================================================================================

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

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

                   For the Fiscal Year Ended December 31, 1999
                         Commission File Number 0-21041

                               EXCELON CORPORATION
                         (Formerly Object Design, Inc.)
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

      Delaware                                                   02-0424252
      --------                                                   ----------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

                       25 Mall Road, Burlington, MA 01803
                      ---------------------------------
               (Address of principal executive offices) (Zip Code)


       Registrant's telephone number, including area code: (781) 674-5000

          Securities registered pursuant to Section 12(b) of the Act:
                          Common Stock, par value $.001
                          -----------------------------

        Securities registered pursuant to Section 12(g) of the Act: None

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

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

The aggregate  market  value  of  voting  stock  held  by  non-affiliates of the
Registrant,  based on the closing price of the Common Stock on February 28, 2000
as reported by the NASDAQ National Market, was approximately  $533,628,606.  For
purposes  of the  foregoing  calculation,  the  Company  has  assumed  that each
director, executive officer and holder of 10% or more of the voting stock of the
Registrant  is an  affiliate.  This  determination  of  affiliate  status is not
necessarily a conclusive determination for other purposes.

The Registrant had 29,128,162  shares of Common Stock outstanding as of February
28, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain  portions of our Definitive  Proxy Statement for our 2000 Annual Meeting
of  Stockholders  are  incorporated  by  reference  into Part III of this Annual
Report on Form 10-K. Exhibit index is located on page 34.

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<PAGE>

PART I

ITEM 1.  BUSINESS

OVERVIEW

eXcelon  Corporation  (formerly  Object Design,  Inc.) is a leading  provider of
software    products   and   services    used   for   building   and   deploying
business-to-business  ("B2B")  software  applications  that enable  companies to
engage in dynamic B2B commerce across the Internet  ("e-business").  We have two
major product lines: our Data Server line of data management  software products,
and our recently  expanded  Dynamic B2B Solutions  product line for building B2B
applications. During 1999, more than 90% of our total revenues were derived from
sales of Data Server product licenses and related services.

In the first  quarter  of 1999,  we  introduced  our first  B2B  product  called
eXcelon,  an eXtensible Markup Language  ("XML")-based  application  development
platform for building and deploying dynamic  electronic  commerce  applications.
With its related suite of XML  development  tools,  this product was designed to
enable companies to create dynamic,  high-value electronic partnerships that can
accommodate the rapid pace of change in the B2B commerce  environment.  Over the
course  of 1999,  we have  increasingly  shifted  our focus to our  Dynamic  B2B
Solutions  product  line,  and in January  2000 we changed our company name from
Object Design,  Inc. to eXcelon  Corporation to better reflect this new business
focus.

We believe that our Dynamic B2B Solutions  will be the foundation for creating a
new  class of  applications  for B2B  integration  and  collaboration,  enabling
corporations to leverage a wide range of business partners to create sustainable
competitive  advantage.  Our B2B software enables  companies to establish direct
links  and  business  process  integration  with  their  customers,   suppliers,
partners,  and  electronic  B2B  marketplaces,  and to  broaden  and  coordinate
interactions and information  exchange between a wide variety of partners,  both
tactical and strategic. Our software is designed to coordinate the interactions,
interoperability,  and connectivity  between one or many business  partners,  by
supporting a broad range of existing and emerging B2B  communications  standards
including XML,  traditional  electronic data interchange,  or EDI, and XML-based
B2B frameworks, such as RosettaNet,  Microsoft's BizTalk, Acord, fpML, and cXML.
In  addition  to  our  software  offerings,  we  offer  eXcelon  eSolutions,   a
comprehensive suite of business and technical  consulting services to assist our
customers in planning and implementing dynamic B2B applications. eSolutions also
includes a set of vertical industry frameworks and application modules for quick
and cost-effective  creation of B2B solutions in specific vertical markets.  One
such  framework  is  built  around  the  XML-based  Acord  standard  used in the
insurance industry.

We believe that our Dynamic B2B Solutions provide our customers with:

IMPROVED EFFICIENCIES AND OPPORTUNITIES FOR COST REDUCTION. Our solutions enable
companies to define and automate their business processes and practices in a way
that best leverages their partners, creating opportunities to outsource non-core
business  functions,  engage in  collaborative  forecasting  with  suppliers for
better inventory control, automate collections,  and streamline product launches
into the sales  channel.  Our solutions  also enable  companies to broaden their
trading  networks,  creating  opportunities  for more  competitive  bidding  for
services,  materials,  and supplies,  automated  access to Internet  procurement
systems  ensuring  lowest  cost  buying,  and better  customer  service via more
responsive and motivated partners in local markets.

NEW REVENUE  OPPORTUNITIES.  Our solutions  enable  companies to gain  increased
market  share by  bringing  products  and  value-added  services  to market more
quickly. For example, a manufacturer can link its customers'  procurement system
directly to its ordering  system,  or list its products on one or many eMarkets,
which in turn may be linked to the same ordering system. Our solutions provide a
platform for rich and real-time business information exchange. With this type of
exchange,  a  manufacturer  can  quickly  change and deploy new kinds of service
contracts, by first outsourcing specialized options to a broader set of business
partners, and then communicating this new service option quickly and efficiently
to the supply channel.

PRODUCTS & SERVICES

We operate in a single industry segment (computer software and related services)
within  which we have two major  product  lines.  Our Dynamic  B2B product  line
encompasses our solutions for addressing the B2B market - our new core business.
Our Data Server  product line includes the products we sell  primarily  into the
telecommunications and embedded independent software vendor ("ISV") markets.


                                       2
<PAGE>

DATA SERVER PRODUCTS

Our Data Server products and services include  ObjectStore and Javlin.  Our Data
Server products run on industry standard hardware,  and adhere to Internet-based
industry  standards  for  communications,   programming  interfaces,   and  data
exchange.

OBJECTSTORE

Our ObjectStore product is our object database management system. ObjectStore is
used  extensively  in the  telecommunications  industry  in  network  management
applications,  in e-business  applications as the engine of high-speed Websites,
and as an OEM data management  system  embedded in hundreds of package  software
applications.  ObjectStore  is available for C++ and Java. One of the attributes
that  makes   ObjectStore   different  from  other  databases  is  its  patented
Cache-Forward architecture.  This architecture maximizes application performance
while reducing network traffic,  thus enabling applications to scale up to serve
large volumes of users without congesting the network.

JAVLIN

Javlin,  our  Enterprise  Java Beans ("EJB") Data Server,  is a Java data server
designed  for  e-business.   Javlin   accelerates  Java   applications  and  EJB
application server performance by providing  distributed  caching and persistent
data  management in the middle tier.  Javlin provides a middle tier solution for
complex data access and integration requirements in a Java environment.

DYNAMIC B2B PRODUCTS AND SERVICES

Our Dynamic B2B products and services  include eXcelon B2B  Integration  Server,
eXcelon  Portal Server  (originally  released in the first quarter of 1999 under
the product name eXcelon) and eXcelon  eSolutions.  Our Dynamic B2B products run
on industry standard hardware,  and adhere to Internet-based  industry standards
for communications, programming interfaces, and data exchange.

eXcelon  B2B INTEGRATION SERVER

Our eXcelon B2B  Integration  Server  enables  users to expand their partner and
trading networks,  to integrate their new and existing  business  processes with
these  business  partners  and eMarkets  and to  establish  high value  business
relationships  that are built  for  change.  The  functional  components  of the
eXcelon B2B Integration Server include the following:

         B2B TRANSLATOR: provides interoperability between existing and emerging
XML-based B2B standards,  and extensions to those  standards.  Companies will be
able to broaden their trading networks and simultaneously connect with partners,
suppliers,  resellers,  and eMarkets  regardless of the B2B standard or protocol
they  use.   Accordingly,   companies  can  more  easily   establish   Web-based
relationships with their business partners regardless of size or location due to
the  limited  information  technology  investment  required  on the part of such
trading partners.

         BUSINESS PROCESS WORKFLOW ENGINE: enables companies with the ability to
include partners in a unified business process workflow. Workflow is represented
using a business  document  metaphor,  so that  information  can be shared  with
internal systems and external business partners.  Interactions  between partners
can be tracked, audited and dynamically changed based upon internal and external
partner  events.  This  capability is critical for Internet B2B  transactions to
ensure the completion of business  transactions  that could span days,  weeks or
even months.

         ENTERPRISE  APPLICATION  ADAPTERS:   provide  adapters  for  enterprise
applications  including SAP, Baan,  PeopleSoft and J.D. Edwards,  as well as for
more than 70 data formats, including Oracle, Informix, DB2, Cobol and Excel.

eXcelon PORTAL SERVER

Our  eXcelon  Portal  Server  enables  companies  to build and  deploy  vertical
eMarkets and trading hubs for reaching  new markets,  expanding  and  automating
trading channels, and facilitating collaboration between businesses. The eXcelon
Portal Server permits  content to be aggregated  from a wide variety of sources,
including external partner catalogs or business content,  or existing enterprise
systems.   This  content  can  be   personalized   and   delivered  to  devices,
applications,  and browsers. The eXcelon Portal Server also coordinates business
transactions  and can be combined  with the eXcelon  B2B  Integration  Server to
provide connectivity and business process integration.

The  eXcelon  Portal  Server  comes  with a suite of tools for  development  and
deployment, including the following:

         Explorer--     for inspecting and organizing content


                                       3
<PAGE>

         Stylus--       a  "what  you see  is  what  you  get"  XSL  editor  for
                        creating  eXtensible  Style Sheets;  personalization and
                        presentation options are defined with this tool

         Studio--       for defining a catalog or auction application framework.

eXcelon eSOLUTIONS

eXcelon eSolutions is a comprehensive suite of business and technical consulting
services for evaluating, designing, and deploying an overall B2B solution. These
services  are designed to provide a proper and  methodical  approach to defining
and building B2B solutions.

eXcelon eSolutions also include vertical industry  frameworks for the insurance,
retail,   telecommunications  and  manufacturing   industries.   Each  framework
leverages  common  components for extending EDI using XML, and for connecting to
industry  specific  eMarkets and trading hubs.  These  frameworks  are among the
first  available  in what  will be an  ongoing  program  through  which  eXcelon
Corporation will provide B2B frameworks for selected vertical industries.

COMPETITION

The markets in which we compete are intensely competitive, rapidly changing, and
are  likely  to see  more  entrants  and  new  technologies.  While  none of our
competitors  or  potential  competitors  currently  offers a product set that is
identical to our Dynamic B2B Solutions,  we do expect  competition from software
vendors  with B2B  solutions  or product  lines such as  WebMethods,  Inc.,  BEA
Systems, Inc., Vitria Technology,  Inc., IBM and OnDisplay,  Inc. We also expect
to see  competition  from existing EDI and  electronic  application  interchange
vendors as they move their solutions towards the problems of integrating  across
organizations.

Competition  for our Data  Server  product  line is from  companies  offering  a
variety of  database  solutions,  including:  object  databases  available  from
Computer Associates,  Gemstone, Poet and Versant; relational databases available
from  Computer  Associates,   IBM,  Informix,   Microsoft,  Oracle  and  Sybase;
extended-relational and object-relational databases available from IBM, Informix
and Oracle; object-to-relational middleware mapping tools such as the Java Blend
product by Sun  Microsystems;  and other  specialized  databases such as on-line
analytical processing databases.

We expect additional  competition from existing competitors and from a number of
other companies that may enter our existing and future  markets.  The additional
competition  could  adversely  affect our business,  results of  operations  and
financial  condition.  Some  of  our  current  and  potential  competitors  have
substantially greater financial, marketing and technical resources than we have.

PRODUCT DEVELOPMENT

We believe  that our future will depend in large part on our ability to maintain
our technology  leadership and to develop products having advanced  features and
functionality. We have made substantial investments in research and development,
primarily   through   internal   development.   Our  research  and   development
organization is divided into teams consisting of development engineers,  quality
assurance,  testing  and  porting  engineers,  and  technical  writers.  Product
definition  is  based on a  consolidation  of  requirements  from  existing  and
prospective  customers and from our technical  support,  product  management and
engineering  groups.  As of December  31,  1999,  there were 77 employees on our
research and development  staff.  Research and development  expenditures  during
1999,  1998,  and 1997  were  $10.3  million,  $8.6  million  and $7.7  million,
respectively,   and  represented  17%,  14%  and  16%  of  our  total  revenues,
respectively. We expect to continue committing significant resources to research
and  development in the future.  All research and development  expenditures  are
charged to operations as incurred.

SERVICES

TRAINING  AND  CONSULTING.  We hold  training  courses at our various  locations
around the world or at customer  sites.  We also  provide  fee-based  consulting
services to our customers in the form of project-based on-site services designed
to provide assistance at key points in a customer's product development cycle.

SUPPORT SERVICES. Maintenance and support contracts are offered with the initial
software license and typically are renewable on an annual basis. Maintenance and
support  fees are set as a fixed  percentage  of the  current  list price of the
product.  Support  services  include  maintenance  of our  software  products in
accordance with  specifications  contained in the user's guide for such products
and access to technical support personnel.


                                       4
<PAGE>

SALES AND MARKETING

We employ a  multi-channel  sales and  marketing  strategy,  using direct sales,
systems integrators,  ISV's,  distributors and other channel partners to address
our global market.

