<PAGE>

-------------------------------------------------------------------------------

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE QUARTERLY PERIOD ENDING March 31, 2001.

                                       OR

[ ] 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: 333-84045



                            PREDICTIVE SYSTEMS, INC.
                        ---------------------------------

             (Exact Name of Registrant as Specified in its Charter)

              DELAWARE                                 13-3808483
 ----------------------------------     ---------------------------------------
   (State or other Jurisdiction of      (I.R.S. Employer Identification Number)
    Incorporation or Organization)

               417 FIFTH AVENUE, NEW YORK, NEW YORK                 10016
-------------------------------------------------------------------------------
             (Address of Principal Executive Offices)            (Zip Code)


                                 (212) 659-3400
-------------------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)


Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]

As of May 10, 2001, there were 35,889,706 shares of the registrant's common
stock, $.001 par value per share, outstanding.


<PAGE>


                                      INDEX

                    PREDICTIVE SYSTEMS, INC. AND SUBSIDIARIES


<TABLE>
<CAPTION>

                                                                                 Page
                                                                                 ----
<S>                                                                              <C>
PART I.  FINANCIAL INFORMATION

         ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

                  Consolidated Balance Sheets as of March 31, 2001
                  (unaudited) and December 31, 2000 ........................      1

                  Consolidated Statements of Operations for the three
                  months ended March 31, 2001 and 2000 (unaudited) .........      2

                  Consolidated Statements of Cash Flows for the three months
                  ended March 31, 2001 and 2000 (unaudited) ...............       3

                  Notes to Consolidated Financial Statements (unaudited) ...      4

         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS .....................      6

         ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                   RISK ....................................................     16

PART II. OTHER INFORMATION

         ITEM 1.  LEGAL PROCEEDINGS ........................................     16

         ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS ................     17

         ITEM 3.  DEFAULTS UPON SENIOR SECURITIES ..........................     17

         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ......     17

         ITEM 5.  OTHER INFORMATION ........................................     17

         ITEM 6.  EXHIBITS AND REPORT ON FORM 8-K ..........................     17

         ITEM 7.  SIGNATURES ...............................................     17

</TABLE>


                                       i

<PAGE>

                    PREDICTIVE SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                            March 31, 2001  December 31, 2000
                                                                                            --------------  ------------------
<S>                                                                                         <C>             <C>
                                                                                              (unaudited)
                              ASSETS
Current assets
        Cash and cash equivalents                                                            $  71,105,365     $  80,058,791
        Investment in marketable securities, at market value                                     4,914,839         3,794,100
        Accounts receivable - net of allowance for
             doubtful accounts of $1,557,725 and $1,292,491, respectively                       18,615,912        22,454,109
        Unbilled work in process                                                                 3,462,302         5,055,471
        Related party receivables                                                                4,371,582         4,115,043
        Receivables from employees and stockholders                                                150,906           423,074
        Deferred tax asset                                                                              --         5,125,792
        Prepaid expenses and other current assets                                                3,349,906         2,335,192
                                                                                             -------------     -------------

             Total current assets                                                              105,970,812       123,361,572

Property and equipment - net of accumulated
        depreciation and amortization of $4,067,850 and $3,363,265, respectively                10,487,926        10,403,523

Goodwill - net of accumulated amortization of $9,613,377 and $3,238,598, respectively          109,273,051       115,441,166

Long-term investments in related parties                                                         1,000,000         2,000,000

Other assets                                                                                       244,417           248,068
                                                                                             -------------     -------------

                       Total assets                                                          $ 226,976,206     $ 251,454,329
                                                                                             =============     =============

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
        Accounts payable                                                                     $   3,025,888     $   3,062,164
        Accrued compensation                                                                     3,107,542         3,096,492
        Accrued expenses and other current liabilities                                           6,617,427         8,976,557
        Current portion of capital lease obligations                                               123,729           137,734
        Current portion of notes payable                                                                --            16,000
        Income taxes payable                                                                       234,521           313,267
        Deferred income tax liability                                                              112,279                --
        Deferred income                                                                          4,193,889         2,890,130
                                                                                             -------------     -------------

             Total current liabilities                                                          17,415,275        18,492,344
                                                                                             -------------     -------------

Noncurrent liabilities
        Capital lease obligations                                                                  120,470           151,965
        Deferred rent                                                                              562,864           530,589
        Deferred income tax liability                                                            3,347,072         8,585,145
                                                                                             -------------     -------------

             Total noncurrent liabilities                                                        4,030,406         9,267,699
                                                                                             -------------     -------------

             Total liabilities                                                                  21,445,681        27,760,043
                                                                                             -------------     -------------

Commitments

Stockholders' equity
        Common stock, $.001 par value, 200,000,000 shares authorized,
             35,687,423 and 34,903,696 shares issued and outstanding                                35,685            34,904
        Additional paid-in capital                                                             228,754,628       227,753,713
        Deferred compensation                                                                     (614,497)         (694,280)
        Accumulated deficit                                                                    (22,504,480)       (3,517,572)
        Accumulated other comprehensive (loss) income                                             (140,811)          117,521
                                                                                             -------------     -------------

             Total stockholders' equity                                                        205,530,525       223,694,286
                                                                                             -------------     -------------

                       Total liabilities and stockholders' equity                            $ 226,976,206     $ 251,454,329
                                                                                             =============     =============

</TABLE>

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


                                       1
<PAGE>

                    PREDICTIVE SYSTEMS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>


                                                                                           Three Months Ended March 31
                                                                                      --------------------------------------
                                                                                         2001                       2000
                                                                                      ------------              ------------
<S>                                                                                   <C>                       <C>
Revenues:
        Professional services                                                         $ 20,357,844              $ 18,901,279
        Hardware and software sales                                                        401,080                   143,873
                                                                                      ------------              ------------

             Total revenues                                                             20,758,924                19,045,152
                                                                                      ------------              ------------

Cost of revenues:
        Professional services                                                           15,211,009                 9,705,820
        Hardware and software purchases                                                    282,828                   108,211
                                                                                      ------------              ------------

             Total cost of revenues                                                     15,493,837                 9,814,031
                                                                                      ------------              ------------

             Gross profit                                                                5,265,087                 9,231,121
                                                                                      ------------              ------------


Sales and marketing                                                                      4,559,552                 2,650,822
General and administrative                                                              11,884,862                 5,440,122
Depreciation and amortization                                                              766,495                   274,837
Intangibles amortization                                                                 6,374,779                   213,177
Restructuring charge                                                                       640,948                        --
Loss on long-term investment in related party                                            1,000,000                        --
Noncash compensation expense                                                               110,267                    19,039
                                                                                      ------------              ------------

