TELESCIENCES INC /DE/, 10-Q, 1999-05-12

TELESCIENCES INC /DE/
10-Q, 1999-05-12
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
________________

Form 10-Q

(Mark One)
[X] Quarterly Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange
Act Of 1934

For the quarterly period ended March 31, 1999

[ ] Transition Report Pursuant To Section 13 Or 15(D) Of The Securities
Exchange Act Of 1934

For the transition period from ............... to ...............

Commission file number 0-22601
-------

Telesciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

<TABLE>

<S> <C>
Delaware 51-0356153
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number.)
</TABLE>

4000 Midlantic Drive
Mount Laurel, NJ 08054-5476
(Address of Principal Executive Offices) (Zip Code)

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

Former Name: Axiom Inc.
------------------------
Former Name, Former Address and Former
Fiscal Year, if changed since last report

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 7,619,265 shares of Common
Stock, par value of $.01 per share, were outstanding as of May 12, 1999.

- --------------------------------------------------------------------------------
<PAGE>

Telesciences, Inc. (Formerly Axiom Inc.) and Subsidiaries

Index

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

Item 1. Consolidated Financial Statements (Unaudited)

Consolidated Balance Sheets as of March 31, 1999 and September 30, 1998.............. 3

Consolidated Statements of Operations - Three and Six Months Ended March 31,
1999 and 1998....................................................................... 4

Consolidated Statements of Cash Flows - Six Months Ended March 31, 1999 and 1998..... 5

Notes to Consolidated Financial Statements........................................... 6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11

Item 3. Quantitative and Qualitative Disclosures About Market Risk........................... 18

Part II - Other Information:

Item 1. Legal Proceedings.................................................................... 19

Item 2. Changes in Securities................................................................ 19

Item 3. Defaults Upon Senior Securities...................................................... 19

Item 4. Submission of Matters to a Vote of Security Holders.................................. 19

Item 5. Other Information.................................................................... 20

Item 6. Exhibits and Reports on Form 8-K..................................................... 20
(a) Exhibits
(b) Reports on Form 8-K
</TABLE>

2
<PAGE>

Part I. Financial Information
Item 1. Consolidated Financial Statements (Unaudited)
Telesciences, Inc. (Formerly Axiom Inc.) and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)

<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................... $ 1,842 $ 1,093
Accounts receivable, net of allowance for doubtful accounts of $3,704 and $3,985........ 7,182 11,325
Inventories............................................................................. 5,905 6,561
Deferred tax assets..................................................................... 436 436
Income tax receivable................................................................... -- 722
Restricted cash......................................................................... 548 --
Other................................................................................... 698 392
------------- ------------
Total current assets................................................................. 16,611 20,529
------------- ------------
PROPERTY AND EQUIPMENT
Computer hardware and software.......................................................... 4,523 4,354
Production and test equipment........................................................... 3,456 3,016
Furniture fixtures and leasehold improvements........................................... 1,638 1,636
------------- ------------
9,617 9,006
Less - Accumulated depreciation and amortization........................................ (5,472) (4,569)
------------- ------------
Net property and equipment........................................................... 4,145 4,437
DEFERRED TAX ASSETS....................................................................... 2,502 2,502
RESTRICTED CASH........................................................................... -- 548
OTHER ASSETS.............................................................................. 1,751 1,783
------------- ------------
$ 25,009 $ 29,799
============= ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt....................................................... $ 318 $ 330
Obligations to Securicor and affiliates................................................. 44 64
Accounts payable........................................................................ 2,127 4,930
Accrued compensation and related benefits............................................... 1,085 1,085
Accrued agent commissions............................................................... 200 353
Other accrued expenses.................................................................. 1,564 1,885
Deferred revenues....................................................................... 3,798 1,602
------------- ------------
Total current liabilities............................................................ 9,136 10,249
------------- ------------

LONG-TERM LIABILITIES:
Deferred tax liabilities................................................................ 220 220
Long-term debt.......................................................................... 340 499
------------- ------------
Total long term liabilities.......................................................... 560 719
------------- ------------

COMMITMENTS AND CONTINGENCIES (NOTE 6)

STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued and
outstanding............................................................................ -- --
Common stock, $0.01 par value, 25,000,000 shares authorized, 7,778,268 and 7,790,305
shares issued and outstanding.......................................................... 78 78
Additional paid-in capital.............................................................. 37,109 37,156
Accumulated deficit..................................................................... (21,226) (18,397)
Treasury stock, 187,500 shares, at cost................................................. (644) --
Cumulative translation adjustment....................................................... (4) (6)
------------- ------------
Total stockholders' equity........................................................... 15,313 18,831
------------- ------------
$ 25,009 $ 29,799
============= ============
</TABLE>

The accompanying notes are an integral part of these statements.

3
<PAGE>

<TABLE>
<CAPTION>
Telesciences, Inc. (Formerly Axiom Inc.) and Subsidiaries
Consolidated Statements of Operations
(In thousands)
(Unaudited)

For the Three Months For the Six Months
Ended March 31, Ended March 31,
----------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Equipment .............................................. $ 3,477 $ 4,034 $ 8,026 $ 8,782
Services ............................................... 2,011 2,262 4,641 4,442
---------- ---------- ---------- ----------
Total revenues ...................................... 5,488 6,296 12,667 13,224
---------- ---------- ---------- ----------

COST OF REVENUES:
Equipment................................................ 2,793 2,648 5,640 5,175
Services ............................................... 1,039 1,843 2,385 3,155
---------- ---------- ---------- ----------
Total cost of revenues .............................. 3,832 4,491 8,025 8,330
---------- ---------- ---------- ----------
Gross Profit ........................................ 1,656 1,805 4,642 4,894
---------- ---------- ---------- ----------

OPERATING EXPENSES:
Research, development and engineering .................. 1,852 1,918 3,666 3,872
Selling, general and administrative .................... 1,649 4,120 3,775 6,934
---------- ---------- ---------- ----------
Total operating expenses ............................ 3,501 6,038 7,441 10,806
---------- ---------- ---------- ----------
Operating loss ...................................... (1,845) (4,233) (2,799) (5,912)
INTEREST EXPENSE (INCOME), net (including related party
interest) ............................................. 5 (96) 4 (195)
OTHER INCOME (EXPENSE) ................................... (41) 14 (26) 14
---------- ---------- ---------- ----------
Loss before income taxes ............................... (1,891) (4,123) (2,829) (5,703)
INCOME TAX BENEFIT ....................................... -- 1,323 -- 1,939
---------- ---------- ---------- ----------
NET LOSS ................................................. $(1,891) $(2,800) $(2,829) $(3,764)
========== ========== ========== ==========

BASIC AND DILUTED NET LOSS PER COMMON SHARE .............. $ (0.24) $ (0.43) $ (0.36) $ (0.58)
========== ========== ========== ==========

SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER
COMMON SHARE .......................................... 7,777 6,467 7,780 6,467
========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

4
<PAGE>
Telesciences, Inc. (Formerly Axiom Inc.) and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

For the Six Months Ended March 31,
----------------------------------------------
1999 1998
------------------- -------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................................................... $(2,829) $(3,764)
Adjustments to reconcile net loss to net cash provided by operating activities -
Depreciation and amortization................................................... 1,078 673
Provision for doubtful accounts................................................. -- 755
Changes in assets and liabilities, net -
Decrease (increase) in -
Accounts receivable........................................................... 4,091 2,923
Inventories................................................................... 656 1,140
Other current assets.......................................................... (306) (271)
Other assets.................................................................. 93 (90)
Deferred taxes................................................................ -- (1,453)
Income tax receivable......................................................... 722 (517)
Increase (decrease) in -
Accounts payable.............................................................. (2,798) (1,321)
Accrued compensation and related benefits..................................... -- (38)
Accrued agent commissions..................................................... (153) (142)
Other accrued expenses........................................................ (321) 902
Deferred revenues............................................................. 2,196 1,340
---------------- -------------------
Net cash provided by operating activities................................... 2,429 137
---------------- -------------------

INVESTING ACTIVITIES:
Purchase of property and equipment................................................. (611) (847)
Cash paid for acquisition, net..................................................... -- (91)
Capitalized software development costs............................................. (880) --
---------------- -------------------
Net cash used in investing activities....................................... (1,491) (938)
---------------- -------------------

FINANCING ACTIVITIES:
Payments on long-term debt......................................................... (171) (73)
Advances on obligations to Securicor and affiliates................................ 66 391
Repayment on obligations to Securicor and affiliates............................... (86) (549)
---------------- -------------------
Net cash used in financing activities....................................... (191) (231)
---------------- -------------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH............................................ 2 (2)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................... 749 (1,034)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................... 1,093 7,206
---------------- -------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................... $ 1,842 $ 6,172
================ ===================
</TABLE>

The accompanying notes are an integral part of these statements.