DIRECT SALES.  We rely  principally on direct sales of our products.  Our direct
sales force is organized in teams consisting of field sales  representatives and
technical  sales support  representatives.  As of December 31, 1999,  our direct
sales force included 103 employees in 20 locations worldwide.  We plan to expand
our direct sales force through aggressive recruitment of qualified individuals.

CHANNEL  PARTNER  PROGRAMS.   We  have  partnered  with  a  variety  of  systems
integrators,  independent software vendors and resellers that can complement our
direct sales force and broaden the worldwide penetration of our products.

INTERNATIONAL DISTRIBUTORS. In certain international markets, we use third party
distributors  and  resellers  that  are  supported  by our  sales  organization.
Approximately  2.5%, 2.3% and 4.2% of our total revenues were derived from sales
to international distributors in 1999, 1998 and 1997, respectively.

In  support  of our sales and  marketing  efforts,  we  conduct  sales  training
courses,  targeted marketing programs including direct mail, trade shows, public
relations,  advertising  and  seminars,  and  ongoing  customer  and third party
communications  programs. We also seek to stimulate interest in our products and
services through speaking engagements,  white papers,  technical notes and other
publications.  We  maintain  a  Web  site  at  http://www.exceloncorp.com  where
potential customers can obtain information about our products.

CUSTOMERS

Our  customers   represent  a  broad  spectrum  of  enterprises  within  diverse
industries,  including  high  technology,  financial  services,   manufacturing,
telecommunications,   insurance,  retail  and  B2B  marketplaces.   No  customer
accounted for 10% or more of total revenues  during the years of 1999,  1998 and
1997.

BACKLOG

We maintain no  material  backlog  because  business,  typically,  is booked and
shipped in the same quarter.

PROPRIETARY RIGHTS

We rely  primarily on a combination  of trade  secret,  copyright,  patent,  and
trademark law and contractual  provisions to protect our  proprietary  rights in
our  software  products.  These  protections  may  not be  adequate  in  certain
circumstances.  As of March 2000, we have two issued patents,  expiring  between
2011 and 2015,  covering our cache  forward  architecture  and other  aspects of
software technology. Competitors may independently develop technologies that are
substantially  equivalent or superior to our  technology.  In addition,  patent,
copyright,  trademark  and  trade  secret  protection  for our  products  may be
unavailable  or  unreliable  in  certain  foreign  countries.  As the  number of
software  products in the industry and the number of software patents  increase,
we  believe  that  software  developers  may  become  increasingly   subject  to
infringement claims.

While no  significant  claims of this type have been asserted  against us, there
can be no  assurance  that such  claims  will not be  asserted  against  us with
respect to existing or future  products or that,  we would  prevail  against any
such claims  that were  asserted.  If a lawsuit of this type is filed,  it could
result in significant  expense to us and divert the efforts of our technical and
management  personnel,  whether or not we ultimately  prevail.  While we believe
that our products do not infringe  other  parties'  patents,  copyrights,  trade
secrets,  trademarks and other proprietary rights, it cannot be certain that our
products  are  not  doing  so.   Infringement  of  valid  third  party  patents,
copyrights, trade secrets, trademarks and other proprietary rights could have an
adverse  effect on our  business and results of  operations.  With respect to an
increasing number of products offered, we rely on "Shrink-wrap" and "Click-wrap"
licenses  not  signed  by  the  licensee  to  protect  our  proprietary  rights.
"Shrink-wrap"  and/or "Click-wrap"  licenses may be unenforceable under the laws
of certain jurisdictions.

EMPLOYEES

As of December 31, 1999,  we employed 313 full-time  employees,  including 77 in
research  and  development,  120 in  sales  and  marketing,  85 in  professional
services and customer support, and 31 in finance and administration. None of our
employees  are  represented  by a labor  union,  and we  consider  our  employee
relations to be good.


                                       5
<PAGE>

ITEM 2.  PROPERTIES

Our corporate headquarters are located in Burlington, Massachusetts,  consisting
of  approximately  60,000 square feet of office space under a lease  expiring in
February 2003. We also lease sales offices in 14 locations worldwide. We believe
that our existing  facilities and offices and additional  space  available to us
are adequate to meet our requirements over the next twelve months.

ITEM 3.  LEGAL PROCEEDINGS

As of the date of this  Annual  Report on Form  10-K,  we are not a party to any
legal proceedings the outcome of which, in the opinion of management, would have
a material adverse effect on our results of operations or financial condition.

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

No matters were submitted to a vote of our stockholders  during the three months
ended December 31, 1999.

PART II

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

Our Common Stock trades on the Nasdaq Stock Market  ("NASDAQ")  under the symbol
"EXLN." The following table sets forth, for the periods indicated,  the high and
low sale prices for the Common Stock as reported by NASDAQ.

1999                              High              Low
                                  ----              ---

First Quarter                   $10.50            $5.00
Second Quarter                    5.44             2.78
Third Quarter                     5.13             2.50
Fourth Quarter                   15.47             3.31


1998                              High              Low
                                  ----              ---

First Quarter                    $8.56            $4.00
Second Quarter                    8.44             4.63
Third Quarter                     8.56             5.00
Fourth Quarter                    7.75             3.75

At December 31, 1999, there were 171 holders of record of our Common Stock. This
number  does not  include  beneficial  owners  for whom  shares  were  held in a
"nominee" or "street"  name.  We believe that there are at least 400  beneficial
owners of our Common  Stock.  We have never  paid cash  dividends  on our Common
Stock.  The current  policy of our Board of  Directors is to retain all earnings
for our continued growth.


                                       6
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The  following  table  summarizes  certain  selected   historical   consolidated
financial  data,  which  should  be read in  conjunction  with our  consolidated
financial statements and related notes included elsewhere herein.

                             Selected Financial Data

                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                        1999          1998           1997       1996         1995
                                                        ----          ----           ----       ----         ----
<S>                                              <C>            <C>           <C>            <C>         <C>
  Statement of Operations Data:

  Revenues                                        $   60,810     $  62,358     $   47,265     $ 38,339    $  32,706
  Operating income (loss)                             (8,218)        4,380           (436)       1,240      (10,406)
  Net income (loss )                                  (7,144)        4,823            800          520      (10,282)
  Earnings (loss) per share
     Basic                                             (0.25)         0.17           0.03         0.03        (4.59)
     Diluted                                           (0.25)         0.17           0.03         0.02        (4.59)

  Balance Sheet Data:

  Working capital                                 $   16,130   $    25,897    $    23,968    $  24,225    $    (990)
  Total assets                                        47,405        48,992         38,878       38,461       17,154
  Long-term obligations                                 -               18            236          120          476
   Total stockholders' equity (deficit)               29,513        34,751         28,819       28,233      (32,756)

</TABLE>


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


OVERVIEW

eXcelon Corporation is a leading provider of software products and services used
for building and deploying B2B software  applications  that enable  companies to
engage in Dynamic B2B commerce  across the  Internet.  We have two major product
lines:  our Data  Server  line of data  management  software  products,  and our
recently   expanded  Dynamic  B2B  Solutions   product  line  for  building  B2B
applications.  Our Dynamic B2B Solutions  product line encompasses our solutions
for addressing  the B2B market - our new core business.  Our Data Server product
line augments the Dynamic B2B Solutions product line and represents the products
we sell  primarily  into the  telecommunications  and embedded ISV markets.  Our
products are marketed and sold worldwide through our direct sales force, systems
integrators,  independent software vendors, international distributors and other
channel partners.

We expect to increase  our sales and  marketing,  research and  development  and
general and administrative expenses as we develop and expand our new Dynamic B2B
Solutions  line of products and services.  Because our B2B products and services
are in the  early  phase of market  acceptance,  we do not  expect  to  generate
sufficient  B2B  revenues in 2000 to cover all such  expenses.  Accordingly,  we
expect to incur a loss in 2000.

Our  revenues  are derived from sales of licenses of our Data Server and Dynamic
B2B Solutions software,  professional services, and maintenance. Our Dynamic B2B
Solutions  product  line  was  introduced  in  1999.  More  than 90% of our 1999
revenues were derived from our Data Server  product  line. We generally  license
our software  products on a perpetual  basis.  License fees are generally billed
upon shipment. Maintenance is generally billed annually in advance. We offer our
eXcelon  eSolutions  and our  implementation  and  other  professional  services
primarily on a time and materials basis. We offer training on a fixed fee basis.

We recognize  revenue in accordance  with the  provisions of AICPA  Statement of
Position 97-2 "Software Revenue Recognition." Revenue from software license fees
is  recognized  when there is evidence of an  arrangement,  the product has been
delivered, fees  are  fixed and  determinable,  and  collection  of the  related
receivable  is  deemed  probable  by  management.  Revenue  from  sales  through
distributors is recorded net of distributor  commissions.  Maintenance  revenue,
including  those  bundled  with  the  initial  license  fee,  are  deferred  and
recognized ratably over the service period,  generally one-year.  Consulting and
training service revenue is recognized as the services are performed.

Our cost of software revenues includes primarily  royalties to third parties for
software used in our software.  Our cost of services revenues primarily includes
salaries and related expenses of our consulting and technical support personnel,
and an allocation of overhead and recruitment costs.


                                       7
<PAGE>

The following  table sets forth certain revenue and cost data as a percentage of
our total revenues for each of the three years ended December 31,1999.

                                                   1999        1998        1997
                                                ---------   ---------   --------
 Revenues:
   Software                                         60%         71%         71%
   Services                                         40          28          24
   Related party software and services               -           1           5
                                                 ---------   ---------   -------
     Total revenues                                100%        100%         100%
                                                 ---------   ---------   -------

 Cost of revenues:
   Cost of software                                  4           2           3
   Cost of services                                 21          16          18
   Cost of related party software and services       -           1           1
                                                 ---------   ---------   -------
     Total cost of services                         25          19          22
                                                 ---------   ---------   -------
 Gross profit                                       75          81          78
 Operating expenses:
   Selling and marketing                            60          51          53
   Research and development                         17          14          16
   General and administrative                       10           9          10
   Restructuring                                     2           -           -
                                                 ---------   ---------   -------
     Total operating expenses                       89          74          79
                                                 ---------   ---------   -------
 Operating income (loss)                           (14)          7          (1)
 Other income, net                                   2           2           3
                                                 ---------   ---------   -------
 Income (loss) before income taxes                 (12)          9           2
 Provision for income taxes                         -            1           -
                                                 ---------   ---------   -------
 Net income (loss)                                 (12)%         8%          2%
                                                 ---------   ---------   -------

1999 COMPARED TO 1998

SOFTWARE  REVENUES.  Software revenues decreased 16.8%, to $36.6 million in 1999
from $44.0 million in 1998.  The decrease was primarily due to decreased  volume
of Data Server software licenses offset partially by an increase in sales of our
new Dynamic B2B Solutions product line. We expect software license revenues from
our Dynamic B2B Solutions business to increase in future periods. As we continue
to place  greater  focus on our Dynamic B2B  Solutions  product  line,  our Data
Server software license revenues may stabilize or decline in future periods. The
timing of closing  large-sized  software deals could result in  fluctuations  of
future software license revenues in any quarter.

SERVICES  REVENUES.  Services revenues increased 34.3%, to $24.2 million in 1999
from  $18.0  million  in 1998.  The  increase  is due to higher  demand  for our
consulting  services related to customer  deployments of our software and higher
maintenance revenues,  reflecting continued growth in our installed base of Data
Server products.  We plan to hire additional consulting personnel during 2000 to
accommodate  projected  additional  growth  for our  consulting  services.  As a
result,  we expect that our services  revenues will grow in absolute  dollars in
future periods, but may fluctuate as a percentage of total revenues.

RELATED  PARTY  REVENUES  AND COST OF  RELATED  PARTY  REVENUES.  Related  party
revenues and  associated  cost of related  party  revenues  were not material in
1999.  In 1998,  related  party  revenues and  associated  cost of revenues were
derived from services provided to IBM. IBM ceased to be a related party in 1999.

REVENUES FROM  INTERNATIONAL  OPERATIONS.  Revenues  from the  operations of our
international  subsidiaries  decreased $1.0 million in 1999 as compared to 1998.
International  revenues as a  percentage  of total  revenues  were 38.5% in 1999
compared with 39.2% in 1998. The decrease in dollar amount of our  international
revenues is approximately  commensurate with the year-over-year  decrease in our
total revenues.

COST OF SOFTWARE  REVENUES.  Cost of software revenues  increased 48.3%, to $2.4
million in 1999 from $1.6 million in 1998,  and  increased  as a  percentage  of
software revenues to 6.5% from 3.6% for such years,  respectively.  The increase
in  absolute  dollars  and  as a  percentage  of  software  revenues  is  due to
additional  purchases of technology  from third parties in 1999 for inclusion in
our new Dynamic B2B Solutions  product line, as well as the write-off in 1999 of
certain previously purchased technologies.


                                       8
<PAGE>

COST OF SERVICES  REVENUES.  Cost of services revenues increased 25.4%, to $12.9
million in 1999 from $10.3  million in 1998 and  decreased  as a  percentage  of
services revenues to 53.5% from 57.3% for such years, respectively. The increase
in dollar  amount  reflects  the growth in staffing  necessary  to generate  and
support increased worldwide service revenues and provide customer support to our
growing  installed  base.  The decrease in cost of services as a  percentage  of
service  revenues is primarily due to higher  average  utilization of consulting
personnel  in 1999.  We expect cost of services  revenues to continue to grow in
absolute  dollars,  and it may increase as a percentage of services  revenues in
future  periods  as  we  invest  in  expanding  our  services   organization  in
anticipation of future growth.