             Cost of operations                                                         25,336,903                 8,597,997
                                                                                      ------------              ------------

             Operating (loss) profit                                                   (20,071,816)                  633,124

Other income (expense):
        Interest income                                                                  1,105,686                 1,264,631
        Other income (expense)                                                              21,885                    (9,486)
        Interest expense                                                                   (42,662)                  (17,989)
                                                                                      ------------              ------------

Income before income tax provision                                                     (18,986,907)                1,870,280

Income tax provision                                                                            --                   841,740
                                                                                      ------------              ------------

Net (loss) income                                                                     $(18,986,907)             $  1,028,540
                                                                                      ============              ============

Net (loss) income per share: Basic                                                    $      (0.54)             $       0.04
                                                                                      ============              ============
Net (loss) income per share: Diluted                                                  $      (0.54)             $       0.03
                                                                                      ============              ============

Weighted average shares outstanding: Basic                                              34,973,653                23,453,839
                                                                                      ============              ============
Weighted average shares outstanding: Diluted                                            34,973,653                33,331,117
                                                                                      ============              ============

</TABLE>


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


                                       2
<PAGE>

                    PREDICTIVE SYSTEMS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                              -----------------------------------
                                                                                                 Three Months Ended March 31
                                                                                              -----------------------------------
                                                                                                  2001                2000
                                                                                              -----------------------------------
<S>                                                                                           <C>               <C>
Cash flows from operating activities:
           Net (loss) income                                                                  $(18,986,907)     $  1,028,540

Adjustments to reconcile net (loss) income to net cash (used in) provided by
      operating activities:
           Noncash compensation expense                                                            110,267            19,039
           Deferred income taxes                                                                        --          (218,740)
           Depreciation and amortization                                                         7,141,274           488,014
           Bad debt expense                                                                        677,159            85,653
           Loss on long-term investment in related party                                         1,000,000                --
           (Increase) decrease in-
                Accounts receivable                                                              2,904,499        (2,890,078)
                Unbilled work in process                                                         1,593,169           (28,566)
                Income taxes                                                                       (99,979)        1,213,322
                Prepaid expenses and other assets                                                 (967,693)           85,060
           Increase (decrease) in-
                Accounts payable                                                                   (36,276)        1,749,704
                Accrued expenses                                                                (2,364,084)         (809,038)
                Deferred income                                                                  1,303,759            46,437
                Deferred rent and other long-term liabilities                                       32,275            53,877
                                                                                              ------------      ------------

                     Net cash (used in) provided by operating activities                        (7,692,537)          823,224
                                                                                              ------------      ------------

Cash flows from investing activities:
           (Purchase) proceeds from sale or redemption of marketable securities, net            (1,098,925)        2,005,040
           (Payments to) repayments from employees, net                                            (35,125)           48,630
           Loans to stockholders                                                                        --          (571,464)
           Purchase of property and equipment, net                                              (1,019,898)       (3,759,320)
                                                                                              ------------      ------------

                     Net cash used in investing activities                                      (2,153,948)       (2,277,114)
                                                                                              ------------      ------------

Cash flows from financing activities:
           Principal payments on capital leases                                                    (45,500)          (43,415)
           Proceeds from exercise of stock options                                               1,218,704           651,560
                                                                                              ------------      ------------

                     Net cash provided by financing activities                                   1,173,204           608,145
                                                                                              ------------      ------------

           Effects of exchange rates                                                              (280,145)            9,869
                                                                                              ------------      ------------

Net decrease in cash                                                                            (8,953,426)         (835,876)

Cash and cash equivalents  - beginning of period                                                80,058,791        89,633,634
                                                                                              ------------      ------------

Cash and cash equivalents  - end of period                                                    $ 71,105,365      $ 88,797,758
                                                                                              ============      ============

      Supplemental disclosures of cash flow information:
           Cash paid during the year for:
                     Interest                                                                 $     11,883      $     14,583
                                                                                              ============      ============

                     Taxes                                                                    $    113,153      $         --
                                                                                              ============      ============


</TABLE>

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


                                       3
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

(1) BASIS OF PRESENTATION

     The consolidated financial statements and accompanying financial
     information as of March 31, 2001 and for the three months ended March 31,
     2001 and 2000 are unaudited and, in the opinion of management, include
     all adjustments (consisting only of normal recurring adjustments) which the
     Company considers necessary for a fair presentation of the financial
     position of the Company at such dates and the operating results and cash
     flows for those periods. The financial statements included herein have been
     prepared in accordance with generally accepted accounting principles and
     the instructions of Form 10-Q and Rule 10-01 of Regulation S-X.
     Accordingly, certain information and footnote disclosures normally included
     in financial statements prepared in accordance with generally accepted
     accounting principles have been condensed or omitted. These financial
     statements should be read in conjunction with the Company's audited
     financial statements for the year ended December 31, 2000. Results for
     interim periods are not necessarily indicative of results for the entire
     year.

(2) ACQUISITIONS

     On October 16, 2000, the Company acquired Synet Service Corporation
     ("Synet") in a transaction accounted for as a purchase. Synet is a network
     and systems management consulting firm that works with organizations to
     improve the availability and reliability of e-commerce applications and
     network infrastructure. The consideration for the acquisition consisted of
     an aggregate of 1,922,377 shares of common stock at a fair value of $11.00
     per share, par value $0.001 per share, $9,000,000 cash paid upon closing of
     the transaction, $1,053,164 cash paid to fund operating needs of the
     Company prior to the closing of the transaction and transaction expenses of
     $1,085,417, of which approximately $687,000 were paid as of March 31, 2001.
     Approximately 522,000 shares were accounted for as stock options until a
     related note was repaid in December 2000, at which time the shares were
     considered to be issued for accounting purposes. The Company also issued
     options to purchase 242,459 shares of common stock to employees of Synet in
     exchange for their Synet options. These options had a fair value of
     $1,110,893 and were accounted for as additional purchase price. The Company
     acquired net tangible assets of $169,482 and recorded intangible assets of
     approximately $33.4 million, which represented customer lists, workforce
     and excess of the purchase price over the fair value of the net tangible
     assets of approximately $30.4 million. Additionally, the Company recognized
     a deferred income tax liability of $1,184,620 related to the
     nondeductibility of certain acquired identifiable intangibles. Goodwill and
     the intangible assets are being amortized on a straight-line basis over
     periods of three to five years. The results of operations of Synet have
     been included in the results of operations of the Company since the date of
     acquisition.