5
<PAGE>

Telesciences, Inc. (Formerly Axiom Inc.) And Subsidiaries
Notes To Consolidated Financial Statements
(Unaudited)

1. Background:

The Company

Telesciences, Inc. (the "Company"), a Delaware corporation, changed its
name from Axiom Inc. in March 1999. Through May 1997, the Company's business
was conducted through its wholly-owned subsidiary, Securicor Telesciences Inc.
("STI"). On that date, STI merged into the Company. Prior to May 1998, the
Company was a majority-owned subsidiary of Securicor Communications Limited
("SCL"), an entity organized under the laws of the United Kingdom and a wholly-
owned subsidiary of Securicor plc ("Securicor"), a company organized under the
laws of the United Kingdom. As the merger represented a transaction between
entities under common control, the net assets of STI were transferred at net
book value. Prior to the completion of the Company's initial public offering,
Securicor provided the financing requirements for the Company through advances.
SCL currently owns approximately 44.7% of the Company's outstanding Common
Stock.

2. Summary Of Significant Accounting Policies:

Interim Financial Information and Summary Financial Information

The financial statements as of March 31, 1999 and for the three month and
six month periods ended March 31, 1999 and 1998 are unaudited and, in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for the fair presentation of results for these
interim periods. The results for the six months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the entire year. While
the Company believes that the disclosures presented are adequate to make the
information not misleading, these Consolidated Financial Statements should be
read in conjunction with the Consolidated Financial Statements and the notes
included in the Company's Form 10-K for the fiscal year ended September 30,
1998, as amended.

Principles of Consolidation

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

Restricted Cash

Restricted cash consists of funds to support a standby letter of credit
required under a contractual arrangement with one of the Company's customers.
Based upon the contractual agreement, this amount will be released on December
31, 1999. Accordingly, this restricted cash is reflected as a current asset as
of March 31, 1999.

Software Development Costs

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

6
<PAGE>

Telesciences, Inc. (Formerly Axiom Inc.) And Subsidiaries
Notes To Consolidated Financial Statements (Continued)
(Unaudited)

2. Summary Of Significant Accounting Policies: (Continued)

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

Capitalized software development costs consist primarily of salary,
consulting, and computer costs incurred to develop new products. During the six
months ended March 31, 1999 and 1998, respectively, software development costs
of $880,000 and $0 were capitalized. Amortization has not yet begun.

Revenue Recognition

Revenues are generally recognized upon shipment of the equipment. In "bill
and hold" transactions, the Company recognizes revenues when the following
conditions are met: the equipment is complete, ready for shipment and segregated
from other inventory; the Company has no further significant performance
obligations in connection with the completion of the transaction; the commitment
and delivery schedule is fixed; the customer requested the transaction be
completed on this basis; and the risks of ownership have passed to the customer.
There were no outstanding accounts receivable balances relating to "bill and
hold" transactions at March 31, 1999 or September 30, 1998. Revenues from
installation and engineering activities are recognized as services are provided.

Depending on contract terms and conditions, software license fees are
recognized upon delivery of the product if no significant vendor obligations
remain and collection of the resulting receivable is deemed probable. The
Company had nominal stand-alone software license fee revenues for the six months
ended March 31, 1999 and 1998, respectively, and these amounts are included in
equipment revenues. If significant vendor obligations exist at delivery and/or
the product is subject to customer acceptance, revenue is deferred until no
significant obligations remain and/or acceptance has occurred. If the payment
of the license fee is coincident to services which are deemed to be essential to
the transaction, the license fee is deferred and recognized using contract
accounting over the period during which the services are performed. The
Company's software licensing agreements provide for a warranty/customer support
(typically 90 days). The portion of the license fee associated with the
warranty/customer support is unbundled from the license fee and is recognized
ratably over the warranty period as services revenue.

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

Net Loss Per Common Share

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

7
<PAGE>

Telesciences, Inc. (Formerly Axiom Inc.) And Subsidiaries
Notes To Consolidated Financial Statements (Continued)
(Unaudited)

2. Summary Of Significant Accounting Policies: (Continued)

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

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

<TABLE>
<CAPTION>
For the Three Months Ended March 31,

Loss Shares Per Share
1999 (Numerator) (Denominator) Amount
- ---------------------------------------------------- ------------------- -------------------- ----------------
<S> <C> <C> <C>
Basic net loss per common share..................... $(1,891,000) 7,777,000 $(0.24)
===============
Dilutive effect of stock options.................. -- --
------------------- --------------------
Diluted net loss per common share................... $(1,891,000) 7,777,000 $(0.24)
=================== ==================== ===============
1998
- ----------------------------------------------------
Basic net loss per common share..................... $(2,800,000) 6,467,000 $(0.43)
===============
Dilutive effect of stock options.................. -- --
------------------- --------------------
Diluted net loss per common share................... $(2,800,000) 6,467,000 $(0.43)
=================== ==================== ===============
</TABLE>

<TABLE>
<CAPTION>
For the Six Months Ended March 31,

1998
- ----------------------------------------------------
Basic net loss per common share..................... $(3,764,000) 6,467,000 $(0.58)
===============
Dilutive effect of stock options.................. -- --
------------------- --------------------
Diluted net loss per common share................... $(3.764,000) 6,467,000 $(0.58)
=================== ==================== ===============
</TABLE>

Diluted loss per common share is the same as basic net loss per common
share as no additional shares for the potential dilution from the exercise or
conversion of securities into shares of common stock are included in the
denominator as the result is anti-dilutive due to the Company's losses. Options
to purchase 938,316 and 386,176 shares of common stock with a weighted average
exercise price of $3.65 and $5.50 per share were outstanding during the three
months ended March 31, 1999 and 1998, respectively, but were not included in the
computation of diluted net loss per common share.

Comprehensive Income

The Company has adopted SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements and requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
presented with equal prominence as other financial statements. The
comprehensive losses for the six months ended March 31, 1999 and 1998 were
$2,827,000 and $3,766,000, respectively.

8
<PAGE>

Telesciences, Inc. (Formerly Axiom Inc.) And Subsidiaries
Notes To Consolidated Financial Statements (Continued)
(Unaudited)

2. Summary Of Significant Accounting Policies: (Continued)

<TABLE>
<CAPTION>
Cumulative
Translation
Adjustments
--------------
<S> <C>
Beginning balance................................. $(6)
Current period change............................. 2
--------------
Ending Balance.................................... $(4)
==============
</TABLE>

Supplemental Disclosures of Cash Flow Information

For the six months ended March 31, 1999 and 1998, the Company paid interest
of $41,000 and $13,000, respectively. For the six months ended March 31, 1999
and 1998, income taxes paid by the Company were immaterial.

On May 15, 1998, pursuant to an Agreement of Merger and Plan of
Reorganization by and among the Company, AV Technology, Inc., a Delaware
corporation ("Technology") and a wholly-owned subsidiary of the Company,
Innovative Data Technology, a California corporation ("IDT"), and the
Shareholders of IDT (the "Shareholders") IDT was merged into Technology in
accordance with the relevant provisions of the California General Corporation
Law and the Delaware General Corporation Law (the "Merger"). In connection with
the Merger, the Company issued to the Shareholders, in exchange for their shares
of common stock of IDT, $1.00 par value, which constituted in the aggregate all
of the issued and outstanding common stock of IDT, an aggregate of 1,290,000
shares of the Common Stock. In November 1998, this number of shares was reduced
by 15,056 to 1,274,944 based on certain post closing adjustments. In March 1999,
the number of shares was further reduced by 187,500 to 1,087,444 based on
certain sales amount adjustments, and may be subject to further adjustment. In
conjunction with the reduction in shares, the Company reduced its intangibles
related to the IDT acquisition and recorded Treasury Stock in the amount of
$644,000.

Management's Use of Estimates

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

Reclassifications

Certain prior year amounts have been reclassified to conform with current
year presentation.

3. Accounts Receivable:

<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
----------------- -----------------
<S> <C> <C>
Billed.......................................... $ 9,543,000 $13,970,000
Unbilled........................................ 1,343,000 1,340,000
----------------- -----------------
10,886,000 15,310,000
Less - allowance for doubtful accounts.......... (3,704,000) (3,985,000)
----------------- -----------------
$ 7,182,000 $11,325,000
================= =================
</TABLE>

9
<PAGE>

Telesciences, Inc. (Formerly Axiom Inc.) And Subsidiaries
Notes To Consolidated Financial Statements (Continued)
(Unaudited)

4. Inventories:

<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
----------------- -----------------
<S> <C> <C>
Raw materials..................................... $4,177,000 $4,323,000
Work-in-process................................... 461,000 581,000
Finished goods.................................... 1,267,000 1,657,000
----------------- -----------------
$5,905,000 $6,561,000
================= =================
</TABLE>

5. Line Of Credit:

On December 7, 1998, the Company entered into an agreement with Silicon
Valley Bank to establish a $5,000,000 line of credit (the "Line of Credit")
which the Company is using to meet its short-term borrowing requirements. The
amount available under the Line of Credit is based upon a percentage of eligible
accounts receivable, as defined. Interest is charged at Silicon Valley Bank's
prime rate plus 1%. Borrowings under the Line of Credit are secured by an
interest in substantially all of the Company's assets. Under the Line of Credit,
the Company is required to comply with specified financial and non-financial
covenants, as defined. The Company intends to seek amendments to certain of
these covenants to enhance availability under the Line of Credit. In this
connection, the Company's largest stockholder has indicated a willingness to
provide a partial guarantee of the Line of Credit, subject to agreement with
Silicon Valley Bank on the terms of such guarantee. However, there is no
assurance that such a guarantee will be given or that any covenants will be
amended and, accordingly, there is no assurance as to the extent, if any, of the
continued availability of the Line of Credit. All receivable collections are
first applied against any outstanding balance under the Line of Credit. The
highest principal balance outstanding during the quarter ended March 31, 1999
was $264,000. Interest was charged at a weighted average rate of 8.75% and
interest expense was $5,900. No amounts were outstanding under the line of
credit at March 31, 1999.

