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FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


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

For the Quarterly Period Ended September 30, 2002

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

Commission File Number 000-30389

EXE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                  
|----------------------------------------------------------------------- |  | -------------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 751719817
(I.R.S. Employer Identification Number)

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

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

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES  X    NO

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of
October 31, 2002.

Common stock, $0.01 par value, 46,059,766 shares outstanding.





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TABLE OF CONTENTS



|                                                   |                                                                                               |                                                        |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                     
|                                                   | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                                   |                                                                                               | CONSOLIDATED BALANCE SHEETS                           
|                                                   |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS                 
|                                                   |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                 
|                                                   |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|                                                   | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                   | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                                   | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION                        
|                                                   | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                                                   | ITEM 5. OTHER INFORMATION                                                                    
|                                                   | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                        
|CERTIFICATIONS                                    
|INDEX TO EXHIBITS                                 
|EX-10.1 Amended/Restated 1997 Incentive Stock Plan
|EX-99.1 Certification Pursuant to 18 USC Sec. 1350



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##### Table of Contents



EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q

|                               |  |                                                                                       |    |                                            |    |  |   | 
|------------------------------ |  | ------------------------------------------------------------------------------------- | -- | ------------------------------------------ | -- |  | - | 
|PART I.                        |  | FINANCIAL INFORMATION                                                                 |    |                                            |    | 
|Item 1.                        |  | Financial Statements                                                                  |    |                                            | 3  | 
|                               |  |                                                                                       |    | Consolidated Balance Sheets                |    |  | 3 | 
|                               |  |                                                                                       |    | Consolidated Statements of Operations      |    |  | 4 | 
|                               |  |                                                                                       |    | Consolidated Statements of Cash Flows      |    |  | 5 | 
|                               |  |                                                                                       |    | Notes to Consolidated Financial Statements |    |  | 6 | 
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |    |                                            | 14 | 
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |                                            | 34 | 
|Item 4.                        |  | Controls and Procedures                                                               |    |                                            | 35 | 
|PART II.                       |  | OTHER INFORMATION                                                                     |    |                                            |    | 
|Item 2.                        |  | Changes in Securities and Use of Proceeds                                             |    |                                            | 35 | 
|Item 5.                        |  | Other Information                                                                     |    |                                            | 36 | 
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                      |    |                                            | 37 | 
|Signatures                     |  |                                                                                       |    |                                            | 38 | 
|Index to Exhibits and Exhibits |  |                                                                                       | 41 |                                           

2



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##### Table of Contents









PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS




EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                                                                                                                                |                                                                                                                                                                                  |                                            |              |              |            |               |              |             |            | 
|------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------ | ------------ | ---------- | ------------- | ------------ | ----------- | ---------- | 
|                                                                                                                                |                                                                                                                                                                                  |                                            |              | As of        |            | As of        
|                                                                                                                                |                                                                                                                                                                                  |                                            |              | December 31, |            | September 30,
|                                                                                                                                |                                                                                                                                                                                  |                                            |              | 2001         |            | 2002         
|                                                                                                                                |                                                                                                                                                                                  |                                            |              |              |            |              
|                                                                                                                                |                                                                                                                                                                                  |                                            |              |              |            |               |              | (unaudited)
|Assets                                                                                                                          |                                                                                                                                                                                  |                                            |              |              |            |               |              |            
|Current assets:                                                                                                                 |                                                                                                                                                                                  |                                            |              |              |            |               |              |            
|                                                                                                                                | Cash and cash equivalents                                                                                                                                                        |                                            | $            | 30,250,156   |            |               | $            | 28,807,344  |           
|                                                                                                                                | Marketable securities, short-term                                                                                                                                                |                                            |              | 12,842,683   |            |               |              | 5,143,873   |           
|                                                                                                                                | Accounts receivable, net of allowance for doubtful accounts and
adjustments of approximately $3,721,000 and $3,898,000 at
December 31, 2001 and September 30, 2002, respectively |                                            |              | 25,029,162   |            |               |              | 14,740,921  |           
|                                                                                                                                | Other receivables and advances                                                                                                                                                   |                                            |              | 572,438      |            |               |              | 487,391     |           
|                                                                                                                                | Prepaid and other current assets                                                                                                                                                 |                                            |              | 2,171,409    |            |               |              | 5,044,786   |           
|                                                                                                                                |                                                                                                                                                                                  |                                            |              |              |            |               |              |            
|                                                                                                                                |                                                                                                                                                                                  | Total current assets                       |              |              | 70,865,848 |               |              |             | 54,224,315 | 
|Marketable securities, long-term                                                                                                |                                                                                                                                                                                  |                                            | 2,203,891    |              |            |               | 8,547,870    |            
|Property and equipment, net                                                                                                     |                                                                                                                                                                                  |                                            | 8,424,584    |              |            |               | 5,499,630    |            
|Goodwill, net                                                                                                                   |                                                                                                                                                                                  |                                            | 5,265,685    |              |            |               | 5,265,685    |            
|Intangible assets, net                                                                                                          |                                                                                                                                                                                  |                                            | 1,760,666    |              |            |               | 1,863,518    |            
|Other assets                                                                                                                    |                                                                                                                                                                                  |                                            | 2,549,794    |              |            |               | 1,844,879    |            
|                                                                                                                                |                                                                                                                                                                                  |                                            |              |              |            |               |              |            
|                                                                                                                                |                                                                                                                                                                                  | Total assets                               |              | $            | 91,070,468 |               |              | $           | 77,245,897 | 
|                                                                                                                                |                                                                                                                                                                                  |                                            |              |              |            |               |              |            
|Liabilities and Stockholders Equity                                                                                            |                                                                                                                                                                                  |                                            |              |              |            |               |              |            
|Current Liabilities:                                                                                                            |                                                                                                                                                                                  |                                            |              |              |            |               |              |            
|                                                                                                                                | Accounts payable                                                                                                                                                                 |                                            | $            | 6,585,936    |            |               | $            | 5,984,576   |           
|                                                                                                                                | Accrued expenses                                                                                                                                                                 |                                            |              | 11,557,606   |            |               |              | 10,134,107  |           
|                                                                                                                                | Accrued payroll and benefits                                                                                                                                                     |                                            |              | 1,749,046    |            |               |              | 1,494,569   |           
|                                                                                                                                | Deferred revenue                                                                                                                                                                 |                                            |              | 9,206,736    |            |               |              | 10,343,406  |           
|                                                                                                                                | Current portion of long-term debt and capital lease obligations                                                                                                                  |                                            |              | 435,167      |            |               |              | 532,900     |           
|                                                                                                                                |                                                                                                                                                                                  |                                            |              |              |            |               |              |            
|                                                                                                                                |                                                                                                                                                                                  | Total current liabilities                  |              |              | 29,534,491 |               |              |             | 28,489,558 | 
|                                                                                                                                | Long-term debt and capital lease obligations, net of current portion                                                                                                             |                                            |              | 995,973      |            |               |              | 542,961     |           
|                                                                                                                                | Long-term accrued expenses, net of current portion                                                                                                                               |                                            |              | 6,814,018    |            |               |              | 9,521,111   |           
|                                                                                                                                | Minority interest                                                                                                                                                                |                                            |              | 169,623      |            |               |              | 184,562     |           
|Commitments and contingencies                                                                                                   |                                                                                                                                                                                  |                                            |              |              |            |               |              |            
|Stockholders equity:                                                                                                           |                                                                                                                                                                                  |                                            |              |              |            |               |              |            
|                                                                                                                                | Preferred stock, $.01 par value: shares authorized - 20,000,000; none
issued or outstanding                                                                                      |                                            |              |             |            |               |              |            |           
|                                                                                                                                | Common stock, voting, $.01 par value: shares authorized - 150,000,000;
shares issued - 46,788,900 and 47,154,689 at December 31, 2001 and
September 30, 2002, respectively       |                                            |              | 467,889      |            |               |              | 471,547     |           
|Additional paid-in capital                                                                                                      |                                                                                                                                                                                  |                                            | 178,741,296  |              |            |               | 178,621,848  |            
|Note receivable from stockholder                                                                                                |                                                                                                                                                                                  |                                            | (211,750     | )            |            |               |             |            
|Treasury stock, at cost, 999,483 and 1,094,923 shares of common stock
at December 31, 2001 and September 30, 2002, respectively |                                                                                                                                                                                  |                                            | (3,431,464   | )            |            |               | (3,645,859   | )          
|Accumulated deficit                                                                                                             |                                                                                                                                                                                  |                                            | (119,601,384 | )            |            |               | (135,281,100 | )          
|Deferred compensation                                                                                                           |                                                                                                                                                                                  |                                            | (2,515,440   | )            |            |               | (1,266,888   | )          
|Other comprehensive income (loss)                                                                                               |                                                                                                                                                                                  |                                            | 107,216      |              |            |               | (391,843     | )          
|                                                                                                                                |                                                                                                                                                                                  |                                            |              |              |            |               |              |            
|                                                                                                                                |                                                                                                                                                                                  | Total stockholders equity                 |              |              | 53,556,363 |               |              |             | 38,507,705 | 
|                                                                                                                                |                                                                                                                                                                                  | Total
liabilities and stockholders equity |              | $            | 91,070,468 |               |              | $           | 77,245,897 | 
|                                                                                                                                |                                                                                                                                                                                  |                                            |              |              |            |               |              |            

See accompanying notes.