     On December 14, 2000, the Company acquired Global Integrity Corporation
     ("Global Integrity") in a transaction accounted for as a purchase. Global
     Integrity provides information security services to Fortune and Global 1000
     companies. The consideration for the acquisition consisted of an aggregate
     of 5,240,275 shares of common stock at a fair value of $8.15 per share, par
     value $0.001 per share, $31,460,270 cash paid upon the closing of the
     transaction and transaction expenses of $1,830,162, of which all have been
     paid as of March 31, 2001. The Company also issued options to purchase
     551,048 shares of common stock to employees of Global Integrity in exchange
     for their Global Integrity options. These options had a fair value of
     $2,271,434 and were accounted for as additional purchase price.
     Additionally, the Global Integrity stockholders and optionholders have the
     right to earn up to an additional $14,012,500 in value (to be paid in cash
     to stockholders and additional options to optionholders) upon the
     achievement of certain revenue milestones by the acquired business. The
     Company acquired net tangible assets of $4,313,033 and recorded intangible
     assets of approximately $81.3 million, which represented customer lists,
     workforce, tradenames, developed technology and excess of the purchase
     price over the fair value of the net tangible assets of approximately $63.0
     million. Additionally, the Company recognized a deferred income tax
     liability of $7,308,222 related to the nondeductibility of certain acquired
     identifiable intangibles. Goodwill and the intangible assets are being
     amortized on a straight-line basis over periods of three to five years. The
     results of operations of Global Integrity have been included in the results
     of operations of the Company since the date of acquisition.


                                       4
<PAGE>

     The following unaudited information presents the pro forma results of
     operations for the Company for the three months ended March 31, 2000 as if
     the acquisitions of Synet and Global Integrity had occurred on the first
     day of this period.

<TABLE>
<CAPTION>

                                              Three Months Ended
                                                March 31, 2000
                                            ----------------------
<S>                                         <C>
                                                 (unaudited)

Revenues                                          $26,781,051
Net loss                                          $(4,907,840)

Per Share Information:
Net loss per share - Basic and Diluted                 $(0.16)
Weighted average shares outstanding -
Basic and Diluted                                  30,519,962

</TABLE>

(3) NET (LOSS) INCOME PER SHARE

     Basic net (loss) income per share is computed by dividing net (loss) income
     available to common stockholders by the weighted average number of shares
     outstanding. Diluted net (loss) income per share reflects the potential
     dilution that would occur if securities or other contracts to issue common
     stock were exercised or converted into common stock, unless they are
     antidilutive.

     The following table reconciles the numerator and denominator for the
calculation:

<TABLE>
<CAPTION>

                                                         Three Months Ended
                                                              March 31
                                                       ----------------------
                                                       2001              2000
                                                       ----              ----
<S>                                                    <C>               <C>
                                                            (unaudited)
Numerator -

   Net (loss) income                              $(18,986,907)     $  1,028,540
                                                  ------------      ------------

   Numerator for basic and diluted
     earnings per share - net (loss)
     income available to common
     stockholders                                 $(18,986,907)     $  1,028,540
                                                  ============      ============

Denominator -

    Denominator for basic earnings
      per share - weighted average
      shares                                        34,973,653        23,453,839
                                                  ============      ============

    Effect of dilutive securities -
       Incremental shares for assumed
      conversion of options                               --           9,877,278
                                                  ------------      ------------

   Denominator for diluted earnings
      per share - weighted average
      shares                                        34,973,653        33,331,117
                                                  ============      ============

Net (loss) income per share -

             Basic                                $      (0.54)     $       0.04
             Diluted                              $      (0.54)     $       0.03
                                                  ============      ============

</TABLE>


                                       5
<PAGE>

(4) COMPREHENSIVE (LOSS) INCOME

     The Company adopted Statement of Financial Accounting Standards No. 130,
     "Reporting Comprehensive Income," which established standards for reporting
     and displaying comprehensive income and its components. The components of
     comprehensive (loss) income are as follows:

<TABLE>
<CAPTION>


                                                   Three Months Ended
                                                        March 31
                                                   ------------------
                                                   2001          2000
                                                   ----          ----
<S>                                                <C>           <C>
                                                       (unaudited)

         Net (loss) income                      $(18,986,907)  $1,028,540
         Unrealized loss (gain) on investments        21,814      (13,020)
         Foreign currency translation
                  adjustment                        (280,145)       9,869
                                                  ----------   ----------
         Comprehensive (loss) income            $(19,245,238)  $1,025,389
                                               =============   ==========

</TABLE>

(5) RESTRUCTURING CHARGES



         In February 2001, the Company's management established a plan to
         lay-off 18% of its workforce. These employees consisted of field
         consultants that were under performing as well as employees who held
         certain administrative and management positions deemed to be
         duplicative functions. As of March 31, 2001, 79 employees were
         terminated. The Company recorded restructuring charges of $640,948,
         primarily related to severance costs of the terminated employees, of
         which $36,038 remained unpaid as of March 31, 2001. Such charges have
         been reflected as operating expenses to the Company.

(6) EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued SFAS No. 133 ("SFAS 133"), "Accounting
         for Derivative Instruments and Hedging Activities." SFAS 133
         establishes accounting and reporting standards requiring that every
         derivative instrument be recorded in the balance sheet as either an
         asset or liability measured at its fair value. SFAS 133 requires that
         changes in the derivative's fair value be recognized currently in
         earnings unless specific hedge accounting criteria are met. SFAS 133 is
         effective for fiscal years beginning after June 15, 1999. In July 1999,
         the FASB approved SFAS No. 137, "Accounting for Derivative Instruments
         and Hedging Activities-Deferral of the Effective Date of SFAS 133",
         which amends SFAS 133 to be effective for all fiscal quarters of all
         fiscal years beginning after June 15, 2000. As the Company currently
         does not engage in derivative instruments or hedging activities, the
         adoption of this accounting principle did not have a material impact on
         the Company's financial position or results of operations.



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

         THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO FUTURE
EVENTS AND FUTURE PERFORMANCE OF THE COMPANY WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S
EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE STRATEGIES THAT ARE SIGNIFIED BY THE
WORDS "EXPECTS", "ANTICIPATES", "INTENDS", "BELIEVES" OR SIMILAR LANGUAGE.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH
FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO THE COMPANY ON THE DATE HEREOF,
AND THE COMPANY


                                       6
<PAGE>

ASSUMES NO OBLIGATION TO UPDATE ANY FORWARD LOOKING STATEMENTS. THE COMPANY
CAUTIONS INVESTORS THAT ITS BUSINESS AND FINANCIAL PERFORMANCE ARE SUBJECT TO
SUBSTANTIAL RISKS AND UNCERTAINTIES. IN EVALUATING THE COMPANY'S BUSINESS,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH BELOW
UNDER THE CAPTION "RISK FACTORS" IN ADDITION TO THE OTHER INFORMATION SET FORTH
HEREIN AND ELSEWHERE IN THE COMPANY'S OTHER PUBLIC FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION.