6. Commitments And Contingencies:

The Company is obligated to make certain payments to certain key Company
employees if such employees are terminated. In addition, certain key employees
have performance incentives in the form of cash and equity (in Securicor or an
affiliate) related compensation. The Company does not expect to make these
payments other than in the normal course of business.

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

In August 1997, Acxiom Corporation ("Acxiom") filed suit against the
Company in the United States District Court for the District of Delaware
alleging trademark infringement and dilution under the Lanham Act, as well as
related state law causes of action. On November 16, 1998, the District Court
rendered its decision that Acxiom was entitled to an order enjoining the Company
from making further use of the Axiom name and related injunctive relief. The
court also concluded that Acxiom was not entitled to any money damages. The
Company and Acxiom agreed that neither would appeal the Court's decision, and
the Company agreed to reimburse Acxiom for ancillary costs in the amount of
$50,000.

Pursuant to the court order, on March 30, 1999, the Company amended its
Amended and Restated Certificate of Incorporation to change the name of the
Company from Axiom Inc. to Telesciences, Inc. In connection with the name
change, the Company's symbol on the Nasdaq National Market was changed to TLSI,
effective March 31, 1999.

10
<PAGE>

ITEM 2. Management's Discussion and Analysis of Financial Condition And Results
of Operations

Overview

The Company's principal products are billing data collection, transaction
data management, revenue assurance, fraud management systems and traffic
management systems. The Company also provides professional engineering services
for telecommunications service providers.

The Company's billing data collection and transaction data management
systems collect and normalize data from telecommunications switches that connect
users of telecommunications networks. They provide data to applications
including billing, customer care, marketing, fraud management, data warehousing
and network management applications. The Company's systems interface with all
major switch types.

The revenue assurance and fraud management systems help ensure carriers'
ability to bill accurately and completely for the services they render and guard
against fraudulent use of their networks. The need for such systems is
increasing as a result of the complexity in the marketplace introduced by the
growing number of telecommunications carriers and their interconnections. The
Company provides revenue assurance capabilities through its Sterling Fraud
Management System and in Specialized Processing Modules ("SPMs") running on the
Sterling Billing Mediation System.

The Company's traffic management systems capture information on trunk
usage. This information is transmitted to the customer's network planners who
use the information to optimize network performance. This capability helps
carriers avoid problems of too many available trunks, resulting in increased
costs, and too few available trunks, resulting in disconnected calls, poor
service and lost revenue.

The Company provides professional engineering services to integrate the
Company's product lines into customer networks and applications.

A significant portion of the Company's revenues have been, and are expected
to continue to be, derived from substantial orders placed by large
organizations, and in particular three Regional Bell Operating Companies
("RBOCs"). Aggregate revenues from US West, Inc., Southwestern Bell Telephone
Company and Ameritech Corporation accounted for 40.6% and 60.0% of the Company's
total revenues for the six months ended March 31, 1999 and 1998, respectively.

Domestic revenues are typically generated under cancelable general purchase
agreements which provide for the continuing supply of products and services over
future years. Pricing is based upon the volume of products ordered.
Internationally, the Company typically enters into long-term contracts for the
delivery of turnkey systems which include products and services. All sales
arrangements with international customers are denominated in U.S. dollars.
Sales of Greendown Software Limited, which was acquired by the Company in
February 1998, and which subsequently changed its name to Telesciences, Europe
Ltd. ("Telesciences, Europe"), are denominated in pounds Sterling. These sales
have been insignificant to date. The Company's revenues are difficult to
forecast because the purchase of its systems generally involves a significant
commitment of capital and management time, which often results in lengthy sales
cycles.

Quarterly revenues are subject to substantial fluctuations due primarily to
the Company's concentration of customers and the timing of orders received. The
timing of orders is, in part, dependent on the timing of the Company's
customers' annual budget process. Prior to fiscal 1998, the Company's first and
second fiscal quarters generated a lower level of revenues compared to the
Company's third and fourth fiscal quarters, by which time the Company's
customers typically approve their budgets. Historically, product and service
backlog has been a relatively small amount and the majority is fulfilled within
three months. Because of its close links to, and ongoing communications with,
its customers, the Company generally is able to plan for product demand and,
when the order is received, ship its products within a relatively short time
period thereafter.

11
<PAGE>

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

Research, development and engineering expenses consist of payroll and
related expenses and other costs associated with the design and development of
the Company's products. The majority of these costs are charged to expense as
incurred. During fiscal 1998, the Company embarked upon a rearchitecture of its
core systems, principally for the Sterling Host Collector. This work is
expected to enable the Company to further enhance its product offerings to its
existing customer base, as well as new and multi-service providers, which will
include companies using new technology such as Asynchronous Transfer Mode and
Internet Protocol. The new technology is expected to use object oriented design
tools and the latest proven software tools and methods. Due to the nature of
this rearchitecture project, the Company is capitalizing the costs of the
project and for the six months ended March 31, 1999, the total amount
capitalized was $880,000. These software development costs are accounted for
under SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed." No costs were capitalized during the six months
ended March 31, 1998. In fiscal 1999, the Company expects to capitalize
approximately $1.6 million of costs under SFAS No. 86 associated with this
project.

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

Certain prior year amounts have been reclassified to conform with current
year presentation.

12
<PAGE>

Disclosure Concerning Forward-Looking Statements

From time to time, the Company may publish statements that are not
historical facts but are forward-looking statements relating to such matters as
anticipated financial performance, business prospects, technological
developments, new products, research and development activities and similar
matters. Such statements are generally identified by the use of forward-looking
words and phrases such as "intended," "expects," "anticipates," and "is (or are)
expected (or anticipated)." The Private Litigation Reform Act of 1995 provides
a safe harbor for forward-looking statements. In order to comply with the terms
of the safe harbor, the Company notes that a variety of factors could cause the
Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's forward-
looking statements. The risks and uncertainties that may affect the operations,
performance, development and results of the Company's business include, but are
not limited to the following important factors:

(i) reliance on a limited number of significant customers and
dependence on Sterling Series products;

(ii) difficulty in predicting quarterly revenues because of long sales
cycles and customer budgetary constraints;

(iii) competition in the market for billing data collection and traffic
management systems;

(iv) rapid and unexpected changes in the telecommunications markets and
technologies;

(v) the success of the Company's sales and marketing strategies;

(vi) the ability of the Company to manage its growth;

(vii) the ability of the Company to obtain financing for operations and
growth;

(viii) the ability of the Company to motivate, and retain the services
of, its key management and technical personnel and continue to
hire additional qualified personnel to meet the Company's evolving
staffing needs; and

(ix) risks related to sales to international customers, including, but
not limited to, currency fluctuations, instability in financial
markets and unanticipated shifts in economic policies of foreign
governments, particularly as it relates to Asia.

Results of Operations

Quarter ended March 31, 1999 Compared to Quarter ended March 31, 1998

Revenues

Revenues decreased 12.8% to $5.5 million for the quarter ended March 31,
1999 from $6.3 million for the quarter ended March 31, 1998. The mix in sales
by customer type in the quarter varied significantly from the prior year. RBOC
sales, which were relatively high in 1998 due to sales of the data server
product, were lower at $2.2 million compared with $5.0 million in the previous
year. However, this reduction was, in large part, offset by increases in
international sales, from $1.1 million to $2.2 million, and sales through
channels which increased from $0 to $800,000. Equipment revenues were $3.5
million for the quarter ended March 31 1999, a decrease of 13.8% from the $4.0
million of equipment revenues for the quarter ended March 31, 1998.. Services
revenues decreased 11.1% to $2.0 million for the quarter ended March 31, 1999
from $2.3 million for the quarter ended March 31, 1998.

13
<PAGE>

Gross Profit

Gross profit decreased to $1.7 million for the quarter ended March 31, 1999
from $1.8 million for the quarter ended March 31, 1998. This decrease was
primarily caused by an increase in system sales through channels, which caused a
small reduction in margins. Gross profit related to equipment revenues
decreased to $684,000 for the quarter ended March 31, 1999 from $1.4 million for
the quarter ended March 31, 1998. The Company has a relatively high fixed cost
base which is included in cost of revenues. As a result, fluctuations in
revenues have a significant effect on margins. Gross profit from services
revenues increased to $972,000 for the quarter ended March 31, 1999 from
$419,000 for the quarter ended March 31, 1998. Gross profit from services
revenues increased during the quarter ended March 31, 1999 due to installation
services provided to one of the RBOCs.

Research, Development and Engineering

Research, development and engineering expenses were $1.9 million for each
of the quarters ended March 31, 1999 and 1998. As a percentage of revenues,
research, development and engineering expenses increased during the quarter
ended March 31, 1999 to 33.7% from 30.1% for the quarter ended March 31, 1998.
Software development costs of $534,000 and $0 were capitalized during the
quarters ended March 31, 1999 and 1998, respectively, and therefore, were not
charged to research, development and engineering expense. In 1999, engineering
related to the new products acquired as part of the Company's acquisitions in
1998 were included, whereas these costs did not occur in the same period in
1998.