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |            |            |            | 
|------------------------------------------------------------------------ | ---------------------------------------------------- | ------------------ | -------------------------------- | ---------- | ------------------ | ---------- | ----------------- | ---------- | ---------- | ---------- | ----------- | ---------- | ---------- | ----------- | ----------- | ---------- | ---------- | ---------- | 
|                                                                         |                                                      |                    |                                  |            | Three Months Ended |            | Nine Months Ended
|                                                                         |                                                      |                    |                                  |            | September 30,      |            | September 30,    
|                                                                         |                                                      |                    |                                  |            |                    |            |                  
|                                                                         |                                                      |                    |                                  |            | 2001               |            | 2002              |            | 2001       |            | 2002       
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |            
|Revenue:                                                                 |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|                                                                         | Software license                                     |                    | $                                | 4,935,254  |                    |            | $                 | 2,694,478  |            |            | $           | 20,466,027 |            |             | $           | 9,961,142  |           
|                                                                         | Services and maintenance                             |                    |                                  | 14,886,946 |                    |            |                   | 12,283,217 |            |            |             | 49,316,085 |            |             |             | 36,978,051 |           
|                                                                         | Resale of software and equipment                     |                    |                                  | 2,470,094  |                    |            |                   | 1,319,348  |            |            |             | 6,582,444  |            |             |             | 6,418,717  |           
|                                                                         | Reimbursable expenses                                |                    |                                  | 606,739    |                    |            |                   | 436,813    |            |            |             | 2,121,394  |            |             |             | 1,443,028  |           
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|                                                                         |                                                      | Total revenue      |                                  |            | 22,899,033         |            |                   |            | 16,733,856 |            |             |            | 78,485,950 |             |             |            | 54,800,938 |           
|Costs and expenses:                                                      |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|                                                                         | Cost of software licenses                            |                    |                                  | 323,198    |                    |            |                   | 236,521    |            |            |             | 453,657    |            |             |             | 435,902    |           
|                                                                         | Cost of services and maintenance                     |                    |                                  | 9,489,045  |                    |            |                   | 7,860,928  |            |            |             | 32,105,548 |            |             |             | 24,079,137 |           
|                                                                         | Cost of resale of software and equipment             |                    |                                  | 2,129,455  |                    |            |                   | 1,079,373  |            |            |             | 5,445,496  |            |             |             | 5,307,436  |           
|                                                                         | Cost of reimbursable expenses                        |                    |                                  | 606,739    |                    |            |                   | 436,813    |            |            |             | 2,121,394  |            |             |             | 1,443,028  |           
|                                                                         | Sales and marketing                                  |                    |                                  | 6,225,668  |                    |            |                   | 4,479,519  |            |            |             | 20,865,039 |            |             |             | 14,448,762 |           
|                                                                         | Research and development                             |                    |                                  | 3,485,964  |                    |            |                   | 2,853,288  |            |            |             | 11,322,910 |            |             |             | 8,813,889  |           
|                                                                         | General and administrative                           |                    |                                  | 4,162,294  |                    |            |                   | 2,810,607  |            |            |             | 14,202,053 |            |             |             | 9,006,223  |           
|                                                                         | Amortization of goodwill and intangible assets       |                    |                                  | 2,316,749  |                    |            |                   | 335,848    |            |            |             | 6,520,253  |            |             |             | 897,148    |           
|                                                                         | Warrant and stock compensation expense
allocated to: |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |            |           
|                                                                         |                                                      |                    | Cost of services and maintenance |            |                    | 130,342    |                   |            |            | 49,918     |             |            |            | 406,961     |             |            |            | 225,810    | 
|                                                                         |                                                      |                    | Sales and marketing              |            |                    | 44,952     |                   |            |            | 38,893     |             |            |            | 285,888     |             |            |            | 129,785    | 
|                                                                         |                                                      |                    | Research and development         |            |                    | 39,882     |                   |            |            | 38,893     |             |            |            | 133,958     |             |            |            | 129,785    | 
|                                                                         |                                                      |                    | General and administrative       |            |                    | 161,353    |                   |            |            | 83,294     |             |            |            | 477,443     |             |            |            | 262,988    | 
|                                                                         | Provision for estimated loss on lease abandonment    |                    |                                  |           |                    |            |                   |           |            |            |             | 7,440,336  |            |             |             | 3,998,862  |           
|                                                                         | Employee severance and other facility
closure costs  |                    |                                  |           |                    |            |                   |           |            |            |             | 2,489,744  |            |             |             | 2,487,769  |           
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|                                                                         |                                                      |                    | Total costs and expenses         |            |                    | 29,115,641 |                   |            |            | 20,303,895 |             |            |            | 104,270,680 |             |            |            | 71,666,524 | 
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|Operating loss                                                           |                                                      |                    | (6,216,608                       | )          |                    |            | (3,570,039        | )          |            |            | (25,784,730 | )          |            |             | (16,865,586 | )         
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|Other income (expense):                                                  |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|                                                                         | Interest income                                      |                    |                                  | 554,096    |                    |            |                   | 242,123    |            |            |             | 2,049,341  |            |             |             | 875,456    |           
|                                                                         | Interest expense                                     |                    |                                  | (9,618     | )                  |            |                   | (23,662    | )          |            |             | (29,626    | )          |             |             | (74,478    | )         
|                                                                         | Other                                                |                    |                                  | 117,064    |                    |            |                   | (25,152    | )          |            |             | (269,887   | )          |             |             | 728,541    |           
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|                                                                         |                                                      | Total other income |                                  |            | 661,542            |            |                   |            | 193,309    |            |             |            | 1,749,828  |             |             |            | 1,529,519  |           
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|Loss before minority interest and taxes                                  |                                                      |                    | (5,555,066                       | )          |                    |            | (3,376,730        | )          |            |            | (24,034,902 | )          |            |             | (15,336,067 | )         
|Minority interest in subsidiary income                                   |                                                      |                    | (45,388                          | )          |                    |            | (5,768            | )          |            |            | (146,059    | )          |            |             | (14,939     | )         
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|Loss before taxes                                                        |                                                      |                    | (5,600,454                       | )          |                    |            | (3,382,498        | )          |            |            | (24,180,961 | )          |            |             | (15,351,006 | )         
|Income taxes                                                             |                                                      |                    |                                 |            |                    |            | 149,889           |            |            |            | 151,377     |            |            |             | 328,710     |           
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|Net loss                                                                 |                                                      | $                  | (5,600,454                       | )          |                    | $          | (3,532,387        | )          |            | $          | (24,332,338 | )          |            | $           | (15,679,716 | )         
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|Net
loss per common share - basic and diluted                            |                                                      | $                  | (0.12                            | )          |                    | $          | (0.08             | )          |            | $          | (0.54       | )          |            | $           | (0.34       | )         
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|Weighted average number of common shares
outstanding  basic and diluted |                                                      |                    | 45,612,056                       |            |                    |            | 46,059,766        |            |            |            | 45,261,613  |            |            |             | 46,008,029  |           
|                                                                         |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           
|See accompanying notes                                                   |                                                      |                    |                                  |            |                    |            |                   |            |            |            |             |            |            |             |             |           

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

|                                                  |                                                                             |                                                                            |                                   |                                           |           |                   |             |      |           |            |            |  
|------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------------------------------------- | --------------------------------- | ----------------------------------------- | --------- | ----------------- | ----------- | ---- | --------- | ---------- | ---------- | -
|                                                  |                                                                             |                                                                            |                                   |                                           |           | Nine Months Ended
|                                                  |                                                                             |                                                                            |                                   |                                           |           | September 30,    
|                                                  |                                                                             |                                                                            |                                   |                                           |           |                  
|                                                  |                                                                             |                                                                            |                                   |                                           |           | 2001              |             | 2002
|                                                  |                                                                             |                                                                            |                                   |                                           |           |                   |             |     
|Cash Flow from Operating Activities:              |                                                                             |                                                                            |                                   |                                           |           |                   |             |     
|Net loss                                          |                                                                             | $                                                                          | (24,332,338                       | )                                         |           | $                 | (15,679,716 | )   
|                                                  | Adjustments to reconcile net loss to net cash used in
operating activities: |                                                                            |                                   |                                           |           |                   |             |      |          
|                                                  |                                                                             | Depreciation and amortization                                              |                                   |                                           | 9,374,489 |                   |             |      | 3,335,348 |           
|                                                  |                                                                             | Write-down of property and equipment                                       |                                   |                                           |          |                   |             |      | 1,032,408 |           
|                                                  |                                                                             | Provision for doubtful accounts                                            |                                   |                                           | 2,709,209 |                   |             |      | 2,502,780 |           
|                                                  |                                                                             | Amortization of deferred compensation                                      |                                   |                                           | 1,129,900 |                   |             |      | 748,368   |           
|                                                  |                                                                             | Issuance of warrants for services                                          |                                   |                                           | 174,350   |                   |             |      |          |           
|                                                  |                                                                             | Minority interest                                                          |                                   |                                           | 154,490   |                   |             |      | 14,939    |           
|                                                  |                                                                             | Changes in operating assets and liabilities, net of effect of acquisition: |                                   |                                           |           |                   |             |      |           |           
|                                                  |                                                                             |                                                                            | Accounts receivable               |                                           |           | 1,266,409         |             |      |           | 7,785,461  |           
|                                                  |                                                                             |                                                                            | Other receivables and advances    |                                           |           | (104,881          | )           |      |           | 85,047     |           
|                                                  |                                                                             |                                                                            | Prepaids and other current assets |                                           |           | 100,784           |             |      |           | (2,873,378 | )         
|                                                  |                                                                             |                                                                            | Other long-term assets            |                                           |           | (364,913          | )           |      |           | 704,915    |           
|                                                  |                                                                             |                                                                            | Accounts payable                  |                                           |           | 201,777           |             |      |           | (601,360   | )         
|                                                  |                                                                             |                                                                            | Accrued payroll and benefits      |                                           |           | (1,085,340        | )           |      |           | (254,477   | )         
|                                                  |                                                                             |                                                                            | Deferred revenue                  |                                           |           | (2,601,657        | )           |      |           | 1,136,670  |           
|                                                  |                                                                             |                                                                            | Accrued expenses                  |                                           |           | 5,852,462         |             |      |           | 1,283,592  |           
|                                                  |                                                                             |                                                                            | Other                             |                                           |           | (138,285          | )           |      |           | (442,114   | )         
|                                                  |                                                                             |                                                                            |                                   |                                           |           |                   |             |     
|                                                  |                                                                             |                                                                            |                                   | Net cash used in operating activities     |           |                   | (7,663,544  | )    |           |            | (1,221,517 | )
|Cash Flow from Investing Activities:              |                                                                             |                                                                            |                                   |                                           |           |                   |             |     
|Purchases of property and equipment               |                                                                             |                                                                            | (1,987,222                        | )                                         |           |                   | (605,241    | )   
|Purchase of developed software technology         |                                                                             |                                                                            |                                  |                                           |           |                   | (1,000,000  | )   
|Purchase of marketable securities                 |                                                                             |                                                                            | (14,500,000                       | )                                         |           |                   | (15,710,000 | )   
|Proceeds from sale of marketable securities       |                                                                             |                                                                            | 16,799,804                        |                                           |           |                   | 17,064,831  |     
|Cash paid for AllPoints acquisition               |                                                                             |                                                                            | (1,618,109                        | )                                         |           |                   |            |     
|                                                  |                                                                             |                                                                            |                                   |                                           |           |                   |             |     
|                                                  |                                                                             |                                                                            |                                   | Net cash used in investing activities     |           |                   | (1,305,527  | )    |           |            | (250,410   | )
|Cash Flow from Financing Activities:              |                                                                             |                                                                            |                                   |                                           |           |                   |             |     
|Issuance of common stock for options and warrants |                                                                             |                                                                            | 1,285,294                         |                                           |           |                   | 384,394     |     
|Payments on long-term debt                        |                                                                             |                                                                            | (134,999                          | )                                         |           |                   | (355,279    | )   
|Retirement of AllPoints line of credit            |                                                                             |                                                                            | (750,000                          | )                                         |           |                   |            |     
|                                                  |                                                                             |                                                                            |                                   |                                           |           |                   |             |     
|                                                  |                                                                             |                                                                            |                                   | Net cash provided by financing activities |           |                   | 400,295     |      |           |            | 29,115     |  
|                                                  |                                                                             |                                                                            |                                   |                                           |           |                   |             |     
|Net decrease in cash and cash equivalents         |                                                                             |                                                                            | (8,568,776                        | )                                         |           |                   | (1,442,812  | )   
|Cash and cash equivalents at beginning of year    |                                                                             |                                                                            | 39,820,056                        |                                           |           |                   | 30,250,156  |     
|                                                  |                                                                             |                                                                            |                                   |                                           |           |                   |             |     
|Cash and cash equivalents at end of period        |                                                                             | $                                                                          | 31,251,280                        |                                           |           | $                 | 28,807,344  |     
|                                                  |                                                                             |                                                                            |                                   |                                           |           |                   |             |     

See accompanying notes.