Substantially all of our revenues are derived from professional services. We
provide network consulting services to our clients on either a project outsource
or collaborative consulting basis. We derive revenues from these services on
both a fixed-price, fixed-time basis and on a time-and-expense basis. We use our
BusinessFirst methodology to estimate and propose prices for our fixed-price
projects. The estimation process accounts for standard billing rates particular
to each project, the client's technology environment, the scope of the project,
and the project's timetable and overall technical complexity. A member of our
senior management team must approve all of our fixed-price proposals in excess
of $500,000. For these contracts, we recognize revenue using a
percentage-of-completion method primarily based on costs incurred. We make
provisions for estimated losses on uncompleted contracts on a
contract-by-contract basis and recognize such provisions in the period in which
the losses are determined. Professional services revenues for time-and-expense
based projects are recognized as services are performed. Any payments received
in advance of services performed are recorded as deferred revenue. Our clients
are generally able to reduce or cancel their use of our professional services
without penalty and with little or no notice. We also derive limited revenues
from the sale of hardware and software. We sell hardware and software only when
specifically requested by a client. We expect revenues from the sale of hardware
and software to continue to decline on a percentage basis.

Since we recognize professional services revenues only when our consultants are
engaged on client projects, the utilization of our consultants is important in
determining our operating results. In addition, a substantial majority of our
operating expenses, particularly personnel and related costs, depreciation and
rent, are relatively fixed in advance of any particular quarter. As a result,
any underutilization of our consultants may cause significant variations in our
operating results in any particular quarter and could result in losses for such
quarter. Factors which could cause underutilization include:

              - the reduction in size, delay in commencement, interruption or
         termination of one or more significant projects;

              - the completion during a quarter of one or more significant
         projects;

              - the miscalculation of resources required to complete new or
         ongoing projects; and

              - the timing and extent of training, weather related shut-downs,
         vacations and holidays.


Our cost of revenues consist of costs associated with our professional services
and hardware and software purchases. Costs of revenues associated with
professional services include compensation and benefits for our consultants and
project-related travel expenses. Costs of hardware and software purchases
consist of acquisition costs of third-party hardware and software resold.

In April 2000, we consummated a follow-on public offering for 3.8 million shares
of our common stock, of which 1.0 million shares were offered by the Company
resulting in net proceeds of approximately $39.8 million after deducting
underwriter discounts and commissions, and expenses as payable by us.

On October 16, 2000, we acquired Synet Service Corporation for an aggregate
purchase price of approximately $32.3 million. The purchase price was paid in
the form of 1,922,377 shares of our common stock, options to purchase 242,459
shares of our common stock and $9.0 million in cash, including certain
transaction expenses, in exchange for all of the outstanding capital stock of
Synet. The acquisition was accounted for as a purchase and resulted in
intangible assets of approximately $33.4 million representing the customer
lists, workforce and excess of the purchase price over the fair value of the net
tangible assets acquired. The intangible assets are being amortized over a
period of 3-5 years.

On December 14, 2000, we acquired Global Integrity Corporation for an aggregate
purchase price of approximately $78.3 million. The purchase price was paid in
the form of 5,240,275 shares of our common stock, options to purchase 551,048
shares of common stock and $31.5 million in cash, including certain transaction
expenses in


                                       7
<PAGE>

exchange for all of the outstanding capital stock of Global Integrity. The
acquisition was accounted for as a purchase and resulted in intangible assets of
approximately $81.3 million representing the customer lists, workforce,
tradenames, developed technology and excess of the purchase price over the fair
value of the net tangible assets acquired. The intangible assets are being
amortized over a period of 3-5 years.

We plan to continue to expand our operations by hiring additional consultants,
and adding new offices and systems. The resulting increase in operating expenses
will have a material adverse effect on our operating results if our revenues do
not increase to support such expenses. Based on all of the foregoing, we believe
that our quarterly revenue and operating results are likely to vary
significantly in the future and that period-to-period comparisons of our
operating results are not necessarily meaningful and should not be relied on as
indications of future performance.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2001 and 2000


REVENUES. Revenues increased 9.0% to $20.8 million in the three months ended
March 31, 2001 from $19.0 million in the three months ended March 31, 2000.
Revenues from professional services increased 7.7% to $20.4 million in the three
months ended March 31, 2001 from $18.9 million in the three months ended March
31, 2000. This increase was primarily due to an increase in the number of
professional services projects and an increase in the size of the projects.
Revenues from hardware and software sales increased to $401,000 in the three
months ended March 31, 2001 from $144,000 in the three months ended March 31,
2000. This increase was primarily due to client requests for hardware and
software in connection with professional services projects. During the three
months ended March 31, 2001, Bell South Corporation accounted for 18.2% of our
revenues. The number of our billable consultants increased to 434 as of March
31, 2001 from 337 as of March 31, 2000.

GROSS PROFIT. Gross profit decreased 43.0% to $5.3 million in the three months
ended March 31, 2001 from $9.2 million in the three months ended March 31, 2000.
As a percentage of revenues, gross profit decreased to 25.4% in the three months
ended March 31, 2001 from 48.5% in the three months ended March 31, 2000. This
decrease in gross profit is a result of a decrease in utilization of the related
consultants. Cost of revenues increased to $15.5 million in the three months
ended March 31, 2001 from $9.8 million in the three months ended March 31, 2000.
This increase in cost of revenues was due primarily to an increase in
compensation and benefits paid to consultants.

SALES AND MARKETING EXPENSES. Sales and marketing expenses increased to $4.6
million in the three months ended March 31, 2001 from $2.7 million in the three
months ended March 31, 2000. As a percentage of revenues, sales and marketing
expenses increased to 22.0% in the three months ended March 31, 2001 from 13.9%
in the three months ended March 31, 2000. The increase in absolute dollars was
primarily due to an increase of $467,000 in commissions paid due to an increase
in revenues, an increase of $1.2 million in compensation and benefits paid due
to the hiring of additional personnel and as a result of the acquisitions of
Synet and Global Integrity and an increase of $252,000 in sales and marketing
efforts.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 118.5% to $11.9 million in the three months ended March 31, 2001 from
$5.4 million in the three months ended March 31, 2000. As a percentage of
revenues, general and administrative expenses increased to 57.3% in the three
months ended March 31, 2001 from 28.6% in the three months ended March 31, 2000.
The increase in absolute dollars was primarily due to an increase of $2.5
million in compensation and benefits costs due to the continued investment in
our domestic organization and European corporate staff, an increase of $1.2
million in facilities and equipment leases reflecting the continued investment
in our infrastructure, an increase of $591,000 in the reserve for doubtful
accounts, and an increase of $2.2 million in professional services and other
administrative costs.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 178.9% to
$766,000 in the three months ended March 31, 2001 from $275,000 in the three
months ended March 31, 2000. This increase was due to purchases of additional
computer equipment to support our growth.