SELLING AND MARKETING EXPENSE. Selling and marketing expense increased 15.3%, to
$36.4 million in 1999 from $31.6 million in 1998,  and increased as a percentage
of total revenues to 59.9% from 50.7% for such years, respectively. The increase
in dollar amount and as a percentage of total revenues  resulted  primarily from
the hiring of additional marketing personnel and increased spending on marketing
programs to launch our new Dynamic B2B Solutions product line. We plan to expand
our sales force and incur higher levels of marketing investments  throughout the
next year and, as a result,  expect selling and marketing expense to continue to
increase in future periods.

RESEARCH AND DEVELOPMENT  EXPENSE.  Research and development  expense  increased
19.1%,  to $10.3  million in 1999 from $8.6 million in 1998,  and increased as a
percentage of total  revenues to 16.9% in 1999 from 13.9% for 1998. The increase
was due  principally  to the  addition  of  personnel,  depreciation  of capital
equipment and related  overhead for the development of new Dynamic B2B Solutions
products and  enhancement to existing Data Server  products.  We expect research
and  development  expense to increase in future periods as we continue to expand
and enhance our Dynamic B2B Solutions product line.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased
7.7%,  to $6.1  million in 1999 from $5.6  million in 1998,  and  increased as a
percentage  of total  revenues to 10.0% in 1999  compared  to 9.0% in 1998.  The
increase is reflective of the increased  staffing,  investments  in  information
technology,  professional expenses and other costs associated with our expanding
operations.  We expect general and administrative  expense to increase in future
periods.

RESTRUCTURING.  In 1999,  we  recorded a  restructuring  charge in the amount of
$945,000,  in connection with  repositioning the company for future growth.  The
charge is composed of severance  costs for eleven  employees,  closure  costs of
some office space, and cancellation costs of certain marketing initiatives.

OTHER INCOME.  Other income  increased  14.2%, to $1.1 million in 1999 from $1.0
million in 1998.  The  increase  was largely  the result of overall  higher cash
balances as well as some movement to longer-term investments that yield a higher
rate of return.

PROVISION FOR INCOME TAXES.  In 1999, we paid only certain  foreign income taxes
due to our  overall  net  loss.  Our  effective  tax rate for 1998 was 10%.  The
effective  tax rate in 1998  reflects an  alternative  minimum tax provision for
federal  taxes and certain  state and foreign  taxes.  The effective tax rate is
lower  than  the  statutory  rate  principally  due  to the  utilization  of net
operating loss carryforwards.

1998 COMPARED TO 1997

SOFTWARE  REVENUES.  Software revenues increased 31.2%, to $44.0 million in 1998
from $33.6 million in 1997.  The increase was primarily due to increased  volume
of object database software licenses.

SERVICES  REVENUES.  Services revenues increased 57.6%, to $18.0 million in 1998
from $11.4  million in 1997.  The higher  services  revenue  included  increased
consulting  revenues  relating  to  customer  deployments  and  higher  billable
utilization  of consulting  personnel in 1998, as well as increased  maintenance
revenues,  reflecting  growth in our  installed  base.  Growing  demand  for our
consulting  services  has  led us to  increase  the  number  of  our  consulting
personnel.

RELATED PARTY  SOFTWARE AND SERVICES  REVENUES.  Revenues  from related  parties
decreased to $0.3  million in 1998 from $2.3  million in 1997.  The decrease was
primarily  due to the fact that a large  software  purchase  by IBM in the first
quarter of 1997 that was not repeated in 1998 and to the discontinuation in 1997
of a joint development project with IBM.

REVENUES FROM  INTERNATIONAL  OPERATIONS.  Revenues  from the  operations of our
international  subsidiaries  increased  $8.9 million in 1998 as compared to 1997
and also  increased  as a  percentage  of our total  revenues,  to 39.2% in 1998
compared with 32.9% in 1997.  The increase is due to increased  volume of object
database  software  licenses  and  is  attributable  to  the  expansion  of  our
international  direct  sales force and  increased  services  revenue  reflecting
growth in our international installed base.

COST OF SOFTWARE  REVENUES.  Cost of software revenues  increased 10.9%, to $1.6
million in 1998 from $1.4 million in 1997,  and  decreased  as a  percentage  of


                                       9
<PAGE>

software revenues to 3.6% from 4.3% for such years,  respectively.  The decrease
as a percentage of software revenues reflect lower royalty costs in 1998, due in
part to a change  in  revenue  mix  toward  sales of object  database  and other
products that bear lower or no third-party royalties.

COST OF SERVICES  REVENUES.  Cost of services revenues increased 23.3%, to $10.3
million  in 1998 from $8.4  million in 1997 and  decreased  as a  percentage  of
services revenues to 57.3% from 73.2% for such years, respectively. The increase
in dollar  amount  reflects  the growth in staffing  necessary  to generate  and
support increased worldwide service revenues and provide customer support to our
growing  installed  base.  The decrease in cost of services as a  percentage  of
service  revenues is primarily due to higher  average  utilization of consulting
personnel in 1998.

 COST OF RELATED PARTY SOFTWARE AND SERVICES REVENUES. The cost of related party
software and services revenues declined 39.9%, to $0.2 million in 1998 from $0.4
million in 1997,  and increased as a percentage  of related  party  software and
services revenues to 68.5% from 15.4% in such years, respectively. The increased
cost as a  percentage  of  revenues  was  attributable  to a shift in the mix of
revenues  in  1998  from  higher  margin  software   revenues  to  lower  margin
maintenance revenues.

SELLING AND MARKETING EXPENSE. Selling and marketing expense increased 25.2%, to
$31.6 million in 1998 from $25.2 million in 1997,  and decreased as a percentage
of total revenues to 50.7% from 53.4% for such years, respectively. The increase
in dollar amount resulted  primarily from continued efforts to expand and retain
our  sales  force  and  increased  marketing  investment,   including  increased
expenditures on salaries,  recruiting fees, marketing programs, travel and other
related  expenses,  as well as higher sales  commissions  associated with higher
revenues.

RESEARCH AND DEVELOPMENT  EXPENSE.  Research and development  expense  increased
12.0%,  to $8.6  million in 1998 from $7.7 million in 1997,  but  decreased as a
percentage of total revenues to 13.9% from 16.3% for 1997. The expense  increase
was due  principally  to the  addition  of  personnel,  depreciation  of capital
equipment and related  overhead for  enhancements  to existing  products and the
development of new products.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased
22.3%,  to $5.6  million in 1998 from $4.6 million in 1997,  but  decreased as a
percentage  of total  revenues  to 9.0% in 1998  compared  to 9.7% in 1997.  The
increase in dollar amount is reflective of the increased  staffing,  investments
in information technology, professional expenses and other costs associated with
our expanding operations.

OTHER INCOME.  Other income  decreased  26.6%, to $1.0 million in 1998 from $1.3
million in 1997. The decrease was largely the result of lower rates of return on
cash and investments.

PROVISION FOR INCOME  TAXES.  Our effective tax rate of 10.0% and 10.8% for 1998
and 1997,  respectively,  reflects  an  alternative  minimum tax  provision  for
federal  taxes and certain  foreign and state taxes.  The  effective tax rate in
both years is lower than the statutory rate  principally  due to the utilization
of net operating loss carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1999, our principal sources of liquidity  included $19.2 million
of cash, cash equivalents and short-term marketable securities,  $4.6 million of
long-term  marketable  securities,  and a $2.0 million  revolving line of credit
with Silicon Valley Bank entered into in September 1999.  Availability under the
line of credit is based on a formula of eligible accounts receivable, subject to
compliance with certain covenants.  Borrowings are collateralized by our assets,
excluding  intellectual property, and bear interest at the bank's prime rate. At
December 31, 1999, no  borrowings  were  outstanding,  and we were in compliance
with the bank's  covenants.  A letter of credit in the amount of $450,000  under
the line of credit was  outstanding  at that date. The line of credit expires in
September  2000,  and we expect to renew the line of credit on terms  similar to
the existing agreement.

Our operating  activities provided net cash of $1.7 million and $10.1 million in
1999 and 1998, respectively. The decrease was primarily the result of a net loss
of $7.1 million in 1999  compared to net income of $4.8 million in 1998,  offset
in part by  improved  cash  management  and  higher  non-cash  depreciation  and
amortization expense.

Our investing activities used net cash of $4.3 million and $12.2 million in 1999
and 1998,  respectively.  The  decrease  was  attributable  primarily to the net
purchase of  $150,000  of  marketable  securities  in 1999,  compared to the net
purchase of $7.2 million of  marketable  securities  in 1998,  and a decrease in
purchased technology to $1.2 million in 1999 from $2.7 million in 1998.


                                       10
<PAGE>

Our financing  activities provided net cash of $1.7 million and $933,000 for the
years ended December 31, 1999 and 1998, respectively. The increase was due to an
increase in proceeds  from stock  option  exercises to $2.0 million in 1999 from
$1.0  million in 1998 and the absence of repayment  of  shareholder  advances in
1999.

We believe that our current cash, cash equivalents,  marketable securities, bank
line of  credit  and funds  generated  from  operations,  if any,  will  provide
adequate  liquidity to meet our capital and operating  requirements for the next
twelve months.

EURO CONVERSION

On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates between their existing  sovereign  currencies
and the Euro,  making the Euro their  common  legal  currency on that date.  The
legacy  currencies  will remain legal tender in the  participating  countries as
denominations  of the Euro  between  January  1, 1999 and  January  1, 2002 (the
"transition period").

During the transition  period,  public and private parties may pay for goods and
services using either the Euro or the participating country's legacy currency on
a "no compulsion,  no prohibition"  basis.  However,  conversion rates no longer
will be  computed  directly  from one legacy  currency to  another.  Instead,  a
triangular  process  will  apply  whereby  an amount  denominated  in one legacy
currency will first be converted into the Euro.  The resultant  Euro-denominated
amount will then be converted into the second legacy currency.

We have evaluated the business implications of conversion to the Euro, including
technical adaptation of information  technology and other systems to accommodate
Euro-denominated   transactions,   long-term  competitive  implications  of  the
conversions and the effect on market risk with respect to financial  instruments
and do not expect a material impact on our operations.

NEW ACCOUNTING STANDARDS

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101  summarizes  certain of the  staff's  views in applying  generally  accepted
accounting  principles to revenue recognition in financial  statements.  We have
not yet  completed  our  evaluation  of the impact of the  adoption  of this new
standard; however, it is not expected to have a material impact on our financial
position and results of operations.

In December 1998, the American  Institute of Certified Public Accountants issued
Statement  of  Position  98-9,  "Modification  of  SOP  97-2,  Software  Revenue
Recognition,  With Respect to Certain Transactions"("SOP 98-9"), which addresses
software  revenue   recognition  as  it  applies  to  certain   multiple-element
arrangements.  SOP 98-9 also amends SOP 98-4, "Deferral of the Effective Date of
a  Provision  of SOP 97-2," to extend the  deferral  of  application  of certain
provisions  of SOP 97-2 through  fiscal  years  beginning on or before March 15,
1999. All other  provisions of SOP 98-9 are effective for  transactions  entered
into in fiscal years  beginning  after March 15,  1999.  We will comply with the
requirements  of this SOP as they  become  effective  and do not expect that our
revenues and earnings will be materially affected.

On June 15, 1998, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting Standard No. 133,  "Accounting for Derivative  Instruments
and Hedging  Activities"  ("SFAS  133").  SFAS 133 is effective for fiscal years
beginning after June 15, 2000. SFAS 133 requires that all derivative instruments
be recorded on the balance sheet at their fair values. Changes in fair values of
derivatives are recorded each period in current earnings or other  comprehensive
income,  depending  on whether a  derivative  is  designated  as part of a hedge
transaction and, if it is, depending on the type of hedge  transaction.  We have
not yet  completed  our  evaluation  of the impact of the  adoption  of this new
standard; however, it is not expected to have a material impact on our financial
position and results of operations.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

From time to time,  information provided by us, statements made by our employees
or  information  included  in our  filings  with  the  Securities  and  Exchange
Commission may contain  statements  which are not historical facts but which are
"forward looking  statements" which involve risks and  uncertainties.  The words
"expect",  "anticipate",  "internal",  "plan", "believe," "seek", "estimate" and
similar statements are intended to identify such forward looking statements.  In
particular,  statements in  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations"  relating to our future shipments,  revenue
and expense levels and  profitability,  as well as the sufficiency of capital to
meet   working   capital   and   capital   expenditure   requirements,   may  be
forward-looking  statements.  Our  disclosures  in Item 7A, "  Quantitative  and
Qualitative  Disclosures  About Market  Risk," also  constitute  forward-looking
statements.   This  Report  also  contains  other  forward-looking   statements,
including without limitation  statements  regarding:  the market opportunity for
the Dynamic B2B  software,  our  competitors,  the  stability of our Data Server


                                       11
<PAGE>

business,  the  capabilities  of our Dynamic B2B  Solutions  product  line,  the
adequacy  of our  existing  facilities  to meet our  requirements  over the next
twelve months, adequate liquidity to meet our capital and operating requirements
for the next  twelve  months.  Such  statements  are not  guarantees  of  future
performance,  but are based on assumptions and expectations of our management at
the time such statements are made, and involve certain risks,  uncertainties and
assumptions that could cause our future results to differ  materially from those
expressed in any forward-looking statements. The Company disclaims any intent or
obligation to update publicly any forward-looking statements whether in response
to new information, future events or otherwise.