Selling, General and Administrative

Selling, general and administrative expenses were $1.6 million for the
quarter ended March 31, 1999, a decrease of 60.0% compared to $4.1 million for
the same period in 1998. As a percentage of revenues, selling, general and
administrative expenses decreased during the quarter ended March 31, 1999 to
30.0% from 65.4% for the quarter ended March 31, 1998. Primarily, this decrease
resulted from the Company's program, instituted in July 1998, to reduce expenses
through a reduction in its work force, as well as other cost cutting measures.
Additionally, during the quarter ended March 31, 1998, there was an increase to
the allowance for bad debts of approximately $700,000 as a result of the
uncertainty in the Company's Asian markets and legal costs of $270,000 related
to the Acxiom lawsuit. No such costs were incurred during the quarter ended
March 31, 1999. See Part II Item I - Legal Proceedings.

Interest Expense and Income

Net interest expense was $5,000 for the quarter ended March 31, 1999. Net
interest income was $96,000 for the quarter ended March 31, 1998.

Income Taxes

Due to continued losses throughout the twelve months ended September 30,
1998 ("fiscal 1998"), the Company did not record an income tax benefit during
the quarter ended March 31, 1999. However, as of March 31, 1999, the Company
recorded net deferred tax assets of $2,718,000. Based on an assessment of the
Company's taxable earnings history and expected future taxable income,
management has determined that it is more likely than not that the net deferred
tax assets will be realized in future periods. The Company may be required to
provide an additional valuation allowance for this asset in the future if it
does not generate sufficient taxable income as planned. Additionally, the
ultimate realization of this asset could be negatively impacted by market
conditions and other variables not known or anticipated at this time.

The Company's effective tax rate was 32.1% for the quarter ended March 31,
1998. An income tax benefit of $1.3 million was recorded during the quarter
ended March 31, 1998.

14
<PAGE>

Six Months ended March 31, 1999 Compared to Six Months Ended March 31, 1998

Revenues

Revenues decreased 4.2% to $12.7 million for the six months ended March 31,
1999 from $13.2 million for the six months ended March 31, 1998. The mix in
sales by customer type in the six months varied significantly from the prior
year. RBOC sales reduced from $8.9 million to $5.3 million. In 1998,
significant sales of the data server product to the RBOCs and project
engineering services to US West accounted for much of the total and these were
not at the same level in 1999. However, sales through channels, such as NEC,
increased from $600,000 to $1.1 million, sales to other domestic customers
increased from $1.0 million to $1.9 million and international sales increased
from $2.7 million to $4.4 million. Equipment revenues were $8.0 million for the
six months ended March 31 1999, a decrease of 8.6% from the $8.8 million of
equipment revenues for the six months ended March 31, 1998. Services revenues
increased 4.5% to $4.6 million for the six months ended March 31, 1999 from $4.4
million for the six months ended March 31, 1998.

Gross Profit

Gross profit decreased to $4.6 million for the six months ended March 31,
1999 from $4.9 million for the six months ended March 31, 1998. Gross profit
related to equipment revenues decreased to $2.4 million for the six months ended
March 31, 1999 from $3.6 million for the six months ended March 31, 1998. The
Company has a relatively high fixed cost base which is included in cost of
revenues. As a result, fluctuations in revenues have a significant effect on
margins. Gross profit from services revenues increased to $2.3 million for the
six months ended March 31, 1999 from $1.3 million for the six months ended March
31, 1998. Gross profit from services revenues increased during the six months
ended March 31, 1999 due to the significant installation services provided to
one of the RBOCs.

Research, Development and Engineering

Research, development and engineering expenses were $3.7 million and $3.9
million for the six months ended March 31, 1999 and 1998. As a percentage of
revenues, research, development and engineering expenses decreased during the
six months ended March 31, 1999 to 28.9% from 29.3% for the six months ended
March 31, 1998. Software development costs of $880,000 and $0 were capitalized
during the six months ended March 31, 1999 and 1998, respectively, and
therefore, were not charged to research, development and engineering expense.
In 1999, engineering related to the new products acquired as part of the
Company's acquisitions in 1998 were included, whereas these costs did not occurr
in the same period in 1998.

Selling, General and Administrative

Selling, general and administrative expenses were $3.8 million for the six
months ended March 31, 1999, a decrease of 45.6% compared to $6.9 million for
the same period in 1998. As a percentage of revenues, selling, general and
administrative expenses decreased during the six months ended March 31, 1999 to
29.8% from 52.4% for the six months ended March 31, 1998. Primarily, this
decrease resulted from the Company's program, instituted in July 1998, to reduce
expenses through a reduction in its work force, as well as other cost cutting
measures. Additionally, during the six months ended March 31, 1998, there was
an increase to the allowance for bad debts of approximately $700,000 as a result
of the uncertainty in the Company's Asian markets and legal costs of $370,000
related to the Acxiom Corporation lawsuit. No such costs were incurred during
the six months ended March 31, 1999. See Part II Item I - Legal Proceedings.

Interest Expense and Income

Net interest expense was $4,000 income for the six months ended March 31,
1999. Net interest income was $195,000 for the six months ended March 31, 1998.

15
<PAGE>

Income Taxes

Due to continued losses throughout fiscal 1998 and the first quarter of the
twelve months ending September 30, 1999 ("fiscal 1999") , the Company did not
record an income tax benefit during the six months ended March 31, 1999.
However, as of March 31, 1999, the Company recorded net deferred tax assets of
$2,718,000. Based on an assessment of the Company's taxable earnings history
and expected future taxable income, management has determined that it is more
likely than not that the net deferred tax assets will be realized in future
periods. The Company may be required to provide an additional valuation
allowance for this asset in the future if it does not generate sufficient
taxable income as planned. Additionally, the ultimate realization of this asset
could be negatively impacted by market conditions and other variables not known
or anticipated at this time.

The Company's effective tax rate was 39.0% for the six months ended March
31, 1998. An income tax benefit of $1.9 million was recorded during the six
months ended March 31, 1998.

Backlog

The Company's backlog (firm purchase orders for products and services that
have not yet been recognized as revenue) was approximately $9.0 million and $7.4
million at March 31, 1999 and March 31, 1998, respectively. The Company
normally has a relatively small amount of product and service backlog because
ongoing informal communication with its major customers generally enables the
Company to anticipate orders and ship products within a relatively short time
after the customer's order is received. The Company expects to be able to
fulfill substantially all backlog existing at March 31, 1999 prior to the end of
fiscal 1999.

Liquidity and Capital Resources

The Company completed the initial public offering of its Common Stock (the
"Offering") in July 1997. Prior to the Offering, the Company had financed its
operations primarily with cash generated from operations and borrowings from
Securicor. In July 1997, the Company received net proceeds from the Offering of
approximately $32.4 million (after deducting underwriters' discounts and
commissions and other offering expenses). In August 1997, the Company repaid
$22.9 million in Company borrowings from Securicor. As of March 31, 1999, the
Company had $1.8 million of cash and cash equivalents, $7.2 million in net trade
accounts receivable and $7.5 million of working capital.

Net cash provided by operating activities was $2.4 million and $137,000 for
the six months ended March 31, 1999 and 1998, respectively. For the six months
ended March 31, 1999, the major contributors to the net cash provided by
operating activities were a decrease in accounts receivable of $4.1 million,
amortization and depreciation of $1.1 million, a decrease in inventories of
$656,000, a decrease to income tax receivable of $722,000 and an increase in
deferred revenues of $2.2 million, partially offset by a net loss of $2.8
million and a decrease in accounts payable of $2.8 million. For the six months
ended March 31, 1998, amortization and depreciation of $673,000, a decrease in
accounts receivable of $2.9 million, a decrease in inventories of $1.1 million,
an increase in deferred revenues of $1.3 million and an increase in other
accrued expenses of $902,000 were offset by the net loss of $3.8 million, an
increase in other current assets of $271,000, a decrease in accounts payable,
accrued compensation and related benefits, and accrued agent commissions of $1.5
million and an increase in income tax receivable of $517,000.

Net cash used in investing activities relating to purchases of property and
equipment was $611,000 and $847,000 for the six months ended March 31, 1999 and
1998, respectively. In addition, the Company capitalized $880,000 of software
development costs during the six months ended March 31, 1999. No such costs
were capitalized in 1998. During the quarter ended March 31, 1998, the Company
acquired Telesciences, Europe for a net cash outlay of $91,000.

Net cash used in financing activities was $191,000 and $231,000 for the six
months ended March 31, 1999 and 1998, respectively.

16
<PAGE>

The Company believes that its existing cash balances, cash generated from
operations and borrowings under the Line of Credit will be sufficient to meet
the Company's cash requirements into its fiscal year ending September 30, 2000.
However, depending upon profitability, its rate of growth and the timing of its
collections and other operating factors, the Company may require additional
equity or debt financing to meet its working capital requirements or capital
expenditure needs. There can be no assurance that additional financing, if
needed, will be available when required or, if available, will be on terms
satisfactory to the Company.