INTANGIBLES AMORTIZATION. Amortization of intangibles increased to $6.4 million
for the three months ended March 31, 2001 from $213,000 for the three months
ended March 31, 2000. For the three months ended March 31, 2001, the amount
consisted of $213,000 amortization of intangibles related to the acquisition of
NRCC in


                                       8
<PAGE>

August 1999, $1.8 million amortization of intangibles related to the acquisition
of Synet in October 2000 and $4.4 million amortization of intangibles related to
the acquisition of Global Integrity in December 2000. For the three months ended
March 31, 2000, amortization was solely related to intangibles as a result of
the NRCC acquisition.

RESTRUCTURING CHARGE. For the three months ended March 31, 2001, the Company
laid-off 79 employees in connection with its restructuring plan. These employees
consisted of field consultants that were under performing as well as employees
who held certain administrative and management positions deemed to be
duplicative functions. Amounts recognized as restructuring charges of $641,000
represented severance payments to these employees.

LOSS ON LONG-TERM INVESTMENT IN RELATED PARTY. On March 22, 2001, Paradigm4,
Inc. filed for federal bankruptcy protection. This action created significant
uncertainty regarding the Company's investment in Paradigm4. As a result, the
Company has recognized a loss on its $1.0 million investment in Paradigm4 for
the three months ended March 31, 2001.

NONCASH COMPENSATION EXPENSE. During 1999, we granted options to purchase shares
of common stock at exercises prices that were less than the fair market value of
the underlying shares of common stock. During 2000, related to the acquisition
of Synet and Global Integrity, we issued Predictive options to Synet and Global
Integrity optionholders for the unvested portion of their Synet and Global
Integrity options, respectively. These transactions will result in noncash
compensation expense over the period that these specific options vest. During
the three months ended March 31, 2001 and 2000, we recorded approximately
$110,000 and $19,000, respectively, of noncash compensation expenses related to
these options.

OTHER INCOME (EXPENSE). Other income decreased to $1.1 million in the three
months ended March 31, 2001 from $1.2 million in the three months ended March
31, 2000. This decrease was primarily due to a decrease in interest income as a
result of the utilization of cash and cash equivalents to fund current operating
needs, Synet and Global Integrity acquisitions, and a general decline in
interest rates.

INCOME TAXES. For the three months ended March 31, 2001 the benefit for income
taxes was fully offset by valuation allowances. For the three months ended March
31, 2000, the income tax provision was $842,000 on U.S. pre-tax income of
approximately $1.9 million. The difference in the effective tax rates relates to
the provision for a valuation allowance against net operating losses and an
increase in expenses not deductible for tax purposes.

LIQUIDITY AND CAPITAL RESOURCES. Since inception, we have financed our
operations through borrowings under short-term credit facilities, the sale of
equity securities and cash flows from operations. As of March 31, 2001, we had
approximately $71.1 million in cash and cash equivalents and $4.9 million in
marketable securities.

Cash used in operating activities was $7.7 million for the three months ended
March 31, 2001 due to losses generated in operations and an increase in accrued
expenses.

Net cash used in investing activities was $2.2 million for the three
months ended March 31, 2001. Cash used in investing activities resulted from the
purchase of marketable securities and capital expenditures of approximately $1.0
million. Capital expenditures of $824,000 related to purchases of computer
equipment primarily in connection with the expansion of our operations in
Germany and our managed services division. The remaining $196,000 of capital
expenditures related to office furniture and leasehold improvements.

Cash provided by financing activities was $1.2 million for the three months
ended March 31, 2001. Cash provided by financing activities primarily resulted
from the receipt of proceeds from the exercise of options.

We have a demand loan facility, secured by a lien on all of our assets, under
which we may borrow up to the lesser of $10.0 million or 80.0% of our accounts
receivable. Amounts outstanding under the facility bear interest at the lender's
base rate which was 8.0% as of March 31, 2001. As of March 31, 2001, there were
no amounts outstanding under the facility.

We believe that our existing cash, cash equivalents and marketable securities
will be sufficient to meet our anticipated needs for working capital and capital
expenditures at least for the next twelve months. If cash generated from
operations is insufficient to satisfy our liquidity requirements, we may seek to
sell additional equity or debt securities or to obtain a credit facility. The
sale of additional equity or convertible debt securities could result in
dilution to our stockholders. The incurrence of indebtedness would result in
increased fixed obligations and could result in operating covenants that would
restrict our operations. We cannot assure you that financing will be available
in amounts or on terms acceptable to us, if at all.


                                       9
<PAGE>

RISK FACTORS

An investment in our company involves a high degree of risk. You should
carefully consider the risks described below before you decide to buy our common
stock. If any of the following risks actually occur, our business, results of
operations or financial condition would likely suffer. In this case, the trading
price of our common stock could decline.

Risks Related to Our Financial Condition and Business Model

         Our limited operating history, particularly in light of our recent
growth, makes it difficult for you to evaluate our business and to predict our
future success

         We commenced operations in February 1995 and therefore have only a
limited operating history for you to evaluate our business. Because of our
limited operating history, recent growth and the fact that many of our
competitors have longer operating histories, we believe that the prediction of
our future success is difficult. You should evaluate our chances of financial
and operational success in light of the risks, uncertainties, expenses, delays
and difficulties associated with operating a new business, many of which are
beyond our control. You should not rely on our historical results of operations
as indications of future performance. The uncertainty of our future performance
and the uncertainties of our operating in a new and expanding market increase
the risk that the value of your investment will decline.

         Because most of our revenues are generated from a small number of
clients, our revenues are difficult to predict and the loss of one client could
significantly reduce our revenues

         During the three months ended March 31, 2001, BellSouth Corporation
accounted for 18.2% of our revenues. Our five largest clients accounted for
42.6% of our revenues for the three months ended March 31, 2001. For the year
ended December 31, 2000, our five largest clients accounted for 37.8% of our
revenues. If one of our major clients discontinues or significantly reduces the
use of our services, we may not generate sufficient revenues to offset this loss
of revenues and our net loss will increase. In addition, the non-payment or late
payment of amounts due from a major client could adversely affect us. As of
March 31, 2001, the accounts receivable from BellSouth Corporation was
approximately $4.1 million, which related to work performed in December 2000
through March 2001.

