and an increase in accounts
receivable, prepaid expenses, and other current assets.

Our investing activities used cash of $0.6 million and $0.1 million for the
three months ended March 31, 2001 and 2002, respectively. The uses of cash for
the three months ended March 31, 2001 were for capitalized software development
costs and the purchase of equipment and leasehold improvements. For the three
months ended March 31, 2002 uses of cash were primarily for capitalized software
development costs partially offset by proceeds received from the sale of the
C.E.E. subsidiary.

Cash used in financing activities of $0.2 million during the three months ended
March 31, 2001 related mainly to repayments of debt partially offset by
borrowings against the term loan. Cash used by financing activities was $0.4
million during the three months ended March 31, 2002, and related mainly to
repayments of debt.

We have no significant capital commitments. Planned capital expenditures for
2002 total approximately $1.0 million, including any software development costs
that may qualify for capitalization under SFAS 86. Our aggregate minimum
operating lease payments for 2002 will be approximately $1.6 million. We have
experienced recurring net losses of $3.7 million, $0.3 million and $4.7 million
during the years ended December 31, 1999, 2000 and 2001,


                                       22
<PAGE>

respectively. Additionally, as a result of intense competition and rapid
technological change together with the slowing economy we have also experienced
declining license and service revenues. In response to these conditions,
management has pursued and is continuing to pursue several initiatives to
improve operating results and liquidity and better position AXS-One to compete
under current market conditions. This included, but was not limited to, our
restructuring effort in June, 2001 (See Note 5: Restructuring and Other Costs)
whereby we were able to reduce costs sufficiently to allow us to generate net
income of $0.5 million, $0.9 million, and $0.4 million for the quarters ended
September 30 and December 31, 2001 and March 31, 2002, respectively. Due to
these efforts, we expect that our operating cash flow and available financial
resources will be sufficient to fund our working capital requirements through
2002. However, our ability to achieve the anticipated results is affected by the
extent of cash generated from operations and the pace at which we utilize our
available resources. There is also the risk that cash held by our foreign
subsidiaries will not be readily available in our U.S. operations to pay our
debt and other obligations as the transfer of funds is subject to various
foreign government restrictions. Accordingly, we may in the future be required
to seek additional sources of financing or future accommodations from our
existing lender. No assurance can be given that management's initiatives will be
successful or that any such additional sources of financing or lender
accommodations will be available.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, we are exposed to fluctuations in interest
rates and equity market risks as we seek debt and equity capital to sustain our
operations. We are also exposed to fluctuations in foreign currency exchange
rates as the financial results of our foreign subsidiaries are translated into
U.S. dollars in consolidation. We do not use derivative instruments or hedging
to manage our exposures and do not currently hold any market risk sensitive
instruments for trading purposes.

The information below summarizes our market risk associated with our variable
rate debt obligation as of March 31, 2002. Fair value included herein has been
estimated taking into consideration the nature and term of the debt instrument
and the prevailing economic and market conditions at the balance sheet date. The
table below presents principal cash flows by year of maturity based on the terms
of the debt. The variable interest rate disclosed represents the rate at March
31, 2002, which is the minimum rate in accordance with the agreement. Changes in
the prime interest rate during fiscal 2002 in excess of the minimum interest
rate of 8% per annum will have a positive or negative effect on our interest
expense. Each 1% fluctuation in the prime interest rate will increase or
decrease our annual interest expense on our variable debt by approximately
$3,220 based on the debt outstanding as of March 31, 2002. Further information
specific to our debt is presented in Note 2 to the Consolidated Interim
Financial Statements.

<TABLE>
<CAPTION>

                                 (IN THOUSANDS)
                      VARIABLE                                     YEAR OF
                      INTEREST        ESTIMATED      CARRYING      MATURITY
DESCRIPTION           RATE            FAIR VALUE     AMOUNT        2002
--------------------------------------------------------------------------------
<S>                   <C>             <C>            <C>           <C>
A Term loan           8.00%           $322           $322          $322
</TABLE>

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION AND THE
MARKET PRICE OF SECURITIES

See our 2001 Annual Report on Form 10K for a discussion of risk factors.


                                       23
<PAGE>


                                  AXS-ONE INC.
                                     Part II
                                Other Information


ITEM 1.  LEGAL PROCEEDINGS

Historically, we have been involved in disputes and/or litigation encountered in
our normal course of business. We believe that the ultimate outcome of these
proceedings will not have a material adverse effect on our business,
consolidated financial condition, results of operations or cash flows.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)    Exhibits - None
(b)    Reports on Form 8-K - None




























                                       24
<PAGE>


                                  AXS-ONE INC.



                                   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.



                                    AXS-ONE INC.


DATE:    May 13, 2002               By:  /s/ John A. Rade
                                        ----------------------------------------
                                        John A. Rade
                                        Chief Executive Officer,
                                        President and Director


                                    By:  /s/ William G. Levering III
                                        ----------------------------------------
                                        William G. Levering III
                                        Vice President, Chief Financial Officer,
                                        and Treasurer
                                        (Duly Authorized Officer and
                                        Principal Financial Officer)



























                                       25