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

1. Principles of Consolidation and Basis of Presentation

EXE Technologies, Inc. (the Company or EXE) provides software that drives
customers supply chain execution processes, including fulfillment,
warehousing, distribution, and inventory management. The accompanying unaudited
consolidated financial statements include the accounts of EXE Technologies,
Inc. and our majority-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for fiscal year end financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring entries) considered necessary
for a fair presentation of the results have been included for the interim
periods presented. Operating results for the three and nine month periods ended
September 30, 2002 are not necessarily indicative of the results that may be
expected for any other interim period or for the year ending December 31, 2002.
These statements should be read in conjunction with the Companys audited
financial statements included in the Companys Form 10-K for the year ended
December 31, 2001.

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

On January 1, 2002, the Company adopted Financial Accounting Standards
Board Staff Announcement Topic No. D-103, Income Statement Characterization of
Reimbursements Received for Out-of-Pocket Expenses Incurred. As a result,
the Company began recording revenue and a related cost of revenue in its
statement of operations for reimbursable expenses such as airfare, hotel
lodging, meals, auto rental and other charges related to providing services to
our customers. Prior to the adoption of this standard, the Company recorded
these expense reimbursements as a reduction of expenses. The Companys prior
period financial statements have been reclassified to comply with the new
standard.

Effective January 1, 2002, the Company adopted Emerging Issues Task Force
(EITF) 00-25, Vendor Income Statement Characterization of Consideration Paid
to a Reseller of the Vendors Products". EITF 00-25 requires consideration
paid to resellers of the Companys products be recorded as a reduction in
revenue. The application of this EITF does not result in any impact to
operating or net income (loss) in any past or future periods. The Companys
prior period financial statements have been reclassified to comply with the new
standard.

In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, effective for fiscal years
beginning after December 15, 2001. This statement establishes new rules for
determining impairment of certain other long-lived assets, including intangible
assets subject to amortization, property and equipment and long-lived prepaid
assets. The adoption of this standard did not have an effect on the operating
results or the financial position of the Company.

In July 2002, the Financial Accounting Standards Board issued SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS
No. 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities, such as restructuring, involuntarily terminating
employees and consolidating facilities. SFAS No. 146 excludes from its scope
exit and disposal

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. Principles of Consolidation and Basis of Presentation (continued)

activities conducted in connection with a business combination and those
activities to which SFAS No. 143 and 144 are applicable. SFAS No. 146 is
effective for exit and disposal activities initiated after December 31, 2002.
We do not expect the adoption of this statement to have a material effect on
our consolidated financial position or results of operations.

2. Net Loss Per Share

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

Diluted net income (loss) per common share is computed using the weighted
average number of shares of common stock outstanding during each period and
common equivalent shares consisting of preferred stock, warrants and stock
options (using the treasury stock method), if dilutive. Diluted loss per common
share is the same as basic loss per common share for all periods presented
because all potentially dilutive securities were anti-dilutive. The following
table sets forth anti-dilutive securities which have been excluded from diluted
earnings per share for the periods presented:

|                                        |  |                     |           |      |  |  |            | 
|--------------------------------------- |  | ------------------- | --------- | ---- |  |  | ---------- | 
|                                        |  | As of September 30,
|                                        |  |                    
|                                        |  | 2001                |           | 2002
|                                        |  |                     |           |     
|Common stock options                    |  |                     | 8,665,665 |      |  |  | 9,327,964  | 
|Warrants                                |  |                     |          |      |  |  | 1,015,000  | 
|                                        |  |                     |           |      |  |  |            | 
|Total anti-dilutive securities excluded |  |                     | 8,665,665 |      |  |  | 10,342,964 | 
|                                        |  |                     |           |      |  |  |            | 

3. Comprehensive Loss

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

|                                                        |  |                    |            |                   |  |      |            |      |  |   |             |   |  |   |             |  
|------------------------------------------------------- |  | ------------------ | ---------- | ----------------- |  | ---- | ---------- | ---- |  | - | ----------- | - |  | - | ----------- | -
|                                                        |  | Three Months Ended |            | Nine Months Ended
|                                                        |  | September 30,      |            | September 30,    
|                                                        |  |                    |            |                  
|                                                        |  | 2001               |            | 2002              |  | 2001 |            | 2002
|                                                        |  |                    |            |                   |  |      |            |     
|Net loss                                                |  | $                  | (5,600,454 | )                 |  | $    | (3,532,387 | )    |  | $ | (24,332,338 | ) |  | $ | (15,679,716 | )
|Foreign currency translation gains (losses)             |  |                    | (116,398   | )                 |  |      | 109,769    |      |  |   | 55,553      |   |  |   | (374,027    | )
|Unrealized gain (loss) on securities
available for sale |  |                    | 73,399     |                   |  |      | 3,323      |      |  |   | 188,256     |   |  |   | (125,032    | )
|                                                        |  |                    |            |                   |  |      |            |      |  |   |             |   |  |   |             |  
|Total comprehensive loss                                |  | $                  | (5,643,453 | )                 |  | $    | (3,419,295 | )    |  | $ | (24,088,529 | ) |  | $ | (16,178,775 | )
|                                                        |  |                    |            |                   |  |      |            |      |  |   |             |   |  |   |             |  

4. Derivative Financial Instruments

The Company hedges certain nonfunctional currency exposure. Forward
currency exchange contracts are utilized by the Company to reduce foreign
currency exchange and interest rate risks with the goal of

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\

EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. Derivative Financial Instruments (continued)

offsetting foreign currency transaction gains and losses recorded for
accounting purposes with gains and losses realized on the forward contracts.
The Company does not hold derivative financial instruments for trading or
speculative purposes.

As of September 30, 2002, the Company had outstanding forward currency
exchange contracts of $2.0 million to sell British Pounds Sterling and $2.5 million to sell Japanese
yen which hedge net balance sheet exposures. Gains and losses arising from the
changes in the fair value of forward currency exchange contracts are recognized
as a component of other income (expense). At September 30, 2002, the current
market settlement values of the forward contracts would be immaterial.

5. Intangible Assets and Goodwill

In June 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards (SFAS) No. 141, Business Combinations and
No. 142, Goodwill and Other Intangible Assets, effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to annual impairment tests in accordance with these
statements. Other intangible assets will continue to be amortized
over their useful lives.

The Company completed the transitional impairment test for its
enterprise goodwill and determined that no impairment loss should be recorded
as of January 1, 2002. During the third quarter of 2002, the
Company's market capitalization declined to a level that is less than
the Company's net book value. The Company's required annual analysis
of the impairment to be performed under SFAS No. 142 will be
performed in the fourth quarter of each calendar year. If the
Company's market capitalization remains at a level less than the
Company's net book value, the Company believes that an impairment
charge will likely be required.

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

5. Intangible Assets and Goodwill (continued)

The Company has applied the new rules on accounting for goodwill and other
intangible assets beginning January 1, 2002. With the application of the
nonamortization provisions of SFAS No. 142, the Company ceased amortization of
goodwill as of January 1, 2002. The following table presents the quarterly
results of the Company on a comparative basis assuming the nonamortization
provisions of SFAS No. 142 were effective January 1, 2001:

|                                                        |                                                             |   |                                  |           |                                 |   |            |   |      |   |             |           |  |   |             |   | 
|------------------------------------------------------- | ----------------------------------------------------------- | - | -------------------------------- | --------- | ------------------------------- | - | ---------- | - | ---- | - | ----------- | --------- |  | - | ----------- | - | 
|                                                        |                                                             |   | Three Months Ended September 30, |           | Nine Months Ended September 30,
|                                                        |                                                             |   |                                  |           |                                
|                                                        |                                                             |   | 2001                             |           | 2002                            |   | 2001       |   | 2002
|                                                        |                                                             |   |                                  |           |                                 |   |            |   |     
|Reported net loss                                       |                                                             | $ | (5,600,454                       | )         |                                 | $ | (3,532,387 | ) |      | $ | (24,332,338 | )         |  | $ | (15,679,716 | )
|                                                        | Goodwill amortization                                       |   |                                  | 1,885,595 |                                 |   |            |  |      |   |             | 5,286,185 |  |   |             |  | 
|                                                        |                                                             |   |                                  |           |                                 |   |            |   |      |   |             |           |  |   |             |  
|Adjusted net loss                                       |                                                             | $ | (3,714,859                       | )         |                                 | $ | (3,532,387 | ) |      | $ | (19,046,153 | )         |  | $ | (15,679,716 | )
|                                                        |                                                             |   |                                  |           |                                 |   |            |   |      |   |             |           |  |   |             |  
|Reported net loss per common share -
basic and dilutive |                                                             | $ | (0.12                            | )         |                                 | $ | (0.08      | ) |      | $ | (0.54       | )         |  | $ | (0.34       | )
|                                                        | Goodwill amortization per common
share  basic and dilutive |   |                                  | 0.04      |                                 |   |            |  |      |   |             | 0.12      |  |   |             |  | 
|                                                        |                                                             |   |                                  |           |                                 |   |            |   |      |   |             |           |  |   |             |  
|Adjusted net loss per common share -
basic and dilutive |                                                             | $ | (0.08                            | )         |                                 | $ | (0.08      | ) |      | $ | (0.42       | )         |  | $ | (0.34       | )
|                                                        |                                                             |   |                                  |           |                                 |   |            |   |      |   |             |           |  |   |             |  

Intangible assets as of December 31, 2001 and September 30, 2002 were as
follows:

|                                  |  |              |            |               |  |   |            |  
|--------------------------------- |  | ------------ | ---------- | ------------- |  | - | ---------- | -
|                                  |  | December 31, |            | September 30,
|                                  |  |              |            |              
|                                  |  | 2001         |            | 2002         
|                                  |  |              |            |              
|Developed and acquired technology |  | $            | 4,700,000  |               |  | $ | 5,700,000  |  
|Customer base                     |  |              | 1,800,000  |               |  |   | 1,800,000  |  
|Less accumulated amortization     |  |              | (4,739,334 | )             |  |   | (5,636,482 | )
|                                  |  |              |            |               |  |   |            |  
|Net intangible assets             |  | $            | 1,760,666  |               |  | $ | 1,863,518  |  
|                                  |  |              |            |               |  |   |            |  

In July 2002, the Company acquired developed software technology assets
for an order analysis and planning system for $1.0 million. The acquisition
price will be paid quarterly in four consecutive equal installments beginning
in the third quarter of 2002, and the intangible assets associated with this
acquisition will be amortized over a three year period.