Year 2000 Readiness Disclosure

Background

In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, date-sensitive
computer software may recognize a date using "00" as the year 1900 rather than
the year 2000. This is generally referred to as the Year 2000 issue. If this
situation occurs, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt operations.

Approach

The Company has established a group to coordinate the Company's response to
the Year 2000 issue, both as to its internal systems and as to its products.
This group includes the Company's Vice President - Operations Support, Director
of Quality, Director of Product Line Management, Manager of Engineering
Operations, Purchasing Manager and Manager of Information Technology, as well as
support staff. The Company is in the process of implementing a Year 2000
compliance program consisting of the following: (i) compiling a list of internal
information technology ("IT") and non-IT systems, as well as Company products,
that may require adaptation, remediation or replacement with respect to the Year
2000 issue; (ii) identifying and prioritizing critical systems and products from
the list compiled in part (i) and making inquiries of third parties with whom
the Company does significant business (i.e., vendors and service providers) as
to the state of their Year 2000 readiness; (iii) analyzing critical systems and
products to determine which systems or products are not Year 2000 compliant and
evaluating the costs of adapting, repairing or replacing those systems; and (iv)
adapting, repairing or replacing noncompliant systems or products and testing of
the adapted, repaired or replaced systems.

The Company intends to complete the above process and to be Year 2000
compliant in all material respects by mid-1999.

Status

The Company believes that all of its internal systems are currently Year
2000 compliant in all material respects, or will be Year 2000 compliant in all
material respects, by mid-1999. It is anticipated that additional minor Year
2000 problems will be identified and continuing efforts will be required to
validate the internal systems for Year 2000 compliance.

The Company believes that its internal telephone system is Year 2000
compliant. The Company expects to complete Year 2000 compliance testing on the
telephone system by September 1999. The Company does not expect that there will
be a material cost to the Company in the event that software must be upgraded.

The Company believes that the products which will be supported beyond the
year 2000 are currently Year 2000 compliant. It continues to test all such
products on an ongoing basis. Certain products sold by the Company in the past
that have been discontinued are not Year 2000 compliant. Most customers of
these products have been notified of such noncompliance. The Company does not
intend to repair or replace such products. The Company does not expect any of
such customers to assert that the Company has an obligation to repair or replace
such products, but there can be no assurance that such an assertion will not be
made.

Costs

The total cost to the Company of making its systems Year 2000 compliant is
currently estimated to be less than $500,000, of which the Company has already
incurred approximately $302,000. The cost for replacement of the equipment and
software will be capitalized and depreciated over their respective expected
useful lives. Any assets that will be replaced are fully depreciated at this
time. Furthermore, all costs related to software modification, as well as all
costs associated with the Company's administration of its Year 2000 project, are
being expensed as incurred and are likewise included in the cost estimate above.

Risks Associated with the Year 2000 Problem

The Company utilizes computer systems in many aspects of its business. As
noted, the Company's critical systems are Year 2000 compliant in all material
respects, or are expected to be so no later than mid-1999.

The Company is also exposed to the risk that one or more of its vendors or
service providers could experience Year 2000 problems that impact the ability of
such vendor or service provider to provide goods and services. Though this is
not considered as significant a risk with respect to the suppliers of goods, due
to the availability of alternative suppliers, the disruption of certain
services, such as utilities, could, depending upon the nature and extent of the
disruption, have a material adverse impact on the Company's operations. The
Company is in the process of contacting all vendors and suppliers with whom the
Company has a material relationship to determine whether they will be
sufficiently Year 2000 compliant so as not to cause any material adverse effect
on the Company. To date, the Company is not aware of any vendor or service
provider Year 2000 issue that management believes would have a material adverse
impact on the Company's operations. However, the Company has no means of
guaranteeing that its vendors or service providers will be Year 2000 ready. The
inability of vendors or service providers to complete their Year 2000 resolution
process in a timely fashion could have a material adverse impact on the Company.
The effect of non-compliance by vendors or service providers is not determinable
at this time.

Widespread disruptions in the national or international economy, including
disruptions affecting the financial markets, resulting from Year 2000 issues or
in certain industries, such as disruptions affecting the financial industry and
commercial or investment banks, could also have a material adverse impact on the
Company. The likelihood and effect of such disruptions is not determinable at
this time.

Inflation

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's investment portfolio. The Company does not have any
derivative financial instruments in its portfolio. The Company places its
investments in instruments that meet high credit quality standards. The Company
is adverse to principal loss and ensures the safety and preservation of its
invested funds by limiting default risk, market risk and reinvestment risk. As
of March 31, 1999, the Company's investments consisted of a money market account
and an overnight repurchase agreement. The Company does not expect any material
loss with respect to its investment portfolio.

Foreign Currency Risk

The Company does not use foreign currency forward exchange contracts or
purchased currency options to hedge local currency cash flows or for trading
purposes. All sales arrangements with international customers are denominated
in U.S. dollars. Sales of Telesciences, Europe are denominated in pounds
Sterling. These sales have been insignificant to date.

Through its subsidiary, Telesciences, Europe, the Company has limited
operations in the United Kingdom. Due to this limited activity, the Company
does not expect any material loss with respect to foreign currency risk.

17
<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In August 1997, Acxiom filed suit against the Company in the United States
District Court for the District of Delaware alleging trademark infringement and
dilution under the Lanham Act, as well as related state law causes of action.
On November 16, 1998, the District Court rendered its decision that Acxiom was
entitled to an order enjoining the Company from making further use of the Axiom
name and related injunctive relief. The court also concluded that Acxiom was
not entitled to any money damages. The Company and Acxiom agreed that neither
would appeal the Court's decision, and the Company agreed to reimburse Acxiom
for ancillary costs in the amount of $50,000.

ITEM 2. CHANGES IN SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

On March 24, 1999, the Company held its Annual Meeting of Stockholders for
1999. The total number of shares of Common Stock represented at the Annual
Meeting was 7,218,105, constituting a quorum. The holders of the Company's
Common Stock voted on the following proposals:

1. The election of all six members of the Company's Board of Directors.
All six nominees of the Board of Directors were reelected. The
following is a report of the votes cast at the Annual Meeting for each
nominee for director:

<TABLE>
<CAPTION>
Withhold
Nominee Name Votes For Authority
------------ ---------------- ----------------
<S> <C> <C>
C. Thomas Faulders, III............................ 7,090,272 127,732
Andrew P. Maunder.................................. 7,058,688 159,316
Robert B. Kelly.................................... 7,086,447 131,557
Sammy W. Pearson................................... 7,090,998 127,007
Trevor Sokell...................................... 7,075,313 142,691
Michael G. Wilkinson............................... 7,089,447 128,557
</TABLE>

2. Proposals to amend (a) Section 2-7 (relating to actions at
stockholders meetings generally), (b) Section 3-10 (relating to
removal of directors) and (c) Article X (relating to amendments of the
by-laws) of the Company's Amended and Restated Bylaws, in each case to
change the affirmative vote required to approve matters coming before
meetings of the Company's stockholders (other than the election of
directors, who shall be elected by a plurality) from two-thirds of all
votes entitled to be cast at such meeting (whether or not holders of
such shares are present in person or represented by proxy at the
meeting) to a majority of shares present in person or represented by
proxy at the meeting and entitled to vote on the subject matter, or
such greater vote as may be required by applicable law. The three
proposals were approved. The following is a report of the votes cast
at the Annual Meeting for each of the proposals:

18
<PAGE>

Amendment FOR AGAINST ABSTAIN
-------------------------------------- --------------- ---------------- ----------------
<S> <C> <C> <C>
(A) Section 2-7....................... 5,374,726 302,841 23,500
(B) Section 3-10...................... 5,312,576 289,291 99,200
(C) Article X......................... 5,385,681 290,191 25,195
</TABLE>

3. A proposal to amend the Company's 1997 Stock Incentive Plan (the
"Plan") to increase the number of shares of Common Stock available for
grants under the Plan from 450,000 to 2,000,000. The proposal was
approved. The following is a report of the votes cast at the Annual
Meeting for the proposal:

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- ----------- -----------
<S> <C> <C>
5,237,749 430,836 32,482
</TABLE>

4. A proposal to amend the Company's Amended and Restated Certificate of
Incorporation to change the name of the Company to Telesciences, Inc.
The proposal was approved. The following is a report of the votes cast
at the Annual Meeting for the proposal:

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- ----------- -----------
<S> <C> <C>
7,088,215 114,199 13,400
</TABLE>

5. A proposal to ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending September
30, 1999. The proposal was approved. The following is a report of the
votes cast at the Annual Meeting for the proposal:

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- ----------- -----------
<S> <C> <C>
6,993,768 207,467 14,135
</TABLE>

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 Amended and Restated Certificate of Incorporation of the
Company, as amended to the date hereof.

3.2 Amended and Restated By-Laws of the Company, as amended to
the date hereof.

27 Financial Data Schedule (EDGAR only)

(b) Reports on Form 8-K
None

19
<PAGE>

Signatures

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

Telesciences, Inc.