         Our clients may terminate their contracts with us on short notice

         Our services are often delivered pursuant to short-term arrangements
and most clients can reduce or cancel their contracts for our services without
penalty and with little or no notice. If a major client or a number of small
clients terminate our contracts or significantly reduce or modify their business
relationships with us, we may not be able to replace the shortfall in revenues.
Consequently, you should not predict or anticipate our future revenues based
upon the number of clients we have currently or the number and size of our
existing projects.

         Our operating results may vary from quarter to quarter in future
periods, and as a result, we may fail to meet the expectations of our investors
and analysts, which may cause our stock price to fluctuate or decline

         Our operating results have varied from quarter to quarter. Our
operating results may continue to vary as a result of a variety of factors.
These factors include:
         o    the loss of key employees;
         o    the development and introduction of new service offerings;
         o    reductions in our billing rates;
         o    the miscalculation of resources required to complete new or
              ongoing projects;
         o    the utilization of our workforce;
         o    the ability of our clients to meet their payments obligations to
              us; and
         o    the timing and extent of training.


                                       10
<PAGE>

         Many of these factors are beyond our control. Accordingly, you should
not rely on quarter-to-quarter comparisons of our results of operations as an
indication of our future performance. In addition, our operating results may be
below the expectations of public market analysts or investors in some future
quarter. If this occurs, the price of our common stock is likely to decline.

         We derive a substantial portion of our revenues from fixed-price
projects, under which we assume greater financial risk if we fail to accurately
estimate the costs of the projects

         We derive a substantial portion of our revenues from fixed-price
projects. For the three months ended March 31, 2001 and the year ended December
31, 2000, fixed-price projects accounted for 49.9% and 43.2% of our revenue,
respectively. We assume greater financial risks on a fixed-price project than on
a time-and-expense based project. If we miscalculate the resources or time we
need for these fixed-price projects, the costs of completing these projects may
exceed the price, which could result in a loss on the project and a decrease in
net income. Further, the average size of our contracts has increased in recent
quarters, resulting in a corresponding increase in our exposure to the financial
risks of fixed-price engagements. We recognize revenues from fixed-price
projects based on our estimate of the percentage of each project completed in a
reporting period. To the extent our estimates are inaccurate, the revenues and
operating profits, if any, that we report for periods during which we are
working on a fixed-price project may not accurately reflect the final results of
the project and we would be required to record an expense for these periods
equal to the amount by which our revenues were previously overstated.

         Our operating results may fluctuate due to seasonal factors which could
result in greater than expected losses

         Our results of operations may experience seasonal fluctuations as
businesses typically spend less on network management services during the summer
and year-end vacation and holiday periods. Additionally, as a large number of
our employees take vacation during these periods, our utilization rates during
these periods tend to be lower, which reduces our margins and operating income.
Accordingly, we may report greater than expected losses for these periods.

         Our long sales cycle makes our revenues difficult to predict and could
cause our quarterly operating results to be below the expectations of public
market analysts and investors

         The timing of our revenues is difficult to predict because of the
length and variance of the time required to complete a sale. Before hiring us
for a project, our clients often undertake an extensive review process and may
require approval at various levels within their organization. Any delay due to a
long sales cycle could reduce our revenues for a quarter and cause our quarterly
operating results to be below the expectations of public market analysts or
investors. If this occurs, the price of our common stock is likely to decline.

         We may need to raise additional capital to grow our business, which we
may not be able to do

         Our future liquidity and capital requirements are difficult to predict
because they depend on numerous factors, including the success of our existing
and new service offerings and competing technological and market developments.
As a result, we may not be able to generate sufficient cash from our operations
to meet additional working capital requirements, support additional capital
expenditures or take advantage of acquisition opportunities. Accordingly, we may
need to raise additional capital in the future. Our ability to obtain additional
financing will be subject to a number of factors, including market conditions,
our operating performance and investor sentiment. These factors may make the
timing, amount, terms and conditions of additional financing unattractive for
us. If we are unable to raise additional funds when needed, our ability to
operate and grow our business could be impeded.

         Risks Related to Our Strategy and Market

         We may have difficulty managing our expanding operations, which may
harm our business

         A key part of our strategy is to grow our business; however, our rapid
growth has placed a significant strain on our managerial and operational
resources. From January 1, 1997 to March 31, 2001, our staff increased from


                                       11
<PAGE>

approximately 123 to approximately 634 employees. To manage our growth, we must
continue to improve our financial and management controls, reporting systems and
procedures, and expand and train our work force. We may not be able to do so
successfully.

         We may not be able to hire and retain qualified network systems
consultants which could affect our ability to compete effectively

         Our continued success depends on our ability to identify, hire, train
and retain highly qualified network management consultants. These individuals
are in high demand and we may not be able to attract and retain the number of
highly qualified consultants that we need. If we cannot retain, attract and hire
the necessary consultants, our ability to grow, complete existing projects and
bid for new projects will be adversely affected.

         Competition in the network consulting industry is intense, and
therefore we may lose projects to our competitors

         Our market is intensely competitive, highly fragmented and subject to
rapid technological change. We expect competition to intensify and increase over
time. We may lose projects to our competitors, which could adversely affect our
business, results of operations and financial condition. In addition,
competition could result in lower billing rates and gross margins and could
require us to increase our spending on sales and marketing.

         We face competition from systems integrators, value added resellers,
network services firms, telecommunications providers, and network equipment and
computer systems vendors. These competitors may be able to respond more quickly
to new or emerging technologies and changes in client requirements or devote
greater resources to the expansion of their market share.

         Additionally, our competitors have in the past and may in the future
form alliances with various network equipment vendors that may give them an
advantage in implementing networks using that vendor's equipment.

         We also compete with internal information technology departments of
current and potential clients. To the extent that current or potential clients
decide to satisfy their needs internally, our business will suffer.

         Our acquisitions of Synet Service Corporation and Global Integrity
Corporation may not result in the benefits we anticipate from a combined company

         We recently consummated our acquisition of Synet Service Corporation
and Global Integrity Corporation. The integration of Synet and Global Integrity
into our operations presents us with significant financial, managerial and
operational challenges and may:
         o    divert management attention form running our existing business;
         o    require us to expend resources integrating different technologies
              and cultures; and
         o    strain our financial reporting systems and procedures.

         The acquisitions may not result in the benefits we anticipate from the
combined company and may underperform relative to our expectations, including
with respect to increased business opportunities and economies of scale, and the
retention of personnel from the acquired companies. Moreover, the acquisitions
will require us to amortize additional goodwill in our financial statements,
leading to an adverse effect on our operating results.