The majority of our revenues to date have been derived from our Data Server line
of  object-oriented  products and related  services.  Future  revenues from this
product line will depend to a substantial degree on the emergence and widespread
adoption of  object-oriented  programming  as a methodology  for  developing and
deploying  multi-user  business  applications.  There can be no  assurance  that
object-oriented programming will become, and remain, an accepted methodology for
developing  and  deploying  enterprise-wide  business  applications  or that our
object-oriented  database  products and services will achieve or maintain market
acceptance.

We expect to increase  our sales and  marketing,  research and  development  and
general and administrative expenses as we develop and expand our new Dynamic B2B
Solutions  line of products and services.  Because our B2B products and services
are in the  early  phase of market  acceptance,  we do not  expect  to  generate
sufficient  B2B  revenues in 2000 to cover all such  expenses.  Accordingly,  we
expect  to  incur a loss in  2000.  We  believe  that  our  current  cash,  cash
equivalents, marketable securities and bank line of credit will provide adequate
liquidity  to meet our capital and  operating  requirements  for the next twelve
months.  The time for which we believe our capital is sufficient is an estimate.
The actual time period may differ materially as a result of a number of factors,
risks and  uncertainties.  We may need to raise  additional  funds in the future
through  public or private  debt or equity  financing  in order to  develop  new
products or  services,  acquire  complementary  businesses  or  technologies  or
respond to competitive pressures. Additional financing we may need in the future
may not be available on terms  favorable to us, if at all. If adequate funds are
not available or are not available on  acceptable  terms,  we may not be able to
take advantage of  opportunities,  develop new products or services or otherwise
respond to  unanticipated  competitive  pressures.  In such case,  our business,
operating results and financial condition could be harmed.

Our new Dynamic B2B Solutions product line is currently based in large part upon
XML, or eXtensible  Markup Language,  an emerging standard for sharing data over
the Internet.  While we anticipate that XML will achieve broad market acceptance
in the near future,  it is possible  that a competing  standard  perceived to be
superior could replace XML, in which case the market may not accept an XML-based
product. If a new standard were perceived to be superior, our software might not
be compatible with the new standard or we might not be able to develop a product
using this  standard in a timely  manner.  Consequently,  a failure of XML-based
products to achieve broad market  acceptance or the  introduction of a competing
standard perceived to be superior in the market could harm our business.

The market  for B2B  e-commerce  solutions  is rapidly  changing  and  intensely
competitive.  We expect  competition  to intensify as the number of entrants and
new technologies  increases.  We may not be able to compete successfully against
current or future competitors.  The competitive pressures facing us may harm our
business, operating results and financial condition.

Our current and potential  competitors  include,  among others,  large  software
vendors,    companies   and   trading    networks   that   develop   their   own
business-to-business  integration  e-commerce  solutions,  vendors,  vendors  of
proprietary   enterprise   application   integration,   or  EAI,  solutions  and
application server vendors who have added XML capabilities to their products. In
addition,  our  customers and companies  with whom we currently  have  strategic
relationships may become competitors in the future.  Many of our competitors and
potential competitors have more experience developing  Internet-based  software,
larger technical staffs,  larger customer bases,  more established  distribution
channels,  greater brand recognition and greater financial,  marketing and other
resources  than we do.  Our  competitors  may be able to  develop  products  and
services  that are superior to our software and services,  that achieve  greater
customer  acceptance  or  that  have  significantly  improved  functionality  as
compared to our existing software and future products and services. In addition,
negotiating and maintaining  favorable  customer and strategic  relationships is
critical to our business.  Our  competitors  may be able to negotiate  strategic
relationships on more favorable terms than we are able to negotiate. Many of our
competitors may also have  well-established  relationships with our existing and
prospective customers. Increased competition may result in reduced margins, loss
of sales or  decreased  market  share,  which in turn could  harm our  business,
operating results and financial condition.

We depend on product innovation and new product releases to remain  competitive.
Any delay in the release of products or failure of released products to meet the
market expectation of functionality and features could undermine our competitive
position.  Furthermore,  certain of our competitors are significantly larger and
are  expending  greater  amounts  on  research  and  development  and  sales and
marketing than we are. The result could be new competitive product introductions
that could limit the salability of our products or put pressure on sales prices.


                                       12
<PAGE>

Our future success depends upon our ability to attract and retain highly skilled
technical,  managerial,  sales and marketing  personnel.  We assume that we will
continue  to be able to attract  and retain  such  personnel.  While we have not
experienced any significant  difficulty in hiring  qualified  personnel to date,
competition  for such personnel in the high technology  industry is intense.  We
experience attrition,  and this cannot be predicted.  The failure to recruit and
retain qualified personnel, however, could have a material adverse effect on our
future operating results.

Our  software  is  complex  and may  contain  known  and  undetected  errors  or
performance  problems.  Many  serious  defects are  frequently  found during the
period  immediately  following  introduction  of new software or enhancements to
existing  software.  Although  we attempt to resolve  all errors that we believe
would be considered  serious by our customers,  our software is not  error-free.
Undetected errors or performance  problems may be discovered in the future.  Our
customers  may  perceive  such errors to be serious.  This could  result in lost
revenue  or delays  in  customer  acceptance  and  would be  detrimental  to our
reputation,  which could harm our  business,  operating  results  and  financial
condition.

Because of the complexity of our software,  internal quality  assurance  testing
and customer testing may reveal product  performance issues or desirable feature
enhancements  that could lead us to postpone  the release of new versions of our
software.  In  addition,  the  reallocation  of  resources  associated  with any
postponement  could  cause  delays  in the  development  and  release  of future
enhancements  to our  currently  available  software.  We may  not  be  able  to
successfully  complete the  development of future  enhancements  in a timely and
efficient manner. Any such failure or delay could harm our operating results.

Our market is characterized by rapidly changing  technology,  evolving  industry
standards  and frequent new product  announcements.  To be  successful,  we must
adapt to our rapidly  changing market by continually  improving the performance,
features  and  reliability  of  our  software  and  services.   We  could  incur
substantial costs to modify our software, services or infrastructure in order to
adapt to these  changes.  Our business  could be harmed if we incur  significant
costs without  adequate  results,  or if we are unable to adapt rapidly to these
changes.

The market for  Internet-based,  business-to-business  integration  software  is
relatively  new and is  evolving  rapidly.  Our future  revenues  and any future
profits  depend upon the  widespread  acceptance  and use of the  Internet as an
effective medium for business-to-business  commerce. The failure of the Internet
to  continue  to develop  as a  commercial  or  business  medium  could harm our
business,  operating results and financial condition.  The acceptance and use of
the Internet for  business-to-business  commerce could be limited by a number of
factors,  such as the growth and use of the  Internet in general,  the  relative
ease of conducting  business on the Internet,  the efficiencies and improvements
that conducting  commerce on the Internet  provides,  concerns about transaction
security and taxation of transactions on the Internet.

We  typically  receive  the  majority  of our  revenue in the last month of each
quarter with a concentration  of revenue in the latter half of such month.  This
pattern,  common to many  software  companies,  makes it  difficult  to forecast
accurately,  increasing the possibility of missing a quarterly revenue or profit
target.  Any inability to obtain orders in large volume or to make  shipments in
the period immediately preceding the end of any particular quarter may cause the
results for that  quarter to fall short of our revenue  targets.  Any failure to
meet our quarterly revenue or earnings targets could adversely impact the market
price of our stock. A significant  portion of our revenues is derived from sales
by our international subsidiaries and to distributors outside the United States.
There can be no assurance, however, that we will be able to maintain or increase
international  market demand for our products.  As a result of the foregoing and
other  factors,  we may experience  material  fluctuations  in future  operating
results on a quarterly  or annual  basis which could  materially  and  adversely
affect our business, financial condition, operating results and stock price.

Market prices for securities of software companies have generally been volatile.
In  particular,  the market  price of our stock has been and may  continue to be
subject to significant  fluctuations  and may also be affected by broader market
trends unrelated to our company's performance.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We face exposure to certain market risks, primarily adverse movements in foreign
currency  exchange rates and changes in interest  rates. We have not invested in
derivative instruments or derivative commodity instruments.  We believe that the
fair value of other financial  instruments reflected in our consolidated balance
sheets does not represent a  significant  market risk due to the nature of these
instruments  and their  short-term  maturities.  We also do not believe that our
future  earnings,  fair values and/or cash flows are subject to risk of material
near term loss due to changes in market  rates or prices  that we consider to be
reasonably possible in the near term.  However,  our exposure to market risk may
change  over time as our  business  practices  evolve,  and could in the  future
materially  adversely effect our financial  condition and results of operations.
Our primary  exposure has been related to local  currency  revenue and operating
expenses in Europe and the Asia/Pacific region.


                                       13
<PAGE>

FINANCIAL RISK MANAGEMENT

The carrying amounts  reflected in the consolidated  balance sheets for cash and
cash equivalents,  accounts  receivable,  and accounts payable  approximate fair
value  at  the  balance  sheet  date  due  to  the  short  maturities  of  these
instruments.

Our exposure to market rate risk for changes in interest rates relates primarily
to our investment  portfolio.  We have not used derivative financial instruments
in our investment  portfolio.  Information about our investment portfolio is set
forth in Note C of Notes to the Consolidated  Financial  Statements  included in
Item 8 of this  Annual  Report  on  Form  10-K  and is  incorporated  herein  by
reference.

We  maintain  investment  portfolio  holdings  of various  issuers,  types,  and
maturities.   These  securities  are  classified  as  available  for  sale,  and
consequently,  are recorded on the balance  sheet at fair value with  unrealized
gains  or  losses  included  in  stockholders'  equity.  To  date,  we have  not
experienced  material losses on our  investments.  We place our investments with
high quality issuers and, by policy, limit  the amount of credit exposure to any
one issuer.  Given the short  maturities  and  investment  grade  quality of the
portfolio  holdings at December 31, 1999, a sharp rise in interest  rates should
not  have  a  material  adverse  impact  on the  fair  value  of our  investment
portfolio.

FOREIGN CURRENCY RISK

Fluctuations  in exchange  rates can adversely  effect our results of operations
and  financial   position.   The  financial   statements  of  our  international
subsidiaries,  all of whose  functional  currencies are the local currency,  are
translated  using  exchange  rates in effect at the end of the period for assets
and  liabilities  and average  exchange  rates  during the period for results of
operations.  Foreign currency translation adjustments are recorded as a separate
component  of  stockholders'   equity,   and  also  are  included  in  reporting
comprehensive  income.  We also engage in  transactions  denominated  in foreign
currencies.  Gains and losses from these  transactions,  which to date have been
immaterial,  are  reflected in the results of  operations.  The impact of future
exchange rate fluctuations on our results of operations and financial  condition
cannot  accurately be predicted.  We do not currently engage in foreign currency
hedging activities.




                                       14
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following statements are filed as part of this Annual Report on Form 10-K:

Item                                                                    Page No.
----                                                                    --------

Report of Independent Accountants                                             16

Consolidated Balance Sheets as of December 31, 1999 and 1998                  17

Consolidated Statements of Operations for the three
years ended December 31, 1999, 1998 and 1997                                  18

Consolidated Statements of Cash Flows for the three
years ended December 31, 1999, 1998 and 1997                                  19

Consolidated Statements of Stockholders' Equity for the three
years ended December 31, 1999, 1998 and 1997                                  20

Notes to Consolidated Financial Statements                                    21

Report of Independent Accountants on Financial
Statement Schedule                                                            31

Schedule II - Valuation and Qualifying Accounts                               32




                                       15
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors  and  Stockholders  of eXcelon  Corporation  (formerly
Object Design, Inc.):

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements of  operations,  stockholders'  equity,  and cash flows
present  fairly,  in all material  respects,  the financial  position of eXcelon
Corporation and its  subsidiaries at December 31, 1999 and 1998, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period  ended  December  31,  1999  in  conformity  with  accounting  principles
generally  accepted in the United  States.  These  financial  statements are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements in  accordance  with  auditing  standards  generally
accepted in the United States,  which require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.