Amortization expense related to intangible assets totaled $0.4 million and
$0.3 million during the three months ended September 30, 2001 and 2002,
respectively, and $1.2 million and $0.9 million during the nine months ended
September 30, 2001 and 2002, respectively. Intangible assets with definite
useful lives are amortized on a straight-line basis. The weighted average
amortization period is five years for developed

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

5. Intangible Assets and Goodwill (continued)

and acquired technology and six years for customer base. The estimated
aggregate future amortization expense for intangible assets remaining as of
September 30, 2002 is as follows:

|                  |  |   |           | 
|----------------- |  | - | --------- | 
|Remainder of 2002 |  | $ | 363,519   | 
|2003              |  |   | 666,665   | 
|2004              |  |   | 638,890   | 
|2005              |  |   | 194,444   | 
|                  |  |   |           | 
|Total             |  | $ | 1,863,518 | 
|                  |  |   |           | 

6. Segment Information

The Company provides software that drives customers supply chain
execution processes, including fulfillment, warehousing, distribution, and
inventory management. All financial information is reviewed on a consolidated
basis with additional information by geographic region used to make operating
decisions and assess the results of the Company. Total assets are presented
net of intercompany receivables and payables. The Companys geographic
information as of and for the three and nine months ended September 30, 2001
and 2002 is as follows:

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|                                      |                                                     |  |            |             |        |  |             |            |              |  |              |            |   |  |   |            |   |  |            |             |  
|------------------------------------- | --------------------------------------------------- |  | ---------- | ----------- | ------ |  | ----------- | ---------- | ------------ |  | ------------ | ---------- | - |  | - | ---------- | - |  | ---------- | ----------- | -
|                                      |                                                     |  |            |             |        |  |             |            |              |  | Asia Pacific |            |   |  |   |            |   |  |           
|                                      |                                                     |  | North      |             |        |  |             |            | and the      |  |              |            |   |  |   |            |  
|                                      |                                                     |  | America    |             | Europe |  | Middle East |            | Eliminations |  | Total       
|                                      |                                                     |  |            |             |        |  |             |            |              |  |             
|Three months ended September 30, 2001 |                                                     |  |            |             |        |  |             |            |              |  |              |            |   |  |   |            |   |  |            |            
|                                      | Revenue                                             |  | $          | 11,816,208  |        |  | $           | 4,448,794  |              |  | $            | 6,634,031  |   |  | $ |           |   |  | $          | 22,899,033  |  
|                                      | Amortization of goodwill and
intangible assets      |  |            | 2,292,394   |        |  |             | 13,450     |              |  |              | 10,905     |   |  |   |           |   |  |            | 2,316,749   |  
|                                      | Warrant and stock compensation
expense              |  |            | 154,696     |        |  |             | 63,427     |              |  |              | 158,406    |   |  |   |           |   |  |            | 376,529     |  
|                                      | Operating income (loss)                             |  |            | (6,161,865  | )      |  |             | (713,262   | )            |  |              | 658,519    |   |  |   |           |   |  |            | (6,216,608  | )
|Nine months ended September 30, 2001  |                                                     |  |            |             |        |  |             |            |              |  |              |            |   |  |   |            |   |  |            |            
|                                      | Revenue                                             |  | $          | 42,725,295  |        |  | $           | 12,918,065 |              |  | $            | 22,842,590 |   |  | $ |           |   |  | $          | 78,485,950  |  
|                                      | Amortization of goodwill and
intangible assets      |  |            | 6,446,862   |        |  |             | 40,624     |              |  |              | 32,767     |   |  |   |           |   |  |            | 6,520,253   |  
|                                      | Warrant and stock compensation
expense              |  |            | 692,007     |        |  |             | 232,825    |              |  |              | 379,418    |   |  |   |           |   |  |            | 1,304,250   |  
|                                      | Provision for estimated loss on
lease abandonment   |  |            | 7,154,780   |        |  |             | 285,556    |              |  |              |           |   |  |   |           |   |  |            | 7,440,336   |  
|                                      | Employee severance and other
facility closure costs |  |            | 1,453,984   |        |  |             | 430,310    |              |  |              | 605,450    |   |  |   |           |   |  |            | 2,489,744   |  
|                                      | Operating income (loss)                             |  |            | (23,873,445 | )      |  |             | (3,079,900 | )            |  |              | 1,168,615  |   |  |   |           |   |  |            | (25,784,730 | )
|As of September 30, 2001              |                                                     |  |            |             |        |  |             |            |              |  |              |            |   |  |   |            |   |  |            |            
|                                      | Property and equipment, net                         |  | $          | 5,637,481   |        |  | $           | 1,405,512  |              |  | $            | 905,901    |   |  | $ |           |   |  | $          | 7,948,894   |  
|                                      | Total assets                                        |  |            | 104,625,475 |        |  |             | 9,322,613  |              |  |              | 15,911,394 |   |  |   | (3,108,034 | ) |  |            | 126,751,448 |  
|Three months ended September 30, 2002 |                                                     |  |            |             |        |  |             |            |              |  |              |            |   |  |   |            |   |  |            |            
|                                      | Revenue                                             |  | $          | 7,529,135   |        |  | $           | 4,997,838  |              |  | $            | 4,206,883  |   |  |   |           |   |  | $          | 16,733,856  |  
|                                      | Amortization of goodwill and
intangible assets      |  |            | 335,848     |        |  |             |           |              |  |              |           |   |  |   |           |   |  |            | 335,848     |  
|                                      | Warrant and stock compensation
expense              |  |            | 17,473      |        |  |             | 86,921     |              |  |              | 106,604    |   |  |   |           |   |  |            | 210,998     |  
|Operating income (loss)               |                                                     |  | (3,625,919 | )           |        |  | 573,063     |            |              |  | (517,183     | )          |   |  |  |            |   |  | (3,570,039 | )          
|Nine months ended September 30, 2002  |                                                     |  |            |             |        |  |             |            |              |  |              |            |   |  |   |            |   |  |            |            
|                                      | Revenue                                             |  | $          | 25,804,371  |        |  | $           | 15,101,699 |              |  | $            | 13,894,868 |   |  | $ |           |   |  | $          | 54,800,938  |  
|                                      | Amortization of goodwill and
intangible assets      |  |            | 896,434     |        |  |             | 714        |              |  |              |           |   |  |   |           |   |  |            | 897,148     |  
|                                      | Warrant and stock compensation
expense              |  |            | 379,891     |        |  |             | 161,413    |              |  |              | 207,064    |   |  |   |           |   |  |            | 748,368     |  
|                                      | Provision for estimated loss on
lease abandonment   |  |            | 3,900,000   |        |  |             | 98,862     |              |  |              |           |   |  |   |           |   |  |            | 3,998,862   |  
|                                      | Employee severance and other
facility closure costs |  |            | 2,252,745   |        |  |             | 133,105    |              |  |              | 101,919    |   |  |   |           |   |  |            | 2,487,769   |  
|                                      | Operating income (loss)                             |  |            | (17,333,634 | )      |  |             | 1,332,221  |              |  |              | (864,173   | ) |  |   |           |   |  |            | (16,865,586 | )
|As of September 30, 2002              |                                                     |  |            |             |        |  |             |            |              |  |              |            |   |  |   |            |   |  |            |            
|                                      | Property and equipment, net                         |  | $          | 3,747,104   |        |  | $           | 1,052,949  |              |  | $            | 699,577    |   |  | $ |           |   |  | $          | 5,499,630   |  
|                                      | Total assets                                        |  |            | 62,046,106  |        |  |             | 10,668,946 |              |  |              | 8,638,879  |   |  |   | (4,108,034 | ) |  |            | 77,245,897  |  

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. Warrants Granted to IBM

In September 2002, the Company expanded its strategic relationship with
IBM. One of the key elements of the expanded relationship was the issuance of
1,000,000 warrants to IBM to purchase the Companys common stock at an exercise
price of $0.01 per share. The warrants are exercisable over a
five-year period and will vest over a three-year period
based on IBMs generation of pre-established amounts of incremental software
license revenue for the Company. At September 30, 2002, none of the warrants
were vested or exercisable.

8. Line of Credit

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

9. Commitments and Contingencies

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

10. Estimated Provisions for Lease Abandonment, Employee Severance and Other Costs

During the year ended December 31, 2001, the Company announced and
implemented plans to reduce costs and improve operating efficiency. Provisions
for estimated losses on lease abandonment and employee severance and other
facility closure costs was $14.3 million for the year ended December 31, 2001,
of which approximately $9.9 million was recognized during the nine months ended
September 30, 2001. These estimated charges included: (a) $10.2 million and
$7.4 million in abandonment of certain leased office space less estimated
sublease rentals at facilities in North America and in Europe for the year
ended December 31, 2001 and the nine months ended September 30, 2001,
respectively, (b) $3.5 million and $2.4 million for severance and other
employee related costs for the termination of 233 and 137 employees for the
year ended December 31, 2001 and the nine months ended September 30, 2001,
respectively, and (c) $0.6 million and $0.1 million for disposal of fixed
assets, abandonment of leased equipment and other facility closure costs for
the year ended December 31, 2001 and the nine months ended September 30, 2001,
respectively.

In response to the continued global slowdown in customer spending for
large-scale IT projects, the Company launched additional cost reduction actions
at the end of the second quarter of 2002. These actions, which include the
consolidation of the U.S. professional services and development activities into
one location in Dallas and the expansion of the Companys offshore development
operations, resulted in estimated

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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

10. Estimated Provisions for Lease Abandonment, Employee Severance and Other Costs (continued)

provisions of approximately $6.5 million. These provisions consisted of
approximately $1.4 million for estimated severance and other employee related
costs for the termination of approximately 60 services, sales and marketing,
development and administrative employees and approximately $1.1 million for the
estimated loss on the abandonment of leased office space in Philadelphia.
Additionally, the Company provided $2.9 million for additional estimated losses
associated with facilities previously abandoned and $1.1 million in other
facility closure costs primarily for the write-down of property and equipment.

The Company has made cash payments of approximately $7.3 million against
the reserves established for these various cost reduction actions. The
remaining liability at September 30, 2002 is approximately $12.4 million, of
which $8.8 million is long-term and is expected to be paid through 2009. These
reserves include estimates pertaining to sublease rates, vacancy periods,
employee separation costs and settlement of contractual obligations. Although
the Company does not anticipate significant changes, the actual costs may
differ from these estimates.

11. Related Party

In accordance with an amended employment agreement with the Companys
former Chief Financial Officer dated February 19, 2002, the Company forgave an
outstanding loan of approximately $277,000 on July 1, 2002. Accordingly, the
outstanding balance was charged against operating results during the six months
ended June 30, 2002.

12. Subsequent Events

On November 14, 2002, the Company announced, subject to stockholder
approval, a reverse stock split which would result in each stockholder
receiving one share of common stock for a range of every five (1:5)
up to fifteen (1:15)
common shares currently held. It is currently expected that the stockholder
meeting to approve the reverse stock split will be held in early January 2003.

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

Managements discussion and analysis of the financial condition and results of
operations should be read in conjunction with the Certain Factors That May
Affect Future Results included elsewhere in this Form 10-Q and the Companys
Critical Accounting Policies and Estimates included in the Companys Form 10-K
for the year ended 2001.

Overview

EXE Technologies, Inc. provides software that drives customers supply
chain execution processes, including fulfillment, warehousing, distribution,
and inventory management. Our software solutions deliver the vital, frontline
supply chain intelligence necessary to drive customer execution decisions and
processes. Our products and services help customers worldwide to increase
revenue, reduce distribution costs, manage inventory across the supply chain,
and improve customer loyalty and satisfaction. We provide global service and
support for our software from established facilities in North America, Europe,
the Middle East, Asia, and Australia.

We derive our revenue from the sale of software licenses; product related
consulting, training, maintenance and support (collectively, services and
maintenance); and the resale of software and equipment.