Dated: May 12, 1999 By: /s/ Andrew P. Maunder
--------------------------------------------
Andrew P. Maunder
President and Chief Executive Officer
(Principal Executive Officer)

Dated: May 12, 1999 By: /s/ Frances Penfold
---------------------------------------------
Vice President, Finance
(Principal Financial and Accounting Officer)

<PAGE>

State of Delaware

Office of the Secretary of State PAGE 1
--------------------------------

I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF CORRECTION
OF "TELESCIENCES INC.", CHANGING ITS NAME FROM "TELESCIENCES INC." TO
"TELESCIENCES, INC.", FILED IN THIS OFFICE ON THE NINTH DAY OF APRIL, A.D. 1999,
AT 11:45 O'CLOCK A.M.

A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.

/s/ Edward J. Freel
[SEAL APPEARS ----------------------------------------
HERE] Edward J. Freel, Secretary of State

2415198 8100 AUTHENTICATION: 9679263

991139474 DATE: 04-09-99
<PAGE>

State of Delaware

Office of the Secretary of State PAGE 1
--------------------------------

I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "AXIOM INC.", CHANGING ITS NAME FROM "AXIOM INC." TO "TELESCIENCES INC.",
FILED IN THIS OFFICE ON THE THIRTIETH DAY OF MARCH, A.D. 1999, AT 10:10 O'CLOCK
A.M.

A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.

/s/ Edward J. Freel
[SEAL APPEARS ----------------------------------------
HERE] Edward J. Freel, Secretary of State

2415198 8100 AUTHENTICATION: 9659373

991123556 DATE: 03-30-99

<PAGE>

AMENDED AND RESTATED
BY-LAWS OF
TELESCIENCES, INC.

ARTICLE I - OFFICES
-------------------

Section 1-1. Registered Office and Registered Agent. The Corporation
----------- --------------------------------------
shall maintain a registered office and registered agent within the State of
Delaware, which may be changed by the Board of Directors from time to time.

Section 1-2. Other Offices. The Corporation may also have offices at such
----------- -------------
other places, within or without the State of Delaware, as the Board of Directors
may from time to time determine.

ARTICLE II - STOCKHOLDERS' MEETINGS
-----------------------------------

Section 2-1. Place of Stockholders' Meetings. Meetings of stockholders
----------- -------------------------------
may be held at such place, either within or without the State of Delaware, as
may be designated by the Board of Directors from time to time. If no such place
is designated by the Board of Directors, meetings of the stockholders shall be
held at the principal executive offices of the Corporation.

Section 2-2. Annual Meeting. A meeting of the stockholders of the
----------- --------------
Corporation shall be held in each calendar year, commencing with the year 1998,
at such date and time as shall be designated by the Board of Directors.

At such annual meeting, there shall be held an election for a Board of
Directors to serve for the ensuing year and until their respective successors
are elected and qualified, or until their earlier resignation or removal.

Section 2-3. Special Meetings. Except as otherwise specifically provided
----------- ----------------
by law, special meetings of the stockholders may be called at any time:
(a) By the Board of Directors; or

(b) By the Chairman or President of the Corporation.
<PAGE>

Upon the written request of any person entitled to call a special meeting,
which request shall set forth the purpose for which the meeting is desired, it
shall be the duty of the Secretary to give prompt written notice of such meeting
to be held at such time as the Secretary may fix, subject to the provisions of
Section 2-4 hereof. If the Secretary shall fail to fix such date and give
notice within ten (10) days after receipt of such request, the person or persons
making such request may do so.

Section 2-4. Notice of Meetings and Adjourned Meetings. Written notice
----------- -----------------------------------------
stating the place, date and hour of any meeting shall be given, to the extent
required by law, not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting. If
mailed, notice is given when deposited in the United States Mail, postage
prepaid, directed to the stockholder at his address as it appears on the records
of the Corporation. Such notice may be given by or at the direction of the
person or persons authorized to call the meeting.

When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.

Section 2-5. Quorum. The presence, in person or by proxy, of the holders
----------- ------
of a majority of the outstanding shares entitled to vote shall constitute a
quorum. The stockholders present at a duly organized meeting can continue to do
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. If a meeting cannot be organized
because of the absence of a quorum, those present may, except as otherwise
provided by law, adjourn the meeting to such time and place as they may
determine. In the case of any meeting for the election of Directors, those
stockholders who attend the second of such adjourned meetings, although less
than a quorum as fixed in this Section, shall nevertheless constitute a quorum
for the purpose of electing Directors.
<PAGE>

Section 2-6. Voting List; Proxies. The officer who has charge of the
----------- --------------------
stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.

Upon the willful neglect or refusal of the Directors to produce such a list
at any meeting for the election of Directors, they shall be ineligible to any
office at such meeting.

Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy in any manner
permitted by law. All proxies shall be filed with the Secretary of the
Corporation not later than the day on which exercised. No proxy shall be voted
or acted upon after three (3) years from its date, unless the proxy provides for
a longer period.

Section 2-7. Action at Meetings. When a quorum is present at any meeting
----------- ------------------
or adjournment thereof, action on any matter properly before the meeting, other
than the election of directors, shall be by the affirmative vote of shares
entitled to cast a majority of the votes of the shares present in person or
represented by proxy at the meeting, unless the matter is one upon which by
express provision of law, the Certificate of Incorporation or these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such matter. Directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors.
<PAGE>

Except for the election of directors and as otherwise specifically provided
by law, all other votes may be taken by voice unless a stockholder demands that
it be taken by ballot, in which latter event the vote shall be taken by written
ballot.

Section 2-8. Business at Meetings of Stockholders. Except as otherwise
----------- ------------------------------------
provided by law (including but not limited to Rule 14a-8 of the Securities and
Exchange Act of 1934, as amended, or any successor provision thereto) or in
these By-laws, the business which shall be conducted at any meeting of the
stockholders shall (a) have been specified in the written notice of the meeting
(or any supplement thereto) given by the Corporation, or (b) be brought before
the meeting at the direction of the Board of Directors, or (c) be brought before
the meeting by the presiding officer of the meeting unless a majority of the
Directors then in office object to such business being conducted at the meeting,
or (d) have been specified in a written notice given to the Secretary of the
Corporation, by or on behalf of any stockholder who shall have been a
stockholder of record on the record date for such meeting and who shall continue
to be entitled to vote thereat (the "Stockholder Notice"), in accordance with
all of the following requirements:

(1) Each Stockholder Notice must be delivered to, or mailed and received
at, the offices of the Corporation (i) in the case of an annual meeting that is
called for a date that is within 30 days before or after the anniversary date of
the immediately preceding annual meeting of stockholders, not less than 120 days
prior to the anniversary of the date the Corporation's proxy statement was
released to stockholders in connection with the Corporation's immediately
preceding annual meeting, and (ii) in the case of an annual meeting that is
called for a date that is not within 30 days before or after the anniversary
date of the immediately preceding annual meeting, not later than the close of
business on the tenth day following the day on which notice of the date of
meeting was mailed or public disclosure of the date of the meeting was made,
whichever occurs first, except that, for the 1998 Annual Meeting of
Stockholders, the Stockholder Notice must be received by the Corporation not
later than the close of business on November 30, 1997.
<PAGE>

(2) Each such Stockholder Notice must set forth: (i) the name and address
of the stockholder who intends to bring the business before the meeting; (ii)
the general nature of the business which such stockholder seeks to bring before
the meeting and, if a specific action is to be proposed, the text of the
resolution or resolutions which the proposing stockholder proposes that the
stockholders adopt; and (iii) a representation that the stockholder is a holder
of record of the stock of the Corporation entitled to vote at such meeting and
intends to bring the business specified in the notice before the meeting. The
presiding officer of the meeting may, in his or her sole discretion, refuse to
acknowledge any business proposed by a stockholder not made in compliance with
the foregoing procedure.

ARTICLE III - BOARD OF DIRECTORS
--------------------------------

Section 3-1. Number. The entire Board shall consist of that number of
----------- ------
Directors, not less than one (1) nor more than nine (9), as may from time to
time be prescribed by the Board. The number of Directors shall initially
consist of that number of directors serving at the time of adoption of this
Section 3-1. No decrease in the number of authorized Directors constituting the
entire Board of Directors shall shorten the term of any incumbent Director.

Section 3-2. Place of Meeting. Meetings of the Board of Directors may be
----------- ----------------
held at such place either within or without the State of Delaware, as a majority
of the Directors may from time to time designate or as may be designated in the
notice calling the meeting.

Section 3-3. Regular Meetings. A regular meeting of the Board of
----------- ----------------
Directors shall be held annually, immediately following the annual meeting of
stockholders, at the place where such meeting of the stockholders is held or at
such other place, date and hour as a majority of the newly elected Directors may
designate. At such meeting the Board of Directors shall elect officers of the
Corporation. In addition to such regular meeting, the Board of Directors shall
have the power to fix, by resolution, the place, date and hour of other regular
meetings of the Board.
<PAGE>

Section 3-4. Special Meetings. Special meetings of the Board of Directors
----------- ----------------
shall be held whenever ordered by the President, by a majority of the members of
the executive committee, if any, or by a majority of the Directors in office.

Section 3-5. Notices of Meetings of Board of Directors.
----------- -----------------------------------------
(a) Regular Meetings. No notice shall be required to be given of any
----------------
regular meeting, unless the same be held at other than the time or place for
holding such meetings as fixed in accordance with Section 3-3 of these by-laws,
in which event one (1) day's notice shall be given of the time and place of such
meeting.