PricewaterhouseCoopers LLP

Boston, Massachusetts
February 2, 2000




                                       16
<PAGE>

eXcelon Corporation
(formerly Object Design, Inc.)
Consolidated Balance Sheets
(in thousands)

<TABLE>
<CAPTION>
                                                                          ------------------------------
                                                                                   December 31,

                                                                                 1999            1998
                                                                          --------------- ---------------
<S>                                                                       <C>             <C>
Assets

Current assets:
     Cash and cash equivalents                                             $   13,847      $   14,846
     Short-term investments                                                     5,327           8,745
       Accounts receivable, net of allowance for doubtful
         accounts of $1,232 in 1999 and $1,199 in 1998                         13,902          15,885
     Prepaid expenses and other current assets                                    946             644
                                                                          --------------- ---------------
Total current assets                                                           34,022          40,120
Property and equipment, net                                                     5,169           4,216
Marketable securities                                                           4,589           1,020
Purchased software, net                                                         2,503           2,751
Other assets                                                                    1,122             885
                                                                          --------------- ---------------
Total assets                                                               $   47,405      $   48,992
                                                                          --------------- ---------------

Liabilities and Stockholders' Equity

Current liabilities:
     Current portion of capital lease obligations                          $       17   $          13
     Accounts payable                                                           3,404           2,900
     Accrued expenses                                                           3,898           2,281
     Accrued compensation                                                       2,876           3,596
     Deferred revenue                                                           7,697           5,433
                                                                          --------------- ---------------
Total current liabilities                                                      17,892          14,223

Long-term capital lease obligations                                                 -              18

Commitments and contingencies (Note E)                                              -               -

Stockholders' equity:
  Preferred stock, $.01 par value; authorized
    5,000 shares; no shares issued or outstanding                                   -               -
  Common stock, $.001 par value;  authorized  200,000 shares;
    28,921 and 28,049 shares issued and outstanding in 1999
    and 1998, respectively                                                         29              28
  Additional paid-in capital                                                   66,731          64,977
  Treasury stock, at cost, 40 shares in 1998                                        -            (251)
  Accumulated deficit                                                         (35,054)        (27,910)
  Accumulated other comprehensive loss                                         (1,620)         (1,406)
  Advances to stockholders                                                       (573)           (687)
                                                                          --------------- ---------------
Total stockholders' equity                                                     29,513          34,751
                                                                          --------------- ---------------
Total liabilities and stockholders' equity                                 $   47,405        $ 48,992
                                                                          --------------- ---------------

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

</TABLE>
                                       17
<PAGE>

eXcelon Corporation
(formerly Object Design, Inc.)
Consolidated Statements of Operations
(in thousands, except per share data)

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
                                                                          Year Ended December 31,

                                                                  1999                    1998                  1997
----------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                     <C>                   <C>
Revenues:
   Software                                                     $ 36,623                $44,040               $33,560
   Services                                                       24,187                 18,010                11,425
   Related party software and services                               -                      308                 2,280
----------------------------------------------------------------------------------------------------------------------
   Total revenues                                                 60,810                 62,358                47,265
Cost of revenues:
   Cost of software                                                2,380                  1,605                 1,447
   Cost of services                                               12,931                 10,311                 8,365
   Cost of related party software and services                       -                      211                   351
----------------------------------------------------------------------------------------------------------------------
   Total cost of revenues                                         15,311                 12,127                10,163

Gross profit                                                      45,499                 50,231                37,102

Operating expenses:
   Selling and marketing                                          36,426                 31,589                25,223
   Research and development                                       10,292                  8,643                 7,719
   General and administrative                                      6,054                  5,619                 4,596
   Restructuring                                                     945                    -                     -
----------------------------------------------------------------------------------------------------------------------
   Total operating expenses                                       53,717                 45,851                37,538
----------------------------------------------------------------------------------------------------------------------
Operating income (loss)                                           (8,218)                 4,380                  (436)
Other income, net                                                  1,117                    978                 1,333
----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes                                 (7,101)                 5,358                   897
Provision  for income taxes                                           43                    535                    97
----------------------------------------------------------------------------------------------------------------------
Net income (loss)                                                $(7,144)               $ 4,823                $  800
----------------------------------------------------------------------------------------------------------------------

Net income (loss) per share - (note A)

Net income (loss) per share - basic                               $(0.25)               $  0.17               $  0.03

Weighted average number of
common  shares outstanding - basic                                28,362                 27,756                27,050
----------------------------------------------------------------------------------------------------------------------

Net income (loss) per share - diluted                             $(0.25)               $  0.17               $  0.03

Weighted average number of common and common equivalent
shares outstanding - diluted                                      28,362                 29,064                29,242
----------------------------------------------------------------------------------------------------------------------

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

</TABLE>
                                       18
<PAGE>

eXcelon Corporation
(formerly Object Design, Inc.)
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>

<CAPTION>

-------------------------------------------------------------------------------------------------------------------------------
                                                                                        Year Ended December 31,
                                                                              1999                 1998                 1997
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                   <C>                    <C>
Cash flows from operating activities:

   Net income (loss)                                                       $ (7,144)             $ 4,823                $ 800
   Adjustments to reconcile net income (loss) to net
     cash provided by (used for) operating activities:
     Depreciation and amortization                                            3,513                2,144                2,098
     Bad debt expense                                                         1,007                  899                  648
     Other                                                                      276                  106                  105
Changes in operating assets and liabilities:

     Accounts receivable                                                        679               (2,196)              (3,472)
     Prepaids and other current assets                                         (200)                 145                 (213)
     Other assets                                                              (286)                  (7)                (101)
     Accounts payable and accrued expenses                                    1,415                2,857                   41
     Deferred revenue                                                         2,344                1,369                  (95)
------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities                          1,604               10,140                 (189)
------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:

     Capital expenditures                                                    (3,027)              (2,354)              (2,532)
     Purchased software                                                      (1,151)              (2,675)                (202)
     Purchases of marketable securities                                     (13,048)             (12,527)              (5,801)
     Proceeds from maturities and sales of
        marketable securities                                                12,898                5,323               14,324
     Purchase of minority interest                                                -                    -                  (83)
------------------------------------------------------------------------------------------------------------------------------
Net cash (used for) provided by investing activities                         (4,328)             (12,233)               5,706
------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:

     Proceeds from exercise of stock options                                  2,025                1,048                  911
     Repayment of advances to stockholders                                        -                  200                    -
     Purchase of treasury stock                                                (247)                (251)                   -
     Principal payments on long-term borrowings                                 (13)                 (64)                 (95)
------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                     1,765                  933                  816
------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash                                         (40)                (339)                (940)
Net change in cash and cash equivalents                                        (999)              (1,499)               5,393
Cash and cash equivalents, beginning of year                                 14,846               16,345               10,952
------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                                     $ 13,847             $ 14,846             $ 16,345
------------------------------------------------------------------------------------------------------------------------------

Supplemental cash flow information:

     Interest paid                                                         $     6                $   5                 $  36
     Income taxes paid                                                          95                  153                    91
------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of non-cash transactions:
     Equipment purchased under capital leases
                                                                           $    -                 $  -                  $ 272
------------------------------------------------------------------------------------------------------------------------------

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

</TABLE>
                                       19
<PAGE>

eXcelon Corporation
(formerly Object Design, Inc.)
Consolidated Statements of Stockholders' Equity
(in thousands)

<TABLE>
<CAPTION>
                                                                                   Accumulated
                                                  Additional                       Other
                                           Common   Paid-In  Treasury Accumulated Comprehensive Advances to            Comprehensive
                                           Stock    Capital   Stock      Deficit  Income(Loss)  Stockholders Total     Income (Loss)
                                           -----    -------   ------     -------  ------------  ------------ -----     -------------
<S>                                         <C>    <C>       <C>       <C>          <C>       <C>       <C>                <C>
Balance at December 31, 1996                 $27    $62,837   $   -     $(33,533)    $(211)    $(887)    $28,233
 Exercise of stock options                              911                                                  911
 Amortization of unearned compensation                   91                                                   91
 Net unrealized loss on marketable securities                                         $(15)                  (15)              (15)
 Foreign currency translation adjustment                                            (1,201)               (1,201)           (1,201)
 Net income                                                                  800                             800               800
                                                                                                                         -----------
Comprehensive loss                                                                                                        $  (416)
                                          ---------------------------------------------------------------------------    -----------
Balance at December 31, 1997                $ 27    $63,839   $   -     $(32,733)  $(1,427)     $(887)   $28,819
                                          ---------------------------------------------------------------------------
 Exercise of stock options                     1      1,048                                                1,049
 Amortization of unearned compensation                   90                                                   90
 Repayment stockholder loan                                                                       200        200
 Net unrealized loss on marketable securities                                           12                    12                12
 Foreign currency translation adjustment                                                 9                     9                 9
 Purchase of treasury stock shares                             (251)                                        (251)
 Net income                                                                4,823                           4,823             4,823
                                                                                                                         -----------
Comprehensive income                                                                                                       $ 4,844
                                          ---------------------------------------------------------------------------    -----------
Balance at December 31, 1998                $ 28    $64,977   $(251)    $(27,910)  $(1,406)     $(687)    $34,751
                                          ---------------------------------------------------------------------------
 Purchase of treasury stock shares                             (247)                                         (247)
 Exercise of stock options                     1      1,526     498                                         2,025
 Amortization of unearned compensation                  228                                                   228
 Forgiveness of stockholder loan                                                                  114         114
 Net unrealized loss on marketable securities                                          (67)                   (67)             (67)
 Foreign currency translation adjustment                                              (147)                  (147)            (147)
 Net loss                                                                 (7,144)                          (7,144)          (7,144)
                                                                                                                         -----------
Comprehensive loss                                                                                                         $(7,358)
                                          ---------------------------------------------------------------------------    -----------
Balance at December 31, 1999                $ 29    $66,731   $  -      $(35,054)  $(1,620)     $(573)    $29,513
                                          ---------------------------------------------------------------------------



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

</TABLE>
                                         20
<PAGE>

eXcelon Corporation
(formerly Object Design, Inc.)
Notes to Consolidated Financial Statements

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BUSINESS

eXcelon  Corporation  (formerly  Object Design,  Inc.) is a leading  provider of
software    infrastructure    and   services   for   building   and    deploying
business-to-business  solutions  that are  built  for  change,  or  Dynamic  B2B
Solutions.  Our solutions  enable companies to broaden their trading network and
integrate their business processes more closely with suppliers,  customers,  and
partners through  real-time  exchange and coordination of business  information,
content, and transactions.  Our products are marketed and sold worldwide through
our direct sales  force,  systems  integrators,  independent  software  vendors,
international  distributors and other channel  partners.  We operate in a single
industry segment:  computer  software and related services.  In January 2000, we
changed our legal name from Object Design, Inc to eXcelon Corporation.

BASIS OF PRESENTATION

The consolidated  financial statements include the parent company and its wholly
owned  subsidiaries,  including those operating  outside the United States.  All
significant  intercompany  balances and transactions have been eliminated in the
financial statements.  Certain  reclassifications  have been made for consistent
presentation.  We prepare our financial  statements under accounting  principles
generally  accepted  in the  United  States  that  require  management  to  make
estimates  and  assumptions  that  affect the amounts  reported  and the related
disclosures. Actual results could differ from these estimates.

CASH EQUIVALENTS AND MARKETABLE SECURITIES

Our cash is invested in debt instruments of financial  institutions,  government
entities,  corporations,  and money market funds. We have established guidelines
relative to credit ratings,  diversification and maturities that are intended to
maintain low investment  risk and  liquidity.  Cash  equivalents  include highly
liquid investments with maturity periods of three months or less when purchased.
Short-term  investments  include those  investments with maturities in excess of
three  months  but less  than one year.  Marketable  securities  are those  with
maturities in excess of one year. Cash equivalents and short-term and marketable
securities  are classified as available for sale and reported at fair value with
unrealized  gains and losses included in stockholders'  equity.  We have not had
any significant realized losses related to our investments.

PROPERTY AND EQUIPMENT

Our property and equipment are stated at cost. We provide for depreciation using
the  straight-line  method  over the  estimated  useful  lives of the  assets as
follows:

ASSET CLASSIFICATION             ESTIMATED USEFUL LIFE

Computer equipment                   3-4 years
Purchased computer software            4 years
Office equipment                       4 years
Furniture and fixtures                 5 years
Leasehold  improvements          Shorter of lease term or estimated useful life.

Maintenance  and repairs are charged to expense as incurred.  Upon retirement or
sale, the cost of the asset disposed of and the related accumulated depreciation
are removed  from the  accounts  and any  resulting  gain or loss is credited or
charged to income.

REVENUE RECOGNITION

Our revenue is recognized in accordance  with the provisions of AICPA  Statement
of Position 97-2 "Software Revenue  Recognition."  Revenue from software license
fees is  recognized  when there is evidence of an  arrangement,  the product has
been delivered,  fees are fixed and determinable,  and collection of the related
receivable  is  deemed  probable  by  management.  Revenue  from  sales  through
distributors is recorded net of distributor  commissions.  Maintenance  revenue,
including  those  bundled  with  the  initial  license  fee,  are  deferred  and
recognized ratably over the service period,  generally one-year.  Consulting and
training service revenue is recognized as the services are performed.


                                         21
<PAGE>

CONCURRENT TRANSACTIONS

We  occasionally  enter  into  concurrent  transactions  in which  our  software
licenses are exchanged for products or services. These transactions are recorded
at the  estimated  fair market value of the product or service  received  and/or
software license value. In 1998, we purchased from our customers $2.5 million of
technology that will be incorporated in our products.  These customers purchased
products from us that  accounted for $2.0 million of software  license  revenues
during the year.  Management  believes that these transactions were entered into
under  normal  commercial  terms and  reflect  the fair value of the  technology
received and the software licensed.

FOREIGN CURRENCY

For our foreign  operations,  the  functional  currency  is the local  currency.
Assets and  liabilities  are  translated at rates in effect at the balance sheet
date and  translation  adjustments  are  recorded in  stockholders'  equity.  We
translate  statement  of  operations  amounts at average  rates for the  period.
Transaction  gains and losses are recorded in other  expense in the statement of
operations.

CONCENTRATIONS OF CREDIT RISK

The  amounts  reflected  in the  consolidated  balance  sheets for cash and cash
equivalents,  accounts  receivable,  and accounts payable approximate their fair
value due to their short  maturities.  Financial  instruments  that  potentially
subject us to concentration of credit risk consist  primarily of investments and
trade  receivables.  Our cash, cash  equivalents,  and investments are held with
financial  institutions with high credit  standings.  We sell to a broad base of
customers  representing various geographic locations and industries.  We perform
ongoing credit  evaluations of our customers,  but do not require  collateral or
other  security to support our customer  receivables.  We maintain  reserves for
potential credit losses, and such losses have been within our expectations.

RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS

Research and development  expenditures are charged to operations as incurred. We
consider that  technological  feasibility  has been  established  once a working
model  of a  product  has  been  produced  and  tested.  To  date,  we have  not
capitalized software development costs after technological  feasibility has been
established   since  costs   incurred   subsequent  to  the   establishment   of
technological feasibility have not been material.

INCOME TAXES

Our income tax expense includes applicable U.S. and international  income taxes.
Certain  items of  income  and  expense  are not  reported  in tax  returns  and
financial  statements in the same year. The tax effects of these differences are
reported  as  deferred  tax  assets  and  liabilities.  Deferred  tax assets are
recognized, net of valuation allowances, for the estimated future tax effects of
deductible   temporary   differences   and  tax   operating   loss  and   credit
carryforwards.  Changes in deferred tax assets and  liabilities  are recorded in
the provision for income taxes. We have recorded a valuation  allowance  against
the net deferred tax assets, based upon the available evidence,  that it is more
likely  than  not  that  some or all of the  deferred  tax  assets  will  not be
realized.  We evaluate  the  recoverability  of the  deferred tax assets and the
level of the  valuation  allowance on a quarterly  basis.  At such time as it is
determined  that it is more  likely  than  not  that  deferred  tax  assets  are
realizable, the valuation allowance will be appropriately reduced.

PURCHASED SOFTWARE

Purchased  software includes the cost of purchased third party software,  net of
accumulated  amortization.  Amortization  is  provided  using the  straight-line
method over  periods  ranging from two to five years.  Accumulated  amortization
amounted to $1,868,000 and $469,000 at December 31, 1999 and 1998, respectively.

IMPAIRMENT OF LONG-LIVED ASSETS

We  periodically  evaluate the  recoverability  of our long-lived  assets.  This
evaluation  consists of comparison of the carrying  value of the assets with the
assets'  expected future cash flows,  not discounted and without interest costs.
Estimates of expected  future cash flows  represent  management's  best estimate
based on reasonable and supportable assumptions and projections. If the expected
future cash flows,  not  discounted  and without  interest  charges,  exceed the
carrying value of the asset, no impairment is recognized.  Impairment losses are
measured as the difference  between the carrying value of long-lived  assets and
the fair value, based on discounted future cash flows of the related asset.



                                         22
<PAGE>

STOCK-BASED COMPENSATION

We measure compensation expense for our employee stock-based  compensation using
the  intrinsic  value  method and  provide pro forma  disclosures  of net income
(loss) as if the fair value method had been  applied in  measuring  compensation
expense.  Under  the  intrinsic  value  method  of  accounting  for  stock-based
compensation,  when the exercise  price of options  granted to employees is less
than the fair  value of the  underlying  stock on the grant  date,  compensation
expense is recognized over the applicable vesting period.

NET INCOME (LOSS) PER SHARE

Basic net income  (loss) per share is computed by dividing net income  (loss) by
the weighted-average number of common shares outstanding for the period. Diluted
income  (loss) per share is computed by dividing net income (loss) by the sum of
the weighted-average number of common shares outstanding for the period plus the
number of common  shares  issuable  upon the assumed  exercise  of all  dilutive
potential common shares,  such as stock options.  The following is a calculation
of basic and diluted net income (loss) per share:

(in thousands, except per share amounts):

<TABLE>
<CAPTION>

BASIC NET INCOME (LOSS) PER SHARE                               1999             1998              1997
                                                                ----             ----              ----
<S>                                                        <C>               <C>                <C>
Net income (loss)                                           $ (7,144)         $ 4,823              $800

Weighted average common shares outstanding                    28,362           27,756            27,050

Basic net income (loss) per share                           $  (0.25)          $ 0.17            $ 0.03

Diluted net income (loss) per share

Net income (loss)                                           $ (7,144)         $ 4,823              $800

Weighted average common shares outstanding                    28,362           27,756            27,050
Stock options (dilutive)                                           -            1,308             2,192
                                                            ---------           -----             -----
Total shares                                                  28,362           29,064            29,242

Diluted net income (loss) per share                         $  (0.25)          $ 0.17            $ 0.03

</TABLE>

Options to purchase 3,977,643, 1,800,941 and 364,894 shares of Common Stock were
outstanding during 1999, 1998 and 1997,  respectively,  but were not included in
the  computations of diluted earnings per share as the inclusion of these shares
would have been anti-dilutive.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101  summarizes  certain of the  staff's  views in applying  generally  accepted
accounting  principles to revenue recognition in financial  statements.  We have
not yet  completed  our  evaluation  of the impact of the  adoption  of this new
standard; however, it is not expected to have a material impact on our financial
position and results of operations.

In December 1998, the American  Institute of Certified Public Accountants issued
Statement  of  Position  98-9,  "Modification  of  SOP  97-2,  Software  Revenue
Recognition, With Respect to Certain Transactions" ("SOP 98-9"), which addresses
software  revenue   recognition  as  it  applies  to  certain   multiple-element
arrangements.  SOP 98-9 also amends SOP 98-4, "Deferral of the Effective Date of
a  Provision  of SOP 97-2," to extend the  deferral  of  application  of certain
provisions  of SOP 97-2 through  fiscal  years  beginning on or before March 15,
1999. All other  provisions of SOP 98-9 are effective for  transactions  entered
into in fiscal years  beginning  after March 15,  1999.  We will comply with the
requirements  of this SOP as they  become  effective  and do not expect that our
revenues and earnings will be materially affected.

On June 15, 1998, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting Standard No. 133,  "Accounting for Derivative  Instruments
and Hedging  Activities"  ("SFAS  133").  SFAS 133 is effective for fiscal years


                                         23
<PAGE>

beginning after June 15, 2000. SFAS 133 requires that all derivative instruments
be recorded on the balance sheet at their fair values. Changes in fair values of
derivatives are recorded each period in current earnings or other  comprehensive
income,  depending  on whether a  derivative  is  designated  as part of a hedge
transaction and, if it is, depending on the type of hedge  transaction.  We have
not yet  completed  our  evaluation  of the impact of the  adoption  of this new
standard; however, it is not expected to have a material impact on our financial
position and results of operations.

B. PROPERTY AND EQUIPMENT:

Our property and equipment consisted of the following, in thousands:

                                                           December 31,
                                                      1999              1998
                                                      ----              ----
Computer and computer-related equipment              $ 9,224          $ 8,357
Office equipment and furniture                         1,391            1,390
Purchased computer software                            2,149            2,197
Leasehold improvements                                 1,738              914
Automobiles                                               65               67
                                                     -------           ------
                                                      14,567           12,925
Less accumulated depreciation and  amortization       (9,398)          (8,709)
                                                     --------          -------
                                                    $  5,169           $ 4,216
                                                    ========           =======

At December  31, 1999 and 1998,  property  and  equipment  included  $65,000 and
$67,000  of  automobiles  under  capital  leases.  Accumulated  amortization  of
automobiles  under capital leases at December 31, 1999 and 1998 totaled  $65,000
and $44,000  respectively.  Depreciation expense was $2,063,000,  $1,897,000 and
$2,098,000 for the years ended December 31, 1999, 1998 and 1997, respectively.

C. MARKETABLE SECURITIES:

The fair values of our  investments  have been  determined  through  information
obtained  from market  sources and  management  estimates.  We use the  specific
identification  cost method to determine the gross  realized gains and losses on
the sale of our securities. Realized gains and losses on the sale of investments
were  immaterial  for  all  periods  presented  in  the  consolidated  financial
statements.  Net  unrealized  gains and losses are  recorded as other  equity in
stockholders'  equity.  Marketable  securities held as available for sale can be
summarized as follows, in thousands:

<TABLE>
<CAPTION>
                                                                                     Gross       Gross
        December 31, 1999                                     Amortized Estimated   Unrealized  Unrealized
                                                                Cost     Fair Value    Gains      Losses
                                                              --------- ----------- ----------- -----------
        <S>                                                  <C>          <C>          <C>       <C>
         Government obligations                                $ 1,685     $ 1,685      $ --        $  -
         Corporate obligations                                   9,451       9,389         -        (62)
         Other                                                   2,755       2,755         -           -
                                                                 -----       -----      ----      ------
              Total Investments                               $ 13,891    $ 13,829       $ -      $( 62)
                                                              ========    ========       ===      ======
        Amounts included in:

        Cash and cash equivalents                              $ 3,913     $ 3,913      $ --      $   -
        Short-term investments                                   5,331       5,327        --         (4)
        Marketable securities, non-current                       4,647       4,589        --        (58)
                                                                 -----       -----      ----      ------
             Total                                            $ 13,891    $ 13,829       $ -      $( 62)
                                                              ========    ========       ===      ======
</TABLE>
                                         24
<PAGE>
<TABLE>
<CAPTION>
                                                                                      Gross       Gross
        December 31, 1998                                     Amortized Estimated   Unrealized  Unrealized
                                                                Cost     Fair Value    Gains      Losses
                                                              --------- ----------- ----------- -----------
         <S>                                                 <C>          <C>           <C>        <C>
          U.S. Government obligations                            $ 750      $  750        $ --        $  -
          Other government obligations                           2,725       2,725           -           -
          Corporate obligations                                 10,740      10,744           5         (1)
          Other                                                  2,300       2,300           -           -
                                                                 -----       -----         ---       -----
              Total Investments                               $ 16,515    $ 16,519         $ 5       $ (1)
                                                              ========    ========         ===       =====

        Amounts included in:

        Cash and cash equivalents                             $  6,754    $  6,754        $ --        $  -
        Short-term investments                                   8,744       8,745           2         (1)
        Marketable securities, non-current                       1,017       1,020           3           -
                                                                 -----       -----        ----       -----
             Total                                            $ 16,515    $ 16,519         $ 5       $ (1)
                                                              ========    ========         ===       =====
</TABLE>

At December 31, 1999, the contractual  maturities of our short-term  investments
available for sale range from over 3 months to 12 months.  At December 31, 1999,
our  non-current  marketable  securities  available  for sale  have  contractual
maturities through May 2001.

D. CREDIT AGREEMENT

We  have  a  $2  million  bank  line  of  credit  expiring  in  September  2000.
Availability under the line of credit is based on a formula of eligible accounts
receivable,  subject to compliance with minimum adjusted quick ratio and minimum
tangible net worth covenants.  Borrowings would be collateralized by our assets,
excluding intellectual property, and bear interest at the bank's prime rate. The
line of credit  prohibits  payments of cash  dividends on our Common  Stock.  At
December 31, 1999, no  borrowings  were  outstanding,  and we were in compliance
with the bank's  covenants.  A letter of credit in the amount of $450,000  under
the line of credit was outstanding at that date.

E. COMMITMENTS AND CONTINGENCIES

CAPITAL AND OPERATING LEASES

We lease office facilities and certain equipment under operating leases expiring
at various dates through 2005. In addition to rent, certain leases require us to
pay directly for taxes,  insurance,  maintenance,  and other operating expenses.
Rent expense under operating leases was approximately $3.8 million, $3.4 million
and $2.3  million  for the  years  ended  December  31,  1999,  1998  and  1997,
respectively.  At December  31, 1999 our future  minimum  lease  payments  under
capital and operating leases are as follows, in thousands:

                                                             Capital   Operating
                                                             Leases     Leases

    2000                                                    $    17    $   2,533
    2001                                                          -        2,150
    2002                                                          -        2,067
    2003                                                          -          703
    2004                                                          -          216
    2005                                                          -           19
                                                            -------    ---------
    Total future minimum lease payments                          17    $   7,688
                                                                       =========
    Less amount representing interest                             -
                                                            -------
    Present value of net future minimum lease payments           17
    Less current portion of capital lease obligations            17
                                                            -------
    Long-term portion of capital lease obligations          $     -
                                                            =======

F. STOCKHOLDERS' EQUITY:

PREFERRED STOCK

We are authorized to issue up to 5,000,000 shares of Preferred  Stock,  $.01 par
value,  containing  rights and terms to be  determined by our Board of Directors
without the need for further shareholder  approval.  As of December 31, 1999 and
1998, there were no issued or outstanding shares of Preferred Stock.



                                         25
<PAGE>

STOCK REPURCHASE PROGRAM

In November 1998, our Board of Directors  authorized a stock repurchase  program
whereby we could  purchase up to  2,000,000  shares of our Common  Stock to meet
requirements  of our employee stock option and stock purchase  plans. No minimum
number or value of shares to be repurchased  has been fixed nor has a time limit
as to the  duration  of the  program  been  established.  During the years ended
December  31,  1999 and 1998,  we  repurchased  37,000 and 39,700  shares of our
Common  Stock  at a cost  of  $247,000  and  $251,000,  respectively.  All  such
repurchased  shares were  subsequently  reissued  through  employee stock option
exercises during 1999.

EMPLOYEE STOCK PURCHASE PLAN

We offer an employee stock purchase plan for all eligible  employees.  Under the
plan up to 500,000  shares of our Common  Stock may be  purchased  at 85% of the
lower of the fair market  value of the stock on the first day or the last day of
each six-month  offering  period.  Employees may elect to have up to 6% of their
base pay withheld and applied toward the purchase of shares in each offering, up
to a  maximum  of  $25,000  withheld  in any year.  In 1999 and 1998,  we issued
157,267  and  104,835  shares at  average  purchase  prices of $3.09 and  $4.40,
respectively.  At December 31,  1999,  132,748  shares were  reserved for future
issuance under the plan.