Our revenues have been adversely impacted by a global slowdown in customer
spending for large-scale IT projects during 2001 and 2002. This global slowdown
began to adversely impact our revenues in early 2001 and was impacted further
by the terrorist attacks upon the United States on September 11, 2001. While
the global economic environment for large-scale IT projects remains
challenging, we have remained focused on improving our performance through
better sales execution and expanded product offerings, while significantly
reducing global operating costs. At the end of the second quarter of 2002, we
made the decision to take significant additional cost reduction actions,
including the consolidation of our U.S. development and professional services
operations in Dallas and expansion of our offshore development activities.
These actions are expected to reduce operating costs in the future. We do not
expect the full benefit of these actions to be achieved until the first quarter
of 2003. The cost reduction actions resulted in special charges of
approximately $6.5 million in the second quarter of 2002. The special charges
included estimated severance and related costs and lease abandonment costs
related to the closure of our Philadelphia office and a provision for
additional estimated losses associated with facilities previously abandoned.

The benefits from these cost reduction measures began in the three months
ended September 30, 2002 as expenses for cost of services and maintenance,
sales and marketing, research and development, and general and administrative
declined approximately $0.9 million from the expense level during the three
months ended June 30, 2002. In early October 2002, we signed a three-year
offshore development agreement in accordance with our cost reduction plans.
The arrangement provides offshore development resources in India at a cost
lower than we have been historically incurring in the United States. We expect
future reductions in research and development expenses after a transition
period during the fourth quarter of 2002.

We have reduced our full time employee headcount from 630 at the beginning
of 2001 to 459 at the end of September 2002. The cost reduction actions taken
at the end of June 2002 have resulted in a reduction of 20 employees through
September 30, 2002 and further reductions are expected by the first quarter of
2003.

We will continue to review and evaluate our cost structure in the future
in light of the existing business environment. Further cost reduction actions
will be taken, should business volumes not improve.

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In October 2002, we were notified by the NASDAQ Stock Market, Inc. that
our common stock price had failed to maintain a minimum closing bid price
greater than or equal to $1.00 for 30 consecutive trading days. This failure
to comply with this requirement for continued listing on the NASDAQ National
Market subjects our common stock to possible delisting. In accordance with
NASDAQ rules, we have 90 calendar days, or until January 21, 2003, to regain
compliance with the minimum closing bid requirements.

In order to regain compliance with the minimum closing bid price
requirements, on November 14, 2002, the Company announced, subject to
stockholder approval, a reverse stock split (see Note 12 to the Consolidated
Financial Statements included elsewhere herein).

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and the results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States. The preparation of these financial statements requires
management to make judgments regarding estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. Management bases its judgments
on historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not apparent from other sources. Although management evaluates these judgments
on an ongoing basis, there can be no assurance that actual results will not
ultimately differ from those estimates. For a more detailed explanation of
these judgments, including our judgments relating to revenue recognition,
allowance for doubtful accounts and adjustments, goodwill and intangible
impairment, accruals for lease abandonment and employee termination costs,
related party transactions, and contingencies you may refer to our Annual
Report on Form 10-K for the year ended December 31, 2001.

Results of Operations

Three Months Ended September 30, 2002 Compared to the Three Months Ended September 30, 2001

Revenue

Total Revenue.Total revenue declined $6.2 million, or 26.9%, to $16.7
million for the three months ended September 30, 2002, from $22.9 million for
the three months ended September 30, 2001. International revenue accounted for
55.0% of total revenue during the three months ended September 30, 2002 and
48.3% of total revenue during the three months ended September 30, 2001. No
single customer accounted for more than 10.0% of total revenue during the three
months ended September 30, 2002 or 2001.

In September 2002, the Company expanded its strategic relationship with
IBM. One of the key elements of the expanded relationship was the issuance of
1,000,000 warrants to IBM to purchase the Companys common stock at an exercise
price of $0.01 per share. The warrants are exercisable over a
five-year period and will vest over a three-year period
based on IBMs generation of pre-established amounts of incremental software
license revenue for the Company.

Software License.Software license revenue decreased $2.2 million, or
45.4%, to $2.7 million for the three months ended September 30, 2002, from $4.9
million for the three months ended September 30, 2001. Software license
revenue as a percentage of total revenue excluding reimbursable expenses was
16.5% for the three months ended September 30, 2002 versus 22.1% for the three
months ended September 30, 2001. We believe these declines continue to reflect
the global slowdown in customer spending for large-scale IT projects that began
during 2001 and has extended into fiscal year 2002. When compared with the

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prior year, the largest decline in license revenue occurred in our Asia Pacific
region. Software license revenue declined $0.4 million or 13.7% when compared
with the preceding three months ended June 30, 2002. This decline was
attributed to lower license revenue in our North America and Asia Pacific
regions.

Services and Maintenance.Services and maintenance revenue declined $2.6
million, or 17.5%, to $12.3 million for the three months ended September 30,
2002 from $14.9 million for the three months ended September 30, 2001.
Services and maintenance revenue as a percentage of total revenue excluding
reimbursable expenses was 75.4% for the three months ended September 30, 2002
versus 66.8% for the three months ended September 30, 2001. We believe the
global slowdown in customer spending for large-scale IT projects has adversely
impacted our ability to generate new license revenue resulting in a shift in
our revenue mix. This decline in new projects from new license revenue has
contributed to the decline in services and maintenance revenue. Most of the
decline was in our North America and Asia Pacific regions since these areas
have been the most adversely affected by license revenue declines. Revenues
from consulting services have declined 27.7% when compared to the same three
month period of the prior year and is largely attributed to the continued
decline of consulting revenue from our EXceed Fulfill WMS Unix-based products.
In addition, revenues from the AllPoints product line have declined
approximately $0.9 million as a result of our November 2001 decision to no
longer sell and market these products. Services and maintenance revenue
declined $0.5 million or 4.3% when compared to the preceding three months ended
June 30, 2002. This decline is attributed to the European vacation season and
decreased consulting revenues in Japan.

Resale Software and Equipment.Resale software and equipment revenue
decreased $1.2 million, or 46.7%, to $1.3 million for the three months ended
September 30, 2002, from $2.5 million for the three months ended September 30,
2001. Resale software and equipment as a percentage of total revenue excluding
reimbursable expenses was 8.1% for the three months ended September 30, 2002
versus 11.1% for the three months ended September 30, 2001. Resale software
and equipment revenue decreased $0.7 million or 34.0% when compared with the
preceding three months ended June 30, 2002. This decrease is attributed to a
decline in resale revenues from our North American region.

Costs and Expenses

Cost of Software Licenses.Cost of software licenses consists primarily
of royalties associated with software used to develop our software products,
the cost of reproduction, and the cost of complementary software applications
that we purchase to sell to our customers. Cost of software licenses
represented 8.8% of software license revenue for the three months ended
September 30, 2002 and 6.5% for the three months ended September 30, 2001. The
increase in cost of software licenses as a percentage of software license
revenue was attributed to an increase in purchasing of complementary software
that was sold during the three months ended September 30, 2002.

Cost of Services and Maintenance.Cost of services and maintenance
consists primarily of salaries of professional staff and costs associated with
implementation, consulting and training services, hotline telephone support,
new releases of software and updating user documentation. Cost of services and
maintenance declined $1.6 million, or 17.2%, to $7.9 million for the three
months ended September 30, 2002, from $9.5 million for the three months ended
September 30, 2001. The decrease was related primarily to a reduction in the
number of full time and contract services and maintenance employees. Cost of
services and maintenance decreased $0.2 million or 2.3% when compared to the
preceding three months ended June 30, 2002. As a percentage of services and
maintenance revenue, cost of services and maintenance was approximately 64.0%
for the three months ended September 30, 2002 and for the three months ended
September 30, 2001 and was slightly increased from 62.7% for the three months
ended June 30, 2002. The increase in cost as a percentage of services and
maintenance revenue was largely due primarily to a decline in utilization
attributed to the traditional third quarter European vacation season.

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Cost of Resale Software and Equipment.Cost of resale software and
equipment consists primarily of the costs of the database software tools and
hardware we purchase to resell to our customers. Cost of resale software and
equipment decreased $1.1 million, or 49.3%, to $1.0 million for the three
months ended September 30, 2002, from $2.1 million for the three months ended
September 30, 2001. As a percentage of resale software and equipment revenue,
cost of resale software and equipment was 81.8% for the three months ended
September 30, 2002, 86.2% for the three months ended September 30, 2001 and
82.8% for the three months ended June 30, 2002. The decrease in cost of resale
as a percentage of resale software and equipment revenue was largely attributed
to the increase in revenues obtained from commissions earned on resale
referrals.

Sales and Marketing.Sales and marketing expenses consist primarily of
salaries, commissions, bonuses, recruiting costs, travel, marketing materials
and trade shows. Sales and marketing expenses decreased $1.7 million, or
28.0%, to $4.5 million for the three months ended September 30, 2002, from $6.2
million for the three months ended September 30, 2001. The decrease was
related primarily to a 26.4% reduction in the number of sales and marketing
employees and to lower commission expenses for sales staff and partners as a
result of lower software license revenues. As a percentage of total revenue
excluding reimbursable expenses, sales and marketing expenses remained steady
at 27.5% for the three months ended September 30, 2002, 27.9% for the three
months ended September 30, 2001, and 27.4% for the three months ended June 30,
2002. Sales and marketing expenses decreased $0.4 million or 8.8% when
compared with the preceding three months ended June 30, 2002 primarily due to
reduced staff headcount and lower commission expenses as a result of lower
software license revenues.

Research and Development.Research and development expenses consist
primarily of salaries and other personnel-related costs for our product
development activities. Research and development expenses decreased $0.6
million, or 18.1%, to $2.9 million for the three months ended September 30,
2002, from $3.5 million for the three months ended September 30, 2001. The
decrease in research and development expenses was largely due to efforts to
improve the utilization of development staff on billable service projects and
lower travel and equipment costs as a result of our decision to close the
Philadelphia facility in June of 2002. As a percentage of total revenue
excluding reimbursable expenses, research and development expenses increased to
17.5% for the three months ended September 30, 2002, from 15.6% for the three
months ended September 30, 2001, and from 16.2% for the three months ended June
30, 2002. Research and development expenses slightly decreased $0.1 million or
1.9% when compared with the preceding three months ended June 30, 2002. As
part of our cost reduction program, we have signed a three-year agreement with
a company to provide offshore development resources in India at a cost that
will be lower than our historic development costs. Due to transitional costs
in the final quarter of this year, reduced research and development costs from
the closure of our Philadelphia development operations and the outsourcing of
development from the offshore development contract are not expected to be fully
realized until the first quarter of next year.

General and Administrative.General and administrative expenses consist
primarily of salaries and other personnel-related costs of our finance, human
resources, information systems, administrative, legal and executive
departments, insurance costs and the costs associated with legal, accounting,
and other administrative services. General and administrative costs decreased
$1.4 million, or 32.5%, to $2.8 million for the three months ended September
30, 2002, from $4.2 million for the three months ended September 30, 2001. The
decrease in general and administrative expenses was due primarily to a 26.5%
reduction in the number of general and administrative employees and
contractors. As a percentage of total revenue excluding reimbursable expenses,
general and administrative expenses decreased to 17.2% for the three months
ended September 30, 2002, from 18.7% for the three months ended September 30,
2001, and increased from 16.8% for the three months ended June 30, 2002.
General and administrative expenses decreased $0.2 million or 6.9% when
compared with the preceding three months ended June 30, 2002 primarily due to
efforts to reduce contractor expenses and from reduced depreciation expense
caused by

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property and equipment write-offs associated with the facility closure actions
during the three months ended June 30, 2002. In November 2002, we hired a new
Chief Executive Officer. The existing Chief Executive Officer will continue
with the Company as Chairman of the Board of Directors. As a result, we expect
general and administrative expenses will increase in the future.