(b) Special Meetings. At least one (1) day's notice shall be given of the
----------------
time, place and purpose for which any special meeting of the Board of Directors
is to be held.

Section 3-6. Quorum. A majority of the total number of Directors shall
----------- ------
constitute a quorum for the transaction of business, and the vote of a majority
of the Directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors. If there be less than a quorum present, a
majority of those present may adjourn the meeting from time to time and place to
place and shall cause notice of each such adjourned meeting to be given to all
absent Directors.

Section 3-7. Informal Action by the Board of Directors. Any action
----------- -----------------------------------------
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.

Section 3-8. Powers.
----------- ------
(a) General Powers. The Board of Directors shall have all powers necessary
--------------
or appropriate to the management of the business and affairs of the Corporation,
and, in addition to the power and authority conferred by these by-laws, may
exercise all powers of the Corporation and do all such lawful acts and things as
are not by statute, these by-laws or the Certificate of Incorporation directed
or required to be exercised or done by the stockholders.
<PAGE>

(b) Specific Powers. Without limiting the general powers conferred by the
---------------
last preceding clause and the powers conferred by the Certificate of
Incorporation and by-laws of the Corporation, it is hereby expressly declared
that the Board of Directors shall have the following powers:

(i) To confer upon any officer or officers of the Corporation the power to
choose, remove or suspend assistant officers, agents or servants. (ii) To
appoint any person, firm or corporation to accept and hold in trust for the
Corporation any property belonging to the Corporation or in which it is
interested, and to authorize any such person, firm or corporation to execute any
documents and perform any duties that may be requisite in relation to any such
trust. (iii) To appoint a person or persons to vote shares of another
corporation held and owned by the Corporation. (iv) To designate, by resolution
adopted by a majority of the full Board of Directors, one (1) or more of its
number to constitute an executive committee which, to the extent provided in
such resolution, subject to the limitations of applicable law, shall have and
may exercise the power of the Board of Directors in the management of the
business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed. (v) To designate, by resolution adopted by a majority
of the full Board of Directors, one (1) or more additional committees, each to
consist of one (1) or more Directors, to have such duties, powers and authority
as the Board of Directors shall determine. All committees of the Board of
Directors, including the executive committee, shall have the authority to adopt
their own rules of procedure. Absent the adoption of specific procedures, the
procedures applicable to the Board of Directors shall also apply to committees
thereof. (vi) To fix the place, time and purpose of meetings of stockholders.
(vii) To purchase or otherwise acquire for the Corporation any property, rights
or privileges which the Corporation is authorized to acquire, at such prices, on
such terms and conditions and for such consideration as it shall from time to
time see fit, and, at its discretion, to pay any property or rights acquired by
the Corporation, either wholly or partly in money or in stocks, bonds,
debentures or other securities of the Corporation.
<PAGE>

(viii) To create, make and issue mortgages, bonds, deeds of trust, trust
agreements and negotiable or transferable instruments and securities, secured by
mortgage or otherwise, and to do every other act and thing necessary to
effectuate the same. (ix) To appoint and remove or suspend such subordinate
officers, agents or servants, permanently or temporarily, as it may from time to
time think fit, and to determine their duties, and fix, and from time to time
change, their salaries or emoluments, and to require security in such instances
and in such amounts as it thinks fit. (x) To determine who shall be authorized
on the Corporation's behalf to sign bills, notes, receipts, acceptances,
endorsements, checks, releases, contracts and documents.

Section 3-9. Compensation of Directors. Compensation of Directors and
----------- -------------------------
reimbursement of their expenses incurred in connection with the business of the
Corporation, if any, shall be as determined from time to time by resolution of
the Board of Directors.

Section 3-10. Removal of Directors by Stockholders. The entire Board of
------------ ------------------------------------
Directors or any individual Director may be removed from office without
assigning any cause by the holders of shares entitled to cast a majority of the
votes of the shares present in person or represented by proxy at the meeting.
In case the Board of Directors or any one (1) or more Directors be so removed,
new Directors may be elected at the same time.

Section 3-11. Resignations. Any Director may resign at any time by
------------ ------------
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time of its receipt by the Corporation unless another time be
fixed in the resignation, in which case it shall become effective at the time so
fixed. The acceptance of a resignation shall not be required to make it
effective.

Section 3-12. Vacancies. Vacancies and new created directorships
------------ ---------
resulting from any increase in the authorized number of Directors elected by all
of the stockholders having the right to vote as a single class may be filled by
a majority of the Directors then in office, although less than a quorum, or by a
sole remaining Director, and each person so elected shall be a Director until
his successor is elected and qualified or until his earlier resignation or
removal.
<PAGE>

Section 3-13. Participation by Conference Telephone. Directors may
------------ -------------------------------------
participate in regular or special meetings of the Board by telephone or similar
communications equipment by means of which all other persons participating in
the meeting can hear each other, and such participation shall constitute
presence at the meeting.

Section 3-14. Nominations. Notwithstanding the provisions of Section 2-8
------------ -----------
of these by-laws (dealing with business at meetings of stockholders),
nominations for the election of Directors may be made by the Board of Directors,
a committee appointed by the Board of Directors or by any stockholder of record
entitled to vote on the election of Directors who is a stockholder at the record
date of the meeting and also on the date of the meeting at which Directors are
to be elected; provided, however, that with respect to a nomination made by a
-------- -------
stockholder, which stockholder must provide timely written notice to the
Secretary of the Corporation, in accordance with the following requirements:

(1) To be timely, a stockholder's written notice must be delivered to, or
mailed and received at, the principal executive offices of the Corporation (i)
in the case of an annual meeting that is called for a date that is within 30
days before or after the anniversary date of the immediately preceding annual
meeting of stockholders, not less than 120 days prior to the anniversary of the
date that the Corporation's proxy statement was released to shareholders in
connection with the Corporation's immediately preceding annual meeting, and (ii)
in the case of an annual meeting that is called for a date that is not within 30
days before or after the anniversary date of the immediately preceding annual
meeting, or in the case of a special meeting of stockholders called for the
purpose of electing Directors, not later than the close of business on the tenth
day following the day on which notice of the date of the meeting was mailed or
public disclosure of the date of the meeting was made, whichever occurs first,
except that for the 1998 Annual Meeting of Stockholders, such notice must be
received by the Corporation no later than the close of business of November 30,
1997; and

(2) Each such written notice must set forth: (i) the name and address of
the stockholder who intends to make the nomination; (ii) the name and address of
the person or
<PAGE>

persons to be nominated; (iii) a representation that the stockholder is a holder
of record of the stock of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (iv) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (v) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, by the Board of Directors, and (vi) the consent of each nominee
to serve as a Director of the Corporation if so elected. The presiding officer
of the meeting may refuse, in his or her sole discretion, to acknowledge the
nomination of any persons as not made in compliance with the foregoing
procedure.

ARTICLE IV - OFFICERS
---------------------

Section 4-1. Election and Office. The Corporation shall have a President,
----------- -------------------
a Secretary and a Treasurer who shall be elected by the Board of Directors. The
Board of Directors may elect such additional officers as it may deem proper,
including a Chairman and a Vice Chairman of the Board of Directors, one (1) or
more Vice Presidents, and one (1) or more assistant or honorary officers. Any
number of offices may be held by the same person.

Section 4-2. Term. The President, the Secretary and the Treasurer shall
----------- ----
each serve for a term of one (1) year and until their respective successors are
chosen and qualified, unless removed from office by the Board of Directors
during their respective tenures. The term of office of any other officer shall
be as specified by the Board of Directors.

Section 4-3. Powers and Duties of the President. Unless otherwise
----------- ----------------------------------
determined by the Board of Directors, the President shall have the usual duties
of an executive officer with general supervision over and direction of the
affairs of the Corporation. In the exercise of these duties and subject to the
limitations of the laws of the State of Delaware, these by-laws, and the actions
of the Board of Directors, he may appoint, suspend and discharge employees and
agents, shall
<PAGE>

preside at all meetings of the stockholders at which he shall be present, and,
unless there is a Chairman of the Board of Directors, shall preside at all
meetings of the Board of Directors and, unless otherwise specified by the Board
of Directors, shall be a member of all committees. He shall also do and perform
such other duties as from time to time may be assigned to him by the Board of
Directors.

Unless otherwise determined by the Board of Directors, the President shall
have full power and authority on behalf of the Corporation to attend and to act
and to vote at any meeting of the stockholders of any corporation in which the
Corporation may hold stock, and, at any such meeting, shall possess and may
exercise any and all of the rights and powers incident to the ownership of such
stock and which, as the owner thereof, the Corporation might have possessed and
exercised.

Section 4-4. Powers and Duties of the Secretary. Unless otherwise
----------- ----------------------------------
determined by the Board of Directors, the Secretary shall record all proceedings
of the meetings of the Corporation, the Board of Directors and all committees,
in books to be kept for that purpose, and shall attend to the giving and serving
of all notices for the Corporation. He shall have charge of the corporate seal,
the certificate books, transfer books and stock ledgers, and such other books
and papers as the Board of Directors may direct. He shall perform all other
duties ordinarily incident to the office of Secretary and shall have such other
powers and perform such other duties as may be assigned to him by the Board of
Directors.