STOCK OPTION PLANS

We have four stock option plans,  including two stock option plans  currently in
effect  under  which  future  grants  may be  issued.  In total  for all  plans,
16,182,000  shares  have been  authorized  for  grant.  Our 1996  Incentive  and
Nonqualified  Stock Option Plan ("1996  Plan")  authorizes  grants of options to
purchase up to 3,100,000 shares. The 1996 Plan provides for authorized shares to
increase by 300,000  shares  annually up to a maximum of 3,700,000  shares.  Our
1997  Nonqualified  Stock  Option Plan  ("1997  Plan")  authorizes  the grant to
employees  of the Company of  nonqualified  options to purchase up to  4,500,000
shares.  Stock options  generally have a maximum term of ten years and vest over
periods ranging from one to five years. At December 31, 1999,  total  authorized
but  unissued  shares  under our stock  option  plans were  7,978,930,  of which
1,130,626 options were available for grant.

In October  1998,  our Board of Directors  approved a  one-for-one  stock option
exchange  program that provided  employees  the  opportunity  to exchange  stock
options  previously  granted for new options with a current market price and new
vesting  period.   Executive   officers  and  directors  were  not  eligible  to
participate in the program.  The new options were priced at $3.94 based upon the
closing  price of our stock as reported by NASDAQ on October 28,  1998,  vest in
equal  annual  installments  over four years from October 28, 1998 and expire on
October 28, 2008. A total of 1.3 million  shares with  exercise  prices  ranging
from $5.19 to $16.50 per share were exchanged under the program. The exchange of
such options is  presented  in the  following  table as both  cancellations  and
subsequent grants for the year ended December 31, 1998.

Stock option activity for the years ended December 31, 1999, 1998 and 1997 is as
follows:

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                    1999                          1998                         1997
-----------------------------------------------------------------------------------------------------------------

                           Number        Weighted         Number          Weighted      Number         Weighted
                             Of           Average           Of             Average        of           Average
                          Options      Exercise Price     Options         Exercise     Options      Exercise Price
                          -------      --------------     -------          Price       -------      --------------
                                                                          --------
<S>                       <C>                 <C>         <C>               <C>       <C>              <C>
Outstanding at
  Beginning  of year       4,675,344           $ 4.16      3,813,144         $ 3.84    3,266,991        $ 1.90
Granted                    5,111,050             4.74      3,548,150           5.35    1,923,500          7.01
Cancelled                 (2,186,151)            5.74     (2,148,214)          6.34     (710,177)         0.63
Exercised                   (751,939)            2.04       (537,736)          0.98     (667,170)         7.00
                            ---------                       ---------                   ---------
Outstanding at
   end of year             6,848,304           $ 4.32      4,675,344         $ 4.16    3,813,144        $ 3.84
                           =========                       =========                   =========
Exercisable                1,698,629           $ 3.57      1,234,433         $ 2.66    1,151,686        $ 1.37
                           =========                       =========                   =========
</TABLE>


                                         26
<PAGE>


The following table summarizes  information  about stock options  outstanding at
December 31, 1999:

<TABLE>
<CAPTION>

            Options Outstanding                              Options Exercisable
--------------------------------------------------------     ------------------------------------------------
                                           Weighted Avg.        Weighted
Range of Exercise     Number of Shares       Remaining            Avg.            Number         Weighted Avg.
Prices                  Outstanding        Contract Life     Exercise Price    Exercisable       Exercise Price
------                  -----------                 ----                      -----------       --------------
<S>                          <C>                <C>            <C>             <C>                <C>
$ 0.01  - $0.01                  88,463          5.92           $  0.01            60,403           $ 0.01
  0.02  -  1.00                 477,814          8.10              0.82           173,664             0.51
  1.01  -  2.00                 344,192          6.24              2.00           314,530             2.00
  2.53  -  2.75               1,686,000          9.67              2.74           400,000             2.75
  3.00  -  3.93               1,469,303          8.90              3.79           197,880             3.81
  3.94  -  6.44               1,463,614          8.86              5.31           302,858             5.53
$ 6.50 - $12.13               1,318,918          8.97              8.01           249,294             7.25
                              ---------                                         ---------
Total                         6,848,304          8.87           $  4.32         1,698,629           $ 3.57

</TABLE>

VALUATION OF STOCK PLANS

As  permitted by Statement  of  Financial  Accounting  Standards  No. 123 ("SFAS
123"),  we have chosen to continue to account for our  stock-based  compensation
plans  using  the  intrinsic  value  method.  Accordingly,  we  have  recognized
compensation  expense only for options  granted with  exercise  prices less than
fair market value on the dates of grant.  An  aggregate of 450,000  options were
granted to employees below fair market value during 1997 and 1999,  resulting in
compensation  expense of $228,000,  $90,000 and $91,000 in 1999,  1998 and 1997,
respectively.  Pursuant  to SFAS 123,  had the fair value  method of  accounting
using the  Black-Scholes  pricing model been applied to our stock plans, the pro
forma impact would have been as follows, in thousands except per share amounts:

<TABLE>
<CAPTION>
                                                                     1999             1998            1997
                                                                     ----             ----            ----
<S>                                                             <C>                <C>              <C>
      As Reported

        Net income                                               $(7,144)           $4,823            $800
        Net income per share - basic                               (0.25)             0.17            0.03
        Net income per share - diluted                             (0.25)             0.17            0.03
      Pro Forma
        Net income                                               (12,635)            2,466             403
        Net income per share - basic                               (0.45)             0.09            0.01
        Net income per share - diluted                             (0.45)             0.08            0.01

The fair  value of these  options at the date of grant was  estimated  using the
following assumptions:
                                                                     1999             1998            1997
                                                                     ----             ----            ----
        Risk free interest rate                                      6.7%             5.5%            6.5%
        Dividend yield                                                 0%               0%              0%
        Expected volatility                                          108%              80%             75%
        Expected life                                             5 years          5 years         5 years
</TABLE>

The  weighted  average  fair value of the options  granted at fair market  value
during 1999, 1998 and 1997 was $4.02,  $3.37 and $3.99 per share,  respectively.
The weighted  average fair value of the options  granted  with  exercise  prices
below  fair  market  value  during  1999 and 1997 was $4.40 and $6.10 per share,
respectively.  In 1999 the fair market value of the employee stock purchase plan
was estimated using the following assumptions:  4.63% weighted average risk free
rate, 0% dividend  yeild,  100%  volatility  and a six month  expected life. The
weighted average fair value of the purchase rights for 1999 was $1.57 per share.
The pro forma  effect of applying  SFAS 123 for prior  years is not  necessarily
representative of the pro forma effect to be expected in future years.

ADVANCES TO STOCKHOLDERS

In 1996,  options to purchase 2,760,000 shares of our Common Stock issued to two
officers in December 1995 were  accelerated,  and the officers  exercised  these
options in exchange for cash of $2,760 and full recourse promissory notes in the
amount of $687,000.  The  promissory  notes bear interest at 7.0% and are due on
the earlier of April 1, 2001 or upon  termination  of  employment.  In 1999,  in
connection with the employment  termination of one officer, we agreed to forgive
his promissory note in the principal  amount of $115,000,  plus accrued interest
of $6,000, totaling $121,000, which was included in a restructuring charge (Note
G).


                                         27
<PAGE>

G.       RESTRUCTURING CHARGE:

In September 1999, we recorded a restructuring  charge in the amount of $945,000
in  connection  with a company  re-positioning.  The charge was  composed of the
following, in thousands:

        Severance                                          $ 811
        Office closure                                        64
        Marketing program cancellation                        70
                                                           -----

        Total                                              $ 945
                                                           =====

The severance cost relates to eleven involuntarily  terminated employees.  Prior
to their  termination,  seven employees had been included in sales expense,  two
had been  included  in cost of  services,  one had been  included in general and
administrative  expense,  and one had been  included in marketing  expense.  All
affected  employees  were  terminated  in 1999.  During 1999,  cash  payments in
settlement  of  associated  obligations  amounted  to  $831,000.  The  remaining
liability of $114,000 at December  31, 1999 is included in accrued  expenses and
is  scheduled  to be  settled in 2000  through  cash  payments  under one of the
employment severance agreements.

H. INCOME TAXES:

Our income (loss) before income taxes is as follows, in thousands:

                                          Year Ended December 31,
                               --------------------------------------

                                  1999          1998          1997
                               --------------------------------------
         Domestic               $(4,936)      $ 6,958       $ 2,190
         Foreign                 (2,165)       (1,600)       (1,293)
                                 ------        ------        ------
                                $(7,101)       $ 5,358      $   897
                                ========       =======      =======

Our provision for income taxes consists of the following, in thousands:

                             Year Ended December 31,

                                  -----------------------------------------
                                      1999         1998           1997
                                  -----------------------------------------
         Foreign                   $  43          $   1          $  (2)
         Federal                       -            486             75
         State                         -             48             24
                                  -----------------------------------------
                                   $  43          $ 535          $  97
                                  =========================================

The following is a reconciliation  between the U.S.  federal  statutory rate and
our effective tax rate:

                                               ---------------------------------
                                                    Year Ended December 31,

                                               ---------------------------------
                                                  1999         1998        1997
                                               ---------------------------------
      U.S. federal statutory rate                (34.0)%      34.0%        34.0%
      State taxes, net of federal benefit            -         1.0          1.8
      Foreign tax difference from U.S. rate        2.3        (1.6)        (8.0)
      Non-deductible expenses                      1.0         3.1         10.8
      Previously unbenefitted net operating
       loss carryforwards                            -       (34.3)      (102.8)
      Change in valuation allowance               30.1         7.8         75.0
                                               ---------------------------------
                                                  (0.6)%      10.0%        10.8%
                                               =================================

The  significant  temporary  differences  that  create  deferred  tax assets and
liabilities are shown below, in thousands.

                                                              December 31,
                                                      --------------------------
                                                           1999         1998
                                                      --------------------------
         Deferred tax assets:
           Net operating loss carryforwards           $  12,919      $  11,422
           Tax credit carryforwards                       3,511          2,866
           Reserves not currently deductible                825            840
           Other                                            156            148
           Depreciation and amortization                    210            210
                                                      --------------------------
                                                         17,621         15,486
         Valuation allowance                            (17,621)       (15,486)
                                                      --------------------------
         Net deferred tax assets                      $      -       $      -
                                                      ==========================


                                       28
<PAGE>

As of December 31, 1999, we had federal net operating  loss ("NOL") and research
and  experimentation  credit  carryforwards  of  approximately  $28,500,000  and
$2,600,000, respectively, which may be available to offset future federal income
tax  liabilities  and expire at various  dates  through 2019. We have recorded a
deferred  tax  asset of  approximately  $1,400,000  reflecting  the  benefit  of
deductions  from the exercise of stock  options.  This  deferred  asset has been
fully  reserved  until it is more  likely  than not  that the  benefit  from the
exercise of stock  options  will be realized.  The benefit from this  $1,400,000
deferred tax asset will be recorded as a credit to  additional  paid-in  capital
when realized.  As required by Statement of Financial  Accounting  Standards No.
109, we have  evaluated  the  positive and  negative  evidence  bearing upon the
realization of its deferred tax assets,  which are comprised  principally of net
operating loss and research and experimentation  credit  carryforwards.  We have
determined  that it is more  likely  than not that the  benefits  of federal and
state deferred tax assets will not be recognized  and, as a result,  a valuation
allowance of  approximately  $17,621,000  has been  established  at December 31,
1999.

Ownership changes, as defined in the Internal Revenue Code, may have limited the
amount of net  operating  loss  carryforwards  that can be utilized  annually to
offset future taxable income.  Subsequent ownership changes could further affect
the limitation in future years.

As of December 31,  1999,  our foreign  subsidiaries  had NOL  carryforwards  of
approximately $6,700,000, which expire over various periods.

I.  401(K) PLAN:

We sponsor a defined  contribution  plan under  Section  401(k) of the  Internal
Revenue  Code.  This plan covers all eligible (as  defined)  employees.  Through
1999, we have made no matching  contributions to the plan. Beginning in 2000, we
will match 50% of the first 6% of  eligible  employees'  contributions  up to an
annual maximum of $2,000 per employee.

J. RELATED PARTY TRANSACTIONS:

In  1998  and  1997,   related  party  revenues   derived  from  a  stockholder,
International  Business Machines Corporation  ("IBM"),  amounted to $308,000 and
$2,280,000, respectively. IBM ceased to be a related party in 1999.