Amortization of Goodwill and Intangible Assets.Amortization of goodwill
and intangible assets relates primarily to assets acquired in connection with
the 1997 acquisition of Dallas Systems and the 2001 acquisition of AllPoints.
Amortization of goodwill and intangible assets decreased $2.0 million to $0.3
million for the three months ended September 30, 2002, from $2.3 million for
the three months ended September 30, 2001, and is consistent with $0.3 million
for the three months ended June 30, 2002. Of the decline from the prior year,
$1.3 million of the decline is attributed to the goodwill and intangible
impairment write-off of AllPoints at the end of 2001 and approximately $0.8
million is attributed to the implementation in the current year of Statement of
Financial Accounting Standards Board (SFAS) No. 142, Goodwill and Other
Intangible Assets,which directs that goodwill and intangible assets which are
deemed to have indefinite lives are no longer amortized but are subject to
annual impairment tests. In November of 2001 and July of 2002, we acquired a
total of $2.0 million of developed software technology that has resulted in
$0.1 million in amortization during the three months ended September 30, 2002.

Non-Cash Warrant and Stock Compensation.Non-cash warrant and stock
compensation expense relates to the amortization of deferred compensation
recorded primarily in connection with stock options granted to employees. The
deferred compensation recorded represented the difference between the exercise
price and the deemed fair value of our common stock on the date of grant of
these options. Non-cash warrant and stock compensation expense decreased $0.2
million to $0.2 million for the three months ended September 30, 2002, from
$0.4 million for the three months ended September 30, 2001, and $0.3 million
for the three months ended June 30, 2002.

Other Income (Expense).Other income (expense) consists of gains and
losses from currency fluctuations, interest expense, and interest income on
investments. Other income decreased $0.5 million to an income of $0.2 million
for the three months ended September 30, 2002, from an income of $0.7 million
for the three months ended September 30, 2001. The decrease was due primarily
to $0.2 million decline in foreign exchange gains and a decrease in interest
income of $0.3 million due to a decline in interest rates and a decline in
funds held in marketable securities during the three months ended September 30,
2002. Other income (expense) declined $0.9 million when compared with the
preceding three months ended June 30, 2002 primarily due to foreign exchange
gains during the three months ended June 30, 2002. Although we periodically buy
forward contracts to hedge against certain foreign currency fluctuations, we
may have foreign currency gains and losses that can significantly vary from
quarter to quarter.

Income Taxes.An income tax provision of $0.1 million was recognized
during the three months ended September 30, 2002 compared to no income tax
provision or benefit during the same period of 2001. The income tax provision
was primarily due to tax on income earned by foreign subsidiaries while
corresponding domestic tax benefit generated by foreign tax credits was not
recognized due to the uncertainty of the timing and amount of future taxable
income.

Nine Months Ended September 30, 2002 Compared to the Nine Months Ended September 30, 2001

Revenue

Total Revenue.Total revenue decreased $23.7 million, or 30.2%, to $54.8
million for the nine months ended September 30, 2002, from $78.5 million for
the nine months ended September 30, 2001. International revenue accounted for
52.9% of total revenue during the nine months ended September 30,

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2002 and 45.6% of total revenue during the nine months ended September 30,
2001. No single customer accounted for more than 10.0% of total revenue during
the nine months ended September 30, 2002 or 2001.

Software License.Software license revenue decreased $10.5 million, or
51.3%, to $10.0 million for the nine months ended September 30, 2002, from
$20.5 million for the nine months ended September 30, 2001. Software license
revenue as a percentage of total revenue excluding reimbursable expenses was
18.7% for the nine months ended September 30, 2002 versus 26.8% for the nine
months ended September 30, 2001. We believe these declines were primarily
attributed to the global slowdown in customer spending for large-scale IT
projects that began during 2001 and has extended into fiscal year 2002.

Services and Maintenance.Services and maintenance revenue decreased
$12.3 million, or 25.0%, to $37.0 million for the nine months ended September
30, 2002 from $49.3 million for the nine months ended September 30, 2001.
Services and maintenance revenue as a percentage of total revenue excluding
reimbursable expenses was 69.3% for the nine months ended September 30, 2002
versus 64.6% for the nine months ended September 30, 2001. We believe the
global slowdown in customer spending for large-scale IT projects has adversely
impacted our ability to generate new license revenue resulting in a shift in
our revenue mix. This decline in new projects from new license revenue has
contributed to the decline in services and maintenance revenue. The decline
occurred in our North America and Asia Pacific regions since these areas have
been the most adversely affected by license revenue declines. Revenues from
consulting services have declined 34.3% when compared to the same nine month
period of the prior year and is largely attributed to the continued decline of
consulting revenue from our EXceed Fulfill WMS Unix-based products. In
addition, revenues from the AllPoints product line have declined approximately
$2.2 million as a result of our November 2001 decision to no longer sell and
market these products.

Resale Software and Equipment.Resale software and equipment revenue
decreased $0.2 million, or 2.5%, to $6.4 million for the nine months ended
September 30, 2002, from $6.6 million for the nine months ended September 30,
2001. Resale software and equipment as a percentage of total revenue excluding
reimbursable expenses increased to 12.0% for the nine months ended September
30, 2002 from 8.6% for the nine months ended September 30, 2001. This increase
was due to improved resale revenue from Europe that accompanied a large new
license and services contract during the first quarter of 2002.

Costs and Expenses

Cost of Software Licenses.Cost of software licenses represented 4.4% of
software license revenue for the nine months ended September 30, 2002 and 2.2%
for the nine months ended September 30, 2001. The increase in cost of software
licenses as a percentage of software license revenue was attributed to an
increase in purchasing of complementary software that was sold during the nine
months ended September 30, 2002.

Cost of Services and Maintenance.Cost of services and maintenance
decreased $8.0 million, or 25.0%, to $24.1 million for the nine months ended
September 30, 2002, from $32.1 million for the nine months ended September 30,
2001. The decrease was related primarily to a reduction in the number of full
time and contract services and maintenance employees. As a percentage of
services and maintenance revenue, cost of services and maintenance was 65.1%
for the nine months ended September 30, 2002 and 2001.

Cost of Resale Software and Equipment.Cost of resale software and
equipment decreased $0.1 million, or 2.5%, to $5.3 million for the nine months
ended September 30, 2002, from $5.4 million for the nine months ended September
30, 2001. As a percentage of resale software and equipment revenue, cost of
resale software and equipment was 82.7% for the nine months ended September 30,
2002 and 2001.

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Sales and Marketing.Sales and marketing expenses decreased $6.4 million,
or 30.8%, to $14.4 million for the nine months ended September 30, 2002, from
$20.8 million for the nine months ended September 30, 2001. The decrease was
related primarily to a reduction in the number of sales and marketing employees
and to lower commission expenses for sales staff and partners as a result of
lower software license revenues. As a percentage of total revenue excluding
reimbursable expenses, sales and marketing expenses decreased to 27.1% for the
nine months ended September 30, 2002, from 27.3% for the nine months ended
September 30, 2001.

Research and Development.Research and development expenses decreased
$2.5 million, or 22.2%, to $8.8 million for the nine months ended September 30,
2002, from $11.3 million for the nine months ended September 30, 2001. The
decrease in research and development expenses was due primarily to a reduction
in the number of research and development employees and contractors. As a
percentage of total revenue excluding reimbursable expenses, research and
development expenses increased to 16.5% for the nine months ended September 30,
2002, from 14.8% for the nine months ended September 30, 2001. The increase
was primarily due to lower revenue we have experienced since the beginning of
the slowdown in global IT spending.

General and Administrative.General and administrative costs decreased
$5.2 million, or 36.6%, to $9.0 million for the nine months ended September 30,
2002, from $14.2 million for the nine months ended September 30, 2001. The
decline in general and administrative expenses was largely due to a reduction
in the number of general and administrative employees and contractors. As a
percentage of total revenue excluding reimbursable expenses, general and
administrative expenses decreased to 16.9% for the nine months ended September
30, 2002, from 18.6% for the nine months ended September 30, 2001.

Amortization of Goodwill and Intangible Assets.Amortization of goodwill
and intangible assets decreased $5.6 million to $0.9 million for the nine
months ended September 30, 2002, from $6.5 million for the nine months ended
September 30, 2001. Of the decline from the prior year, $3.4 million of the
decline is attributed to the goodwill and intangible impairment write-off of
AllPoints at the end of 2001 and approximately $2.5 million is attributed to
the implementation in the current year of Statement of Financial Accounting
Standards Board (SFAS) No. 142, Goodwill and Other Intangible Assets,which
directs that goodwill and intangible assets which are deemed to have indefinite
lives are no longer amortized but are subject to annual impairment tests. In
November of 2001 and July of 2002, we acquired a total of $2.0 million of
developed software technology that has resulted in $0.3 million in amortization
during the nine months ended September 30, 2002.

Non-Cash Warrant and Stock Compensation.Non-cash warrant and stock
compensation expense decreased $0.6 million to $0.7 million for the nine months
ended September 30, 2002, from $1.3 million for the nine months ended September
30, 2001. The decline primarily was attributed to employee reductions and the
associated cancellation of the remaining vesting of options.

Estimated Provisions for Lease Abandonment, Employee Severance and Other
Facility Closure Costs. In response to the continued global slowdown in
customer spending for large-scale IT projects, we launched additional cost
reduction actions during the three months ended June 30, 2002. These actions,
which include the consolidation of the U.S. professional services and
development activities into one location in Dallas and the expansion of our
offshore development operations, resulted in a charge of approximately $6.5
million. These provisions consisted of approximately $1.4 million for
estimated severance and other employee related costs for the termination of
approximately 60 services, sales and marketing, development and administrative
employees and approximately $1.1 million for the estimated loss on the
abandonment of leased office space in Philadelphia. Additionally, we provided
$2.9 million for additional estimated losses associated with facilities
previously abandoned and $1.1 million in other facility closure costs primarily
for the write-down of property and equipment.

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During the nine months ended September 30, 2001, we implemented cost
reduction plans and recorded a pretax charge of $9.9 million that included
approximately $2.4 million for severance and other employee related costs for
the termination of 137 services, sales and marketing, development and
administrative employees, $7.4 million for the abandonment of certain leased
office space, less estimated sublease recoveries, at our North American and
United Kingdom facilities, and $0.1 million for other costs associated with the
downsizing of operations at our Hong Kong office.

These provisions are based on managements judgment of the estimated costs
related to the severance, lease abandonments and other related costs. Actual
future costs could vary from these estimates and result in additional
provisions in the future.