Section 4-5. Powers and Duties of the Treasurer. Unless otherwise
----------- ----------------------------------
determined by the Board of Directors, the Treasurer shall have charge of all the
funds and securities of the Corporation which may come into his hands. When
necessary or proper, unless otherwise ordered by the Board of Directors, he
shall endorse for collection on behalf of the Corporation checks, notes and
other obligations, and shall deposit the same to the credit of the Corporation
in such banks or depositories as the Board of Directors may designate and shall
sign all receipts and vouchers for payments made to the Corporation. He shall
sign all checks made by the Corporation, except when the Board of Directors
shall otherwise direct. He shall enter regularly,
<PAGE>

in books of the Corporation to be kept by him for that purpose, a full and
accurate account of all moneys received and paid by him on account of the
Corporation. Whenever required by the Board of Directors, he shall render a
statement of the financial condition of the Corporation. He shall at all
reasonable times exhibit his books and accounts to any Director of the
Corporation, upon application at the office of the Corporation during business
hours. He shall have such other powers and shall perform such other duties as
may be assigned to him from time to time by the Board of Directors. He shall
give such bond, if any, for the faithful performance of his duties as shall be
required by the Board of Directors and any such bond shall remain in the custody
of the President.

Section 4-6. Powers and Duties of the Chairman of the Board of Directors.
----------- -----------------------------------------------------------
Unless otherwise determined by the Board of Directors, the Chairman of the
Board, if any, shall preside at all meetings of Directors. The Chairman of the
Board shall have such other powers and perform such further duties as may be
assigned to such officer by the Board of Directors. To be eligible to serve,
the Chairman of the Board must be a Director of the Corporation.

Section 4-7. Powers and Duties of Vice Presidents and Assistant Officers.
----------- -----------------------------------------------------------
Unless otherwise determined by the Board of Directors, each Vice President and
each assistant officer shall have the powers and perform the duties of his
respective superior officer. Vice Presidents and assistant officers shall have
such rank as shall be designated by the Board of Directors and each, in the
order of rank, shall act for such superior officer in his absence, or upon his
disability or when so directed by such superior officer or by the Board of
Directors. Vice Presidents may be designated as having responsibility for a
specific aspect of the Corporation's affairs, in which event each such Vice
President shall be superior to the other Vice Presidents in relation to matters
within his aspect. The President shall be the superior officer of the Vice
Presidents. The Treasurer and the Secretary shall be the superior officers of
the Assistant Treasurers and Assistant Secretaries, respectively.

Section 4-8. Delegation of Office. The Board of Directors may delegate
----------- --------------------
the powers or duties of any officer of the Corporation to any other officer or
to any Director from time to time.
<PAGE>

Section 4-9. Vacancies. The Board of Directors shall have the power to
----------- ---------
fill any vacancies in any office occurring from whatever reason.

Section 4-10. Resignations. Any officer may resign at any time by
------------ ------------
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time of its receipt by the Corporation, unless another time
be fixed in the resignation, in which case it shall become effective at the time
so fixed. The acceptance of a resignation shall not be required to make it
effective.

ARTICLE V - CAPITAL STOCK
-------------------------

Section 5-1. Stock Certificates. Shares of the Corporation shall be
----------- ------------------
represented by certificates signed by or in the name of the Corporation by (a)
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and (b) the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, representing the number of shares
registered in certificate form. If such certificate is countersigned (i) by a
transfer agent other than the Corporation or its employee, or (ii) by a
registrar other than the Corporation or its employee, the signatures of the
officers of the Corporation may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of issue. Section 5-2. Determination of Stockholders of Record. The
----------- ---------------------------------------
Board of Directors may fix, in advance, a record date to determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action. Such date shall be not more than sixty (60) nor less than
ten (10) days before the date of any such meeting, nor more than sixty (60) days
prior to any other action.
<PAGE>

If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held.

The record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting. Section 5-3. Transfer of Shares. Transfer of shares
----------- ------------------
shall be made on the books of the Corporation only upon surrender of the share
certificate, duly endorsed and otherwise in proper form for transfer, which
certificate shall be canceled at the time of the transfer. No transfer of
shares shall be made on the books of this Corporation if such transfer is in
violation of a lawful restriction noted conspicuously on the certificate.

Section 5-4. Lost, Stolen or Destroyed Share Certificates. The
----------- --------------------------------------------
Corporation may issue a new certificate of stock or uncertified shares in place
of any certificate therefore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen, or
destroyed certificate, or his legal representative to give the Corporation a
bond sufficient to indemnify it against claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
<PAGE>

ARTICLE VI - NOTICES
--------------------

Section 6-1. Contents of Notice. Whenever any notice of a meeting is
----------- ------------------
required to be given pursuant to these by-laws or the Certificate of
Incorporation or otherwise, the notice shall specify the place, day and hour of
the meeting and, in the case of a special meeting of stockholders or where
otherwise required by law, the purpose or purposes for which such meeting is
called. Section 6-2. Method of Notice. All notices shall be given to each
----------- ----------------
person entitled thereto, either personally or by sending a copy thereof through
the mail or by telegraph or telecopier, charges prepaid, to his address as it
appears on the records of the Corporation, or supplied by him to the Corporation
for the purpose of notice. If notice is sent by mail, telegraph or telecopier,
it shall be deemed to have been given to the person entitled thereto when
deposited in the United States Mail or with the telegraph office for
transmission or when confirmation of receipt by telecopier is received. If no
address for a stockholder appears on the books of the Corporation and such
stockholder has not supplied the Corporation with an address for the purpose of
notice, notice deposited in the United States Mail addressed to such stockholder
care of General Delivery in the city in which the principal office of the
Corporation is located shall be sufficient. Section 6-3. Waiver of Notice.
----------- ----------------
Whenever notice is required to be given under any provision of law or of the
Certificate of Incorporation or by-laws of the Corporation, a written waiver,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, Directors, or
members of a committee of Directors need be specified in any written waiver of
notice unless so required by the Certificate of Incorporation.
<PAGE>

ARTICLE VII - INDEMNIFICATION OF DIRECTORS AND
OFFICERS AND OTHER PERSONS
--------------------------------

Section 7-1. Right to Indemnification. Each person who was or is made a
----------- ------------------------
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding")(other than an action by or in the right of the
Corporation), by reason of the fact that he or she, or a person for whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director or officer or in any other capacity while
serving as a director or officer of the Corporation, shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exist or may hereafter be amended
(but, in the case of any such amendment, the rights of indemnification provided
hereby shall continue as theretofore notwithstanding such amendment unless such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors, administrators and personal representatives, provided, however, that
--------- -------
the Corporation shall indemnify any such indemnitees in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation.
<PAGE>

The right to indemnification conferred in this Section shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if the Delaware General Corporation Law requires, the
- -------- -------
payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise. The Corporation may, by action of the Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.

Section 7-2. Right of Claimant to Bring Suit. A claimant may bring suit
----------- -------------------------------
against the Corporation under Section 7-1 only if the Corporation fails to pay
in full within 30 days of its receipt of a written claim for payment hereunder.
If successful in whole or in part, the claimant shall be entitled to be paid
also the expense of prosecuting such claim (including, but not limited to,
attorneys' fees). It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant has not met
the standards of conduct that make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed, but the burden of providing such defense shall be on the Corporation.
Neither the failure of the Corporation (including the Board of Directors,
independent legal
<PAGE>

counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the Corporation (including the Board of Directors, independent legal counsel,
or its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.

Section 7-3. Non-Exclusivity of Rights. The right to indemnification and
----------- -------------------------
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of any other
right that any person may have or hereafter acquire under any statute, provision
of the Certificate of Incorporation, by-laws, agreement, vote of stockholders or
disinterested directors or otherwise.

Section 7-4. Insurance. The Corporation may maintain insurance, at its
----------- ---------
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.

ARTICLE VIII - SEAL
-------------------
The form of the seal of the
Corporation, called the corporate seal [Form of Seal]
of the Corporation, shall be as im-
pressed adjacent hereto.

ARTICLE IX - FISCAL YEAR
------------------------

The fiscal year of the Corporation shall end on September 30.

ARTICLE X - AMENDMENTS
----------------------

These or other by-laws may be adopted, amended or repealed by the
affirmative vote of shares entitled to cast a majority of the votes of the
shares present in person or represented by proxy at the meeting.
Notwithstanding the foregoing, the Board of Directors shall have the power to
adopt, amend or repeal these or other by-laws, except that the Board of
Directors shall not have the power to amend Section 2-7, Section 3-10 or Article
X of these by-laws unless such amendment is adopted by the stockholders in
accordance with the previous sentence. The fact
<PAGE>

that such power has been so conferred upon the Board of Directors shall not
divest the stockholders of the power nor limit their power to adopt, amend or
repeal by-laws.

ARTICLE XI - INTERPRETATION OF BY-LAWS
--------------------------------------

All words, terms and provisions of these by-laws shall be interpreted and
defined by and in accordance with the General Corporation Law of the State of
Delaware, as amended, and as amended from time to time hereafter. Any
determination involving interpretation or application of these by-laws made in
good faith by the Board of Directors in a manner consistent with the previous
sentence shall be final, binding and conclusive on all parties in interest.

<PAGE>
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