K. GEOGRAPHIC DATA:

Sales  and  marketing   operations  outside  the  United  States  are  conducted
principally  through  foreign  sales  subsidiaries  in Europe and  Asia/Pacific.
Financial  information,  summarized  by  geographic  area,  is  as  follows,  in
thousands:

                                           Year ended December 31,

                                        1999          1998           1997
                                        ----          ----           ----
       REVENUES

         North America               $ 37,399        $ 37,939      $ 31,714
         United Kingdom                10,761          10,448         5,733
         Rest of Europe                 4,356           7,395         5,486
         Asia Pacific                   8,294           6,576         4,332
                                      -------        --------      --------
          Total Revenues             $ 60,810        $ 62,358      $ 47,265
                                     ========        ========      ========
       IDENTIFIABLE ASSETS

         North America               $ 47,298        $ 49,758      $ 48,723
         United Kingdom                 4,843           4,321         5,786
         Rest of Europe                 1,860           4,254         3,496
         Asia Pacific                   3,192           4,960         4,628
         Eliminations                  (9,788)        (14,301)      (23,755)
                                       -------       --------       --------
          Total identifiable assets  $ 47,405        $ 48,992      $ 38,878
                                      =======        ========      ========

       OPERATING INCOME (LOSS)

         North America                $(6,039)      $  6,021        $   870
         United Kingdom                   (42)          (294)          (159)
         Rest of Europe                (1,669)        (1,009)          (995)
         Asia Pacific                    (468)          (338)          (152)
                                      --------       --------       --------
    Total operating income (loss)     $(8,218)       $ 4,380        $  (436)
                                      ========       =======        ========


                                       29
<PAGE>



L.       LEGAL PROCEEDINGS

We are also subject to various  legal  proceedings  and claims that arise in the
ordinary course of business.  We currently  believe that resolving these matters
will  not  have  a  material  adverse  impact  on  our  consolidated   financial
statements.

M.       QUARTERLY RESULTS OF OPERATIONS:
       (unaudited and in thousands, except per share amounts)

1999                                 First      Second      Third      Fourth
----                                Quarter     Quarter     Quarter    Quarter
                                    -------     -------     -------    -------
Revenue                            $13,108     $14,647     $15,643     $17,412
Gross profit                         9,705      11,067      11,502      13,225
Operating income (loss)             (2,274)     (1,954)     (3,410)       (580)
Net income                          (2,009)     (1,671)     (3,155)       (309)
Net income per share - basic         (0.07)      (0.06)      (0.11)      (0.01)
Net income per share - diluted       (0.07)      (0.06)      (0.11)      (0.01)


1998                                 First      Second      Third      Fourth
----                                Quarter     Quarter     Quarter    Quarter
                                    -------     -------     -------    -------
Revenue                             $13,026     $15,602    $16,628     $17,102
Gross profit                         10,057      12,531     13,571      14,072
Operating income (loss)                (172)        919      1,807       1,826
Net income                               25       1,034      1,867       1,897
Net income per share - basic           0.00        0.04       0.07        0.07
Net income per share - diluted         0.00        0.04       0.06        0.06



                                       30
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS
                         ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of eXcelon Corporation (formerly Object Design, Inc.):

Our audits of the consolidated  financial  statements  referred to in our report
dated  February  2, 2000 of eXcelon  Corporation  also  included an audit of the
financial  statement  schedule listed in Item 14(a)(2) of this Form 10-K. In our
opinion,  the financial  statement  schedule  presents  fairly,  in all material
respects,  the information  set forth therein when read in conjunction  with the
related consolidated financial statements.

PricewaterhouseCoopers LLP

Boston, Massachusetts
February 2, 2000










                                       31
<PAGE>




eXcelon Corporation
(Formerly Object Design, Inc.)
Schedule II-Valuation and Qualifying Accounts
(in thousands)

<TABLE>
<CAPTION>
                                       Balance at          Charged to         Charged to           Balance
                                       Beginning           Costs and           Other               End of
                                       of Period           Expenses           Accounts             Period
                                      -----------         -----------         ----------         -----------
<S>                                   <C>                  <C>                <C>                 <C>
Year ended December 31, 1999
  Allowance for doubtful accounts      $ 1,199              $ 1,007            $ (974)             $1,232

Year ended December 31, 1998
  Allowance for doubtful accounts          800                  899              (500)              1,199

Year ended December 31, 1997
  Allowance for doubtful accounts          823                  648              (671)                800

</TABLE>



                                       32
<PAGE>




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

Not Applicable

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information set forth under the captions  "Directors and Executive Officers"
and "Section 16(a) Beneficial Ownership Reporting  Compliance" in our Definitive
Proxy  Statement for the Annual  Meeting of  Stockholders  to be held on May 24,
2000, which is expected to be filed with the Securities and Exchange  Commission
not later than 120 days after the end of our fiscal year ended December 31, 1999
(the "Definitive Proxy Statement"), is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

The information set forth under the caption  "Remuneration of Executive Officers
and  Directors" in the  Definitive  Proxy  Statement is  incorporated  herein by
reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  information  set forth under the  caption  "Security  Ownership  of Certain
Beneficial   Owners  and  Management"  in  the  Definitive  Proxy  Statement  is
incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  set forth  under the  caption  "Certain  Transactions"  in the
Definitive Proxy Statement is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this Report:

     (1) FINANCIAL STATEMENTS

     Report of Independent Accountants
     Consolidated Balance Sheets as of December 31, 1999 and 1998
     Consolidated  Statements  of Income for the years ended  December 31, 1999,
     1998 and 1997
     Consolidated  Statements  of Cash Flows for the years  ended  December  31,
     1999, 1998 and 1997
     Consolidated  Statements  of  Stockholders'  Equity  for  the  years  ended
     December 31, 1999, 1998 and 1997
     Notes to Consolidated Financial Statements

     (2)  FINANCIAL STATEMENT SCHEDULES

         Schedule II - Valuation and Qualifying Accounts
         Report of Independent Accountants on Financial Statement Schedule

All other  schedules  are omitted  because the  required  information  is either
inapplicable or presented in the Consolidated Financial Statements.



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<PAGE>

      (3)  Exhibits

(a)      Exhibits

 *3.3       Amended and Restated Certificate of Incorporation
 *3.5       Amended and Restated By-Laws of the Company
 *4.1       Specimen certificate for Common Stock of the Company
 *10.1*     1989 Incentive and Nonqualified Stock Option Plan
 *10.2*     1995 Nonqualified Stock Option Plan
 *10.3*     1996 Incentive and Nonqualified Stock Option Plan
 *10.4*     1996 Employee Stock Purchase Plan
 *10.12     Lease dated  September 15, 1993 between the Company and 25 Mall Road
            Trust
 *10.13     First Amendment to Lease dated June 28, 1994 between the Company and
            25 Mall Road Trust
 *10.14     Second  Amendment  to Lease dated March 1, 1996  between the Company
            and 25 Mall Road Trust
 *10.15*    Employment Agreement dated December 21, 1995 between the Company and
            Robert N. Goldman,  as amended by Amendment to Employment  Agreement
            dated May, 1996
 *10.16*    Employment Agreement dated December 21, 1995 between the Company and
            Justin J. Perreault,  as amended by Employment  Agreement dated May,
            1996
 ##10.17*   Executive  Employment  Agreement dated November 19, 1998 between the
            Company and Lacey Brandt
 ##10.18*   Executive  Employment  Agreement dated November 19, 1998 between the
            Company and Kirk Bowman
 ##10.19*   Executive  Employment  Agreement dated November 19, 1998 between the
            Company and Brian Otis
 ##10.20*   Executive  Employment  Agreement dated November 19, 1998 between the
            Company and Lawrence Alston
 *10.21     Sixth Amended and Restated  Stockholders'  Agreement  dated February
            13, 1996, among the Company and certain of its stockholders
 *10.22     Amended and Restated IBM Stockholders'  Agreement dated May 14, 1993
            among  the  Company,  International  Business  Machines  Corporation
            ("IBM") and certain other stockholders of the Company, as amended by
            a Second  Amendment dated March 31, 1994, by a Third Amendment dated
            June 10, 1994 and by a Fourth Amendment dated February 14, 1996
 *10.23     Amended and Restated  Registration  Rights  Agreement dated June 29,
            1990 among the Company and certain of its  stockholders,  as amended
            by Amendment  No. 1 dated  October 1, 1990, by Amendment No. 2 dated
            July 29, 1991, by Amendment No. 3 dated March 12, 1992, by Amendment
            No. 4 dated April 12, 1993,  by Amendment  No. 5 dated May 14, 1993,
            by Amendment No. 6 dated March 31, 1994 and by Amendment No. 7 dated
            February 13, 1996
 *10.25     Internal Use and  Substrate  Agreement  dated April 10, 1993 between
            the Company and IBM
 *10.26     Break-Up Agreement dated April 10, 1993 between the Company and IBM
 *10.27     Escrow Agreement dated April 10, 1993 between the Company and IBM
 *10.28     Master Agreement dated April 10, 1993 between the Company and IBM
 *10.29     First  Amended  and  Restated   Agreement   Regarding   Confidential
            Information dated February 11, 1993 between Company and IBM
 **10.30    Loan and  Security  Agreement  dated  December  17, 1996 between the
            Company and Bank of Boston, as amended
 **10.31    $2,000,000  Revolving  Note dated  December  17, 1996 payable by the
            Company to Bank of Boston, as amended
 #10.32*    1997 Nonqualified Stock Option Plan
 #10.33     Third Amendment to Lease dated March 1, 1996 between the Company and
            25 Mall Road Trust
 ##10.34    Third  Amendment  to the  Loan and  Security  Agreement  and  Second
            Amendment to the Revolving  Note dated December 17, 1996 between the
            Company and Bank Boston
 ##10.35    Fourth  Amendment  to the  Loan and  Security  Agreement  and  Third
            Amendment to the Revolving  Note dated December 17, 1996 between the
            Company and Bank Boston
 ##10.36*   Executive  Employment  Agreement dated November 19, 1998 between the
            Company and Robert N. Goldman
 ##10.37*   Executive  Employment  Agreement dated November 19, 1998 between the
            Company and Justin J. Perreault
 ##10.38*   Amended and Restated Executive  Employment  Agreement dated February
            23, 1999 between the Company and Justin J. Perreault
 ##10.39*   Amended and Restated Executive  Employment  Agreement dated February
            23, 1999 between the Company and Robert N. Goldman
 +10.40     Fourth  Amendment  to Lease dated March 1, 1996  between the Company
            and 25 Mall Road Trust
 ++10.41*   Separation  Agreement and General  Release  dated  September 1, 1999
            between the Company and Justin J. Perreault
 ++10.42*   Separation  Agreement and General  Release  dated  September 1, 1999
            between the Company and Kirk Bowman
 ++10.43*   Amended and Restated Executive  Employment Agreement dated September
            2, 1999 between the Company and Robert N. Goldman
 ++10.44*   Executive  Employment  Agreement dated September 1, 1999 between the
            Company and Ross Hinchcliffe


                                       34
<PAGE>

 ++10.45*   Executive  Employment  Agreement dated September 1, 1999 between the
            Company and Satish Maripuri
 ++10.46*   Executive  Employment  Agreement  dated  May 19,  1999  between  the
            Company and Daniel E. O'Connor
 ++10.47    Asset  Purchase  Agreement  dated  September  30,  1999  between the
            Company and Transformis LLC
 ++10.48    Loan and Security  Agreement  dated  September  30, 1999 between the
            Company and Silicon Valley Bank
 21.1       List of Subsidiaries of the Company (filed herewith)
 23.1       Consent of PricewaterhouseCoopers LLP (filed herewith)
 27.1       Financial Data Schedule (filed herewith)

* Before an exhibit  number:  This exhibit is  incorporated  by reference to the
similarly  numbered exhibit filed as part of our Registration  Statement on Form
S-1, Securities and Exchange Commission File No. 333-05241.

** Before an exhibit  number:  This exhibit is  incorporated by reference to the
similarly  numbered exhibit to our Annual Report on Form 10-K for the year ended
December 31, 1996.

# Before an exhibit  number:  This exhibit is  incorporated  by reference to the
similarly  numbered exhibit to our Annual Report on Form 10-K for the year ended
December 31, 1997.

# # Before an exhibit  number:  This exhibit is incorporated by reference to the
similarly  numbered exhibit to our Annual Report on Form 10-K for the year ended
December 31, 1998.

+ Before an exhibit  number:  This exhibit is  incorporated  by reference to the
similarly  numbered  exhibit to our Quarterly Report on Form 10-Q for the period
ended June 30, 1999.

++ Before an exhibit  number:  This exhibit is  incorporated by reference to the
similarly  numbered  exhibit to our Quarterly Report on Form 10-Q for the period
ended September 30, 1999.

* After an exhibit number: Management contracts and compensatory arrangements.

 (b)   REPORTS ON FORM 8-K

The  Company did not file any Report on Form 8-K during the three  months  ended
December 31, 1999.




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<PAGE>
                                   SIGNATURES

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

                                           EXCELON CORPORATION
                                           (Formerly Object Design, Inc.)

Date:  March 30, 2000                       /s/ Robert N. Goldman
                                           -------------------------------------
                                           Robert N. Goldman
                                           President and Chief Executive Officer

Date:  March 30, 2000                       /s/ Lacey Brandt
                                           -------------------------------
                                           Lacey Brandt
                                           Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been  signed by the  following  persons in the  capacities  and on the dates
indicated.

       Signature                  Title                           Date
       ---------                  -----                           ----
/s/ Robert N. Goldman             President and Chief
--------------------------        Executive Officer
Robert N. Goldman                 (Principal Executive
                                  Officer)                        March 30, 2000

/s/ Lacey Brandt                  Chief Financial
--------------------------        Officer (Principal
Lacey Brandt                      Financial and Accounting
                                  Officer)                        March 30, 2000


/s/Gerald Bay                     Director                        March 30, 2000
--------------------------
Gerald Bay

/s/Arthur Marks                   Director                        March 30, 2000
--------------------------
Arthur Marks

/s/ Kevin Burns                   Director                        March 30, 2000
--------------------------
Kevin Burns

/s/ David Litwack                 Director                        March 30, 2000
--------------------------
David Litwack




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