Other Income (Expense).Other income decreased $0.2 million to an income
of $1.5 million for the nine months ended September 30, 2002, from an income of
$1.7 million for the nine months ended September 30, 2001. The decrease was
due primarily to a $1.2 million decline in interest income caused by a decline
in interest rates and a decline in funds held in marketable securities during
the nine months ended September 30, 2002. This decrease was offset by and
increase of $1.0 million from foreign exchange gains. Although we periodically
buy forward contracts to hedge against foreign currency fluctuations, we may
have foreign currency gains or losses that can significantly vary from quarter
to quarter.

Income Taxes.An income tax provision of $0.3 million was recognized
during the nine months ended September 30, 2002 compared to $0.2 million tax
provision during the same period of 2001. The income tax provisions were
primarily due to taxes on income earned by foreign subsidiaries while
corresponding domestic tax benefits generated by foreign tax credits was not
recognized due to the uncertainty of the timing and amount of future taxable
income.

Liquidity and Capital Resources

We have funded our operations through the issuance of our preferred and
common stock, bank borrowings and cash flow from operations. As of September
30, 2002 we had approximately $42.5 million in cash and marketable securities,
including long-term marketable securities, a decline of approximately $2.8
million during the first nine months of 2002.

Net cash used by operating activities was $1.2 million for the nine months
ended September 30, 2002. The net loss after deducting non-cash adjustments was
approximately $8.1 million. This net cash use was significantly offset by cash
generated from changes in operating assets and liabilities of approximately
$6.9 million. Accounts receivable declined approximately $7.8 million,
resulting from an improvement in our receivable days outstanding from 121 days
at the end of 2001 to 80 days at the end of the third quarter of 2002.
Additionally, accrued liabilities grew by approximately $1.3 million and
deferred revenues increased by approximately $1.1 million. Prepaids and other
current assets increased by $2.9 million due primarily to prepayment of
insurance premiums, including director and officer liability insurance. Net
cash used in operating activities was $7.7 million for the comparable nine
months ended September 30, 2001.

Net cash used in investing activities was $0.3 million for the nine months
ended September 30, 2002. We acquired the rights to certain developed software
technology, during the third quarter of 2002, for $1.0 million (see Note 5 to
the consolidated financial statements included elsewhere herein) and purchased
property and equipment of $0.6 million. Additionally, we generated
approximately $1.4 million of cash from net sales of marketable securities.
Net cash used in investing activities was $1.3 million for the comparable nine
months ended September 30, 2001. We believe that capital expenditures over the
next twelve months will not exceed $1.0 million.

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Net cash provided by financing activities was less than $0.1 million for
the nine months ended September 30, 2002. We generated cash of $0.4 million
from the issuance of common stock and reduced long-term debt by approximately
$0.4 million. Net cash provided by financing activities was $0.4 million for
the comparable nine months ended September 30, 2001.

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

We currently have operating lease obligations of approximately $44.2
million, of which $5.0 million is payable over the next year and the balance is
due over an additional 13 years. Certain of the leases are abandoned and
provisions have been made for the estimated losses on these leases (see Note 10
to the consolidated financial statements included elsewhere herein), but cash
payments will be required for the remainder of the existing lease obligations.
In October 2002, we agreed to pay the landlord of our abandoned Philadelphia
facility $0.4 million in early 2003 to terminate the facility lease. If we are
able to reach a settlement with the lessors of other abandoned facilities on
terms favorable to the Company within the next twelve months, additional
settlement payments might be required which could be considerably higher than
the scheduled lease payments during that period.

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

We do not engage in
any activities involving special purpose entities or
off-balance sheet financing.

Forward-Looking Statements

In addition to historical information, this filing and our Annual Report
on Form 10-K may contain forward-looking statements. Any statements contained
herein (including without limitation statements to the effect that the Company
or its management believes, expects, anticipates, plans, and similar
expressions) that relate to future events or conditions, including, among
others, statements relating to economic conditions, sales execution, cost
reduction and restructuring actions and their impact on earnings and cash
flows, sufficiency of working capital, accounting for goodwill and other
intangible assets, interest rate risk, the enhancement of the Companys
software and a reverse stock split should be considered forward-looking
statements. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in these forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in the section
entitled Certain Factors That May Affect Future Results below. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which reflect managements opinions only as of the date hereof. The Company
undertakes no obligations to revise or publicly release the results of any
revision to these forward-looking statements, whether as a result of new
information, future events, or otherwise.

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Certain Factors That May Affect Future Results

Risks Relating to Our Business

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

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

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

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



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

We may not be profitable in the future.

With the exception of the third and fourth quarters of the year ended
December 31, 2000, we have experienced quarterly and annual losses since the
formation of EXE in September 1997. We experienced net losses of $26.1 million
in 1999, $3.3 million in 2000, $63.9 million in 2001, and $15.7 million for the
nine months ended September 30, 2002. We may continue to incur losses on both a
quarterly and an annual basis. Moreover, we expect to continue to incur
significant sales and marketing, research and development and general and
administrative expenses and, as a result, we will need to generate significant
revenue to report net income in future periods. We may not achieve our planned
growth or generate sufficient revenue to report net income in future periods.

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

We expect to derive a majority of our product license revenue in the
future from our fulfillment and collaboration products and their components.
Our business depends on continued customer acceptance of these products and the
release, introduction and customer acceptance of new products. We expect that
we

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will continue to depend on revenue from new and enhanced versions of our
fulfillment and collaboration products, and our revenue could decline if our
target customers do not continue to adopt and expand their use of these
products and their components.

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

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

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

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

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

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

Joseph Cowan, our President and Chief Executive Officer, and Ken Vines,
our Senior Vice President, Chief Financial Officer and Treasurer, joined us in
November 2002 and May 2002, respectively.

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Failure to integrate Mr. Cowan or Mr. Vines into the Company or with the senior
management team could disrupt our operations and harm our business and
financial results.

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

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

We depend on a limited number of sales personnel who have recently joined us.

We sell our software primarily through a direct sales force and through
strategic relationships with systems integrators, consulting services
companies, vendors of complementary software and hardware vendors. During the
past year we have experienced significant turnover in our U.S. sales force.
Almost all of the current members of our U.S. sales force have joined us within
the past year. Our future success will depend in part on the efforts of our
direct sales force. Most of the members of our sales force have not worked
together in the past and, as a result, may not work together effectively as a
team. In addition, our newly hired sales personnel may fail to develop the
necessary skills to be productive within our organization, or if they reach
productivity more slowly than anticipated, our ability to increase our revenue
and grow our business will be compromised. In addition, due to the competitive
nature of our industry, we may not be able to retain some or all of the members
of our sales force.

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

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



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

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

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

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

If we are unsuccessful in identifying, financing and integrating suitable
acquisition candidates, including businesses, products and technologies, our
growth could be harmed.

Due to the intense competition we face, we may not be able to identify
suitable acquisition candidates available for purchase at reasonable prices,
consummate any acquisition or successfully integrate any acquired business into
our operations.

Further, acquisitions may involve a number of additional risks, including:



| |  | diversion of managements attention;                       
|- |  | -----------------------------------------------------------
| 
| |  | failure to retain key personnel of the acquired businesses;
| 
| |  | unanticipated events or circumstances;                     
| 
| |  | legal liabilities; and                                     
| 
| |  | impairment charges on goodwill and intangible assets.      

We expect to finance any future acquisitions with cash on hand, as well as
with possible debt financing or by issuing common or preferred stock. If we
were to proceed with one or more future acquisitions for cash, a substantial
portion of our available cash could be used to complete them. If we were to
proceed with one or more acquisitions for stock, our stockholders would suffer
dilution of their interests. We can give you no assurance that we would be able
to arrange for any needed debt financing on terms acceptable to us. Most of the
businesses that might be attractive acquisition candidates are likely to have
significant intangible assets. During 2001, amortization of acquired or
existing intangible assets represents a substantial charge and has and will
continue to reduce earnings. However, under new accounting rules effective for
fiscal years beginning after December 15, 2001, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the new rules. Other intangible
assets will continue to be amortized over their useful lives.

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

Although we have recently improved on the time required to collect
accounts receivable from our customers, there is no assurance that this trend
will continue. Historically, we have experienced longer receivable collection
periods that has largely been attributed to the deterioration of certain of our
customers financial condition due to the negative economic climate in the
United States and the international markets we serve. The failure of any
significant customer to pay for our products on a timely basis could adversely
affect our results of operations and our operating cash flow.

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

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

Our international operations, which we could expand in the future, are subject
to heightened risks. If any of these risks actually occur, our earnings could
decline.

International revenue accounted for approximately 52.9% of our total
revenue during the nine months ended September 30, 2002, 46.9% of our total
revenue during the year ended December 31, 2001, 40.5% of our total revenue
during the year ended December 31, 2000 and approximately 36.2% of our total
revenue during 1999. We expect international revenue to continue to account for
a significant percentage of total revenue in the future, and we plan to
continue to expand our international activities as part of our growth strategy.
This expansion will require significant financial resources and management
attention that could have a negative effect on our earnings. As our
international operations continue to develop, they may become increasingly
subject to risks inherent in international business activities, including:



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

Our earnings could decline if these or other factors affect international
operations.

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

A majority of the revenue and expenses incurred by our international
operations are denominated in currencies other than the United States dollar.
In particular, our revenue and costs of operations in Japan and Singapore are
denominated in Japanese yen and Singapore dollars and in Europe some of our
contracts are denominated in the Euro. In addition, with the expansion of
international operations, the number of foreign

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currencies in which we must operate is likely to increase, resulting in
increased exposure to exchange rate fluctuations. Exchange rate fluctuations
have caused and will continue to cause currency transaction gains and losses.
We experienced currency transaction gains (losses) of $0.8 million for the nine
months ended September 30, 2002, $(0.5) million for the year ended December 31,
2001 and $(0.8) million for the year ended December 31, 2000. We can give you
no assurance that currency transaction losses will not adversely affect our
results in future periods.

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

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

Also, we believe our success will depend on our ability to productively
manage our personnel. We expect future increases in the number of our sales and
professional services staff. Growth may result in increased salary expenses and
training costs in advance of any resulting increase in services revenue due to
the typically lower productivity levels of newer personnel. Moreover, any
growth in software license revenue will likely generate the need for more
professional services personnel to deploy and implement software and to train
customers. A shortage in the number of trained personnel, either within our
Company or available from outside consulting firms, could limit our ability to
implement our software on a timely and cost-effective basis. Our earnings will
suffer if we generate insufficient revenue to cover growth-related expenses,
significantly strain management resources with additional responsibilities,
fail to successfully expand our relationships and develop additional
relationships with third-party implementers and complementary software vendors
or fail to have sufficiently trained sales and marketing personnel and
professional services personnel.

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

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

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

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

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

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



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

We also license software tools used to develop our software and software for
internal systems. We cannot assure you that the third party software or
software tools will continue to be available to us on commercially reasonable
terms. The loss or inability to maintain any of these software licenses could
result in delays or reductions in product shipments until equivalent software
could be identified and licensed or compiled, which could harm our business.

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

During the calendar year 2001, we terminated approximately 233 of our
services, sales, development and administrative personnel. Additionally, at the
end of June 2002, we announced that approximately an additional 60 employees
would be terminated. It is possible that these employees could bring legal
actions against us under applicable federal, state or local laws. Any such
claims, whether with or without merit, could subject us to costly litigation
and the diversion of management time and attention, and successful claims could
result in awards of damages to or reinstatement of former employees, any of
which could harm our operating results.