         If we are unable to find suitable acquisition candidates, our growth
could be impeded

         A component of our growth strategy is the acquisition of, or investment
in, complementary businesses, technologies, services or products. Our ability to
identify and invest in suitable acquisition and investment candidates on
acceptable terms is crucial to this strategy. We may not be able to identify,
acquire or make investments in promising acquisition candidates on acceptable
terms. Moreover, in pursuing acquisition and investment opportunities, we may be
in competition with other companies having similar growth and investment
strategies. Competition for these acquisitions or investment targets could also
result in increased acquisition or


                                       12
<PAGE>

investment prices and a diminished pool of businesses, technologies, services or
products available for acquisition or investment.

         Our acquisition strategy could have an adverse effect on client
satisfaction and our operating results

         Acquisitions, including those already consummated, involve a number of
risks, including:

         o    adverse effects on our reported operating results due to
              accounting charges associated with acquisitions;
         o    increased expenses, including compensation expense resulting from
              newly hired employees; and
         o    potential disputes with the sellers of acquired businesses,
              technologies, services or products.

         Client dissatisfaction or performance problems with an acquired
business, technology, service or product could also have a material adverse
impact on our reputation as a whole. In addition, any acquired business,
technology, service or product could significantly underperform relative to our
expectations.

         Competition for experienced personnel is intense and our inability to
retain key personnel could interrupt our business and adversely affect our
growth

         Our future success depends, in significant part, upon the continued
service and performance of our senior management and other key personnel. Losing
the services of any of these individuals may impair our ability to effectively
deliver our services and manage our company, and to carry out our business plan.
In addition, competition for qualified personnel in the network consulting
industry is intense and we may not be successful in attracting and retaining
these personnel. There may be only a limited number of persons with the
requisite skills to serve in these positions and it may become increasingly
difficult to hire these persons. Our business will suffer if we encounter delays
in hiring additional personnel.

         We may not be able to hire a Chief Executive Officer, which could
interrupt our business and adversely affect our growth.

         On March 30, 2001, our Chief Executive Officer, Ronald J. Pettengill,
Jr., resigned and William W. Wyman, one of our Board Members, was elected
Chairman and Chief Executive Officer on an interim basis. Accordingly, we are
engaged in finding a permanent Chief Executive Officer. Our business may suffer
if we encounter delays in hiring a permanent Chief Executive Officer. In
addition, there may be only a limited number of persons with the requisite
skills to serve as our Chief Executive Officer and it may become increasingly
difficult to hire such a person. If we are unable to hire a Chief Executive
Officer, or if we cannot successfully integrate a new Chief Executive Officer
into our senior management team, then our ability to manage our company,
effectively deliver our services and carry out our business plan may be
impaired.


         Our international expansion efforts, which are a key part of our growth
strategy, may not be successful

         We expect to expand our international operations and international
sales and marketing efforts. In January 1999, we commenced operations in
England. In August 1999, we acquired Network Resource Consultants and Company, a
network consulting company based in The Netherlands. Additionally, Synet
Services Corporation, acquired in October 2000, has a German subsidiary and
Global Integrity Corporation, acquired in December 2000, has existing operations
in England and Japan. We have had limited experience in marketing, selling and
distributing our services internationally. We may not be able to maintain and
expand our international operations or successfully market our services
internationally. Failure to do so may negatively affect our business, as well as
our ability to grow.

         Our business may suffer if we fail to adapt appropriately to the
challenges associated with operating internationally

         Operating internationally may require us to modify the way we conduct
our business and deliver our services in these markets. We anticipate that we
will face the following challenges internationally:


                                       13
<PAGE>

         o    the burden and expense of complying with a wide variety of foreign
              laws and regulatory requirements;
         o    potentially adverse tax consequences;
         o    longer payment cycles and problems in collecting accounts
              receivable;
         o    technology export and import restrictions or prohibitions;
         o    tariffs and other trade barriers;
         o    difficulties in staffing and managing foreign operations;
         o    cultural and language differences;
         o    fluctuations in currency exchange rates; and
         o    seasonal reductions in business activity during the summer months
              in Europe.

         If we do not appropriately anticipate changes and adapt our practices
to meet these challenges, our growth could be impeded and our results of
operations could suffer.

         If we do not keep pace with technological changes, our services may
become less competitive and our business will suffer

         Our market is characterized by rapidly changing technologies, frequent
new product and service introductions and evolving industry standards. As a
result of the complexities inherent in today's computing environments, we face
significant challenges in remaining abreast of such changes and product
introductions. If we cannot keep pace with these changes, we will not be able to
meet our clients' increasingly sophisticated network management needs and our
services will become less competitive.

         Our future success will depend on our ability to:
         o    keep pace with continuing changes in industry standards,
              information technology and client preferences;
         o    respond effectively to these changes; and
         o    develop new services or enhance our existing services.

         We may be unable to develop and introduce new services or enhancements
to existing services in a timely manner or in response to changing market
conditions or client requirements.

         If the use of large-scale, complex networks does not continue to grow,
we may not be able to successfully increase or maintain our client base and
revenues

         To date, a majority of our revenues have been from network management
services related to large-scale, complex networks. We believe that we will
continue to derive a majority of our revenues from providing network design,
performance, management and security services. As a result, our future success
is highly dependent on the continued growth and acceptance of large-scale,
complex computer networks and the continued trend among our clients to use
third-party service providers. If the growth of the use of enterprise networks
does not continue or declines, our business may not grow and our revenues may
decline.

We may not successfully penetrate the managed services market

         In December 2000, we entered into the managed services market. This is
a new market for us and one in which we have not had significant experience.
Entering into this market requires a material financial commitment by us. We
cannot assure you that our efforts in this new market will be successful.
Accordingly, we may lose some or all of the resources we invest in this new
market.

         If the Internet does not grow and continue to develop as a viable
business tool, demand for our services and our revenues may decline

         The growing demand for network management services has been driven in
part by the growth of the Internet. The Internet may not prove to be a viable
commercial marketplace because of:

         o    inadequate development of the necessary infrastructure;


                                       14
<PAGE>

         o    lack of development of complementary products (such as high speed
              modems and high speed communication lines);
         o    implementation of competing technology;
         o    delays in the development or adoption of new standards and
              protocols required to handle increased levels of Internet
              activity; or
         o    governmental regulation.

         Moreover, critical issues concerning the use of the Internet remain
unresolved and may affect the growth of the use of such technologies to solve
business problems. If the Internet fails to grow or grows more slowly as a
viable business tool than anticipated, there will be a significant decline in
the need for our services and our revenues will decline.