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

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

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

Five customers have requested defense and indemnification from us for
threatened patent claims against them by a third party relating to bar code
technology. For additional information about these requests, see Item 1.
BusinessIntellectual Property in our Annual Report on Form 10-K.

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We may implement a reverse stock split in the range of one-for-five to
one-for-fifteen. The effect of a reverse split on the trading price of our
common stock is unpredictable.

Our Board of Directors has approved a reverse stock split in the range of
one-for-five to one-for-fifteen. This proposal is to be considered for approval
by our stockholders at an upcoming Special Meeting of stockholders. We believe
that, if the reverse stock split is approved, there is a greater likelihood
that the minimum bid price of our common stock will be maintained at a level
over $1.00 per share. There can be no assurance, however, that approval of the
reverse stock split will succeed in raising the bid price of our common stock
above $1.00 per share, or that a bid price of $1.00, if achieved, would be
maintained, or that even if the Nasdaqs minimum bid price requirements were
satisfied, our common stock would not be delisted by the Nasdaq for other
reasons. Although the theoretical effect of a reverse stock split is to
increase the per share price of Common Stock, the actual price effect of a
reverse stock split is difficult to predict. It is possible that the post-split
trading price of our stock could be below the level one would expect based on
the proportional effect of the split alone. In addition, the fewer number of
shares that will be available to trade will possibly cause the trading market
of the common stock to become less liquid, which could have an adverse effect
on the price of the common stock.

The low price of our common stock could result in the delisting of our common
stock.

If our common stock is delisted from the Nasdaq National Market, we would
likely seek to list our common stock on the Nasdaq SmallCap Market, if
possible, or for quotation on the American Stock Exchange or a regional stock
exchange, if available. However, listing or quotation on such a market or
exchange could reduce the market liquidity for the common stock. If our common
stock is not listed or quoted on another market or exchange, trading of our
common stock could be conducted in the over-the-counter market on an electronic
bulletin board established for unlisted securities such as the Pink Sheets or
the OTC Bulletin Board.

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

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

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

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



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

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

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

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

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

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

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

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

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



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

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

Risks Relating to Our Industry

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

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



| |  | adherence to emerging Internet-based technology standards;          
|- |  | --------------------------------------------------------------------
| 
| |  | comprehensiveness of applications;                                  
| 
| |  | adaptability and flexibility;                                       
| 
| |  | immediate, interactive capability with customer and partner systems;
| 
| |  | financial viability;                                                
| 
| |  | global capability;                                                  
| 
| |  | references from existing customers;                                 
| 
| |  | industry domain experience and expertise;                           

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| |  | ability to support specific industry requirements;
|- |  | --------------------------------------------------
| 
| |  | ease of application use and deployment;           
| 
| |  | speed of implementation;                          
| 
| |  | customer service and support; and                 
| 
| |  | initial price and total cost of ownership.        

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



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

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

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

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

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



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

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

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

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

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




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We develop products in the United States and market our products in North
America, Europe, the Middle East, Asia and Australia. Revenues outside the
United States were 40.5%, 46.9% and 52.9% of our total revenues for the years
ended December 31, 2000 and 2001 and for the nine months ended September 30,
2002, respectively. Most of our foreign subsidiaries sales and expenses are
made in local currencies. International sales denominated in currencies other
than the U.S. dollar are primarily in the Japanese Yen, Singapore dollar and
the Euro. Accordingly, we are exposed to fluctuations in currency exchange
rates. Foreign currency transaction gains (losses) were approximately $(0.8)
million, $(0.5) million and $0.8 million for the years ended December 31, 2000
and 2001 and for the nine months ended September 30, 2002, respectively.
Because most of our sales are currently made in U.S. dollars, a strengthening
of the dollar could make our products less competitive in foreign markets.

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

As of September 30, 2002, the Company had outstanding forward currency
exchange contracts of
$2.0 million to sell British Pounds Sterling and $2.5 million to sell Japanese
yen which hedge net balance sheet exposures. Gains and losses arising from the
changes in the fair value of forward currency exchange contracts are recognized
as a component of other income (expense). At September 30, 2002, the current
market settlement values of the forward contracts would be immaterial.

We used a portion of the proceeds obtained from our August 2000 initial
public offering to repay all outstanding amounts under our revolving credit
facility and term loan, which we subsequently terminated. To the extent that we
utilize our new credit facility (see Note 8 to the Consolidated Financial
Statements included elsewhere herein) in the future, future interest expense
could be subject to fluctuations based on the general level of U.S. interest
rates.

We have invested the remaining proceeds from our initial public offering
in investment grade corporate and government securities and money market funds.
The primary objective of our investment activities is to preserve capital while
at the same time maximizing the income we receive from our

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investments without significantly increasing risk. Some of the securities that
we invest in may have market risk. This means that a change in prevailing
interest rates may cause the principal amount of the investment to fluctuate.
For example, if we hold a security that was issued with a fixed interest rate
at the then-prevailing rate and the prevailing interest rate later rises, the
principal amount of our investment will probably decline. As of September 30,
2002, we had $25.4 million of securities which mature in 90 days or less, $3.1
million of securities which mature between 90 days and one year, and $8.5
million of securities which mature between one and two years. We do not believe
that we have any material exposure to interest rate risk.




ITEM 4. CONTROLS AND PROCEDURES

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

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




PART II. OTHER INFORMATION




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(c) Recent Sales of Unregistered Securities

During the three months ended September 30, 2002, we issued warrants to
purchase 1,000,000 shares of Common Stock to IBM at an exercise price of $0.01
per share. The warrants were not registered under the Securities Act of 1933.

We believe that the transaction described above were exempt from
registration under Section 3(b) or 4(2) of the Securities Act because the
subject securities were issued to one entity which was believed to be a
sophisticated investor or to have had a pre-existing business or personal
relationship with us or our management and to have been purchasing for
investment without a view to further distribution. In addition, the recipient
of securities in such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the
certificate issued in such transaction. The recipient had adequate access,
through its relationship with us, to information about us.

(d) Use of Proceeds

The Company completed its initial public offering of 8.0 million shares of
its common stock pursuant to a Registration Statement on Form S-1 (Registration
No. 333-35106, effective August 3, 2000) on
August 9, 2000. Total proceeds from the offering, including the exercise of
the over-allotment option, were approximately $63.9 million, net of
underwriting discounts and commissions of approximately $5.0 million

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and other
fees and expenses of approximately $1.8 million.

From the date of receipt through September 30, 2002, we have used the
proceeds as follows:

|                          |  |  |   |             
|------------------------- |  |  | - | ------------
|Repayment of indebtedness |  |  | $ | 16.6 million
|Acquisition of businesses |  |  |   | 3.7 million 
|Working capital           |  |  |   | 12.3 million
|                          |  |  |   |             
|Total                     |  |  | $ | 32.6 million
|                          |  |  |   |             

The remainder of the proceeds has been invested in investment grade
corporate and government securities and money market funds. We intend to use
the remaining proceeds for research and development activities; expenditures on
sales and marketing, consulting services, and general and administrative
personnel; systems costs; and working capital and general corporate purposes,
including possible acquisitions of, or investments in, businesses and
technologies that are complementary to our business. None of the net proceeds
of the offering were paid by us, directly or indirectly, to any director,
officer or general partner of ours or any of their associates, or to any
persons owning ten percent or more of any class of our equity securities, or
any affiliates of ours.




ITEM 5. OTHER INFORMATION

The National Association of Securities Dealers, Inc. (the NASD) has
promulgated Nasdaq Marketplace Rules requiring that listed companies have audit
committees of at least three members comprised solely of independent
directors as defined under their Marketplace Rule 4200(a)(14). The Company
believes that each of the current members of the Audit Committee is an
independent director within the meaning of NASD Marketplace Rule 4200(a)(14)
except for Mr. William J. Lansing. Nasdaq Marketplace Rule 4350(d)(2)(B)
establishes an exemption to the three independent members rule by permitting
a listed companys audit committee under exceptional and limited
circumstances to include one director who is not independent if the Board of
Directors determines that his or her membership on that committee is required
by the best interests of the company and its stockholders.

In the meeting of the Board of Directors of the Company on November 6,
2002, the Board of Directors determined that it is in the best interests of the
Company its stockholders for Mr. Lansing to continue serving on the Audit
Committee because Mr. Lansing is not an employee or immediate family member
of any employee of the Company and the Board believes that Mr. Lansings
service as managing member of General Atlantic Partners, LLC will not impair or
influence his judgment. The Board has determined that because Mr. Lansing has
extensive business, financial and accounting experience and significant
knowledge of the Companys industry, he will be able to provide valuable
service and counsel to the Audit Committee. Accordingly, the Board of
Directors determined that exceptional and limited circumstances exist which
require Mr. Lansing to continue to serve as a Director on the Audit Committee.
The Board believes that the interests of the Company and its stockholders are
best served by Mr. Lansings continued membership in the Audit Committee.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



|(a) |  | Exhibits
|--- |  | --------



| | 10.1 |  | Amended and Restated EXE Technologies, Inc. 1997 Incentive and
Non-Qualified Stock Option Plan, as amended.
| | ---- |  | -----------------------------------------------------------------------------------------------------------
|
| | 99.1 |  | Certification pursuant to 18 U.S.C. Section 1350.                                                          



|(b) |  | Reports on Form 8-K
|--- |  | -------------------
|   
|    |  | None.              

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                        |  |                          |  |                                                                                       
|----------------------- |  | ------------------------ |  | --------------------------------------------------------------------------------------
|                        |  |                          |  | EXE TECHNOLOGIES, INC.                                                                
|                        |  |                          |  |                                                                                       
|Date: November 14, 2002 |  | By: /s/ RAYMOND R. HOOD 
|                        |  |                          |  |                                                                                       
|                        |  |                          |  | Raymond R. Hood
Chairman of the Board of Directors and
Chief Executive Officer        
|                        |  |                          |  |                                                                                       
|Date: November 14, 2002 |  | By: /s/ KENNETH R. VINES
|                        |  |                          |  |                                                                                       
|                        |  |                          |  | Kenneth R. Vines
Senior Vice President, Finance, Chief
Financial Officer and Treasurer

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CERTIFICATIONS

I, Raymond R. Hood, Chief Executive Officer of the registrant
certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of the registrant.                                                                                                                                                                                                                                                         
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934,
as amended) for the registrant and have:                                                                  



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



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors:
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dated: November 14, 2002

/s/ Raymond R. Hood

Chief Executive Officer

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CERTIFICATIONS

I, Kenneth
R. Vines, Chief Financial Officer of the registrant certify
that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of the registrant.                                                                                                                                                                                                                                                         
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934,
as amended) for the registrant and have:                                                                  



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



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors:
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dated: November 14, 2002

/s/ Kenneth R. Vines

Chief Financial Officer

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INDEX TO EXHIBITS

|     |  |                                                                                                            
|---- |  | -----------------------------------------------------------------------------------------------------------
|10.1 |  | Amended and Restated EXE Technologies, Inc. 1997 Incentive and
Non-Qualified Stock Option Plan, as amended.
|     |  |                                                                                                            
|99.1 |  | Certification pursuant to 18 U.S.C. Section 1350.                                                          

41