         Risks Related to Intellectual Property Matters and Potential Legal
Liability

         Unauthorized use of our intellectual property by third parties may
damage our brand

         We regard our copyrights, trade secrets and other intellectual property
as critical to our success. Unauthorized use of our intellectual property by
third parties may damage our brand and our reputation. We rely on trademark and
copyright law, trade secret protection and confidentiality and/or license and
other agreements with our employees, customers, partners and others to protect
our intellectual property rights. However, we do not have any patents or patent
applications pending and existing trade secret, trademark and copyright laws
afford us only limited protection. Despite our precautions, it may be possible
for third parties to obtain and use our intellectual property without our
authorization. The laws of some foreign countries are also uncertain or do not
protect intellectual property rights to the same extent as do the laws of the
United States.

         We may have to defend against intellectual property infringement
claims, which could be expensive and, if we are not successful, could disrupt
our business

         We cannot be certain that our services, the finished products that we
deliver or materials provided to us by our clients for use in our finished
products do not or will not infringe valid patents, copyrights, trademarks or
other intellectual property rights held by third parties. As a result, we may be
subject to legal proceedings and claims from time to time relating to the
intellectual property of others in the ordinary course of our business. We may
incur substantial expenses in defending against these third-party infringement
claims, regardless of their merit. Successful infringement claims against us may
result in substantial monetary liability or may materially disrupt the conduct
of our business.

         Because our services are often critical to our clients' operations, we
may be subject to significant claims if our services do not meet our clients'
expectations

         Many of our projects are critical to the operations of our clients'
businesses. If we cannot complete these projects to our clients' expectations,
we could materially harm our clients' operations. This could damage our
reputation, subject us to increased risk of litigation or result in our having
to provide additional services to a client at no charge. Although we carry
general liability insurance coverage, our insurance may not cover all potential
claims to which we are exposed or may not be adequate to indemnify us for all
liability that may be imposed.

         Our stock price is likely to be highly volatile and could drop
unexpectedly

         The market price of our common stock is highly volatile, has fluctuated
substantially and may continue to do so. As a result, investors in our common
stock may experience a decrease in the value of their common stock regardless of
our operating performance or prospects. In addition, the stock market has, from
time to time, experienced significant price and volume fluctuations that have
affected the market prices for the securities of technology companies. In the
past, following periods of volatility in the market price of a particular
company's securities, securities class action litigation was often brought
against that company. Many technology-related companies have been subject to
this type of litigation. We may also become involved in this type of litigation.
Litigation is often expensive and diverts management's attention and resources.


                                       15
<PAGE>

         We are controlled by a small group of our existing stockholders, whose
interests may differ from other stockholders

         Our directors, executive officers and affiliates currently beneficially
own approximately 48.7% of the outstanding shares of our common stock.
Accordingly, these stockholders will have significant influence in determining
the outcome of any corporate transaction or other matter submitted to the
stockholders for approval, including mergers, acquisitions, consolidations and
the sale of all or substantially all of our assets, and also the power to
prevent or cause a change in control. The interests of these stockholders may
differ from the interests of the other stockholders.

         Our charter documents and Delaware law may inhibit a takeover that
stockholders may consider favorable

         Provisions in our charter and bylaws may have the effect of delaying or
preventing a change of control or changes in our management that stockholders
consider favorable or beneficial. If a change of control or change in management
is delayed or prevented, the market price of our common stock could decline.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     Currency Rate Fluctuations.
Our results of operations, financial position and cash flows are not materially
affected by changes in the relative values of non-U.S. currencies to the U.S.
dollar. We do not use derivative financial instruments to limit our foreign
currency risk exposure.

     Market Risk.
Our accounts receivable are subject, in the normal course of business, to
collection risks. We regularly assess these risks and have established policies
and business practices to protect against the adverse effects of collection
risks. As a result, we do not anticipate any material losses in this area.

     Interest Rate Risks.
We do not currently have any outstanding indebtedness. In addition, our
investments are classified as cash and cash equivalents with original maturities
of three months or less. Therefore, we are not exposed to material market risk
arising from interest rate changes, nor do such changes affect the value of
investments as recorded by us.


PART II. OTHER INFORMATION

         ITEM 1. LEGAL PROCEEDINGS

Except as set forth below, we are not a party to any material legal proceedings.

On October 29, 1999, Art Eckert ("Plaintiff") filed an action against the
Company in which he alleged that the Company was in breach of an employment
agreement between Plaintiff and the Company. Plaintiff also alleged that the
Company fraudulently induced Plaintiff to enter into this purported employment
agreement. Plaintiff seeks to recover damages in excess of $3.2 million with
respect to the claim for breach of contract, and damages in excess of $6.0
million with respect to the claim for fraudulent inducement. The Company filed a
motion to dismiss the claim for fraudulent inducement on December 13, 1999.
Plaintiff amended the complaint, essentially adding allegations with respect to
the claim for fraudulent inducement, and opposing the Company's motion.

         By Decision and Order filed on July 11, 2000, Judge S. Barrett Hickman,
in New York Supreme Court, Putnam County, denied the Company's motion to dismiss
the claim for fraudulent inducement. The case is in the discovery phase and
Predictive intends to defend it vigorously.


                                       16
<PAGE>

         ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On October 27, 1999, the SEC declared effective the Registration Statement on
Form S-1, SEC Registration Number 333-84045 for our public offering of common
stock in the United States (the "Offering"). We realized net proceeds of
approximately $67.0 million from the Offering. Since that time we have used
$53.8 million of the proceeds for the following: $11.1 million for the
acquisition of Synet; $33.3 million for the acquisition of Global Integrity; and
$9.4 million to fund current operating needs.

         ITEM 3. DEFAULTS UPON SENIOR SECURITIES
                 NONE

         ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                 NONE

         ITEM 5. OTHER INFORMATION
                 NONE

         ITEM 6. EXHIBITS AND REPORT ON FORM 8-K


         The Company filed two reports on Form 8-KA during the first quarter
         ended March 31, 2001. Information regarding the items reported on is as
         follows:

                  January 2, 2001
                           The Company filed an amendment to its 8-K that
                           announced the completion of the acquisition of Synet
                           Service Corporation.

                  February 27, 2001
                           The Company filed an amendment to its 8-K that
                           announced the completion of the acquisition of Global
                           Integrity Corporation.

         ITEM 7.  SIGNATURES

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

PREDICTIVE SYSTEMS, INC.
     (Registrant)

Date:    May 15, 2001        /s/ WILLIAM W. WYMAN.
-------------------------------------------------------------------------------
     Name: William W. Wyman

Title: Chief Executive Officer
     (principal executive officer)

Date:    May 15, 2001        /s/ GERARD E. DORSEY
-------------------------------------------------------------------------------
Name: Gerard E. Dorsey
Title: Chief Financial Officer
(principal accounting and financial officer)


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